1. 2 Agenda Welcome & Introductions Garry Ramsey, Chief Marketing Officer, Bluegrass Family Health Todays Healthcare Environment & CDHPs as a Solution.

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AgendaWelcome & Introductions

Garry Ramsey, Chief Marketing Officer, Bluegrass Family Health

Today’s Healthcare Environment & CDHPs as a SolutionKismet Toksu, President, Candor Consulting

HRA, FSA, HSA & Debit CardsLynden Kendrick, Vice President, Wells Fargo Flex Benefits Services

Bluegrass Consumer Choice - ConceptRita Woods, Product Specialist, Bluegrass Family Health

Sales Proposition to Employer Groups – Case StudiesGarry Ramsey, Chief Marketing Officer, Bluegrass Family Health

Broker Sales Support, Process & CommissionsNancy Atkins, Director of Sales, Bluegrass Family Health

Q & A

Insurix Quoting Tool DemonstrationAaron Downend, Vice President, Insurix

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Kismet ToksuPresident

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State of the Current Environment

Premiums increased an average of 13.9% in 2003. Average coverage cost is now $9,068 family/$3,576 single. Plan sponsors continue to pay an average of 84% of premium for single

and 73% for family coverage. Rx cost increases are driving employers and consumers toward

generics. 58% of patients surveyed use the internet to become better educated

about their treatment options and costs. A 4% pay increase is considered good in this economy is often negated

by increasing health care costs. Rising costs squeeze budgets leaving less money for salaries and

wages, especially among small employers.

Data excerted from nationwide surveys conducted by the Kaiser Family Foundation, Fidelity Investment and Mercer Human Resource Consulting.

Rather than cutting health benefits, employers are screaming for innovative coverage ideas.

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Enter… Consumer Choice Health Care

Holds Cost or Minimize Increases in 2004

Minimizes Premium Trend Going Forward – average 7% for CDHP rather than 15% PPO

Continues to Provide Comprehensive, High Quality Medical Benefits

Better Manages Utilization

Supports Recruitment and Retention Goals

Provides Incentives for Employees to Become Partners in Managing Health Care Costs

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Employer Value Proposition

Mitigates health care cost trend. Employs a new cost control strategy combining supply-side and

demand-side management. Provides financial incentives to employees for wise health care

purchasing.

Motivates members to be healthy.

Enables and supports employees to take control of their healthcare.

Provides a “safety umbrella” in the event of multiple or catastrophic health events.

Creates a partnership between Employer and Employee in managing health care quality and cost.

Leverages the power of technology.

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Current Adoption Rates

When offered as an option: Up to 65% of participants enroll – appx. 20% is average 20% - 30% of new hires select

Increasingly offered as full replacement

More than 90% of employees re-enroll

Employee surveys show high levels of satisfaction

Employer and carrier analysis show positive financial results

Employee and employer survey results from Towers Perrin, PriceWaterhouseCooper, Mercer Human Resources Consulting, Definity Health and Lumenos.

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• Abbott Labs• Baylor Health Systems• Budget Group• Western Trailers• Cardinal Health*• Honeywell• JB Hunt• Novartis• Pharmacia• City of Provo• US Postal Service

• Whole Foods• Raytheon• CVS Pharmacy• Charter Communications• Old World Industries• Intel• Medtronic• Pitney Bowes• Ridgeview Medical Center• Trover Solutions

Current Employers Offering CDHPsLarge Group + Mid and Small Segments in All Industries

* Current Bluegrass Family Health client.

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Consumer Choice “Best in Class” Product Features

Employer-sponsored, consumer-directed health care alternatives -- in its best form -- combine:

1. Preventive Care Coverage2. HRA 3. Patient Responsibility4. Traditional Coverage 5. Consumer Support –

Web Tools Health & Medical Management

Are fully Internet-enabled.

Leverage and support consumer purchasing ability by providing access to tools.

Focus on the consumer as the most powerful form of health care cost containment.

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How Consumer Choice Products WorkHow Consumer Choice Products WorkExample: Family CoverageExample: Family Coverage

Health Reimbursement Account$1,000

64% of participants roll over fundsAverage roll over amount of $342

Patient Responsibility

$1,000

TraditionalCoverage

Employee is responsiblefor paying an out-of pocketamount. This is called the “bridge” or “gap.”

Employee is responsiblefor paying an out-of pocketamount. This is called the “bridge” or “gap.”

Annual employerpre-tax allocation to an employee’s HRA

Employer providescoverage above the deductible

Coverage takes effectwhen expenses exceedannual employer HRA

allocation plus the “Bridge.”

HRA used for qualified expenses;

Unused amounts roll over year to

year

Deductible $2,000

Preventive Care 100% 1st Dollar Coverage

+ Consumer Health & Medical Management + Web Enabled ToolsFSA & Debit Card Features Optional

Institutional Trust ServicesWells Fargo Health Benefit Services

A Fast, Easy & Quality Solution!A Fast, Easy & Quality Solution!

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Institutional TrustInstitutional Trust Premier Provider of Retirement,Premier Provider of Retirement,

HRA, FSA and HSA Administrative ServicesHRA, FSA and HSA Administrative Services

Administering 120,000 HRA accounts; 95,000 FSA accounts. Administering 120,000 HRA accounts; 95,000 FSA accounts.

Total Trust Assets Under Administration: Over $500 Billion

Total Trust Assets Under Management: Over $200 Billion

Total Institutional Trust Staff: 1,600+ Team Members

Total Investment Professionals: 200+ Team Members

Total Wells Fargo Mutual Funds Assets: Over $72 Billion

Total Retirement Plan Services Participants: Over 1 Million

Institutional Trust Plans: Over 8,500

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HRA TrendsHRA Trends What we are seeing

Both HRA & Flex use BennyTM Card for all of 213(d)

Using data file to match card swipes to lessen audits letters.

Most plans are NOT funded.

Rx and Dental HRA’s are new…we are introducing both for 2004

Flex first vs. second or mutually exclusive

Vesting periods and retirement strategy including interest

Offering HRA as option or full replacement

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Employer Advantages of HRA vs HSA

Potential HRA Advantages Potential HSA Disadvantages

Cash flow advantage—HRA $’s are a promise to pay. Employer keeps control

Employer may fund on pay-as-you-go basis but doesn’t have real control.

Employer has much more flexibility in designing plan

High Deductible Health Plan (HDHP) more strict. Only $1K and 2K deductible or more will apply.

Employer can decide to vest $ or not. HSAs are owned by EE’s

No trust required, company can set up VEBA. Most don’t.

Must set up trust

No restriction on other plans ee may have. HSA participant cannot be covered by other plan with lower deductible.

Maximum out-of-pocket not mandated, company has more freedom to design plan

HSAs set limits on plans…$5k for single and $10k for family. Rx plans are problems

EE’s must use $ for qualified expenses EE can use $ for car payment and pay penalty

Employer has more control of expense substantiation process

Employer cannot restrict reimbursement or claims process

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Card Features• Works with Wells Fargo as the “Intel Inside”• Interfaces with HRA and/or FSA;

employees can still submit manual claims• Used for allowable services wherever

MasterCard is accepted• “Multi-Purse” capabilities• With web (wffbs.com) access to:

– account transactions– account balances– account history

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Rita Y. WoodsProduct Development Specialist

Bluegrass Family Health

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Bluegrass Consumer Choice

Next Generation Alternative

Employers

Understand health care costs will continue to rise

Most cannot continue to absorb the rising costs

Employees

Want more choice and control

Underestimate the value of their health insurance benefits

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Deductible

Bluegrass Consumer Choice

Five Major Components

Web

-ena

bled

tool

s

PPOHealth

Insurance

PatientResponsibility

Health Reimbursement

Arrangement

Preventive Care

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Bluegrass Consumer Choice Plan Design – Phase I

DEDUCTIBLE Range of Deductibles offered

Employee $1000/1500/2000/$2500

E+S, E+C, Family (2X) $2000/3000/4000

1 person must meet the deductible after which it is cumulative

OUT-OF-POCKET MAXIMUM

1 person must meet the OOP Max, after which it is cumulative

Range of Out of Pocket Max offered

Employee $2000/$2500/$3000/$4000/$5000E+S, E+C, Family (2X) $4000/$5000/$6000/$8000/$10000

Standard Funding Level at 40, 45 or 50% of DeductibleHRA

Benefits Mirror PPO

Covered expenses pre-determined

PREVENTIVE CARE

Allocated on individual basis

100% first dollar coverage paid from PPO

Co-insurance for all services except preventive care90% / 10% in network 70% / 30% out of network80% / 20% in network 60% / 40% out of network70% / 30% in network 50% / 50% out of network

Urgent care pays at in network rates

CO-INSURANCE

All services on a co-insurance basis -- No preset co-pay

Utilizes current network

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Bluegrass Consumer Choice Plan Design – Phase I

PHARMACY

Co-insurance with minimum (lower of $15 or price) and maximum ($150) by script

Range of Deductibles offered ($100, $150, $200)

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Bluegrass Consumer Choice Web Support – MyBluegrassInfo.com

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Bluegrass Consumer Choice Web Support – Wells Fargo Flex Benefits Services

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Bluegrass Consumer Choice

Plan Design – Phase I

FSA – Option Behavioral – Mandated

Rx – Option Chiropractic – Mandated

Infertility - Option Home Health – Mandated

Benny Card - Option

ADD-ONS/OTHER

MEDICAL – 2-4 Tiers HRA – 2-3 Tiers

Employee Employee

Employee + Spouse Employee + 1

Employee + Child(ren) Family

Family

TIERS

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Garry R. RamseyChief Marketing Officer

Bluegrass Family Health

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Bluegrass Consumer Choice

Next Generation Alternative

Brokers and Agents

To review a sample Bluegrass Consumer Choice recommendation package, contact your Bluegrass Family Health Account Executive, or call 1-800-787-2680, ext. 4317.

Employers

For more information about Bluegrass Consumer Choice, please contact your Broker or Agent.

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Nancy G. AtkinsDirector of Sales & Marketing

Bluegrass Family Health

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Product Description

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Employer Materials

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Employee Materials

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Quoting Options

Deductible

1,000$ / 2,000$

1,500$ / 3,000$

2,000$ / 4,000$

2,500$ / 5,000$

Out - of - Pocket Maximum2,000$ / 4,000$

2,500$ / 5,000$

3,000$ / 6,000$

4,000$ / 8,000$

5,000$ / 10,000$

Coinsurance

90% / 10%

80% / 20%

70% / 30%

Rx Options

Coinsurance

50 / 100$ 80% / 20% 150$

100 / 200$ 80% / 20% 150$

150 / 300$ 80% / 20% 150$

50 / 100$ 70% / 30% 150$

100 / 200$ 70% / 30% 150$

Maximum per Prescription Deductible

150 / 300$ 70% / 30% 150$

200 / 400$ 70% / 30% 150$

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Quoting Process

Phase 1

Step 1 -- You submit request to BFH Account Executive

Step 2 -- BFH Account Executive submits request to Underwriting

Step 3 -- BFH Underwriting calculates rates and returns to Account Executive

Step 4 -- BFH Account Executive works with You to formulate recommendation

Step 5 -- BFH Account Executive returns rates and recommendation to You

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Proposal Package

$ 89.25 89.25 89.25

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Garry R. RamseyChief Marketing Officer

Bluegrass Family Health

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HSA Integration – May 2004

Online Enrollment – July 2004

Enhanced Web Support Tools – 3rd Qtr 2004

Automated Quoting Process – 3rd Qtr 2004

Additional Rx Options – 4th Qtr 2004 Carve in or out of medical HRA Stand-alone Rx-only HRA

Bluegrass Consumer Choice Co-branded Benny Card – 4th Qtr 2004

Bluegrass Consumer ChoicePhase II

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