Agenda

1. Contributory Plan UpdateCheryl IernaDirector of Product DevelopmentCommonwealth ChoiceNovember 12, 2009

2. Agenda • Review completed product evaluation data • Enrollment data • Employee choice data • Impact on carrier premiums • Employer, enrollee and broker survey results • Next steps

3. Context • CP product launched to pilot brokers in February (about 10 actively selling) • Small group health plan product (<50 employees) using adjusted list bill rates • Offers carrier choice to employees, with fixed dollar employer contribution • CP Pilot Program intended to assess - • Customer satisfaction • Health plan risk “selection” • Operational effectiveness • Market demand

4. Enrollment Data

5. Enrollment Statistics The Contributory Plan Pilot has enrolled 42 employers and 145 subscribers through September 2009 Contributory Plan Enrollment by Month As of September 2009 Cumulative Employers 6 8 22 29 29 32 34 42 Cumulative Subscribers 13 21 48 73 73 83 110 145 Average Group Size 2.2 2.6 2.2 2.5 2.5 2.6 3.2 3.5 Source: Connector CP Enrollee Reports

6. Enrollment Statistics Most of this enrollment has been in the smaller group sizes, consistent with the small group market overall Total Enrollment by Group Size As of September 2009, 42 groups total Avg Group Size CP : 3.5 Mass SmG: 3.3 % Groups of 1 CP: 33% Mass SmG: 50% # Employers Group Size: # Subscribers 14 16 21 8 15 12 21 22 16 =145 total Source: Connector CP Enrollee Reports

7. Enrollment Statistics Larger groups tended to choose Silver plans and smaller groups chose Bronze plans. Only 1 employer chose a Gold plan Employer Tier Choice As of September 2009, 42 groups total Average Group Size: 2.0 4.6 1.0 % of Employers 40% 57% 2% % of Subscribers 23% 76% 1% Source: Connector CP Enrollee Reports

8. Employee Choice

9. Enrollment Choice Analysis Excluding groups of one, 35% of subscribers chose an alternative plan design representing 58% of employers ChoiceShare of employees exercising choice, 24 groups totalExcludes September accounts and intentional groups of 1 58% of employers had at least one sub exercise choice.(14 of 24 employers, excluding intentional groups of 1). 65% stayed with benchmark plan 7% chose an alternate plan with the benchmark carrier 35% exercised choice 28% chose an alternate carrier Source: Connector CP Enrollee Reports

10. Enrollment Choice Analysis There is not a significant difference in age. Employees with non-single coverage were slightly more likely to exercise choice Which employees exercise choice? Does it vary by age, family composition? Excluding September accounts and intentional groups of one, 24 groups total 1 Average age as of August 15, 2009 Source: Connector CP Enrollee Reports

11. Enrollment Choice Analysis Of the 35 Employees exercising choice, 17 chose a plan that cost less, 18 chose a plan that cost more Monthly Employee Cost of Chosen Plan vs. Benchmark PlanFor employees choosing a non-Benchmark Plan (each column is one subscriber), 35 subs from 24 accountsExcludes September accounts and intentional groups of 1 Chosen Plan MORE Expensive than Benchmark Avg premium per subscriber impact of choice: +$13 per subscriber (5% increase) Chosen Plan LESS Expensive than Benchmark Note: Those who purchased a more expensive plan tend to be slightly younger (41 vs. 44) and more likely to be single (72% vs. 47%) than those who purchased a less expensive plan. Of the 3 subs who chose to pay $300+ more/month than the benchmark plan, one is a single COBRA subscriber, one is a family subscriber who has an employer contribution of 100%, and the last one is a family subscriber living in NH. The 2 subs who chose to pay $150+ less/month than benchmark were both families. Source: Connector CP Enrollee Reports

12. Ability of List Bill Rating to Produce Comparable Premiums

13. Premium Comparison Analysis: Overall Results Overall premiums paid by CP are 1.3% lower than premiums carriers would have gotten with re-rating Monthly Premium GapAs of August enrollment, 34 groups total Overall Gap: -$844 -1.3% • Very small sample size. Findings provide directional feedback only . • Excluding intentional groups of 1 changes the overall percent gap slightly to -1.6% • Totals are for subscribers enrolled through August 2009, excluding those who enrolled in months after their company’s initial enrollment. Companies who have cancelled are not included. Source: CP Enrollment data, Carrier data, Faulkner Consulting Group Analysis, DeWeese Consulting Analysis

14. Premium Comparison Analysis: Alternative Approach Best Guess: Without CP, all CP accounts would have been sold to the benchmark carrier. Under this assumption, CP premiums are virtually the same as the premiums that would have been collected without CP CP Premiums Actual premiums paid by subscribers1 What would have happenedif there were no CP Premium Gap ($26), or (0.04%) CP premium collected is $26 or 0.04% less than what would have been paid if there were no CP • CP premiums derived based on original carrier quote. • Carrier quote based on the original census, before waivers and choice • CP pricing model adjusts original carrier quote for final census using a list billing adjustment algorithm • Without CP, assumes all business would still have been sold, to the benchmark carrier • The benchmark carrier then would have gotten 100% of the subscribers (there would have been no choice) • Carrier payment estimated at original group composite premium rates, applied to group enrollment, after waivers and before choice Note: Very small sample size – results provide directional feedback only 1 These premiums are before the deduction of the 4.5% Connector admin fee. 2 The comparisons are based on the month the account enrolled in the plan. Any changes to subscribers after the initial month of enrollment is not included in this analysis. As a result this analysis has 3 fewer subs than the August totals affecting 2 accounts - one account had 3 new subs, another account had 1 cancellation and 1 new sub. All 4 of the new subs exercised choice, so these results reflect 4 fewer subs who exercised choice than the August totals.

15. Survey Results

16. Survey + Interview Findings Qualitative feedback on the CP pilot was gathered via online surveys and live interviews • Incentives were offered to employers and employees for survey participation. • Survey respondents appear to be representative in terms of choice behavior; 40% of employee respondents had exercised choice compared to 35% overall. • Employer contacts who were also subscribers were sent both an employer and employee survey. • 5 of the brokers who responded to surveys in April are no longer actively part of the CP pilot.

17. Survey + Interview Findings: Employers and Employees Importance of employee choice The employee choice model appears to be well received by employers and employees How important was the “employee choice” feature in selecting the Contributory Plan? Please compare your satisfaction with the employee choice allowed by the Contributory Plan vs. purchasing “traditional” insurance outside the Health Connector 13/16 (81%) Important/very important 14/16 (88%) More/much more satisfied Employers How did you like being able to choose a plan other than the Benchmark Plan and being able to pay/pocket the difference in monthly contributions? How satisfied were you with the health plan choices offered through the Contributory Plan? 31/34 (91%) Liked/really liked 27/34 (79%) Satisfied/very satisfied Employees Note: 3 out of 4 groups with only 1 subscriber rated the importance of employee choice as Important/very important. An employer with only one subscriber commented, “I currently do not employ any full-time employees who meet the health insurance requirements for my size business. However, this will be a benefit that we can offer as our business grows.” Key concerns among both group were operational (website/enrollment). Employers were also concerned about network options for employees who resided outside of MA. Employees were also concerned about provider networks. Source: Online surveys of Feb-Aug CP enrollees, Faulkner Consulting Group

18. Broker Feedback Survey + Interview Findings • 53% of brokers reported that all/most of their clients were aware of CP • 40% of brokers reported that all/most of their clients who were aware were interested in CP • Two thirds of brokers were generally satisfied with CP overall • Two key concerns - • CP pricing (e.g., perceived higher than a direct to carrier option, high employer expectations for Health Connector to lower prices) • Operational (e.g., quoting process, enrollment, list bill rates) Source: Online surveys of Feb-Aug Brokers selling CP, Faulkner Consulting Group

19. Conclusions and Next Steps

20. In Summary • Some employers and brokers like it • Choice is highly valued by employees • Early data shows little difference in premiums collected in list vs. composite rating (0.04-1.3%) • There is little evidence of risk selection bias - • Little notable variation in age or family composition between benchmark and non-benchmark plans • Employees are equally likely to buy up as to buy down • Enrollment growth is slow and group size is less than projected

21. Conclusions • Product is viable • Will serve a segment of the small-group market, but not most of it • Needs “re-tooling” in order to better serve a segment of small employers and grow

22. Next Steps • CCA has identified the key issues facing the CP product - • Broker distribution channel • Technical pricing issues • Current web functionality limitations • Lack of out of state coverage • CCA staff working on time and resource estimates to address these issues • Once estimates are complete, CCA to decide on next phase of CP • Recommendations to the Board in the December/January timeframe