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Small Business Transition Opportunity Board of Directors Meeting January 14, 2010

Small Business Transition Opportunity Board of Directors Meeting January 14, 2010. Small Business Transition Opportunity: Introduction. Governor Patrick and legislative leaders have highlighted the need for rate relief for small employers This opportunity meets 3 key goals for CommChoice:

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Small Business Transition Opportunity Board of Directors Meeting January 14, 2010

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  1. Small Business Transition OpportunityBoard of Directors MeetingJanuary 14, 2010

  2. Small Business Transition Opportunity:Introduction • Governor Patrick and legislative leaders have highlighted the need for rate relief for small employers • This opportunity meets 3 key goals for CommChoice: • Reduce employer costs • Simplify/streamline “administrivia” • Reduce Health Connector’s costs • This opportunity focuses on mini-group segment: 1-5 employees

  3. Small Business Transition Opportunity:Advantages of Scale • CommChoice model depends on scale: • Reduce administrative fee charged to carriers (currently at 4.5%) • Economies of scale applicable to all CommChoice enrollees

  4. Small Business Transition Opportunity:Approach • Phased transition of accounts: 4/1/10: 1,200 subscribers 4/1/11: 15,800 subscribers • FY ’12 – Total CommChoice membership could exceed 50,000 (220% of current size)

  5. Small Business Transition Opportunity:Value for Small Employers • Reduce admin charges to “mini-employers” (typically $35/sub) • Eliminate annual membership fee ($85/year) • Simplify shopping experience for small employers/brokers

  6. Small Business Transition Opportunity:Employer Admin Fee * Per Subscriber per month basis * FY 2010 includes SBSB Membership Fee

  7. Small Business Transition Opportunity:Projected Carrier Admin Fee

  8. Small Business Transition Opportunity:SBSB Total Revenue * Legacy business will decrease over time. * Replaced with new small group growth at a lower per subscriber per month cost. * SBSB Legacy PSPM increases due to expected composite premium increase. * Conservatively assumed no incremental new growth in FY 2011.

  9. Small Business Transition Opportunity:Commonwealth Choice P/(L) * Total Commonwealth Choice business (Small Group & Non-Group)

  10. Small Business Transition Opportunity:Commonwealth Choice P/(L) * Total Commonwealth Choice business (Small Group & Non-Group)

  11. Small Business Transition Opportunity:Key Terms • Business Transfer Agreement • Phased transition of “legacy” accounts: • Phase 1: 1,200 subscribers for 4/1/10 • Phase 2: 15,800 subscribers for 4/1/11 • Payment for “legacy” accounts: Historic fee (≈ $35 PSPM)

  12. Small Business Transition Opportunity:Key Terms (Cont.) • Service Contract Amendment • Payment for “new” small group accounts: • With Broker: $6.24 PSPM (call center/billing fee), plus $10 PSPM (broker expense), plus $1.75 PSPM (general agency services for small businesses) • Without broker: $6.24 PSPM (call center/billing fee), plus $5 PSPM (general agency services for small businesses)

  13. Small Business Transition Opportunity:Key Terms (Cont.) • Service Contract Amendment (Cont.) • Extend existing sub-connector service contract at current rate of $6.24 PSPM from May, 2011 to May, 2013

  14. Small Business Transition Opportunity:Vote • The Board hereby votes to authorize the Connector to enter into a Business Transfer Agreement with Small Business Services Bureau, Inc. with the same key terms and substantially the same other terms and provisions as the Connector staff has recommended.  This Board approval is subject to the determination by the Executive Director that the business deal proposed by SBSB and reviewed by the Board provides the same or greater value and benefits to the Connector compared to any business deal described in a response to a Request for a Response issued by the Connector pertaining to a transfer of business from an intermediary to the Connector.

  15. Small Business Transition Opportunity:Vote (Cont.) • The Board hereby votes to authorize the Connector to enter into an extension of the existing service contract with the Small Business Services Bureau, Inc. with the same key terms and substantially the same other terms and provisions as Connector staff has recommended. 

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