OptumHealth Allies Customer Demographics & Value Proposition

1. OptumHealth Allies Customer Demographics & Value Proposition

2. Primary Target Audience – General Descriptions • Working uninsured • Working underinsured (no dental, no vision, limited benefit plans, high deductible plans) • Those who expect to have coverage, either public or private, for only part of the year • Those who lack coverage for the entire family • Families of 3 or more • Households with income above $50,000 (or 400% of the poverty threshold) or higher • People interested in being proactive about health care purchases and activities • People willing to spend out-of-pocket dollars to get care • People suffering from chronic conditions with typically high out of pocket spending • People aged 35 and above • Urban, suburban residents • People who purchase AFLAC or other supplemental, defined benefit insurance plans • People with credit cards and/or bank accounts • Web savvy people with Internet access at home or at work • People who currently spend significant out-of-pocket dollars on health care purchases • Females who fit the above classifications

3. Product Value Proposition • Consumers save real dollars on health care related purchases paid for out-of-pocket • An excellent complement to existing insurance packages on wide range of services not covered by traditional insurance. • Alternative to health insurance for those who can not afford coverage for a wide variety of services and products • One membership applies to the whole family. • Easy to use and easy to save offering discounts at doctor’s offices, medical facilities, alternative health care providers, and an extensive selection of our online partner’s Internet websites • Guaranteed savings off retail prices for all visits to medical care, vision, dental, chiropractic, etc providers through our minimum discount guarantee* • Enormous range of opportunities to save through our extensive medical, dental, vision, chiropractic network with over 500,000 provider locations • Reduces out-of-pocket expenses • Provides benefits regardless of whether you remain insured • Low monthly payment regardless of health condition • Reduces costs for vital preventative care services • Part of a stable and respected health care company that has been in business for almost forty years and has enormous financial resources to support it unlike many players in this industry • HealthAllies is compliant with all industry regulations in all 50 states

4. Product Positioning (Small Business) • Same member features and value proposition as the direct-to-consumer product • Low cost benefit to provide for employees • Partially offsets the impact of limited coverage insurance plans if it is offered • Encourages employee loyalty and boosts morale • Encourages use of preventative medical care services and wellness services potentially improving employee health and well-being yielding better performance at work • Encourages use and participation in FSA, HSA, and HRA plans.

5. Research Data Highlights • When analyzing the lifecycle trends in health care spending, almost 80% of the average lifetime consumption of health care spending occurred from the age of 40 and up. • Among the nonelderly, expenditures for health care and insurance premiums are often incurred at the family level. For example, health plans sometimes set family-level deductibles and out-of-pocket spending limits. Moreover, many proposals to expand insurance coverage and slow the growth of health care costs are applied at the family level, and their impact varies with the level of family spending on health care. • In 2004, there were approximately 127 million nonelderly families in the U.S. civilian non-institutionalized population. Among these families, 55.1 percent had private coverage all year (70.0 million), 6.8 percent had public coverage all year (8.6 million) and 15.1 percent were uninsured all year (19.2 million). In addition, 16.7 percent of families had partial private coverage (21.2 million), i.e., at least one family member had private coverage for part of the year. The remaining 6.3 percent of families had partial public coverage (8.0 million), i.e, no family member had any private coverage during the year but at least one family member had public coverage for part of the year. • Among nonelderly families in 2004, 48.2 percent were one-person families, 23.5 percent were two-person families, and 28.4 percent were families with three or more persons • Among families with three or more persons, family-level mean out-of-pocket expenditures were highest for those with private insurance, and lowest among those with public insurance. Mean out-of-pocket expenditures were $1,654 among families with private coverage, and $355 among families with public coverage. The difference between mean out-of-pocket expenditures for uninsured families ($1,206) and for families with private coverage was not statistically significant. (15) • Out-of-pocket expenditures on health care services were highest among families with private coverage and lowest among uninsured families. • According to data from SIPP, approximately 26 million families had at least one person who was uninsured at a given point in time in 1998.

6. Research Data Highlights • CBO's analysis of data from SIPP and MEPS indicates that about a quarter of the nonelderly population (or about 57 million to 59 million Americans) was uninsured at any time during 1998 (see Table 1). According to MEPS, that measure remained essentially unchanged from 1998 to 1999. (16) • Analysis of SIPP and MEPS data also shows that the uninsured population is very fluid. According to data from SIPP, roughly 63 percent of the people who were uninsured at any time in 1998 lost coverage or gained coverage (or did both) at some point during the year. (16) • Nearly 90 percent of the people who were uninsured all year in 1998 were in families in which at least one person worked, either part time or full time (see Table 2, column 3). Research has found that about 75 percent of the uninsured in working families do not have access to insurance through their employer, the dominant form of coverage among the nonelderly, while the other 25 percent have access to employment-based insurance but do not accept it. (16) • CBO's analysis of SIPP data reveals that although many uninsured spells are relatively short, some are quite long. Many people who become uninsured are in transition from one source of coverage to another (for example, because of a waiting period for coverage at a new job), so their uninsured spells are relatively brief. (16) • The high cost of insurance and lack of access to employment-based coverage are the two most commonly reported reasons for being uninsured. More than 60 percent of uninsured adults cited one or both of those factors as contributing to their lack of coverage (see Table 6). (16) • In 2004, office visits to physicians accounted for about 16 percent of total health care expenses for the civilian non-institutionalized population (figure 1). Private insurance paid for nearly half (48.3 percent) and Medicare paid for just over one-fifth (21.1 percent) of all expenditures for these visits. Out-of-pocket payments by individuals and families was the third largest source of payment category, comprising 14.1 percent of total expenditures for office-based physician care. (17)

7. Research Data Highlights (General Observations) • While more than one-third of visits for office-based physician care (37.2 percent) were to primary care doctors in general practice, family practice, or internal medicine, only about one-quarter of expenditures were for visits to these types of physicians (figure 2). Expenditures for visits to pediatricians also comprised a disproportionately low share of total expenditures for office-based physician care (9.2 percent of visits versus 5.8 percent of expenses). These discrepancies reflect the fact that visits to these types of physicians are generally less expensive than visits to many other types of physicians (e.g., ophthalmologists, orthopedists, cardiologists, and specialists included in the “other” category, such as neurologists, urologists, and general surgeons). (17) • In 2004, the average expense for an office-based visit to a physician was $155 (figure 3). However, the average expense per visit varied substantially according to physician specialty. For example, the averages for primary care providers (general practitioners, family practitioners, internists), pediatricians, and psychiatrists were about $100, which was about half or less of the average expense for a visit to a cardiologist ($232), orthopedist ($210), or ophthalmologist ($206). (17) • On average, in 2004 about one-fifth of expenses for an office-based physician visit were paid out of pocket (19.4 percent) (figure 5), but this percentage varied by physician specialty. The average share paid out of pocket was lowest for visits to cardiologists (12.9 percent) and orthopedists (15.7 percent) and highest for visits to ophthalmologists, psychiatrists, and dermatologists (about one-quarter of expenses for these providers, on average) (17) • The most common office visits in 2004 (number of visits): General/Family Practice (37.2%), Pediatrics (9.2%), Obstetrics & Gynecology (7.6%), Ophthalmology (6.1%), and Orthopedics (5.1%) • The most common office visits in 2004 (expenses): General/Family Practice (24.2%), Pediatrics (5.8%), Obstetrics & Gynecology (7.5%), Ophthalmology (8.2%), Orthopedics (7.0%), and Cardiology (5.0%)

8. Research Data Highlights (Dental) • “Tooth decay (dental caries) is one of the most common chronic infectious conditions among children in the United States.” (7) By the age of 17 approximately 78% of children have tooth decay. (8) The American Academy of Pediatric Dentistry recommends children begin having dental service visits at approximately age 1.(9) • 50.9% of children between the ages of 2-17 had at least one dental visit in 2003, and the average annual dental expense for a child (2-17) who had at least one dental visit was $243, excluding Orthodontist visits, which raised the average expenditure to $501 for the same population segment. (8) • 43.6% of the general population had at least one dental visit in 2004. The average expense for this group was $560 per year per person for people who had at least one visit. The distribution of this is very income dependent with higher income groups attending the dentist more often. Only 27% of those people with no dental coverage visited a dentist in 2004. The average dental expense for a person who had a dental visit but did not have dental coverage was $482. (10) • Approximately 20% of the child population (0-20) had no dental coverage in 2004 and the average dental expense for uninsured children was $470 compared to $544 for children overall. (10) • 34% of adults (21-64) had no dental coverage in 2004 and the average dental expense for uninsured people in this age group in 2004 was $466 compared to $556 overall. (10)

9. Research Data Highlights (Dental) • Approximately 70% of older adults (65+) did not have any dental coverage in 2004 with average annual dental expenses for uninsured people in this age group of $528 compared to $620 overall. (10) • 24.7% of the population with “High Income” did not have dental coverage. (10) • 86% of the people who had a dental visit had a diagnostic procedure (examination or x-ray), while 79% of people who made a trip to the dentist had a preventative procedure (cleaning, fluoride, or sealant) (10) • The average annual orthodontics expense in 2004 for children was $1,375. (10) • In 2004, expenditures for dental care among the U.S. civilian non-institutionalized (community) population were 7.4 percent of total health care expenditures. In 2004, 42.5 percent of the population had a dental expenditure. (18) • In addition, persons with a dental expenditure in 2004 paid 48.0 percent of the costs out of pocket. This is about two and a half times the rate of 19.0 percent paid out of pocket for overall health expenditures. (18)

10. Research Data Highlights (Pregnancy & Children w/ Special Healthcare Needs) • Of the prenatal expenses incurred by privately-insured women who had an uncomplicated pregnancy 15.7% were paid for out-of-pocket for the period 2001-2004. The mean expenditure on prenatal care for this segment was $1,962.00. (12) • “Children with special health care needs are those who have or are at increased risk for a chronic physical, developmental, behavioral, or emotional condition and who also require health and related services of a type or amount beyond that required by children generally.” (11) • 81.3% of people with health insurance coverage spent money out-of-pocket on health care if they had a child with special healthcare needs. The average out of pocket medical expense on privately insured children with SHCN was $300.13 in 2000. (11) • 54.7% of people with health insurance coverage spent money out-of-pocket on health care if they had a child with special healthcare needs. The average out of pocket medical expense on uninsured children with SHCN was $355.14 in 2000. (11)

11. Research Data Highlights (Chronic & Expensive Conditions) • In 2002, the five most expensive health conditions were heart disease, cancer, trauma, mental disorders, and pulmonary conditions. (13) • Twenty five percent of the US Community population was reported to have one or more of five major chronic conditions: mood disorders, diabetes, heart disease, asthma, and hypertension. (13) • The rise in the number of people suffering from the most-expensive-to-treat conditions more than the rise in the cost to treat each individual was the primary determinant in the growth of spending. Three main factors contributed to the rise in the number of people being treated for these conditions are: an increase in the rate of obesity in the general population, changes in clinical treatment guidelines on how handle asymptomatic or mildly symptomatic sufferers, and new diagnostic technologies. (13) • 20 million Americans suffered from heart disease in 2004 with mean expenditures on health care related to this disease of $4,506 and 6.7% of that was paid for out of pocket. (14) • 10.9 million Americans suffered from cancer in 2004 with mean expenditures on health care related to this disease of $5,727 and 4.9% of that was paid for out of pocket. (14) • 34.2 million Americans suffered from trauma related disorders in 2004 with mean expenditures on health care related to this disease of $1,635 and 10.1% of that was paid for out of pocket. (14) • 23.9 million Americans suffered from mental disorders in 2004 with mean expenditures on health care related to this disease of $1,538 and 22.4% of that was paid for out of pocket. (14) • 43.2 million Americans suffered from pulmonary conditions in 2004 with mean expenditures on health care related to this disease of $1,042 and 16.2% of that was paid for out of pocket. (14)

12. Research Data Highlights (Age-Related) • The demands associated with long-term care might pose the greatest challenge for both personal/family resources and public resources. In the United States, nursing home and home health-care expenditures doubled during 1990--2001, reaching approximately $132 billion (14); of this, public programs (i.e., Medicaid and Medicare) paid 57%, and patients or their families paid 25%. In addition, during 2000--2020, public financing of long-term care is projected to increase 20%--21% in the United Kingdom and the United States … However, these increases will be less if public health interventions decrease disability among older persons helping them to live independently. (19)

13. Socio-economic Trends • Obesity • Electronic records, tools, and content • Aging population • Decreasing depth and breadth of coverage • Focus on prevention of disease (Wellness initiatives) • Genetic screening, treatment, and therapy for disease • Early treatment (Early periodic screening, diagnosis, and treatment) • Smaller families • Urban living • Telecommuting • Consumer directed and funded health care spending • Two working parents in the household

14. References • Invoke Consumer Research Study: “The Community” (BolinFulcrum) • Discount Health Plan Market Assessment (blueframe) • HealthAllies Concept Testing: Small Business Target (OriginalThought LLC)