Alice Rosenblatt

Executive Vice President & Chief Actuary, WellPoint

Private Sector Initiatives to Control Costs

Presentation to Citizens’ Health Care Working Group

May 13, 2005

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About WellPoint

Product Innovation

Network Design

Health Care Management

Pharmacy Management

Leveraging Technology

Agenda

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About WellPoint

Leading health benefits company in the nation Approximately 28 million medical members

– Blue plans in 13 states: California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, Ohio, Virginia and Wisconsin

– UniCare across the country, including significant presence in Illinois, Texas, and Massachusetts

– HealthLink in Missouri and six other states: Arkansas, Illinois, Indiana, Iowa, Kentucky and West Virginia

Major specialty businesses: pharmacy, dental, vision, life/disability, behavioral health, EAP, workers’ compensation, state-sponsored

Nation’s 2nd largest Medicare contractor Cover 1.8 million State Sponsored members (Medicaid, SCHIP,

etc.) More than 38,000 associates

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Product InnovationConsumer Driven Health Care

Consumer-CentricProduct

•Typically a high-deductible PPO ($1,500 - $4,000)

•100% covered preventive care

•Health Reimbursement Account (HRA)

•Health Savings Account (HSA)

•Complemented by Flexible Spending Account (FSA)

•Web based front end•Benefits integration framework

•Deep and broad•Choice-driven

•eHealth tools•eService tools•Provider directories•Quality guidance

Five key elements comprise the framework for the most common product offerings

Consumer Decision

Support Tools

Technology Platform

Flexible Provider Network

Cost-share Funding

Mechanisms

Product and Plan Design

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• User-friendly with context-consistent data and information

• Research more than 150 different medical conditions and procedures

• Compare hospital quality

Product InnovationHealthcare Advisor

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Clinical outcomes Patient safety Hospital reputation Market-specific studies Hospital comments

Product InnovationHealthcare Advisor

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Product InnovationTonik

Developed by and for the “Young Invincibles”

Unique package of benefits

Educates audience

Offers low price points

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Product InnovationBeneFits Plans for Small Businesses

Makes it easier for small businesses to offer coverage to their employees– employee participation requirements reduced to

60%

– employer contribution reduced to 25% or $50

– coverage options for part-time employees

84% of groups buying BeneFits plans to date were previously uninsured

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Network DesignProvider Contracting

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Segmented Networks

Centers of Excellence• Narrow network for high

cost procedures– CABG– Transplant– Bariatric Surgery

• Smaller, more efficient quality networks– Select HMO– Select PPO

Using information to recognize hospitals for quality of care, better outcomes and efficiency

Network DesignInformation-Based Networks

Hospitals

Subspecialists

Specialists

Primary Care Physicians

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Network DesignP4P Programs at WellPoint

Partnerships with physicians and hospitals on quality incentive programs that include PPO and HMO products, and Medicaid

Clinical Outcomes

Evidence-based medical procedures

Generic Prescribing Rates

Technology & streamlined administrative processes

Patient Satisfaction

Focused on primary care physicians. Typical major components:

PCP Programs

Clinical Outcomes

Evidence-based medical procedures

Generic Prescribing Rates

Technology & streamlined administrative processes

Patient Satisfaction

Focused on specialty care physicians. Early initiatives in: Ob/Gyn, Cardiology, Orthopedics. Measures similar to PCP programs:

Specialist Programs

Patient Safety

Clinical Outcomes

Patient Satisfaction

Focused on acute care hospital, typically full service facilities. Hospital programs typically have the following components:

Hospital Programs

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At Risk withUnhealthy Lifestyles

Single Factor - Multi-Factor

Chronically Ill /Complex Conditions

Early Stage - Late Stage

Healthy, Wanting toRemain Healthy

Wellness - Fitness

Manage DiseaseImprove HealthSustain Wellness

Data Mining, Predictive Modeling

Integrated Care Models/Care Counselors

Disease Management

Hospital and Physician Quality Programs/Pay For Performance

New Technologies and Therapeutics Processes

Specialty Pharmacy Programs

Health Care Management

Health Care ManagementClinically Appropriate, Cost-Effective Imaging

Pre-Authorization of Advanced Imaging– MRI, CT, PET and

Nuclear Stress Redirects Imaging to

most clinically appropriate modality

Steerage from higher cost to lower cost site of service, e.g., benefit designs in consumer directed plans

Criteria developed in collaboration with American College of Radiology

65

70

75

80

85

90

95

2Q00

3Q00

4Q00

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

Before prior consultation After prior Consultation

CT and MRI Imaging UtilizationAnnual Procedures Per 1000 Members

Radiology Management

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Midwest Care Counselor Prospective controlled study of 12,000 members

– Control group: 4,134– Intervention group: 7,797

Multiple chronic diseases: Average cost per year $24,000 Savings of 14% – or $3,500 per year – for members enrolled in

program ROI of 4:1

Health Management Corporation (HMC) ASO groups who purchased DM (study group of 76,000 members)

and those who did not (control) Chronic diseases (diabetes, asthma, coronary artery disease) Savings of 11% for those enrolled in the program ROI of 2.8:1

Sources: Cousins, Liu, Disease Management, Vol. 6, 2003. Harvard Blue Works Award, Program Description.

Health Care ManagementDisease Management Programs

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Health Care ManagementBehavioral Health

Follow-up after psychiatric hospitalization Health management program for depression

and co-existing illness Postpartum depression screening and

education program Anti-depressant medication compliance in

cooperation with PBM

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Pharmacy Management

Clinical / Medical ManagementClinical Business Plan Intervention ProgramsTherapy Management Disease ManagementPatients-At-Risk

Formulary ManagementTreatment GuidelinesP&T CommitteesManufacturer DiscountsPreferred Rx ProgramsPrior Auth CenterGeneric drug initiatives

ReViewPointOnline Reporting

Claims ProcessingClaims KeyingOnline DUR

Network ManagementNational NetworkCustomized Local NetworksMAC Programs

ConsultativeServicesIncentive ProgramsBenefit DesignsInterventionsAccount ManagementSales SupportBusiness StrategiesPharmacy Care Pharmacy Care

ManagementManagement

Mail Service PharmacyIntegrated Mail Service Pharmacy2 Facilities

Specialty PharmacyManagement and distribution of high tech, injectable drugs2 Facilities

4th largest PBM

Over 336M scripts in 2004

Full spectrum of PBM services

Innovative programs to manage drug trend

Clinical programs: outcomes-focused, patient-centric

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Leveraging Technology

Contact Point

Contact Channels

Constituents

MEMBERMEMBERSHIP SERVICES EMPLOYER BROKER / AGENT

Membership Service

AssociateWeb EDIEET

PROVIDER

IVRWEB PHONEEMAIL FAX POSTALEDI

• Member Self-service• Employer Access• AgentFinder / AgentConnect• Provider Finder

• Auto-adjudication rates• Standard plan designs• Enhanced workflow management• Associate training

• Provider connectivity (EDI)• Consistent claim edits• Provider education / training

Process around 600 million medical and pharmacy claims per year

Benefits, eligibility & claims status inquiries account for about 85% of customer service call volume

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Leveraging TechnologyPhysician Quality & Technology Initiative

E-prescribingOutcomes Research Electronic Med RecordVirtual Visits

BasicConnectivity

ClaimsProcesses

MedicalManagement

Clinical Support

EligibilityMember BenefitsClaim StatusReferralsClaim SubmissionRe-CredentialingProvider Directory Provider Change

Preprocessing Claims Remittance Allowance Inquiry Claims CorrectionPlan AR Aging

ER Notifications Formulary Management Alerts and Reminders Auto-AdjudicationPre-Certification Disease Management

Move from basic administrative services to transactions that support quality care

GOAL:

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BEFORE AFTER

High Handwriting Risk

No Drug Utilization Review

No Formulary Check

No Handwriting Risk

Full Drug Utilization Review

Formulary Check Completed

Prescription Improvement PackagePrescription Improvement Package

Leveraging TechnologyPhysician Quality & Technology Initiative

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Leveraging TechnologyCalRHIO

WellPoint Foundation made $1M grant to support California Regional Health Information Organization

CalRHIO Goal: build a statewide data exchange– Support use of IT and creation of a secure health information

data exchange system to improve safety, quality, and efficiency of health care

– Enable healthcare providers to use IT to securely exchange vital patient information

– Identify legislation and regulation necessary for statewide data sharing

– Ensure California’s data exchange projects are consistent with national technology platforms and networks