1. 1
U.S. Health Insurance Overview
“An Insider’s Perspective”

2. 2
Agenda
Introduction
HAP Overview
Types of Insurance
Trends
Managing Care
Consumerism
Shift from Volume to Value
Regulations and Process
Opportunity
Product Development Lifecycle Timeline

3. 3
HAP Lines of Business
HAP has nearly 650,000 members across commercial individual and group, government programs (Medicare and
Medicaid) and self-funded lines of business.
Lines of Business
Group
Fully
Insured
HMO, PPO,
EPO, CDHP
ASO
Self Funded
HMO/PPO
TPA
Self Funded/
Shared
Funded
Individual
HMO, PPO,
HSA
Individual
Medicare
HMO,
HMO-POS,
PPO, PDP,
MedSup
Group
Medicare
HMO, PPO
Medicaid
and
Medicare
Medicaid, Healthy
Michigan Plan, MIChild,
CSHCS, HMO Special
Needs Plan (D-SNP)
MI Health Link
(Medicaid and Medicare
Demonstration Project)

4. 4
Health Insurance Funding
In the broadest terms, there are two sources of financing for the health insurance plans across the United
States
• Government: The government uses tax money collected from citizens to provide certain types of health
insurance to applicable populations
• Medicare is health insurance offered to those who have reached age 65
• Medicaid is health insurance offered to the impoverished
• CHIP for children who cannot receive insurance through their guardianship
• Commercial: Individuals, groups and organizations pay premiums for health insurance coverage
• Many people have the option to contribute towards a policy from their employer, being included on a group
plan
• Health insurance can be acquired outside of employer-based coverage as well
• Individuals can take out policies for themselves

5. 5
Self-Funded Insurance Plans
Some employers, typically larger ones, choose to self-fund their employee insurance plans.
• They can save some on typical insurance company profit margins fully-insured plans would
include
• However, this comes with significantly higher risk
• In these instances the insurance company serves as a Third Party Administrator (TPA) to the
self-funded plan and bills monthly for administrative costs
• These plans are much more exposed to losses in the event of excess employee claims than a
fully-insured plan would be
• Self-funded plans have much more control over which benefits they want included in their plan
• Some groups will include stop-loss insurance which covers their self-funded health plan in the
event that claims exceed a predetermined level

6. 6
Self-Funded Growth
While a significant portion of large firms had already adopted partial if not full self-funding for their coverage, the
years 2000-2016 realized a 15% increase across the market
• Small firm percentages have remained more-or-less consistent
Figure 6: Percentage of Covered Workers in Partially or Completely Self-Funded Plans, by Firm Size, 1999-2016
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2016

7. 7
Insuring the U.S. Population
• Private plans cover a little more than 60% of the population
• Government plans cover a little more than a third
• The remainder fall into the Uninsured “category”

8. 8
• Many Americans receive health benefits from
employer-sponsored insurance plans
• Approximately 151 million nonelderly people
are covered by such plans in 2017, more than
half of the nonelderly population
• Funded by premiums which are usually paid in
part by employers and in part by the employed
• In 2017 the average for annual premiums in
employer-sponsored health insurance plans
were as follows
• $6,690 for single coverage
• $18,764 for family coverage
• Other sources of financing include copays and
coinsurance, which are payments made each
time medical service is acquired after meeting
the deductible
Employer-Sponsored Health Plans

9. 9
Managed Care
In earlier markets, conventional (indemnity) health insurance plans were the most common type of plan
• These plans do not incorporate networks
• Same cost sharing applied no matter which provider produces healthcare services to member
Over the last 20 years, organizations issuing health coverage sought out ways to better manage treatment
decisions and costs. As a result “managed care” practices were born. New trends emerged:
• Development of treatment protocols
• Prior authorizations of certain services to ensure need
• Financial incentives to reduce wastefulness
• Streamlining of different aspects of receiving and paying for healthcare
• Compilation of clinical and financial data
The prevalence of health systems that can successfully integrate the different levels of the healthcare
process has continued to rise. Having the provider and insurer elements of healthcare under the same
“roof” can be vastly advantageous.

10. 10
Network-Based Managed Care
Panel or network of contracted health care providers including:
• A set of selected providers that furnish a comprehensive array of health care services to enrollees;
• Explicit standards for selecting providers;
• Formal utilization review and quality improvement programs;
• An emphasis on preventive care; and
• Financial incentives to encourage enrollees to use care efficiently
Provider networks can be used to reduce costs by negotiating favorable fees from providers, selecting cost effective
providers, and creating financial incentives for providers to practice more efficiently.

11. 11
Shifting Relationship Between Payor and Provider
Health insurance (and downstream clinical care) is becoming more retail everyday
 Historically system growth came from its physicians, leading to a dominant strategy of “get the physicians and
patients will follow.”
 New channels and consumer decisions up-end that theory as the health system of tomorrow will need to grow
market share twice. First, a need to be included in the right insurance network(s), second to be selected as
provider of choice for ongoing care needs by the retail-oriented consumer.

12. 12
Provider-Owned Health Plans
• Health insurance plans owned by healthcare providers, typically hospital systems
• Offer ability to combine clinical data and claims data allows for analysis and improvement
• Premiums dollars are better-retained throughout the system
• Through chaining referrals, all aspects of care are under the same umbrella
• These health plans (PLHPs – Provider-led Health Plans) are growing in both quantity of PLHPs and total PLHP enrollment
Source: http://healthcare.mckinsey.com/sites/default/files/The%20market%20evolution%20of%20provider-led%20health%20plans.pdf

13. 13
Trends

14. 14
External Market Forces at Work
There are a number of key interrelated environmental forces impacting the health care industry, creating an uncertain market
for health plans, employers and employees, providers and consumers.
Cross-Industry Retail
and Rise of Consumer
Demands
Emerging Technology /
Digital Health Care
Revolution
Health Care Industry
Forces
Economic Factors and
Shift from Volume to Value
Government Reform
Future Market
for
Health Plans

15. 15
Payor and health system consolidation
Focus on cost containment efforts through traditional efforts as well as the reduction in clinical decision-
making variability
Medicare and Medicaid are projected to be the fastest growing markets
Aging demographics – increased demand for healthcare and the need to better manage these populations
Increasing consumerism – need to quickly learn to connect with consumers
Rapidly growing out-of-pocket expenditures as insurance covers a lower percent of growing costs
Growth in use of retail clinics
Digital transformation needed – health industry behind
General Industry Trends

16. 16
Health Insurance Trends
Overall trends point to decisions by individuals, groups, and carriers to focus on cost effectiveness
while promoting optimal health and care
Rise of consumerism…. Public making better-informed decisions for their care and costs
• Michigan’s individual market grew by 23% from 2013-16 1
• High deductible plans
• Rate of employees with $1,000+ deductible has grown from 41% to 51% in past year 2
• Over half of large groups offer HDHP option 3
• Enrollment in Bronze plans
• Bronze enrollment has increased from 13% to 31% since the ACA was implemented in 2014 4
Carriers and health systems partnering to offer high-performance networks and lower cost options
• Resulting in narrow and tiered networks
• Rate of groups offering narrow network has increased from 7% to 11% in past year 5
Group interest in reducing administrative costs and encouraging employee health and informed decision-making
• Shifting from fully-insured to self-funded
• 82% of large groups are using a self-funded option 6
• Health and wellness programs have become the norm
• 83% of large groups offer a wellness program 7
• Nearly 90% of employers will offer wellness apps, patient portals, and decision-support tools by 2018
Note: Small group=less than 200; Large group=200+
Sources: 1 Mark Farrah 4 CMS Open Enrollment Reports 2, 3, 5,6, 7 Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006-2016

17. 17
Consumer Need Focus
As consumers re-shape the demands of the health care market, health
plans are aligning their business initiatives to meet those needs
Help me
understand my
options
Make my
experience
simple
Keep me healthy
Connect me with
my health
network
Consider my
finances
Website
Alignment and
Redesign
Telemedicine
EMR Remote
Mobile App
Partners in Retail
Care
Revamped Plan
Offerings on/off
Marketplace
Concierge
Services
Enhanced
Customer
Service CRM
Capabilities
Automated Plan
Selection
Assistance via
digital platforms
Direct Link
Between health
plan customer
service reps &
health system

18. 18
Population: Aging
0%
5%
10%
15%
20%
% of Population Age 65+
Baby boomers will have a dramatic impact on use and costs of services.

19. 19
Number of Medicare Beneficiaries, 1970-2030
The number of people Medicare serves will nearly double by 2030.

20. 20
Deductibles on the Rise
Another industry trend has been the increase of the deductible. In a Consumer Driven Health Plan (CDHP)
environment with the introduction of savings options such as HSAs, plans are being designed with higher deductibles
• Small firms have historically had higher deductibles when compared to their large firm counterparts, yet all firms
have realized the shift of employees towards high-deductible plans since 2009
Figure 7: Percentage of Covered Workers Enrolled in a Plan with a General Annual Deductible of $1,000 or More for Single
Coverage, By Firm Size, 2009 - 2016
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006-20116

21. 21
More Accountable for One’s Own Cost of Care
For more than 70 years, health insurance has been the bedrock of employer-sponsored benefits, providing coverage to 150M
Americans today. Even though medical inflation has slowed, outside of direct wages, providing insurance is an employer’s largest cost
of doing business, and with coverage costs and regulatory demands expected to increase, many of the nations 5.7M employers are
searching for cost-shifting strategies and employees are directly bearing the burden.1
Even though premium growth has slowed down on a percentage basis the last three years, over the last 15 years, both single and
family premiums for coverage have tripled in cost.

22. 22
Narrow or High Performing Networks
Figure 8: Among Firms Offering Health Benefits, Percentage of Firms Who Offer a Narrow Network Plan or Have Eliminated
a Hospital; or Health System, by Firm Size, 2016
As evidenced below, large groups are taking advantage of Narrow Networks
• Though there is participation at every level, participation increases with covered group size
• According to the Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2016, in 2015 only 7% of all firms
offered narrow networks, compared to 2016’s 11%
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2016

23. 23
Increased Cost Sharing - Employee Contributions
*Kaiser/HRET. Survey of Employer-Sponsored Health Benefits,2004-2014.[Data from a survey of individuals with family coverage]
+81%
Over the last decade, the average insurance premium has increased in cost 69% ($9,950 to $16,834)
while average worker contribution over that same period has spiked-up 81% ($2,661 to $4,823).

24. 24
Employee Wellness
• Employers are increasingly engaging in employee wellness activities
• Premise: A healthier workforce will require fewer claims, freeing up financing required for insuring a less
healthy population
• Among firms offering health benefits, 38% of small firms and 62% of large firms provide workers an
opportunity to complete a health risk assessment
• Assessments include questions about a person’s medical history, health status and lifestyle
• 52% of large firms with health risk assessment programs offer incentives to complete these assessments
• These assessments supply information used to benchmark employee health and progress
• 52% of large firms and 21% of small firms offer biometric screenings
• These are similar to the assessments in that they gauge employee health
• Biometric screenings measure information such as body weight, cholesterol, blood pressure, nutrition, etc.
• 53% of large firms offering these screenings have incentives tied to completion
• Many firms offer programs to help with unhealthy lifestyles
• 85% of large firms and 58% of small firms offer a program in one of the following
• Smoking cessation
• Weight management
• Behavioral of lifestyle coaching
Source: http://files.kff.org/attachment/Summary-of-Findings-Employer-Health-Benefits-2017

25. 25
Employers Continue to Shift Risk and Cost
1 PWC Health Research Institute: The Rise of Retail Health Coverage (Sept. 2014)
2 Kaiser/HRET. Survey of Employer-Sponsored Health Benefits,1999-2014
16%
21%
35%
40%
46%
50% 49%
58%
61%
10%
12%
18%
22%
27%
31%
34%
38%
41%
2006 2007 2008 2009 2010 2011 2012 2013 2014
% OF WORKERS WITH DEDUCTIBLE OF $1,000
OR MORE FOR SINGLE COVERAGE1
Small Firms (3-199 Workers) All Firms
Employers are increasingly looking to consumer
driven health plans (high deductible + HSA) to shift
risk to their employees.
National Large Employer Cost-Control Strategies (2014)

26. Market Forces Turning Patients into Consumers
Traditional Market Retail Market
Growing number of individual buyers
1
Proliferation of product options
2
Increased transparency Cost & Quality
3
Reduced switching costs / Defined
Contributions and Private Exchanges
4
Greater consumer cost exposure and
participation requirements
5
Passive employer,
price-insulated employee
Activist employer,
price-sensitive, data seeking
individual consumer
Broad, open networks “High Performing”, custom
networks with cost/quality
controls
No platform for apples-to-
apples plan comparison
Clear plan comparison on
exchange platforms and
cost/quality data for services
Disruptive for employers to
change benefit options
Easy for individuals to
customize personal options
and switch plans annually
Static employee premium
contribution, low
deductibles and limited
wellness requirements
Variable individual premium
contribution, high
deductibles and active
wellness participation
Characteristics of a Traditional vs. Retail Market
In the next decade, enrollment in health insurance marketplaces, public or private, will grow
exponentially as employers move away from the benefits business and individual consumers take on
new responsibility. As the market moves from B2B to B2C the shift in demands will be dramatic.
26

27. Rise of Consumerism: Demanding Transparency
27Source: Accenture 2013 Healthcare Transparency Survey
For consumers who use patient reviews in their doctor selection process, the health plan website is one of the most
trusted and referenced source. When it comes to sourcing information on a specific ailment, treatment or medicine, the
health plan is a much less trusted source.
Consumers rank their health plan fifth among sources they consult
to research information about a specific ailment, symptom or
medicine.
For consumers who use patient reviews in their doctor selection process, the
health plan website is most commonly referenced source.

28. 28
Rise of Consumerism: Demanding Transparency
HAP’s Current Transparency
Functionality:
Sources: HRI Consumer Survey, PWC 2013; Healthgrades, Marketing Health Services, Spring 2014
Treatment and out-of-pocket cost remain a mystery to consumers, but the ability to provide that data is a
significant area of growth and investment for large group plans and other investors.
Increase in Transparency Tools 2013-2014
Large Group Health Plans
Provider Search Treatment
Cost Estimates
Out-of-Pocket
Cost Estimate

Prices for hospital, physician and ancillary services remain a mystery
for a majority of consumers
Competitive
Price Compare
Quality Scores &
Member Reviews
 

29. 29
Rise of Consumerism: Digital Communication
Traditional communication methods will be
inadequate to satisfy growing industry and
consumer expectations for value and
convenience.
Social, mobile, virtual visits, predictive
analytics, and cloud data are the
underpinnings for creating a new business
model and services that consumers will
demand and for which health plans will be
sought after and paid.
But to succeed in this new digital world,
health organizations will first need a strategy
that connects modern technologies to their
primary systems.
Source PwC Research Briefing: Top health industry issues of 2014: A new health economy takes shape

30. Rise in Consumerism: The Appeal of Virtual Care
Survey finds virtual visits preferred versus clinic visits near errands or place of work
Increasing Consumer
Preference
Virtual visit with
provider to review
symptoms/treatment
Preference for Location of Services
Clinic located
near work
Clinic located
near errands
Clinic located
near the home
Young, wealthy, busy - strongest potential target audience for telehealth and virtual care1
Of 18-29 yrs olds
54%
Of those making
>$71K per year
49%
Of those working
>35 hours per week
53%
2014 Primary Care Consumer Choice Survey, Marketing and Planning Leadership Council interviews and analysis. 30

31. Rise in Consumerism: Easier Access to Care
Traditional
Access
Points
Growing Demand
Consumer-Oriented
Access Points
Retail
Clinic
Urgent Care
Center
Telehealth
Primary Care
Office
Low Acuity High Acuity Emergency
Department
Consumer-Oriented Service Delivery Sites Filling the Gap
Consumers are demanding easier access and the market is responding to their unmet need
Sources: Deloitte 2015 Health Plans Outlook – Whitepaper; The Advisory Board Company 2014 Primary Care Consumer Choice Survey, Marketing and Planning Leadership Council
Interviews and Analysis
Telehealth has become the new norm, such that anytime day or night, a consumer can
demand and get a secure video consultation with a doctor via a computer or smartphone
at the same cost (about $35) as the typical copay charge incurred with an employer plan.
Deloitte forecasts that virtual visits will soon become the norm (outstripping physical
office visit volume) and that as many as one in six (16%) of visits were virtual in 2014.
. 31

32. Lower Acuity Sites Make Economic Sense as Well
It is estimated nationally that 103M PCP visits and 47M ED visits could be delivered in lower
acuity, less costly treatment settings with alternative care staff.1
32
Annual Visits
to PCPs
Annual
ED Visits
Visits Eligible for
PA/NP-Led Care
103M
47M
132M
Non-Urgent
ED Visits Shifted
to Other Care Sites
573M
18% of PCP visits
could be handled
by PAs or NPs at
more convenient
care sites
Non-urgent ED
visits could be
treated at urgent
care, retail or
primary care
Visits At Risk of Shifting to Other “Lower Acuity” Sites of Care
Source: (1) CDC/NCHS, "National Ambulatory Medical Care Survey, National Hospital Ambulatory Medical Care Survey," 2009-2010; “Primary Care Physician Shortages Could be
Eliminated Through Use of Teams, Nonphysicians, and Electronic Communication,” Health Affairs 32:1. Jan 2013. Health Care Advisory Board interviews and analysis.

33. Retail Clinics & Urgent Care – Explosive Growth
. 33
2000-20151
Estimated Total Number of Retail Clinics in the US
202
868
1135 1172 1220
1355
1418
1743
2243
2868
2000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Growth trajectory depends
on preferred payor relations,
market PCP capacity, and
health system partnerships
Retailer
Operational
Retail Clinics1 900+ 400+ 135 14 75+
Source: As of October 2014. Accenture, "Retail medical clinics: From Foe to Friend?," 2013; Ritchie J, "After a stall, Kroger could add clinics," Cincinnati Business Courier, July 5, 2013; Robeznieks
A, "Retail clinics at tipping point," Modern Healthcare, May 4, 2013; Health Care Advisory Board interviews and analysis.

34. Other Economic Forces at Work – Consolidation
Cuts in government reimbursement, eroding employer-based coverage and emerging,
lower-cost sites of treatment are placing enormous economic pressure on both health
systems and physician groups – leading to rapid market consolidation.
Emerging Threats to Provider Profitability
34Source: The Advisory Board Company, Health Care Industry Trends 2015.

35. Hospital Mergers & Acquisitions (National)
Hospital Mergers and Acquisitions
M&A Plans for the Next 12 Months1
Number of Hospitals Part of a Health System
2000-2013
88%
12%
n=189
No M&A Activity
Planned
Planning to Pursue
M&A Within the
Next 12 Months
Source: AHA Hospital Fast Facts, available at www.aha.org; GE Capital Survey, available at: www.gehealthcarefinance.com; Kaufman Hall, “Number of Hospital Transactions Grew in 2013,”
available at: www.kaufmanhall.com; Advisory Board interviews and analysis.; HFMA, “Hospital M&A Activity Slows Slightly in 2014”, Note: 2014 Hospital M&A number through Dec. 19, 2104 35
65
89 95 98
72
2010 2011 2012 2013 2014
2,542 2,626 2,775 2,921 3,144
2000 2003 2006 2009 2013

36. 36
Shift from Volume to Value

37. Shift From Volume to Value
37
“The current system is stuck on fee-for-service, and it’s a barrier to a better
healthcare model. But I think we’re at a historic time, with a growing
consensus that it’s time to move away from fee-for-service. Once freed from
that tyranny, creativity is unlocked.”
George Halvorson - Chairman and CEO of Kaiser Permanente

38. Today’s health care thrives on volume -- it is provider-centric and driven by fee-for-service payments. The emerging value based health care is
patient-centric, and increasingly population-centric -- driven by global payments.
Experts predict that patient-centered care models, with redesigned reimbursement methods, will create enough value to offset the cost impact of the
aging baby boomers, keeping aggregate health care spending roughly constant over the next decade.
The $2.6 trillion the U.S. spends under that future scenario will not remotely resemble the $2.6 trillion spent today – nor will the industry that delivers
it.
Oliver Wyman forecasts over the next decade value-based models and payments will:1
 Eliminate $500B in low-value-add activities and begin to flatten the cost curve to 3% (slightly above current inflation).
 Cause more than $1 trillion of value to rotate from the old models of care to the new and create more than a dozen new $10 billion high-
growth, alternative care markets.
 Drive “extra” industry players from the retail and technology sectors (fueled by private capital) to enter the health care market either on their
own or partnership with current health innovators. There will be a rapid convergence of the technology, telecommunications, media, and
consumer electronics firms to redefine the value chain.
The Continuous Shift From Volume to Value
Source: The Volume to Value Revolution – Rebuilding the DNA of Health from the Patient In. Oliver Wyman, Health and Life Sciences, 2013. 38

39. Medicare Payment Innovation – Program Guide
Source: The Advisory Board, The Field Guide to Medicare Payment Innovation. 39

40. 40
Regulations and Process

41. 41
ACA Marketplace
Health Insurance Marketplaces established by the ACA are known as Exchanges
• They are organized to act as a competitive market for buying health insurance
• Exchanges offer a variety of plans that meet certain benefit standards
• Exchanges offer individuals cost sharing subsidies and tax credits on a basis of need derived from
income
• Small businesses can buy coverage for their employees through the Small Business Health Options
Program (SHOP) Marketplace
• Exchanges exist in every state and may be either ran by the state or federally operated
• Plans are separated into tiers on a basis of cost-sharing proportions (bronze, silver, gold, platinum)
• Many of the rules governing the ACA Exchanges are in flux due to political tides

42. 42
ACA Essential Health Benefits
To qualify to sell coverage in the ACA Exchanges, plans must entail specified benefits. These are known as
“Essential” Health Benefits are as follows:
• Ambulatory patient services. [outpatient care]
• Emergency services.
• Hospitalization. [inpatient care]
• Maternity and newborn care
• Mental health and substance use disorder services, including behavioral health treatment.
• Prescription drugs.
• Rehabilitative and habilitative services and devices.
• Laboratory services
• Preventive and wellness services and chronic disease management;
• Pediatric services, including oral and vision care

43. 43
State Financial Standards
State financial standards include requirements for minimum capital, investment practices, and establishment of claims and other
reserves. These are put in place to ensure that all financial obligations can be met by insurers in the event of emergency.
Minimum capital requirements: These are requirements of state law that set minimum amount of net worth an insuring
organization must maintain in order to operate
• Must be able to pay all claims
• Varies with the type of insurance (life, health, auto, etc.)
• Recently, laws allow “risk based” capital requirements relating to the minimum capital requirements to ensure best business practices
State market conduct standards include requirements in the following areas:
• Claims practices
• Underwriting practices
• Advertising
• Marketing
• Rescissions of coverage
• Timely payment of claims
Health coverage is generally provided for a limited period, typically one year increments, and state requirements exist to address
the extent to which a purchaser has a right to renew the policy for another year without being reevaluated for coverage

44. 44
Rx Approval
There is a structured process to acquiring FDA approval for new prescription drugs:
• The prospective drug must be tested
• Firstly laboratory and animal tests
• Afterwards human trials to test for safety and effectiveness
• Company sends the FDA an application known as a New Drug Application (NDA)
• If drug contains biologic materials, application is known as Biologics License Application (BLA)
• These applications include
• Drug’s test results
• Manufacturing information to ensure company can properly produce drug
• Company’s proposed label for drug
• Contains uses for drug
• Contains possible risks/side effects
• Includes dosages and usage instructions
• If FDA physicians and scientists conclude drug’s usefulness outweighs known risks and the drug can be
manufactured to FDA standards, drug will be approved and can be marketed in the United States

45. 45
Medical Devices
The FDA’s Center for Devices and Radiological Health (CDRH) regulate companies
that design, manufacture, repackage, relabel and/or import medical devices into
the United States. There are two paths medical devices may take to be FDA-
reviewed prior to market depending on the nature of the device:
• The FDA will “clear” the device after reviewing a premarket notification known
as a 510(k)
• To acquire FDA 510(k) approval the submitter of the 510(k) must show that the device is
“substantially equivalent” to a device that is already legally marketed for the same use
• The FDA will “approve” the device after reviewing a premarket approval, known
as a PMA
• To acquire PMA approval, the PMA applicant must provide sufficient assurance to the device’s safety
and efficiency

46. 46
Value-Added Items and Services
Value-Added Items and Services (VAIS) are items and services offered to plan
enrollees that are explicitly not plan benefits.
• VAIS are typically realized in the form of discount programs to members
• Items and services that cannot be justified as medical benefits built into plan
design
• Typically in the context of health-related industries
• Gym memberships, weight-loss programs, nutritional discounts, exercise
equipment/wearables, etc.

47. 47
Value-Added Items and Services -- Example
Example: A MA plan contracts with a provider or a separate insurer, to provide non-Medicare covered
benefits for its own enrollees at a reduced cost. The MA plan provider requires the plan to collect payments
from enrollees and send those payments to the provider or separate insurer issuing the benefit.
Analysis: MA plans must include in the plan benefit package all benefits it furnishes, including those furnish
via contract on behalf of its enrollees. It may not offer such a benefit as a VAIS. The plan cannot collect
payments from enrollees for services that are not covered as benefits by the plan.
However, if the provider or insurer contracted in this example were to offer services as a discounted rate to
the MA plan enrollees, and these enrollees pay the provider or insurer directly for the services, the play may
provide access to this discount as a VAIS.
Source: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/mc86c04.pdf

48. 48
Drug Formularies
A Drug formulary is a list of prescription drugs, generic and non-generic, used by health plans to
identify drugs that will be covered
• Typically a committee of physicians, nurse practitioners and pharmacists maintain a formulary
• In many cases drugs that appear on a formulary are arranged in tiers
• These tiers identify different cost-sharing mechanisms for respectively tiered drugs
• Usually prescriptions become more expensive for the member the higher the tier
• Some formularies require prior authorization for certain medications
• Drugs that fall into this categorically may have safety issues, high potential for inappropriate use or
have lower-priced alternatives on the formulary

49. 49
Diversifying products,
services, business models
Big data and game
changing technology
Value-based care –
working with providers in
different ways
(collaborative and sharing
data)
•Taking big data, analytics
solutions, technology-enabled
and expert human-capital-
enabled business capabilities to
providers
Thinking outside the
legacy transaction
processing roles of a
health plan to value-
added roles
Future Focus - Opportunity

50. 50
Oct Nov Dec Jan Feb March April May June July Aug Sept Oct Nov Dec
Marketing
Begins Oct 1
Product Development
Timelines developed / Corporate w ide impact assessed /Review for compliance w ith current industry regulations / Systems, processes and
documents updated and built / Vendor contracts negotiated and signed (if required)Cross departmental project team built / Kick-Off Meeting
Product Implementation Planning
Implementation kick-off/ Benefit review w ith Matrix Partners /ANOC-EOC creation
NOTE: Other Product Development Initiatives generally follow the Large Group process but can be implemented at any time (e.g., telemedicine, wellness plans, etc.) In addition to January, July timeframe is also peak time for large group renewals.
Implementation and Launch
Marketing strategy developed and communication materials created / Internal and external training developed and delivered / GO
Live
LEGEND: Provider/ Network Contracts Signed Agent Event
Product Management
Ongoing development and implementation of strategies for product membership growth and retention. Recommend and implement process changes to increase performance.
LARGE GROUP
for 1/1/ Effective Date
Need approx. 9 months for
implementation activities
once network and provider
decisions are made (e.g.,
pricing, filing, collateral
development, web updates,
launch to market, etc.)
Research and Analysis
Market evaluation including review of RFPs / Resource estimates requested / Budget developed
Business Case prepared /Initial presentation to PSC / Strategic Initiative presented (if required)
Product Development
Finalize product strategy / Submit CMS Applications & Notifications / Develop new products/
Confirm benefit design & system capability /Price products
Open Enrollment
Implementation & Launch
CMS approval & sign off/ Fulfill ANOC-EOCs/Marketing material & Required document
creation / Benefit configuration & testing/Producer & Internal staff training / Move benefit &
system changes into production
Research and Analysis
Submit CMS Notice of Intent / Review market data & conduct membership analysis/Engage research vendors/Conduct focus groups / Review & interpret CMS regulation changes / Develop product strategy
Bid Submission/CMS Desk Review
Bid Submission (PBP/BPT) for CMS approval/ CMS
Desk Review / Resubmit as needed
Current Year Activities for Future Plan Year
Research and Analysis
Review and interpret CMS regulations / Establish timelines based on CMS dates / Conduct Internal and external brainstorm sessions and focus groups / Analyze competitive data, product performance and market opportunities
Product Development
Development of new products / Price products / Update riders and contracts /
Product w ithdraw and mapping / SERFF template creation
PRODUCT/
SEGMENT
Configuration, Build and Compliance
Template validation / Product submissions (DIFS and CMS)
Response to DIFS/ CMS objections / Final attestation and sign off on product portfolio
QUALIFIED
HEALTH
PLANS (QHP)
MEDICARE
ADVANTAGE
Medicare Annual Election Period
Oct 15 - Dec 7
4th Qtr Activities
Implementation and Launch
Communicate product portfolio to internal stakeholders and distribution channels/ Prepare data for member renew al letters /
Collateral development / Vendors configured and tested / Internal and external / Products configured and SBCs built
Product Development Lifecycle

51. 51
Appendix

52. 52
Health Insurance Basics
Risk Pooling: The fundamental concept behind insurance – an individual’s risk is
diminished when said individual is grouped together with others
-Risk Pool: Participants in group whose risks are combined
Insurer: An organization that issues insurance policies to cover risks
Insured: A group or individual that purchases the services of an insurer to protect
themselves from risk
Premiums: What the insurer charges the insured for its services
Deductible: The portion of incurred losses the insured in fiscally responsible to cover
Copay: A fee paid by the insured at when the insured utilizes services
Coinsurance: A predetermined percentage of cost sharing between the insurer and
insured

53. 53
Underwriting
Underwriting is the application of methods which maintain a predictable and stable level of risk.
Underwriting is the system which pushes risk pools away from adverse selection and one of the best ways
to accomplish this is to provide coverage to large, already-formed groups of people (employees of large
firms):
• Employee group usually representative of general population if large enough
• Firms do not explicitly hire sick people
Despite the advantages of seeking already formed groups, there are still practices in place to avoid adverse
selection:
• Limit the time during the year for plan enrollment (“Open enrollment”)
• Require certain percentage of employee population to join
• Require minimum employer contributions to plan
Underwriting takes into account factors such as claims history, age distribution, industry and geographic
location

54. 54
ACA (Affordable Care Act): See PPACA
ACR (Administrative Cost Ratio): The ratio of general administrative expenses to premium income.
ASO (Administrative Services Only): An arrangement in which an employer group funds its own employee health insurance program but hires an outside
firm to perform specific administrative services to include evaluating and processing claims while not assuming any risk.
BI (Business Intelligence): A HAP strategic initiative to develop a data warehouse as well as enterprise reporting and analytics capabilities that will
better serve HAP's internal and external reporting needs.
CAHPS (Consumer Assessment of Health Plan Survey): A survey used to collect standardized information on member experience and satisfaction with
their health plans and their services.
CDHP (Consumer Driven Health Plan): A plan with an annual deductible of at least $1,000 for an individual and $2,000 for a family. CDHPs must be tied
to a tax-exempt health savings account (HSA) or health reimbursement account (HRA), in which the member or their employer deposits money to use
for medical expenses.
CHIP (Children’s Health Insurance Program - also referred to as SCHIP): A state and federal partnership program that works closely with Medicaid to
provide low-cost coverage for children in families who earn too much income to qualify for Medicaid but can’t afford to purchase private health
insurance.
CMS (Centers for Medicare & Medicaid Services): US federal agency which administers Medicare, Medicaid, and the State Children's Health Insurance
Program.
Glossary of Acronyms

55. 55
CRM (Customer Relationship Management): A platform that enables the delivery of a best-in-class personalized service experience to all customers,
members, providers, groups, and employees through all touch points.
ED: Emergency Department
EHR (Electronic Health Record): A digital version of medical information that has the ability to be easily shared among multiple stakeholders and to have
the patient’s information follow him or her through the various modalities of care engaged by that patient.
EMR (Electronic Medical Record): A digital version of the medical and treatment history of the patients in one practice.
FFS (Fee for Service): A patient sees a provider, the provider bills the health plan or patient, and gets paid based on that bill.
HCR (Health Care Reform): See PPACA
HDHP (High Deductible Health Plan): A plan with a higher deductible and lower premium than a traditional health plan.
HE (Health Engagement): 2-tiered benefit designs with a wellness component. Currently offered to 50+ but will be expanded to small group and PPO.
HEDIS (Health Plan Employer Data Information Set): Developed by NCQA as a set of data reporting standards for financial, utilization, membership and
clinical data for performance comparison between health plans.
HFHS: Henry Ford Health System
HFMG (Henry Ford Medical Group): A premier, self-governed, group practice of more than 1,200 physicians and researchers in more than 40 specialties
employed by the Henry Ford Health System.
HFPN (Henry Ford Physician Network): A high-performing network for HFHS employees.
Glossary of Acronyms (cont.)

56. 56
HIE/HIX (Health Insurance Exchange): A set of state-regulated and standardized health care plan from which individuals may purchase health insurance
eligible for federal subsidies. All exchanges must be fully certified and operational by January 1, 2014.
HITEC (Health Information Technology for Economic and Clinical Health): Enacted as part of the American Recovery and Reinvestment Act of 2009. IT
was created to promote the adoption and meaningful use of health information technology. It also addresses the privacy and security concerns
associated with the electronic transmission of health information, in part, through several provisions that strengthen the civil and criminal enforcement
of the HIPAA rules.
HRA (Health Reimbursement Account): A tax-exempt account that can be used to pay for current or future qualified health expenses. HRAs are
established benefit plans funded solely by employer contributions, with no limits on the amount an employer can contribute. HRAs are often paired
with a high-deductible health plan, but are not required to do so.
HSA (Health Savings Account): A tax-exempt savings account that can be used to pay for current or future qualified medical expenses. Employers may
make HSAs available to their employees or individuals can obtain HSAs from most financial institutions. In order to open an HSA, an individual must
have health coverage under an HSA-qualified high deductible health plan.
ICU: Intensive Care Unit
IPA (Independent Practice Association): An association of independent physicians, or other organization that contracts with independent physicians, and
provides services to managed care organizations on a negotiated per capita rate, flat retainer fee, or negotiated fee-for -service basis.
IVR (Interactive Voice Response): A technology that allows a computer to interact with humans through the use of voice.
Glossary of Acronyms (cont.)

57. 57
MLR (Medical Loss Ratio): The ratio of premiums that are spent on medical claims and quality improvement activities divided by the total premium.
NCQA (National Committee for Quality Assurance): A private, 501(c)(3) not-for-profit accrediting organization dedicated to improving health care
quality. Provides information about the quality of national managed care plans to enable consumers to evaluate health plan performance.
PCMH (Patient Centered Medical Home): A health care setting that facilitates partnerships between individual patients, their personal physicians, and
when appropriate, the patient’s family. Care is facilitated by registries, information technology, health information exchange and other means to assure
that patients get the indicated care when and where they need it.
PDP: Prescription Drug Plan
PO (Physician Organization): Physician linkages and alliances that allow physicians to manage risk and capitation.
PPACA (Patient Protection and Affordable Care Act): Health care reform legislation signed by President Obama on March 23, 2010. Also known as ACA
and HCR.
SHOP (Small Business Health Options Programs): Designed to help small employers access affordable insurance for their employees.
TPA (Third Party Administrator): An organization that processes claims or certain aspects of employee benefit plans for a separate entity.
VBID (Value Based Insurance Design): Plan designs that help align consumer incentives with the use of high-value services, offering an opportunity for
quality improvement, cost savings and reductions in unnecessary and ineffective care.
VEBA (Voluntary Employee Beneficiary Association): A group that provides for the payment of life, sickness, or accident benefits to individuals with an
employment-related bond.
Glossary of Acronyms (cont.)