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The Maryland Healthcare Landscape Greater Baltimore Committee - - PowerPoint PPT Presentation

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The Maryland Healthcare Landscape Greater Baltimore Committee November 7, 2017 Chet Burrell President & CEO PROPRIETARY AND CONFIDENTIAL Median Household Income in Maryland Richest State in the Nation (Highest) Maryland: $76,596

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SLIDE 1

PROPRIETARY AND CONFIDENTIAL

The Maryland Healthcare Landscape

Greater Baltimore Committee

Chet Burrell President & CEO

November 7, 2017

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PROPRIETARY AND CONFIDENTIAL

Median Household Income in Maryland – Richest State in the Nation

Source: United States Census Data, 2016

(Highest) Maryland: $76,596 District of Columbia: $75,991 Virginia: $66,916 (Lowest) Mississippi: $40,910 National Median $56,277

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PROPRIETARY AND CONFIDENTIAL

98% 160% 224% 92% 167% 270% 24% 45% 64% 21% 35% 47%

0% 50% 100% 150% 200% 250% 300% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Cumulative Increases in Health Insurance Premiums, Workers’ Contributions to Premiums, Inflation, and Workers’ Earnings 1999-2017

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2017. Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2017; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-2017 (April to April).

Insurance Premiums vs. Earnings & Inflation

Health Insurance Premiums Workers’ Contribution to Premiums Workers’ Earnings Overall Inflation

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SLIDE 4

PROPRIETARY AND CONFIDENTIAL

Small Employers Offering Coverage Less Frequently

Percent of Firms in CareFirst Region (DC, MD) with Fewer Than 50 Workers Offering Health Insurance, 2008-2016

Source: Agency for Healthcare Research and Quality. Medical Expenditure Panel Survey-Insurance Component, 2008-2016.

52% 55% 53% 44% 45% 44% 43% 43% 39% 30% 35% 40% 45% 50% 55% 60% 2008 2009 2010 2011 2012 2013 2014 2015 2016

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PROPRIETARY AND CONFIDENTIAL

  • The high level of cost sharing of Bronze and Silver products plans (40% and 30%,

respectively) leads to high out of pocket costs and member underinsurance.

ACA Individual Market by Metal Level

Source: Individual ACA Extract (D&I), October 26, 2017

Metal Level Distribution of CareFirst Maryland Individual ACA Subscribers

Subscribers: 85,811 129,594 115,575 107,635 Maryland

2,059 2% 3,943 3% 5,079 4% 7,285 7% 24,282 28% 38,862 30% 43,096 37% 25,497 24% 32,747 38% 53,909 42% 47,312 41% 62,710 58% 15,921 19% 19,200 15% 20,088 17% 12,143 11% 10,802 13% 13,680 11% YE 2014 YE 2015 YE 2016 2017 Maryland

Platinum Gold Silver Bronze Catastrophic

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SLIDE 6

PROPRIETARY AND CONFIDENTIAL

Increases to Out-of-Pocket Expenses – Sign of the Times

  • The total allowed out-of-pocket maximum has increased approximately 3-5% each year from 2014-2018.
  • The 2018 out-of-pocket maximum for an individual is $1,000 more than the maximum in 2014, and for a

family is $2,000 more – a total increase of 15.7% in four years.

$6,350 $6,600 $6,850 $7,150 $7,350 $12,700 $13,200 $13,700 $14,300 $14,700 $5,000 $7,000 $9,000 $11,000 $13,000 $15,000 $17,000 2014 2015 2016 2017 2018

Highest Allowed Out-of-Pocket Maximum 2014-2017

Total Increase: $2,000 or 15.7% Family Individual Total Increase: $1,000 or 15.7%

Year-Over-Year Increase

+3.9% +3.8% +4.4% +2.8%

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PROPRIETARY AND CONFIDENTIAL

Percentage of Workers Enrolled in an HRA or HSA-Qualified High Deductible Plan, 2006-2017

2% 3% 3% 3% 7% 8% 8% 9% 7% 9% 9% 9% 2% 3% 4% 6% 6% 9% 12% 11% 14% 15% 19% 19% 4% 6% 7% 9% 13% 17% 19% 20% 21% 24% 28% 28% 0% 5% 10% 15% 20% 25% 30% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 HDHP/HRA HSA-Qualified HDHP

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006-2017.

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PROPRIETARY AND CONFIDENTIAL

Employers are Increasingly Shifting More Cost to Members

CareFirst High Deductible Plan Enrollment in 2017

  • CareFirst first introduced CDH high-deductible plan designs in 2006 in response to:
  • Employer demand for less expensive alternatives
  • The prevailing wisdom has been that shifting more costs to the consumer would cause them to make

more informed healthcare choices and work to control costs over the long term

  • Through benefit buy-downs, enrollment in high-deductible plans grew rapidly after they were first introduced

in 2006 45% 55% Small Group Market 28% 72% Individual Under 65 Market 32% 68% 51+ Risk Market High Deductible Plan Other

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PROPRIETARY AND CONFIDENTIAL

Premiums Apply Market Pressure

  • Pressure on the system is coming from consumers and small businesses resisting escalating

premiums and out of pocket costs

Total Possible Cost for Maryland (Baltimore Metro Area) Members

Monthly Premium Annual Premium Out-of-Pocket Limit Total Possible Cost Individual Market (BlueChoice HMO Silver $3,500) Single1 $465 $5,580 Family of Four 2 $1,487 $17,844 Small Group Market (BlueChoice HMO HSA/HRA $1,500) Single1 $370 $4,440 Family of Four 2 $1,108 $13,294

1 Based on a 40-year-old 2 Based on two 40-year-olds and two children

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PROPRIETARY AND CONFIDENTIAL

Premiums Apply Market Pressure

  • Pressure on the system is coming from consumers and small businesses resisting escalating

premiums and out of pocket costs

Total Cost for Maryland (Baltimore Metro Area) Members

Monthly Premium Annual Premium Out-of-Pocket Limit Total Possible Cost Individual Market (BlueChoice HMO Silver $3,500) Single1 $465 $5,580 $7,350 Family of Four 2 $1,487 $17,844 $14,700 Small Group Market (BlueChoice HMO HSA/HRA $1,500) Single1 $370 $4,440 $5,500 Family of Four 2 $1,108 $13,294 $11,000

1 Based on a 40-year-old 2 Based on two 40-year-olds and two children

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PROPRIETARY AND CONFIDENTIAL

Premiums Apply Market Pressure

  • Pressure on the system is coming from consumers and small businesses resisting escalating

premiums and out-of-pocket costs

Total Cost for Maryland (Baltimore Metro Area) Members

Monthly Premium Annual Premium Out-of-Pocket Limit Total Possible Cost Individual Market (BlueChoice HMO Silver $3,500) Single1 $465 $5,580 $7,350 $12,930 Family of Four 2 $1,487 $17,844 $14,700 $32,544 Small Group Market (BlueChoice HMO HSA/HRA $1,500) Single1 $370 $4,440 $5,500 $9,940 Family of Four 2 $1,108 $13,294 $11,000 $24,294

1 Based on a 40-year-old 2 Based on two 40-year-olds and two children

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PROPRIETARY AND CONFIDENTIAL

  • Consolidation of provider systems do not yield “economy of scale” savings to the member, account, or health

insurer

  • Large provider systems use size as leverage for more favorable reimbursement
  • Large provider systems have more costly PSP arrangements
  • Consequence of consolidation of provider systems is a systemic increase in fee schedules and overall cost
  • As providers consolidate, more care is directed to these more expensive provider systems
  • Federal Policy aids in the move toward consolidation by calling for integrated care delivery

Provider Consolidation Raises Costs

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PROPRIETARY AND CONFIDENTIAL

Largest Health Systems Congeal into Oligopolies Johns Hopkins Health System

2000 2017

.**University of Maryland Medical System and Johns Hopkins Health System each own 50% of Mt. Washington Pediatric Hospital.

Hospital Beds* 2,696 Practitioners* 3,314 2016 CareFirst Admissions 22,102 2016 Inpatient Revenue ($M) $376.9 2016 Outpatient Revenue ($M) $365.0 Total 2016 Revenue ($M) $741.9 Johns Hopkins Health System

Johns Hopkins Health System

Johns Hopkins Hospital Anchor Hospital Kennedy Krieger Institute Affiliate 2011 Bayview Medical Center 1984 Howard Co. General Hospital 1998 Mt. Washington Pediatric Hospital** 2006 Suburban Hospital 2009 Sibley Memorial Hospital 2010 Children’s Hospital of St. Petersburg Fla. 2011

Johns Hopkins Health System

Johns Hopkins Hospital Anchor Hospital Kennedy Krieger Institute Affiliate Bayview Medical Center Howard Co. General Hospital Mt. Washington Pediatric Hospital** Suburban Hospital GBMC Affiliate Sibley Memorial Hospital

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PROPRIETARY AND CONFIDENTIAL

Largest Health Systems Congeal into Oligopolies MedStar

2000 2017

Hospital Beds* 2,891 Practitioners* 4,731 2016 CareFirst Admissions 18,150 2016 Inpatient Revenue ($M) $378.2 2015 Outpatient Revenue ($M) $380.5 Total 2015 Revenue ($M) $758.7 MedStar

MedStar Health

Joined to form MedStar Health in 1998

  • Medlantic
  • Helix Health

Union Memorial Hospital 1987 Franklin Square Hospital 1987 Good Samaritan Hospital 1994 Harbor Hospital 1996 National Rehabilitation Hospital 1998 Washington Hospital Center 1998

  • St. Mary’s

2009 Southern Maryland Hospital 2012 Montgomery General Hospital 2008 Georgetown University Hospital 2000

MedStar Health

Joined to form MedStar Health in 1998

  • Medlantic
  • Helix Health

Union Memorial Hospital Franklin Square Hospital Good Samaritan Hospital Harbor Hospital National Rehabilitation Hospital Washington Hospital Center

  • St. Mary’s

Southern Maryland Hospital Montgomery General Hospital Georgetown University Hospital

* Hospital beds and practitioners based on 2015 data.

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PROPRIETARY AND CONFIDENTIAL

Largest Health Systems Congeal into Oligopolies University of Maryland Medical System (UMMS)

*Hospital beds and practitioners based on 2015 data. University of Maryland Medical System and Dimensions Health System (Prince George’s General Hospital, Laurel Regional Hospital, and Bowie Emergency Room) have affiliated. University Specialty Hospital closed. University of Maryland Medical System and Johns Hopkins Health System each own 50% of Mt. Washington Pediatric Hospital.

University of Maryland Medical System

University of Maryland Hospital Anchor Hospital University Specialty Hospital* James Kernan Hospital Maryland General Hospital Baltimore Washington Medical Center UM Shore Hospital at Dorchester UM Shore Hospital at Easton UM Shore Medical Center at Chestertown Upper Chesapeake Health Hartford Memorial Hospital UM St. Joseph Medical Center

University of Maryland Medical System

University of Maryland Hospital Anchor Hospital Charles Regional Medical Center (formerly Civista) 2010 UM Rehabilitation and Orthopedic Institute (formerly Kernan) 1986 UM Midtown Campus (formerly Maryland General) 1999 UM Baltimore Washington Medical Center 2000 Mt Washington Pediatric Hospital** 2006 UM Shore Hospital at Dorchester 2006 UM Shore Hospital at Easton 2006 UM Shore Medical Center at Chestertown 2008 Upper Chesapeake Health 2009 Harford Memorial Hospital 2009 UM St. Joseph Medical Center 2012

2000 2017

Hospital Beds 1,996 Practitioners 2,141 2016 CareFirst Admissions 15,811 2016 Inpatient Revenue ($M) $276.6 2016 Outpatient Revenue ($M) $274.4 Total 2016 Revenue ($M) $546.8 UMMS

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PROPRIETARY AND CONFIDENTIAL

Huge Variation in Cost Among Hospitals

  • High-cost tier hospitals are larger, with nearly 30% of CareFirst admissions. These are mostly “consolidated”

systems

  • Expected admission costs are set by Diagnostic Related Groups (DRGs) for all hospitals in the CareFirst service

area

  • The average cost of admission at a high-cost hospital is more than double that of a low-cost hospital

Source: CareFirst Health Informatics – 2016 Data

2016 Admissions Hospital Cost Tier Total Admits Percent of Total Admits Total Actual Admit $ Actual Average Admit $ Expected Average Admit $ Difference between Actual and Expected Average High 25,814 29.0% $835,057,592 $32,349 $27,404

  • 18.0%

High Mid 19,884 22.4% $471,421,165 $23,709 $23,760 0.2% Low Mid 18,661 21.0% $311,952,872 $16,717 $18,831 11.2% Low 24,516 27.6% $361,430,028 $14,743 $18,299 19.4% Total 88,875 100.0% $1,979,861,656 $22,277

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PROPRIETARY AND CONFIDENTIAL

Pharmacy Spending Driving Overall Trend

  • The single largest contributor to premium increases

$86.71 $90.77 $95.77 $106.30 $116.14 $129.35 $60.00 $80.00 $100.00 $120.00 $140.00 2012 2013 2014 2015 2016 2017*

Overall Rx Per Member Per Month

Overall Rx is based on CareFirst Book of Business. *2017 YTD is based on claims paid thru September.

49 Percent

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PROPRIETARY AND CONFIDENTIAL

Pharmacy Spending Driving Overall Trend

  • The largest contributor to increases in pharmacy cost is Specialty Drugs

Specialty drug allowed is based on CareFirst Book of Business.*2017 YTD is based on claims paid thru September 2017.

$14.80 $20.54 $28.93 $31.09 $37.64 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 2013 2014 2015 2016 2017*

Specialty Drug Allowed Per Member Per Month

154 Percent

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PROPRIETARY AND CONFIDENTIAL

Medical spending is based on 2011 and 2016 CareFirst Book of Business. Pharmacy % is adjusted to represent typical spend for members with CareFirst’s pharmacy benefit.

  • Spending on prescription drugs is the largest share of the CareFirst medical dollar (including

spending in both the Pharmacy and Medical portions of CareFirst benefit plans)

  • This places increased focus on pharmacy care coordination and utilization

2011 2016

29.6% 27.6% 20.3% 18.4% 4.1% 0% 5% 10% 15% 20% 25% 30% 35% 33.1% 25.1% 18.5% 17.1% 6.1% 0% 5% 10% 15% 20% 25% 30% 35%

$346 PMPM $406 PMPM

Total Distribution of CareFirst Medical Payments

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PROPRIETARY AND CONFIDENTIAL

Proportion of Claims Dollar Spent On Pharmacy Has Grown Over Time

  • The proportion of claims spent on other services has either remained essentially flat or declined.

Medical spending is based on CareFirst Book of Business. The Pharmacy % is adjusted to represent typical spend for members with CareFirst’s pharmacy benefit. 2017 YTD is based on claims paid thru September 2017.

28.4% 28.8% 32.0% 33.1% 32.5% 22.5% 22.7% 22.6% 25.1% 23.3% 19.5% 19.5% 18.5% 18.5% 18.7% 20.2% 19.7% 17.9% 17.1% 17.8% 5.4% 5.7% 6.2% 6.1% 6.0% 4.0% 3.6% 2.8% 2.2% 1.7% 0% 5% 10% 15% 20% 25% 30% 35% 2013 2014 2015 2016 2017 YTD

Distribution of CareFirst Payments by Year

Pharmacy Specialists Hospital Inpatient Hospital-Based Outpatient Primary Care Physician Other Professional

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PROPRIETARY AND CONFIDENTIAL

Overall Medical Trend (OMT) – Persistent Upward Pressure

6.8% 4.3% 3.2% 2.7% 4.2% 3.5% 4.2% 5.0% 0% 1% 2% 3% 4% 5% 6% 7% 8% 2011 2012 2013 2014 2015 2016* August 2017* 2017F*

Combined Medical & Pharmacy Trend Adjusted for Rebates – PMPM CareFirst Service Area Book of Business excluding Individual ACA

Lowest sustained OMT in the Company’s history

* With completion factors.

2017 Plan: 5%

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PROPRIETARY AND CONFIDENTIAL

63.9 62.4 57.9 56.4 55.1 54.7 53.1 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 2011 2012 2013 2014 2015 2016 2017*

Admissions per 1000 17 Percent

Hospital Admissions Declined by 17 Percent

Admissions are based on CareFirst Book of Business .*2017 YTD is based on claims paid thru September 2017..

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PROPRIETARY AND CONFIDENTIAL

Emergency Room Visits Have Declined By 14 Percent

239.4 244.5 225.1 221.1 215.0 208.8 206.2 200.0 210.0 220.0 230.0 240.0 250.0 2011 2012 2013 2014 2015 2016 2017*

ER Visits per 1000

14 Percent

ER visits are based on CareFirst Book of Business. .*2017 YTD is based on claims paid thru September 2017.

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PROPRIETARY AND CONFIDENTIAL

Material Decrease in Admissions Since 2011

  • From 2011 to 2016, enrollment remained relatively flat, while admissions decreased by 14.4%.
  • The average cost of an admission during the 2011-2016 period was $19,316.
  • Had the admission rate persisted at 2011 levels, CareFirst would have paid an additional $400 Million for

hospital admissions

63.9 62.4 57.9 56.4 54.8 54.7 53.1 1.89M 1.89M 1.85M 1.84M 1.87M 1.81M 1.81M 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2,000,000 2,200,000 2,400,000 2011 2012 2013 2014 2015 2016 2017* 40 45 50 55 60 65 70

CareFirst Enrollment and Inpatient Admissions

Admissions per 1000 Members Enrolled

*2017 YTD is based on claims paid thru September 2017.

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PROPRIETARY AND CONFIDENTIAL

CareFirst’s PCMH Program

PCMH Key Characteristics

  • Accountability for total cost of

care

  • Incentive only
  • Information rich
  • Behavior change based
  • Uniform model

Five Elements of Changed Behavior

  • 1. Effectiveness of referral patterns
  • 2. Extent of engagement in care

coordination

  • 3. Effectiveness of medication

management

  • 4. Consistency of performance within

each Panel of PCPs

  • 5. Gaps in care and quality deficits
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PROPRIETARY AND CONFIDENTIAL

Huge Variability in Costs Among Hospitals

  • Inpatient admission costs are 119% higher among high cost tier hospitals compared to low

tier hospitals.

  • High cost tier hospitals are generally larger, and account for 26% of the total area hospitals,

but 42% of all regional admission costs.

  • Higher rate of referral to low cost hospitals is a major cost-saving opportunity for Panels.

Low Cost: $14,743 High Cost: $32,349

Hospitals Stratified Based on Cost

  • f Inpatient Admissions

Regional Average Cost $22,277 High Mid Cost Low Mid Cost 119% Variance from Low Cost to High Cost

Source: CareFirst Health Informatics – 2014 thru 2016 Data

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SLIDE 27

PROPRIETARY AND CONFIDENTIAL

Source: CareFirst Health Informatics – July 2016 to June 2017 Data

Top 20 Causes of Admission – Book of Business

Admission Type Book of Business % of Actual Actual Top 20 Episodes Number Total # Total $ Avg $

  • 1. Pregnancy w Vaginal Delivery

12,778 19.2% $155,893,316 $12,268

  • 2. Pregnancy w Cesarean Section

7,263 10.9% $116,456,271 $16,105

  • 3. Osteoarthritis

5,253 7.7% $150,824,470 $29,429

  • 4. Condition Related to Treatment - Medical/Surgical

2,419 3.3% $61,952,275 $28,458

  • 5. Coronary Artery Disease

2,120 3.0% $60,464,263 $30,461

  • 6. Pneumonia, Bacterial

2,048 3.0% $43,689,709 $22,325

  • 7. Diabetes

1,854 2.6% $30,606,119 $17,888

  • 8. Newborns, w/wo Complication

1,840 2.0% $43,467,753 $33,618

  • 9. Cerebrovascular Disease

1,807 2.5% $45,151,379 $27,515

  • 10. Overweight and Obesity

1,719 2.5% $32,693,910 $19,368

  • 11. Infection/Inflammation - Skin/Subcutaneous Tissue

1,375 2.0% $15,791,419 $12,129

  • 12. Hypertension, Essential

1,361 1.9% $23,659,500 $18,398

  • 13. Mental Hlth - Substance Abuse

1,303 1.6% $12,845,519 $12,435

  • 14. Mental Hlth - Depression

1,288 1.9% $13,939,736 $11,170

  • 15. Cholecystitis/Cholelithiasis

1,149 1.7% $19,354,106 $17,280

  • 16. Gastroint Disord, NEC

1,108 1.1% $11,155,764 $15,430

  • 17. Diverticular Disease

1,057 1.5% $16,046,572 $15,655

  • 18. Tumors - Gynecological, Benign

1,003 1.4% $13,597,303 $14,909

  • 19. Cardiac Arrhythmias

976 1.3% $13,623,285 $15,605

  • 20. Mental Hlth - Bipolar Disorder

936 1.3% $10,681,639 $12,264 Top 20 Subtotal 50,657 72.3% $891,894,309 $18,617

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SLIDE 28

PROPRIETARY AND CONFIDENTIAL

Episodes Used to Determine Specialist Performance Relative to Regional Average Low Cost High Cost

Specialists Stratified Relative to Regional Average Episode Cost

Regional Average Cost High Mid Cost Low Mid Cost 5%-100% Variance from Low Cost to High Cost

  • All Hospitals and Specialists are stratified based on their profile of episode specific costs over a rolling

3-year period

  • The average spread between High and Low cost Specialists is 47% across all episodes and specialty

categories

Source: CareFirst Health Informatics – 2014 thru 2016 Data

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PROPRIETARY AND CONFIDENTIAL

Panels Make Core “Buying” and Arranging Decisions – Increasingly Directing Referrals to Cost Effective Providers

38,500 Providers

  • f All Other Types

4,400 PCPs* High Cost Providers Mid High Cost Providers Mid Low Cost Providers Low Cost Providers

* Includes Nurse Practitioners

  • High, Mid-High, Mid-Low, and Low Cost Specialist rankings are shared with PCMH PCPs.
  • Quality judgment is left to PCPs – PCPs refer where they believe they will get the best result.
  • PCPs develop a list of preferred specialists; free to make exceptions.
  • Since providing this cost information, CareFirst has seen evidence of changes in referral patterns from

independent PCPs – many have become convinced of the efficacy of referring to lower cost Specialists and Hospitals for common, routine illnesses.

  • In contrast, PCPs employed by large health systems have lost freedom to refer where they want –
  • nly referring to specialists within their high cost system.
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PROPRIETARY AND CONFIDENTIAL

  • 34% of large Health System Panels are high-cost, while 39% of all Virtual Panels are low-

cost

  • Large Health System Panels typically cause PCPs to refer only to specialists in their own

system, usually at high cost

Variation in Cost Among PCMH Panels in 2016

Source: CareFirst Health Informatics – 2016 Data

Cost Tercile Health System Panels Virtual Panels Single Panel Independent Multi-Panel Independent Low 12% 39% 26% 7% Mid-Low 25% 28% 27% 15% Mid-High 30% 18% 27% 32% High 33% 15% 20% 46% Total 100% 100% 100% 100%

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PROPRIETARY AND CONFIDENTIAL

Variation in Cost Among PCMH Panels - 2016

Cost Quartile Risk Adjusted PMPM Low $348.65 Mid-Low $376.53 Mid-High $401.01 High $435.94 Total $390.03

Adult Panels

Cost Quartile Risk Adjusted PMPM Low $145.79 Mid-Low $160.85 Mid-High $176.26 High $194.76 Total $168.97

Pediatric Panels 25.0% 33.6% Source: CareFirst HealthCare Analytics – 2016 Data for 345 Viable Panels

Source: CareFirst Health Informatics – 2016 Data

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SLIDE 32

PROPRIETARY AND CONFIDENTIAL

ACA Impact

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PROPRIETARY AND CONFIDENTIAL

ACA – What Did It Get Right?

  • ACA reached the target population – poorer, sicker, older
  • Poorer: Nationally, 16M more Medicaid enrollees, 9M Marketplace enrollees receive premium

subsidies

  • Sicker: 2018 filed ACA premium nearly three times 2013 medically underwritten premium ($641

PMPM vs. $220 PMPM in Maryland)

  • Older: Average age of 39 for CareFirst Individual ACA members vs. 34 for pre-ACA medically

underwritten

  • ACA provides good, affordable coverage to previously uninsured and underinsured through:
  • Essential health benefits
  • Community rating
  • Guaranteed issue
  • Subsidies based on income
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SLIDE 34

PROPRIETARY AND CONFIDENTIAL

Reduction in Uninsured as a Result of ACA

Source: “Assessing the Impact of Health Care Reform in Maryland”, Department of Legislative Services, January 2017.

Uninsured Rate: United States and Maryland (All Ages)

11.3% 10.4% 10.3% 10.2% 7.9% 6.6% 15.5% 15.1% 14.8% 14.5% 11.7% 9.4% 0% 2% 4% 6% 8% 10% 12% 14% 16% 2010 2011 2012 2013 2014 2015 United States Maryland

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SLIDE 35

PROPRIETARY AND CONFIDENTIAL

ACA Has Reached Its Target Population – The Poorer, Sicker And Older

Source: Office of the Assistant Secretary for Planning and Evaluation. Compilation of State Data on the Affordable Care Act. December

  • 2016. https://aspe.hhs.gov/compilation-state-data-affordable-care-act

U.S Maryland Increase in Medicaid Enrollment 2013 to 2016 16,106,000 396,000 Individuals Receiving Advanced Premium Tax Credits (APTC) [Q1 2016] 9,390,000 101,000 Individuals Receiving Cost Sharing Reductions (CSR) [Q1 2016] 6,354,000 72,000 Individuals who Gained Coverage by Staying on their Parents' Plan Until Age 26 2,300,000 41,000 Total Increase in Coverage due to Affordable Care Act 34,150,000 538,000 Percent of Individuals Purchasing through Marketplaces Who Receive Cost Sharing Reductions (CSR) [Q1 2016] 68% 71% Average Advanced Premium Tax Credits (APTC) [Q1 2016] $291 $243

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SLIDE 36

PROPRIETARY AND CONFIDENTIAL

Only Two Carriers Remain in Maryland Individual ACA Market

Pre-ACA 2013 ACA 2014 ACA 2015 ACA 2016 ACA 2017 ACA 2018 CareFirst       Kaiser*       United – Golden Rule  United – Compass*   United – All Savers    Aetna  Coventry (Aetna)  Assurant  AARP (age 50+)  Cigna**    Evergreen    Total Carrier Participants 7 4 6 6 3 2

*Narrow network **Minimal enrollment

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SLIDE 37

PROPRIETARY AND CONFIDENTIAL

CareFirst is Sole Carrier in 13 Counties in Maryland

Carroll 6,196 3% Frederick 9,664 5% Garrett 1,028 1% Alleghany 1,290 1% Washington 4,035 2% Baltimore 26,133 14% Harford 8,086 4% Montgomery 45,245 25% Cecil 2,998 2% Kent 988 1% Howard 12,725 7% Anne Arundel 17,824 10% Prince George’s 15,286 8% Charles 3,364 2%

  • St. Mary’s

2,196 1% Worcester 3,211 2% Dorchester 976 1% Wicomico 3,159 2% Somerset 549 <1% Talbot 2,239 1% Caroline 1,135 1% Queen Anne’s 2,233 1% Calvert 2,715 1% Baltimore City 9,970 5%

CareFirst Members Percentage In Kaiser Areas 157,208 86% Not In Kaiser Areas 26,037 14% Total 183,245 100%

Kaiser’s network in Maryland only includes 5 hospitals:

  • Anne Arundel Medical Center
  • Greater Baltimore Medical Center
  • Holy Cross Hospital
  • Saint Agnes Hospital
  • Suburban Hospital
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SLIDE 38

PROPRIETARY AND CONFIDENTIAL

Maryland Average Individual Rate Increases Filed and Approved 2014-2018

Maryland Average Individual Rate Increases Filed and Approved 2014-2018

Note: Due to the influx of previously medically underwritten members in 2015 who were allowed to keep their pre-ACA coverage in 2014, the overall morbidity of risk pool was only slightly worse in 2015 compared to 2014, and then worsened substantially in each subsequent year.

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SLIDE 39

PROPRIETARY AND CONFIDENTIAL

CareFirst’s Share of Individual ACA Market in Maryland was Over 90% at Outset in 2014; Slightly Less Than Two-Thirds Today

2014 MHBE Market Share

  • f Plan Selections

(as of 7/3/2014) Total: 72,207 enrollees

CareFirst 67,800 93.9% Kaiser 3,560 4.9% Evergreen 525 0.7% United All Savers 322 0.4%

2017 MHBE Market Share

  • f Plan Selections

(as of 4/18/2017) Total: 143,065 enrollees

CareFirst 89,459 62.5% Kaiser 52,968 37.0% Cigna 638 0.4%

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SLIDE 40

PROPRIETARY AND CONFIDENTIAL

Opioid and Addiction Strategy

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SLIDE 41

PROPRIETARY AND CONFIDENTIAL

Addiction Caused Deaths

62,000 58,000 43,000 38,000 10,000 20,000 30,000 40,000 50,000 60,000 70,000 Drug Overdose 2016 All of Vietnam War Peak of AIDS 1995 Peak Car Crash 1972

  • Leading cause of death among Americans under age 50
  • Responsible for more US deaths than Vietnam War, HIV/AIDS, car crashes
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SLIDE 42

PROPRIETARY AND CONFIDENTIAL

Opioid Crisis among CareFirst Members

PEOPLE COST IMPACT 1.9 million people suffer from substance abuse related to prescription opioids in the United States In 2016, approximately 204,000 CareFirst Members received at least one opioid prescription. 18,000 CareFirst members had a diagnosis of substance use disorder. Substance abusers have $15,500 in excess claims costs per year

  • ver non-abusers

Substance use disorder compounds the affects of behavioral health and medical illness. ~$78.5 billion is spent annually

  • n medical and substance

abuse treatment, lost work productivity and criminal justice costs.

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SLIDE 43

PROPRIETARY AND CONFIDENTIAL

Lethal Dose: Heroin vs Fentanyl

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SLIDE 44

PROPRIETARY AND CONFIDENTIAL

Opioid Crisis in Maryland

  • 86% of all intoxication deaths that occurred in Maryland in 2015 were opioid-related
  • The number of opioid-related deaths increased by 23% between 2014 and 2015, and have more

than doubled since 2010

Source : http://bha.dhmh.maryland.gov/OVERDOSE_PREVENTION/Documents/2015%20Annual%20Report_revised.pdf

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SLIDE 45

PROPRIETARY AND CONFIDENTIAL

CareFirst Opioid Strategies

CareFirst is taking a five-part approach to this national epidemic: 1) Formulary Management 2) Safety and Monitoring of Fraud Waste and Abuse 3) Behavioral Health and Substance Use Disorder (BSD) Program 4) Alcohol and Drug Addiction Program 5) Securing Access to Preferred Providers In the Community

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SLIDE 46

PROPRIETARY AND CONFIDENTIAL