The Potential Impact of State Mandatory Assignment Legislation on Consumers

Transcription

1 The Potential Impact of State Mandatory Assignment Legislation on Consumers September 4, 2003 Prepared by: Jon M. Wander, F.S.A., M.A.A.A. Daniel E. Freier, F.S.A., M.A.A.A. At the Request of the Blue Cross and Blue Shield Association Consultants & Actuaries 222 South 9 th Street, Suite 1500 Minneapolis, MN (612) phone (612) fax

2 Table of Contents Sections Page I. Executive Summary...1 II. Introduction...3 III. Background on Mandatory Assignment Legislation...4 IV. Background on Health Plan Practices that Protect Consumers...5 V. Assessing the Potential Impact of Mandatory Assignment Legislation on Consumers...6 VI. Conclusion...10 Appendices 1 Methodology and Assumptions 2 Criteria Used to Identify Patients 3 Assumed Benefit Plans 4 Background on Reden & Anders, Ltd.

3 I. Executive Summary Health plans negotiate contractual arrangements with providers that save consumers thousands of dollars in health care costs. These contracts provide for discounts from the amounts routinely charged by providers and prevent providers from balance billing the discounts back to consumers. State mandatory assignment legislation would likely put these savings at risk by reducing incentives for providers to contract with health plans. Mandatory assignment legislation would require health plans that maintain networks of providers to make payments directly to nonparticipating providers if enrollees assign their benefits (i.e., rights to payment) to them. Receiving payment directly from a health plan is an important incentive for a provider to contract with a plan. Having a contract in place assures that enrollees benefit from both the discounted payment and the protection against balance billing for that discount. To illustrate the potential impact of state mandatory assignment legislation on consumers, we developed a model to estimate the savings that certain patients with serious medical conditions derive from provider discounts and balance billing protections. As Table 1 shows, consumers with serious medical conditions save significant amounts of out-of-pocket costs due to the contracts health plans negotiate with physicians. If mandatory assignment legislation were enacted, these savings would likely be put at risk. TABLE 1 ESTIMATED 2002 ANNUAL SAVINGS BY TYPE OF PATIENT Patient Profile* Average Amount Routinely Billed by Physicians Average Allowed Reimbursement to Physicians Savings from Negotiated Discounts/ Balance Billing Protections Woman with advanced breast cancer $43,490 $30,008 $13,482 Man with coronary artery heart disease $24,330 $16,788 $7,542 Child with severe asthma $10,430 $7,196 $3,234 Woman with ischemic stroke $14,961 $10,323 $4,638 Man with diabetes mellitus $12,986 $8,961 $4,025 *Assumes each patient receives all care inside an employer-sponsored PPO network. See Section V and Appendix 2 for a more complete description of the five patient profiles. jmw:kkc:0904bcbsamandatoryassignmentrpt -1-

4 Executive Summary (cont d) We used a large database of actual medical claims from health plans across the country to estimate the average claim costs for the five types of patients shown in Table 1. We then estimated average provider discounts from a database that contains several hundred million records of billed and allowed charges from health plans nationwide. We used the average provider discounts to estimate the value of the health plan contractual arrangements for the five patient profiles. As Table 1 shows, we found that savings for patients with these medical profiles would be substantial. For example, we estimate that a 40 year old woman with advanced breast cancer, treated with a modified radical mastectomy, followed by reconstructive surgery and chemotherapy would be billed an average of $43,490 annually for physician services. Due to the arrangements health plans negotiate with physicians, we estimate the average allowed payment for treating this patient would be only $30,008. The difference between the average amount billed and the amount allowed is a savings of $13,482. These are real savings to the consumer because balance billing protections prohibit physicians from holding patients liable for the difference. Another way in which consumers could be impacted by this legislation is through higher private health insurance costs. Employers would likely pass on to consumers a portion of the increased premiums resulting from the legislation through higher employee premium contributions and/or lower wage increases. jmw:kkc:0904bcbsamandatoryassignmentrpt -2-

5 II. Introduction Reden & Anders, Ltd. (R&A) was engaged by the Blue Cross and Blue Shield Association to analyze the savings to consumers generated by the contracts that health plans negotiate with health care providers and the potential impact of state mandatory assignment legislation on these savings. Consumers save thousands of dollars in health care costs each year from contractual arrangements that health plans negotiate with providers. These arrangements provide for discounts from the amounts routinely charged by providers and prevent providers from charging these discounts back to consumers. State legislation typically advanced by physicians, among other health care providers, could put these consumer savings and protections at risk. Known as mandatory assignment legislation, such proposals would require health plans to pay nonparticipating providers directly if enrollees assign their rights to payment to them. Allowing nonparticipating providers to receive direct payment from health plans would reduce the incentive providers have to continue to contract with health plans. Providers that terminate their contracts with health plans could expose members to provider balance billing. This refers to the practice of billing patients for the difference between regular charges and the health plan s allowed reimbursement. For a health plan to maintain an adequate network, they could be forced to increase provider reimbursement, thus increasing health insurance premiums.. jmw:kkc:0904bcbsamandatoryassignmentrpt -3-

6 III. Background on Mandatory Assignment Legislation Mandatory assignment legislation would require health plans that maintain networks of participating providers to make payments directly to nonparticipating providers if enrollees assign their benefits (i.e., rights to payment) to them. For health plans that do not face such legislative restrictions, payments for services delivered by nonparticipating providers are typically sent directly to enrollees. In some instances, health plans may pay nonparticipating providers directly even when not required to by law. Receiving payment directly from a health plan is an important incentive for a provider to contract with a plan. Under mandatory assignment legislation providers could receive some of the advantages of participation in a health plan s network (e.g., prompt, direct payment and little or no bad debt) without accepting the obligations (e.g., discounted payments and refraining from balance billing consumers). To date, 15 states have enacted some type of mandatory assignment law. Only five of these laws apply to all types of licensed health care providers; the rest are limited to particular types of providers or services. jmw:kkc:0904bcbsamandatoryassignmentrpt -4-

7 IV. Background on Health Plan Practices that Protect Consumers Health plans arrange for the provision of benefits by contracting with providers in an effort to reduce total health care spending and out-of-pocket costs for consumers. Health plans achieve this goal through contractual agreements requiring providers to accept the plans payment as payment in full (except for applicable deductibles, coinsurance and copayments) and not to balance bill their patients. Provisions that prohibit balance billing are crucial because in the absence of such protections, consumers would not benefit from the discount and could end up paying the amount that physicians charge in excess of negotiated health plan reimbursement. Providers have incentives to negotiate discounts with health plans and to accept the negotiated payments as payment in full: (1) providers who contract with health plans can expect that a greater volume of the plan s patients will receive services from them; and (2) providers that contract with health plans are paid directly by the plans and, thus, do not have to face the inconvenience, expense and risk of attempting to collect payment from patients. The discounts on physician charges and balance billing protections benefit all health plan members. However, the effects of eliminating discounts and balance billing protections would be greatest for the people who are most in need of health care services. jmw:kkc:0904bcbsamandatoryassignmentrpt -5-

8 V. Assessing the Potential Impact of Mandatory Assignment Legislation on Consumers To assess the potential effects on consumers of ending discounts and balance billing protections, we developed a model to estimate the average savings that five types of patients with serious medical conditions derive from the balance billing protections in provider contracts. We assumed that all five patients are enrolled in an employer-sponsored preferred provider organization (PPO) and receive all of their care in-network. We used actual average billed charges from the R&A Research Database and estimated PPO provider discounts to construct a nationwide estimate of claims costs for the five patients with serious medical conditions over the course of a year. The analysis reviewed actual claims for patients with the following case characteristics: A 40-year old woman with advanced breast cancer, treated with a modified radical mastectomy, followed by reconstructive surgery and chemotherapy. A 54-year old man with coronary artery heart disease who has an acute myocardial infarction, and recurrent post-mi angina requiring coronary bypass grafting. A child with severe, persistent asthma. A 50-year old woman that had an ischemic stroke who, after the complete hemiplegic stroke, requires vascular surgery (prophylactic thromboendarterectomy). A 55-year-old man with diabetes mellitus with eye surgery for treatment of proliferative diabetic retinopathy. jmw:kkc:0904bcbsamandatoryassignmentrpt -6-

9 Assessing the Potential Impact of Mandatory Assignment Legislation on Consumers (cont d) For each patient, Table 2 shows: The estimated average amount that physicians would have billed in the absence of a negotiated discount, The estimated allowable amount for the physician services, The savings resulting from discounts/balance billing protections with physicians, The patient s share of that allowable amount, and The amount paid by the health plan. TABLE AVERAGE ANNUAL PHYSICIAN CLAIM COSTS FOR FIVE PATIENT PROFILES Patient Cost Sharing Paid by Health Plan Patient Profile* Billed Charges Allowed Reimb. Discount Savings Woman with advanced breast cancer $43,490 $30,008 $13,482 $1,234 $28,774 Man with coronary artery heart disease $24,330 $16,788 $7,542 $526 $16,262 Child with severe asthma $10,430 $7,196 $3,234 $750 $6,446 Woman with ischemic stroke $14,961 $10,323 $4,638 $660 $9,663 Man with diabetes mellitus $12,986 $8,961 $4,025 $833 $8,128 *Assumes each patient receives all care inside an employer-sponsored PPO network. Like physicians, hospitals also negotiate discounts and balance billing protections with health plans. Therefore, if a mandatory assignment bill were to include hospitals, the savings lost from discounts and balance billing protections could be considerably more. jmw:kkc:0904bcbsamandatoryassignmentrpt -7-

10 Assessing the Potential Impact of Mandatory Assignment Legislation on Consumers (cont d) Table 3 applies to hospitals rather than physicians. For each patient, the table shows: The estimated amount that hospitals would have billed in the absence of a negotiated discount, The estimated allowable amount for the hospital services, The savings resulting from discounts/balance billing protections with hospitals, The patient s share of that allowable amount, and The amount paid by the health plan. TABLE AVERAGE ANNUAL HOSPITAL CLAIM COSTS FOR FIVE PATIENT PROFILES Patient Cost Sharing Paid by Health Plan Patient Profile* Billed Charges Allowed Reimb. Discount Savings Woman with advanced breast cancer $42,958 $29,211 $13,747 $915 $28,296 Man with coronary artery heart disease $95,011 $64,607 $30,404 $1,445 $63,162 Child with severe asthma $23,228 $15,795 $7,433 $1,339 $14,456 Woman with ischemic stroke $37,626 $25,586 $12,040 $1,315 $24,271 Man with diabetes mellitus $21,096 $14,345 $6,751 $1,149 $13,196 *Assumes each patient receives all care inside an employer-sponsored PPO network. jmw:kkc:0904bcbsamandatoryassignmentrpt -8-

11 Assessing the Potential Impact of Mandatory Assignment Legislation on Consumers (cont d) The above tables show how individual consumers could be directly impacted by providers terminating their contracts with health plans. However, there are other ways in which the legislation could impact consumers. For example, to maintain their provider networks, health plans could be forced to increase the reimbursement they pay to participating providers, thus increasing health insurance premiums. Employers would likely pass on to consumers a portion of the increased premiums through higher employee premium contributions and/or lower wage increases. jmw:kkc:0904bcbsamandatoryassignmentrpt -9-

12 VI. Conclusion Health plans negotiate contractual arrangements with providers that reduce consumer out-ofpocket costs and make health insurance more affordable. The combined savings from provider discounts and health plan balance billing protections can amount to thousands of dollars for an individual patient who has a serious medical condition. For the five types of patients we examined, annual cost savings range from $3,234 to $13,482 for physician services and from $6,751 to $30,404 for hospital services. Provider mandatory assignment bills could jeopardize these consumer savings by reducing the incentives providers have to continue to contract with health plans. Another way in which consumers could be impacted by this legislation is through higher private health insurance costs. Employers would likely pass on to consumers a portion of the increased premiums resulting from the legislation through higher employee premium contributions and/or lower wage increases. jmw:kkc:0904bcbsamandatoryassignmentrpt -10-

13 Appendix 1 Methodology and Assumptions To determine the estimated consumer savings generated by provider discounts and balance billing protections, we used various data sources including two R&A databases. The first is our research database, which is a large database of actual medical claims. This database includes information on the costs, diagnoses, medical procedures, and demographic information of individuals enrolled in many health plans across the country. This database allows us to determine the medical claim costs associated with various diseases and procedures. The second database is the Ingenix MDR Payment System database. This database contains several hundred million records of billed and allowed charge data by procedure code from commercial health care payers nationwide. The allowed charge database is segregated by HMO versus PPO which allows us to calculate average provider discounts for HMOs versus PPOs. The process we used to develop our estimates for the five types of patients was as follows: 1. We defined criteria we could use to identify these patients in the R&A research database. The criteria were generally based on demographic information (e.g., age and gender) and the existence of certain medical procedures and diagnoses. The criteria are provided in Appendix We extracted the total annual utilization and provider billed charges from our research database for all the people that met the criteria. From this, we calculated the average annual charges billed for each of the five types of patients. We calculated average billed charges for hospital services separately from physician services. 3. We estimated average nationwide PPO discounts (separately for hospitals versus physicians) from the Ingenix MDR Payment System database and other information from Interstudy. jmw:kkc:0904bcbsamandatoryassignmentrpt

14 Appendix 1 Methodology and Assumptions (cont d) 4. We applied the provider discounts from Step 3 to the billed charges from Step 2 to estimate the average value of the hospital and physician discounts associated with each of the five types of patients. 5. We defined a typical employer-sponsored PPO benefit plan (see Appendix 3) and calculated the patient cost sharing amounts (i.e., copayments, deductibles, and coinsurance) for each types of patient. The remaining pages of Appendix 1 summarize our assumptions and calculations. jmw:kkc:0904bcbsamandatoryassignmentrpt

15 Appendix 1 (continued) Estimated Costs by Type of Patient 2002 Cost Levels Patient: Plan Type: A 40 year old woman with advanced breast cancer, treated with a modified radical mastectomy followed by reconstructive surgery and chemotherapy. Employer Sponsored PPO Plan Assumptions Average Provider Discounts Copayments Hospital 32% Inpatient per Admit $0 Physician 31% Emergency Room $0 Office Visit $15 Deductible Preventive Visit $15 Deductible $300 Prescriptions - generic $10 Coinsurance 20% Prescriptions - brand Formulary $15 Out-of-pocket maximum $1,800 Prescriptions - brand Non Formulary $25 (including deductible) All services received in-network Calculations Service Category Utilization Unit Utilization per Patient Billed Charges per Patient Provider Discount Provider Discount Allowed Reimb. Deductible Coinsurance Copay Total Member Cost Sharing Health Plan Payment Medical Inpatient Admits 1.2 $22,867 32% $7,317 $15,550 $81 $406 $0 $487 $15,063 Outpatient ER Cases % Other Outpatient Cases ,305 32% 6,178 13, ,716 Office Visits & Related Visits ,430 31% 753 1, ,334 Preventive Visits Visits % Other Physician Services ,016 31% 12,715 28, ,415 Medical Subtotal $86,448 $27,229 $59,219 $300 $1,500 $349 $2,149 $57,070 Pharmacy Rx Generic Scripts 17.7 $177 $177 Rx Brand Scripts Pharmacy Subtotal 27.5 $332 $332 Summary of Results Hospital & Average Costs Hospital Physician Physician Amount Billed by Provider $42,958 $43,490 $86,448 - Savings from Discounts/Balance Billing Protections $13,747 $13,482 $27,229 = Health Plan Allowed Reimbursement $29,211 $30,008 $59,219 - Patient Cost Sharing $915 $1,234 $2,149 = Health Plan Payment $28,296 $28,774 $57,070 jmw:kkc:0904bcbsamandatoryassignmentrpt

16 Appendix 1 (continued) Estimated Costs by Type of Patient 2002 Cost Levels Patient: Plan Type: A 54-year old man with coronary artery heart disease who has an acute myocardial infarction and recurrent post-mi angina requiring coronary bypass grafting. Employer Sponsored PPO Plan Assumptions Average Provider Discounts Copayments Hospital 32% Inpatient per Admit $0 Physician 31% Emergency Room $0 Office Visit $15 Deductible Preventive Visit $15 Deductible $300 Prescriptions - generic $10 Coinsurance 20% Prescriptions - brand Formulary $15 Out-of-pocket maximum $1,800 Prescriptions - brand Non Formulary $25 (including deductible) All services received in-network Calculations Service Category Utilization Unit Utilization per Patient Billed Charges per Patient Provider Discount Provider Discount Allowed Reimb. Deductible Coinsurance Copay Total Member Cost Sharing Health Plan Payment Medical Inpatient Admits 1.7 $88,240 32% $28,237 $60,003 $224 $1,118 $0 $1,342 $58,661 Outpatient ER Cases 0.6 1,374 32% Other Outpatient Cases 4.0 5,397 32% 1,727 3, ,588 Office Visits & Related Visits ,301 31% Preventive Visits Visits % Other Physician Services ,021 31% 7,137 15, ,529 Medical Subtotal $119,341 $37,946 $81,395 $300 $1,500 $171 $1,971 $79,424 Pharmacy Rx Generic Scripts 22.0 $220 $220 Rx Brand Scripts Pharmacy Subtotal 39.4 $495 $495 Summary of Results Hospital & Average Costs Hospital Physician Physician Amount Billed by Provider $95,011 $24,330 $119,341 - Savings from Discounts/Balance Billing Protections $30,404 $7,542 $37,946 = Health Plan Allowed Reimbursement $64,607 $16,788 $81,395 - Patient Cost Sharing $1,445 $526 $1,971 = Health Plan Payment $63,162 $16,262 $79,424 jmw:kkc:0904bcbsamandatoryassignmentrpt

17 Appendix 1 (continued) Estimated Costs by Type of Patient 2002 Cost Levels Patient: A child with severe, persistent asthma Plan Type: Employer Sponsored PPO Plan Assumptions Average Provider Discounts Copayments Hospital 32% Inpatient per Admit $0 Physician 31% Emergency Room $0 Office Visit $15 Deductible Preventive Visit $15 Deductible $300 Prescriptions - generic $10 Coinsurance 20% Prescriptions - brand Formulary $15 Out-of-pocket maximum $1,800 Prescriptions - brand Non Formulary $25 (including deductible) All services received in-network Calculations Service Category Utilization Unit Utilization per Patient Billed Charges per Patient Provider Discount Provider Discount Allowed Reimb. Deductible Coinsurance Copay Total Member Cost Sharing Health Plan Payment Medical Inpatient Admits 1.7 $19,430 32% $6,218 $13,212 $187 $933 $0 $1,120 $12,092 Outpatient ER Cases 1.4 1,089 32% Other Outpatient Cases 2.7 2,709 32% 867 1, ,686 Office Visits & Related Visits ,520 31% 781 1, ,453 Preventive Visits Visits % Other Physician Services ,892 31% 2,447 5, ,984 Medical Subtotal $33,658 $10,667 $22,991 $300 $1,500 $288 $2,089 $20,902 Pharmacy Rx Generic Scripts 31.7 $317 $317 Rx Brand Scripts Pharmacy Subtotal 70.9 $936 $936 Summary of Results Hospital & Average Costs Hospital Physician Physician Amount Billed by Provider $23,228 $10,430 $33,658 - Savings from Discounts/Balance Billing Protections $7,433 $3,234 $10,667 = Health Plan Allowed Reimbursement $15,795 $7,196 $22,991 - Patient Cost Sharing $1,339 $750 $2,089 = Health Plan Payment $14,456 $6,446 $20,902 jmw:kkc:0904bcbsamandatoryassignmentrpt

18 Appendix 1 (continued) Estimated Costs by Type of Patient 2002 Cost Levels Patient: Plan Type: A 50-year-old woman with that had an ischemic stroke who, after the complete hemiplegic stroke requires vascular surgery (prophylactic thromboendarterectomy) Employer Sponsored PPO Plan Assumptions Average Provider Discounts Copayments Hospital 32% Inpatient per Admit $0 Physician 31% Emergency Room $0 Office Visit $15 Deductible Preventive Visit $15 Deductible $300 Prescriptions - generic $10 Coinsurance 20% Prescriptions - brand Formulary $15 Out-of-pocket maximum $1,800 Prescriptions - brand Non Formulary $25 (including deductible) All services received in-network Calculations Service Category Utilization Unit Utilization per Patient Billed Charges per Patient Provider Discount Provider Discount Allowed Reimb. Deductible Coinsurance Copay Total Member Cost Sharing Health Plan Payment Medical Inpatient Admits 1.9 $31,482 32% $10,074 $21,408 $183 $917 $0 $1,100 $20,308 Outpatient ER Cases % Other Outpatient Cases 2.9 5,364 32% 1,716 3, ,460 Office Visits & Related Visits ,249 31% Preventive Visits Visits % Other Physician Services ,668 31% 4,237 9, ,946 Medical Subtotal $52,587 $16,678 $35,909 $300 $1,500 $175 $1,975 $33,934 Pharmacy Rx Generic Scripts 16.5 $165 $165 Rx Brand Scripts Pharmacy Subtotal 31.5 $402 $402 Summary of Results Hospital & Average Costs Hospital Physician Physician Amount Billed by Provider $37,626 $14,961 $52,587 - Savings from Discounts/Balance Billing Protections $12,040 $4,638 $16,678 = Health Plan Allowed Reimbursement $25,586 $10,323 $35,909 - Patient Cost Sharing $1,315 $660 $1,975 = Health Plan Payment $24,271 $9,663 $33,934 jmw:kkc:0904bcbsamandatoryassignmentrpt

19 Appendix 1 (continued) Estimated Costs by Type of Patient 2002 Cost Levels Patient: Plan Type: A 55-year-old male with diabetes mellitus with laser eye surgery for treatment of proliferative diabetic retinopathy Employer Sponsored PPO Plan Assumptions Average Provider Discounts Copayments Hospital 32% Inpatient per Admit $0 Physician 31% Emergency Room $0 Office Visit $15 Deductible Preventive Visit $15 Deductible $300 Prescriptions - generic $10 Coinsurance 20% Prescriptions - brand Formulary $15 Out-of-pocket maximum $1,800 Prescriptions - brand Non Formulary $25 (including deductible) All services received in-network Calculations Service Category Utilization Unit Billed Utilization per Charges per Patient Patient Provider Discount Provider Discount Allowed Reimb. Deductible Coinsurance Copay Total Member Cost Sharing Health Plan Payment Medical Inpatient Admits 0.4 $8,132 32% $2,602 $5,530 $74 $369 $0 $443 $5,087 Outpatient ER Cases % Other Outpatient Cases ,580 32% 4,026 8, ,869 Office Visits & Related Visits ,191 31% Preventive Visits Visits % Other Physician Services ,788 31% 3,654 8, ,483 Medical Subtotal $34,082 $10,776 $23,306 $300 $1,500 $182 $1,982 $21,324 Pharmacy Rx Generic Scripts 28.9 $289 $289 Rx Brand Scripts Pharmacy Subtotal 51.0 $638 $638 Summary of Results Hospital & Average Costs Hospital Physician Physician Amount Billed by Provider $21,096 $12,986 $34,082 - Savings from Discounts/Balance Billing Protections $6,751 $4,025 $10,776 = Health Plan Allowed Reimbursement $14,345 $8,961 $23,306 - Patient Cost Sharing $1,149 $833 $1,982 = Health Plan Payment $13,196 $8,128 $21,324 jmw:kkc:0904bcbsamandatoryassignmentrpt

20 Appendix 2 Criteria Used to Identify Patients This appendix provides the specific demographic, diagnosis, and procedure code criteria we used to identify the five types of patients in our research database. jmw:kkc:0904bcbsamandatoryassignmentrpt

21 Appendix 2 Criteria Used to Identify Patients in R&A Research Database Patient #1 - Female Breast Cancer year old female 2. Breast Cancer (Diagnosis Code 174.xx) 3. Modified Radical Mastectomy (CPT Code or ICD9 Procedure 85.45, 85.46, 85.47, 85.48) or Radical Mastectomy (CPT Codes and 19220) 4. Reconstructive Surgery (CPT Codes or ICD9 Procedure 85.7 and 85.8x) 5. Chemotherapy (Diagnosis Code V58.1 or ICD9 Procedure 99.25) Patient #2 - Male Heart Disease year old male 2. Coronary Heart Disease (Diagnosis Code 414.0, , , ) 3. Acute Myocardial Infarction (Diagnosis Code 410.xx) 4. Recurrent Post-MI Angina (Diagnosis Code 413.xx) 5. Coronary Bypass Grafting (CPT Codes 33504, 33505, , or ICD9 Procedure 36.1x) Patient #3 - Child with Severe and Persistent Asthma 1. Male or Female 14 years old or less 2. At least one inpatient admission or three or more emergency room visits (Primary Diagnosis Code 493.xx) 3. Patients in the top 20% of total charges of all similar patients Patient #4 - Female Ischemic Stroke year old female 2. Ischemic Stroke (Diagnosis Code 436 or 438.2x) 3. Prophylactic Thromboendarterectomy (CPT Codes 35301, 35311, or ICD9 Procedure 38.12) Patient #5 - Male Diabetic year old male 2. Diabetes Mellitus (Diagnosis Code 250.xx) 2. Proliferative Diabetic Retinopathy (Diagnosis Code ) 3. Treatment of Retinal Lesion (CPT Codes 67228) jmw:kkc:0904bcbsamandatoryassignmentrpt

22 Appendix 3 Assumed Benefit Plans This appendix provides the employer-sponsored PPO benefit plan that we used to calculate the member cost sharing (i.e., copayments, coinsurance, and deductibles) for each of the five types of patients. jmw:kkc:0904bcbsamandatoryassignmentrpt

23 Appendix 3 Assumed Typical Benefit Plan Employer-Spondored PPO Out-of Type of Service In-Network Network Hospital Inpatient Services Ded/Coins Ded/Coins Hospital Outpatient Services Emergency Room Ded/Coins Ded/Coins Outpatient Surgery Ded/Coins Ded/Coins Lab & Radiology Ded/Coins Ded/Coins Other Outpatient Services Ded/Coins Ded/Coins Physician Services Office and Related Services $15 Copay Ded/Coins Preventive Care Visits $15 Copay Ded/Coins Surgery Ded/Coins Ded/Coins Lab & Radiology Ded/Coins Ded/Coins Other Physician Services Ded/Coins Ded/Coins Prescription Drugs Generic Drugs $10 Copay NA Brand - Formulary Drugs $15 Copay NA Brand - Non-Formulary Drugs $25 Copay NA Deductible $300 $500 Coinsurance 20% 30% Out-of-Pocket Maximum (Including Deductible): $1,800 $2,500 Notes: Deductible and coinsurance does not apply to prescription drugs or other services with flat dollar copayments. Out-of-pocket maximums include the deductible and do not apply to services with flat dollar copayments. jmw:kkc:0904bcbsamandatoryassignmentrpt

24 Appendix 4 Background on Reden & Anders, Ltd. R&A is a national actuarial consulting firm specializing in financial and business support for the health care industry. R&A professional staff includes credentialed actuaries, health care consultants, physicians, nurses, operations experts, and researchers. Our actuaries and consultants provide services to health systems, HMOs, Blue Cross and Blue Shield plans, hospitals, physician organizations, medical device manufacturers, pharmaceutical companies and employer coalitions/large employers. We assist our insurance company and HMO clients with statutory and regulatory filings, product development, reserve analysis, risk management and provider contracting strategies. We work with hospitals and physician organizations to evaluate and negotiate HMO and PPO contracts and manage insurance risk inherent in capitated and non-capitated agreements. We also assist employer coalitions and large employers with health insurance risk management to set up and manage innovative delivery systems. R&A was founded in Minneapolis in Steady growth lead to the opening of a second office in Denver in Three years later we were acquired by Ingenix Health Intelligence. This enabled additional expansion, including the acquisition of PM Squared in San Francisco, the opening of an Atlanta office, and access to one of the largest health care databases in the country. In 2002, R&A acquired the U.S. Health Care Sector Practice from Tillinghast-Towers Perrin, which included new offices in New York and Chicago. Ingenix, a UnitedHealth Group company, offers products and services including coding and reimbursement; compliance; cost management; decision support; fraud and abuse prevention and data integration, analysis and consulting. jmw:kkc:0904bcbsamandatoryassignmentrpt