Todd R. Rooker President, SilverScript Insurance Co

©2005 SilverScript, Inc. All rights reserved. This presentation contains confidential and proprietary information of SilverScript, Inc. and may not be

reproduced, distributed or printed without written permission from SilverScript, Inc.

Medicare Prescription Drug Coverage: An Overview of Opportunities and Challenges for

PBMs and Industry Partners

Todd R. RookerPresident, SilverScript Insurance Co.

Wisconsin Association of Health UnderwritersFall Sales Conference

Sept. 14, 2005

Confidential and proprietary information. Not for distribution.

What is SilverScript?

SilverScript Insurance Company Indirectly wholly owned subsidiary of Caremark Will participate as a PDP in 34 regions

– Pending insurance licensure in all states– Granted waiver by CMS to operate PDP until licensure

secured

Two products offered for 2006– A fully-insured offering, featuring two basic alternative

benefit plan designs


Agenda

Evolution of Part D Providing employer support Providing health plan support The role of agents and brokers in Medicare Part

D The future of the program for duals and low-

income subsidy individuals Conclusions


Medicare Modernization ActThe Evolution of Part D

Encourages growth of managed care in Medicare Adds a drug-only benefit to the existing Medicare fee-for-

service (FFS) program Relies on private plans (which must bear insurance risk) to

deliver drug benefits Included interim drug discount card, which “sunsets” at end

of 2005 Other significant components

Health savings accounts (HSAs) Reimportation Revise Part B drug reimbursements (AWP reform) E-prescribing Hatch-Waxman changes Demonstration projects


Key Dates

Employer subsidy applications due to CMS MAPD/PDPs begin marketing Medicare.gov plan comparison site goes

live Dual eligibles auto-assigned Open enrollment begins. Final day to send

notices of creditable coverage Part D benefit begins End of initial enrollment period Facilitated enrollment of low-income

subsidy eligibles

— Sept. 30, 2005

— Oct. 1, 2005

— Oct. 15, 2005

— Oct. 20, 2005

— Nov. 15, 2005

— Jan. 1, 2006

— May 15, 2006

— May 16, 2006


Employer Options Subsidy

Employer provides prescription coverage to retirees under regular prescription benefit plan

Direct waiver PDP Employer becomes a PDP for its own retirees

Indirect waiver PDP Employer contracts with a PDP to offer a closed Part D plan to

their retirees Wrap

A nonMedicare plan that coordinates with Part D. Employer encourages its retirees to join a Part D plan, but provides additional benefits

Premium subsidy Employer subsidizes premiums for retirees who enroll in a PDP

or MA-PD plan Drop coverage

Employer drops retiree coverage. Retirees may enroll in a PDP or MA-PD plan of their choice


What are Employers Doing for 2005?

83%

0%

11%

6%

28% Subsidy

Waiver PDP

Drop Coverage

Wrap/PremiumSubsidy

Source: Caremark survey of employer clients, June 2005


Employer SubsidyHow to Ensure Your Groups Qualify

Five-step process for 2006:1. Submit application by Sept. 30

– Extension recently granted to Oct. 312. Include actuary’s attestation that plan meets actuarial

equivalence standard, which is a CMS requirement3. Certify that the plan will notify enrollees of the creditable

coverage status of the plan4. Submit and periodically update enrollment information5. Submit aggregate data about incurred drug costs and

reconcile costs at the end of the year


Employer SubsidyHow Your PBM Can Help

Subsidy Requirement PBM SupportApplication filing with CMS by September 30

Can provide executive summary template for application

Include actuary’s attestation that plan meets actuarial equivalence standard

Can provide access to tools and data to assist with actuary’s attestation

Segregate subsidy population Can assist in setting plan and beneficiary hierarchy

Certify that plan will notify enrollees of the creditable coverage status of the plan

Can provide letters of creditable coverage

Submit and periodically update eligibility information

Can assist clients in meeting CMS eligibility format requirements and ongoing enrollment files

Submit aggregate data about incurred drug costs and reconcile costs at year-end

Can provide client with claims files and backend-reporting requirements for CMS


Employer SubsidyAdvantages

CMS highlights the administrative advantages of the retiree drug subsidy option including: Employer control over plan design Ability to use vendors of choice Reduced administrative requirements No service area restriction Later deadlines Retiree communication requirements streamlined Easier to manage requirements for noncalendar year plans


Health Plan Options

Medicare Advantage Prescription Drug Plan (MAPD) Prescription Drug Plan (PDP) options:

Open PDP Waiver PDP (indirect or direct)

Support employer-based coverage 28% subsidy Wrap plans

Fallback plans None anticipated for 2006


MAPD/PDP SupportHow Your PBM Can Help

Client application support

Customer care enrollment and eligibility support

Benefit set up and coordination of benefits

Network contracting and development including long-term care, home infusion, Indian/tribal/ urban pharmacies

Claims processing Mail service/specialty Formulary development,

P&T review Reporting Rebate processing and

billing Electronic prescribing Compliance/audit


MAPD/PDP Outsource ChallengesAreas to be Cautious Assigning to a PBM

Customer care Customer calls can only support prescription inquiry which

may impact beneficiary satisfaction Information and outreach

Duplicate production of information to accommodate Medical and prescription coverage

Limited control of branding Enrollment

Owning the beneficiary experience Missed cross-selling opportunities


Role of Agents and Brokers

Generally, a licensed agent must review and approve a Medicare beneficiary’s Part D application

Significant growth opportunities Current policyholders Medicare beneficiaries without prescription coverage Group business and employers dropping coverage

Impact on Medicare supplement business H, I, & J plans: not “creditable” coverage


Looking ForwardEmployers

Employers looking to subsidy for 2006 Re-evaluate for 2007 Dropping coverage, wraps, waiver PDPs

Part D plans will partner with employers who elect to drop prescription coverage Direct marketing and education to beneficiaries

through a trusted source (employers) Perceived continuity Ties-in with normal open enrollment season

Additional services may be offered by Part D plans to ease transition to insured benefit Premium subsidy Implement secondary or wrap coverage


Looking ForwardDual Eligibles and Low-Income Subsidy

Note: 100% of poverty is equal to $9,310/single: $12,490/couple in 2004. Source Congressional Budget Office, November 2003.

62% eligible for full

subsidy

20% eligible for reduced subsidy

19% not eligible because of assets

Nondual eligibles <150% of poverty: 9.4 million beneficiaries

All Medicare beneficiaries: 39.4 million

Nondual eligibles >150% of poverty (23.6 million beneficiaries)

60%

Dual eligibles (6.3 million beneficiaries)

16% Nondual eligibles <150% of poverty (9.4 million beneficiaries)

24%


Looking ForwardPart D Market

Beneficiary experience Plan design, adoption, adverse selection Premiums versus drug pricing Shift from employer coverage to insured market

CMS Reinsurance corridors, risk adjusters COB process

Budgetary factors Deficit, Iraq, Katrina, political environment

2007 PDP and MAPD bids Year-to-year uncertainty on premiums Re-enrollment process PDPs versus MAPDs


Questions?

Documents

Todd R. Rooker President, SilverScript Insurance Co