TALKING POINTS BCBSF 1996 SECOND QUARTER ENROLLMENT GROWTH RESULTS

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Darlene Jennings
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1 TALKING POINTS BCBSF 1996 SECOND QUARTER ENROLLMENT GROWTH RESULTS Customer Growth and Satisfaction Eighty-six percent of our customers have chosen a coordinated approach to health care through Health Options, Capital Health Plan or our Preferred Provider Organization product. Over the last 12 months, Health Options has grown in membership by 17 percent, making it one of the fastest-growing HMOs in Florida. Across the country, trade publications and national health care sources continue to recognize Health Options as a fast-growing leader in the health care industry. The Florida Association of Health Maintenance Organizations reported that Health Options has outpaced the statewide HMO market for four consecutive years. Department of Insurance reports show that Health Options is the largest HMO in the state as of June 30, The gain in Health Options customer enrollment represents steady, solid growth. Health Options continues to grow in membership because customers are seeing the value in coordinated, preventive health care programs. The group retention number is 90 percent for the second quarter. Overall, 88 percent of customers renewed their Health Options coverage. In a recent BCBSF statewide image survey, four times as many Floridians prefer BCBSF over its closest competitor. Ninety-one percent of those polled say BCBSF is "a high quality insurance company." Companywide, BCBSF insures approximately 2.0 million Floridians. In the second quarter of this year, Health Options increased its membership number by 23,823 for a total of 555,185 customers. New Product Introductions Part of our growth in 1996 can be attributed to the introduction of new products that give Floridians access to the quality, affordable care that the company's group customers experience.

Second Quarter Enrollment Growth Talking Points (Continued) BlueCare, an individual HMO plan for people under 65, is now offered in each of our five regions.

2 Second Quarter Enrollment Growth Talking Points (Continued) BlueCare, an individual HMO plan for people under 65, is now offered in each of our five regions. This coverage is ideal for working Floridians without access to employersponsored health benefits, individuals between jobs, the self-employed and other who need more affordable options for quality health care. BCBSF is continuing its expansion of Medicare & More, an HMO for Medicare beneficiaries. Thousands of seniors are experiencing the benefits of predictable costs for quality health care, access to doctors who have been screened for quality and covered services that detect illness early. Quality Health Options adds value to the quality of its customers' care by promoting health and wellness. An example is our Healthy Addition program, a statewide prenatal care program providing education services and high risk monitoring, designed to reduce low birth-weight or premature deliveries. More at-risk mothers have carried their babies to term as a result of this program. As the leader in the health care industry in Florida, BCBSF is continually developing programs that promote illness prevention and early detection of disease. Two illnesses that the company is currently operating programs for include diabetes and asthma. These programs help to elevate the quality of care that customers receive from their health care partners. During 1995, Health Options earned full accreditation from the National Committee for Quality Assurance (NCQA). NCQA accreditation is the seal of quality all consumers should look for when considering a health plan. Only 15 percent of health care plans who apply earn full accreditation. Full accreditation demonstrates that Health Options performs well when measured against NCQA's national standards for quality management and improvement, physician credentialing, preventive health services and medical record management.

3 Second Quarter Enrollment Growth Talking Points (Continued) Network Health Care Advantages of network health care include preventive care, quality measurement, management of chronic conditions and the ability to provide comprehensive care within a budget. By making quality health care more affordable, this approach also expands access to more Floridians. Almost four million Floridians have chosen HMOs over traditional health plans for quality health care. This growth is proof that comprehensive care plans provide high quality care, with more comprehensive benefits, more preventive services and lower, predictable out-of-pocket costs.

4 Executive Compensation Other BCBSF Issues That May Be Linked To Financial Performance To provide the highest quality, most cost-effective health care delivery and financing programs to our customers, BCBSF must attract and retain highly qualified, talented and innovative executives. We compete for executives with large national life and health insurers and other health care financing and delivery organizations including managed care companies. Our compensation policies are measured against this competitive market. BCBSF's ability to compete nationally for its executives has contributed significantly to sound management, enrollment growth and the financial stability of our company. All compensation policies are established by the BCBSF Board of Directors, many of whom represent the public. These policies are developed following extensive review and analysis of compensation practices throughout the nation. Blue Cross and Blue Shield of Florida does not compete with other Blues plans. Rather, we compete with major national insurers who do business in Florida. It is the company's policy not to disclose the salaries of our employees. For-Profit Status The company has no plans at this time to change its status to a for-profit company. BCBSF is a mutual insurance company, subject to the same regulation by the Department of Insurance as other insurers operating in Florida. In 1995, the company paid $47.0 million in state and federal taxes.

5 Issues Related to Financial Performance (Continued) National Health Care Reform On August 1 Congress approved the Health Insurance Portability and Accountability Act of BCBSF applauds this effort to increase access to health care coverage for millions of Americans. Many of the provisions included in the bill relating to portability and guaranteed renewability are already practiced in Florida, so the bill will not have as great an impact in Florida as in other states Florida Legislative Session There were several health care-related bills introduced in the House and Senate this year that BCBSF considered harmful to our customers. Fortunately, the majority of the harmful legislation did not pass, including several Direct Access and Any Willing Provider bills that would have given special privileges to dermatologists, ophthalmologists, optometrists, teaching hospitals and cancer centers. These bills would have undermined the patient's ability to benefit from coordinated care and raised the cost of health care. Objectionable legislation that did pass relates to maternal length of hospital stay, emergency rooms and civil remedy. Legislation that we have long supported also passed: Guaranteed renewability of individual coverage; "portability" through credit for previous qualifying coverage; and "mini-cobra," or continuation of coverage for employees of small companies (<20 employees). Grassroots/Lobbying Initiatives BCBSF has a responsibility to protect the quality of health care that our two million customers have come to expect. HMOs and PPOs continue to face challenges in the legislative and political arenas. BCBSF feels that it has an obligation to its customers, and Florida consumers, to keep them informed about the threats to the quality and affordability of their health care. This is especially important since voters may be asked to decide on a ballot initiative in 1998 that could eliminate quality care at an affordable cost.

Issues Related to Financial Performance (Continued) To protect the interests of our customers, BCBSF is committed to defeating harmful legislation for health care.

6 Issues Related to Financial Performance (Continued) To protect the interests of our customers, BCBSF is committed to defeating harmful legislation for health care. If the bills in this year's session would have passed, the price tag associated with diminished quality and higher costs would have been far greater than the price of keeping the public and legislators informed. Network Contracting Changes Blue Cross and Blue Shield of Florida is constantly working to provide Floridians with access to quality, affordable health care. As a part of our efforts, we routinely review our agreements with providers to ensure we are meeting customers' needs. Changes in our networks are considered in response to customer needs, or concerns related to quality. As (facility x ) will no longer be contracting with Blue Cross and Blue Shield of Florida, we are currently working to identify any patients who could be affected by this change. Any patients in the course of treatment will not be impacted by this change. If customer issues arise, we will address the needs of each customer on an individual basis. We contract individually with hospitals and periodically make hospital network changes to align our health care plans with the changing needs of our nearly 2 million customers. As changes occur, our primary goal is to ensure customers' access to care is not interrupted. As part of our ongoing efforts to improve our networks, Blue Cross and Blue Shield of Florida has revised its contracts with renal dialysis centers. These updates will provide access to high quality centers for BCBSF customers who undergo renal dialysis. Staff Realignment BCBSF is realigning staff to ensure our resources are allocated efficiently so that the company can continue providing quality, affordable health care to our customers. Staff realignment will help BCBSF become more efficient to ensure we can remain competitive in the marketplace.

7 Issues Related to Financial Performance (Continued) Rate Increases It has always been BCBSF's objective to provide its customers with quality benefits at the most reasonable cost possible. We will continue to work to hold down medical costs while still providing access to the highest quality care possible. BCBSF has been successful in slowing the rate of premium increases in many of its products. All individual rate increases are approved by the Florida State Department of Insurance before being implemented. As health care services become more expensive, and as people use their benefits more often, rates must reflect the increase in claims payouts. This is how BCBSF assures that our policyholders will have needed coverage now and in the future.

TALKING POINTS BCBSF CONSOLIDATED 1996 SECOND QUARTER FINANCIAL RESULTS

TALKING POINTS BCBSF CONSOLIDATED 1996 SECOND QUARTER FINANCIAL RESULTS Income (Operating and Net) Operating income for the second quarter of 1996 increased compared to the second quarter of 1995. Operating