The guide for hard-to-find information on benefit products, services and industry data

The guide for hard-to-find information on benefit products, services and industry data

Caremark is a leading provider of fully integrated pharmacy benefit management services, specialty pharmacy services, and disease management programs to more than 2,000 health plan sponsors nationally. We provide health management solutions that improve health outcomes while enabling benefit plan sponsors and plan members to maximize their healthcare investment. If you would like additional copies of the 2005 Benefits Barometer, or prefer someone from Caremark to contact you, please call 800.927.3727 or email us at consultant.resource@caremark.com. The 2005 Benefits Barometer was produced by Caremark Inc. with the cooperation of Thomson Financial Services, New York, NY.

Benefits Barometer A research resource for benefit professionals featuring statistical snapshots of benefit plan costs, plan designs and the benefits management function The 2005 Benefits Barometer draws on numerous sources for data providing readers with a profile of current employee benefit plan designs as well as valuable benchmarking information. This year s publication includes more entries and draws from more resources than ever before. The following sources are most frequently cited for the Benefits Barometer: Caremark Drug trend information, cost projections and other data relating to pharmacy benefit management was provided by Caremark, Scottsdale, AZ. For more information, call 800.927.3727. The Bureau of Labor Statistics National Compensation Survey - Compensation Cost Trends. This study generates quarterly indexes measuring fluctuations in labor costs and annual data. Visit www.bls.gov for statistics. The EBN-Hay Survey on Benefits Management, which this year included nearly 700 benefit executives who are readers of EBN. The complete online survey findings are available for purchase at www.benefitnews.com. Hewitt Associates. Findings from sources such as the Hewitt Health Value Initiative, a database representing more than 2,000 health plans in 139 U.S. markets, including 300 major employers and 18.23 million health plan participants was used. More information is available at www.hewitt.com. The Kaiser Family Foundation and Health Research and Educational Trust (HRET) Employer Health Benefits Survey of 2004. This survey reports findings from more than 1,925 randomly selected public and private employers. For more information, contact the Henry J. Kaiser Family Foundation at www.kff.org. The MetLife Study of Employee Benefits Trends of 2003. The national study of employee benefits trends surveyed both employees and employers during the third quarter of 2003. Visit www.metlife.com to learn more about what this survey revealed. Mercer. The 2003 Coping with the Economy Survey, with 242 organizations responding, reflected trends in the retirement and health care industries. Contact Mercer Human Resource Consulting at www.mercerhr.com. U.S. Centers for Medicare & Medicaid Services (CMS), Office of the Actuary, National Health Expenditures. Both historical and projected statistics measure spending for health care in the U.S. by type of service delivered and source of funding for those services. Go to www.cms.hhs.gov to learn more. 800.927.3727 consultant.resource@caremark.com

BENEFIT COST HIGHLIGHTS 8% 7% 6% 5% 4% 3% 2% 1% 1994 Employment cost index Changes in wages and salaries and in benefit costs, private industry, 1994-2004 1995 1996 1997 1998 1999 2000 2001 2002 2003 Benefits +6.8 Wages and salaries +2.6 2004 Source: Bureau of Labor Statistics, 2004 12-month percent changes in employment cost index, not seasonally adjusted Compensation June June June June June Component 2000 2001 2002 2003 2004 Civilian workers Compensation costs 4.4 3.9 4.0 3.7 3.9 Wages and salaries 4.0 3.7 3.5 2.7 2.5 Benefit costs 5.3 4.5 5.0 6.3 7.2 Private industry Compensation costs 4.6 4.0 4.0 3.5 4.0 Wages and salaries 4.1 3.8 3.6 2.6 2.6 Benefit costs 5.7 4.8 5.1 6.1 7.3 State and local government Compensation costs 3.5 3.6 3.6 4.1 3.4 Wages and salaries 3.7 3.7 3.2 3.1 1.9 Benefit costs 3.1 3.4 4.6 6.8 6.6 Source: Bureau of Labor Statistics, 2004 $250 $200 $150 0 Health premiums soar Average monthly employee contribution to cover a family in an employer-sponsored health plan $135 $222 2000 2001 2002 2003 2004 Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2000-2004; Exh. 6.1. Employer costs for employee compensation, June 2004 Compensation Civilian State and local Private component workers government industry Wages and salaries 70.9% 68.9% 71.4% Benefits 29.1 31.1 28.6 Paid leave 6.6 7.7 6.4 Supplemental pay 2.4.9 2.7 Insurance 7.7 10.3 7.1 Health benefits 7.3 9.9 6.6 Retirement & savings 4.1 6.2 3.5 Defined benefit 2.5 5.5 1.7 Defined contribution 1.6.7 1.8 Legally required 8.1 5.9 8.7 Other benefits.2.2.2 Source: Bureau of Labor Statistics, 2004 Total Health Care Spending in 2002: Where did the money go? Physician & Clinical Services: 22% Prescription Drugs: 11% Hospital Care: 31% Other Spending: 36% Other Spending = Long-term care, administrative & other expenditures. Source: Federal Trade Commission & Dept. of Justice Report: Improving Health Care: A Dose of Competition, July 2004. 4

Preliminary* HMO rate increases 2004 vs. 2005 by region *Preliminary HMO increases are before plan changes, negotiations and terminations. West 16.3% (2004) 13.5% (2005) Midwest 18.5% (2004) 13.1% (2005) National average increase 17.5% (2004) 13.7% (2005) Northeast 16.8% (2004) 14.6% (2005) Southwest 19.1% (2004) 13.4% (2005) Southeast 18.7% (2004) 14.1% (2005) 2004 Hewitt Associates LLC Health care cost increase trends by plan type and region (2004) HMO Indemnity POS PPO Total East 11.01% 3.11% 16.29% 7.79% 10.66% Southeast 14.88% 7.08% 14.06% 10.26% 13.04% Midwest 11.01% 10.75% 15.10% 10.48% 12.17% Southwest 15.63% 10.38% 20.66% 8.79% 13.8% West 12.54% 7.59% 17.83% 9.9% 12.81% Total (National) 12.52% 5.88% 16.3% 9.5% 12.33% Source: Hewitt Health Value Incentive, 2004 National averages for health care costs per employee by region 2001 2002 2003 2004 2005 projected East $4,796 $5,465 $6,302 $6,974 $7,762 Southeast $4,335 $5,171 $5,913 $6,684 $7,436 Midwest $4,548 $5,168 $6,176 $6,927 $7,707 Southwest $4,504 $5,441 $6,215 $7,073 $7,867 West $3,999 $4,527 $5,551 $6,262 $6,971 Total $4,567 $5,259 $6,034 $6,778 $7,542 Source: Hewitt Health Value Incentive, 2004 5

BENEFIT COST HIGHLIGHTS $ in billions 600 500 400 300 200 100 0 Drug spend continues to increase, but trend is slowing Drug spend Percentage change 15.9% 15% 15.3% 12.4% 11.7% 13.4% 12.9% 10.7% 9.7% 9.2% 10% $140.8 $162.4 $184.1 $207.9 $233.6 $292.4 $360.1 $435.2 $519.8 5% 2001 2002 2003* 2004* 2005* 2007* 2009* 2011* 2013* Note: 2002-2006 data are projections; total drug spend includes uninsured expenditures. Source: U.S. Centers for Medicare & Medicaid Services (CMS), Office of the Actuary, 2004 Ten-year look at drug spend as a proportion of health care costs 15% 12% 9% 11.6% in 2004 13.6% in 2008 15.5% in 2013 By what percentage did you project your health coverage costs to increase from 2003 to 2004? or more 8% 16% to 19% 10% 0% to 5% 13% 6% 3% 5.8% in 1994 8.5% in 1999 1994 1996 1998 2000 2002 2004E 2006E 2008E 2010E 2012E 2013E 10% to 15% 46% 6% to 9% 23% Note: 2004-2013 data are projections Source: U.S. Centers for Medicare & Medicaid Services (CMS), Office of the Actuary, 2004 Source: 2004 EBN-Hay Survey on Benefits Management By what percentage did your pharmaceutical costs increase from 2003 to 2004? or more 8% 0% to 5% 15% 16% to 19% 15% 6% to 9% 24% 10% to 15% 38% Source: 2004 EBN-Hay Survey on Benefits Management 8 7 6 5 4 3 2 1 0 Whether Ever Purchased Prescription Medication from a Foreign Country to Save Money Among Pharmacy Customers - By Type of Pharmacy Used Most Often Mass...8% Among pharmacy customers, Mass merchant customers were the most likely (8%) to have purchased prescription medications from a foreign country to save money, independent customers (3%) were the least likely. Food...6% Mail/Online...5% Clinic/Other...5% Chain...5% Ind...3% Source: 2004 Wilson Health Information, LLC. 6

What changes did you make in your pharmacy benefit plan for 2004 or are you considering for 2005? Increased co-pays 54% Increased number of co-pay tiers 12% Mandatory mail order for maintenance medication 8% Mandatory generic where available 11% Open formulary (where nonformulary brand has a higher co-pay than formulary brand) 13% Closed formulary (where nonformulary brand drugs are reimbursed only with special approval) 2% Source: 2004 EBN-Hay Survey on Benefits Management Drug plan cost-sharing In 2003 and 2004, plans increased participant cost share. Percent of participants covered 0% 10% 30% 40% 50% 60% 70% 3- tier co-pay 52% 60% 63% Dispense as written penalty 51% 53% 54% How many employee co-payment tiers does your pharmacy benefit have (excluding mail order)? None 2% One 1% Two 17% Three 74% Four or more 4% NA 2% 2003 retail and pharmacy sales Mass merchant 9.6% Independent pharmacies 18.8% Source: 2004 EBN-Hay Survey on Benefits Management Supermarket 12.3% $203.1 billion Mail order 17.2% Traditional chain pharmacies 42.0% Source: National Association of Chain Drug Stores, 2003 Community Pharmacy Results Co-insurance 21% 26% 31% Retail refill restriction 23% 19% 19% Deductible 11% 13% 15% Maximum out-of-pocket 6% 12% 14% 2002 2003 2004 Source: Caremark Analytics & Outcomes, Book of Business Data 2004 Caremark Inc. All Rights Reserved. 7

BENEFIT COST HIGHLIGHTS Generic Preferred Nonpreferred Distribution of covered workers with the following types of cost sharing for prescription drugs, by drug type, 2004 Four-Tier 84% 10% 3% 1% 3% 84% 9% 4% 1% 2% 84% 8% 5% 2% 2% 17% 50% 3% 31% Copay Coinsurance Both Neither Copay or Coinsurance whichever Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2004 2000 2001 2002 2003 2004 Distribution of covered workers facing different cost-sharing formulas for prescription drug benefits 27% 49% 22% 2% 41% 41% 18% 1% 55% 30% 13% 1% 63% 23% 13% 2% 3% 65% 10% 1% Four-Tier Three-Tier Two-Tier Payment is the same regardless of type of drug Other/Don't know Note: Tests found no statistically different distribution from the previous year shown at p<.05. No test was conducted between 2003 and 2004 due to the addition of a new category. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2004 Average copays for generic drugs, preferred drugs, nonpreferred and four-tier drugs Generic drugs $0 $10 $20 $30 $40 $50 $7 $8* $9* $9* $10* Preferred drugs Nonpreferred drugs Four-Tier drugs $13 $15* $17* $19* $21* $17 $20 $25* $29* $33* > > > > $48 2000 2001 2002 2003 2004 * Estimate is statistically different from previous year at p<.05. ^ Four-tier drug copay information was not obtanied prior to 2004. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2000, 2001, 2002, 2003, 2004 8

Average annual premiums for covered workers, by plan type, 2004 Percentage change in premiums for covered workers, by firm size, 2004 Conventional Single $468 Family $2,382 HMO Single $552 Family $2,674 PPO Single $573 Family $2,691 POS Single $542 Family $2,618 All Plans Single $558 Family $2,661 Worker contribution $3,352 $3,820 $7,220 $2,906 $3,458* $6,830 $3,235 $3,808* $7,526 $3,085 $3,627 $7,195 $3,137 $3,695 $7,289 Employer contribution $9,602 $9,504* $10,217* $9,813 $9,950 All Small Firms (3-199 workers) (3-24 workers) (25-49 workers) (50-199 workers) All Large Firms (200 or more workers) Midsize (200-999 workers) Large (1,000-4,999 workers) Jumbo (5,000+ workers) All Firms 11.5% 13.6% 12.4% 9.1%* 11.1% 10.3% 10.7% 11.6% 11.2 * Estimate of total premium is statistically different from All Plans by coverage type at p<.05. Note: Family coverage is defined as health coverage for a family of four. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2004. * Estimate is statistically different from All Firms at p<.05. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2004. 18% 14% 10% 6% 2% Increases in health insurance premiums compared to other indicators 12.0% 18.0% 14.0% * Estimate is statistically different from the previous year shown at p<0.05. Estimate is statistically different from the previous year shown at p<0.1. Note: Data on premium increases reflect the cost of health insurance premiums for a family of four. 8.5% Health insurance premiums Workers earnings Overall inflation 5.3%* 12.9%* 10.9%* 8.2%* 13.9% 11.2%* 2.3% 0.8% 2.2% 1988 1990 1992 1994 1996 1998 2000 2002 2004 Source: KFF/HRET Survey of Employer-Sponsored Health Benefits: 1999-2004; KPMG Survey of Employer-Sponsored Health Benefits: 1993, 1996; The Health Insurance Association of America (HIAA): 1988, 1989, 1990; Bureau of Labor Statistics, Consumer Price Index (U.S. City Average of Annual Inflation (April to April), 1988-2004; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April), 1988-2004 Premium increases, by plan type and funding arrangement, 2004* 15% 12% 9% 6% Fully insured Self-funded 3% 0% 11.4% 11.1% 10.0% 12.5% 12.4% 11.1% 10.3% 11.2% 13.1% 9.1% All Plans Conventional HMO PPO POS * Tests found no statistically different estimates between fully insured and self-funded plans at p<.05. Note: Data on premium increases reflect the total cost of health insurance premiums for a family of four. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2004 9

HEALTH PLANS Top concerns of benefits executives Very or Somewhat Important 2004 2003 Health plan costs 93% 97% Recruiting/retention 77% 75% Skills training 65% 64% Retirement planning education 49% 46% Benefits technology 47% 52% Voluntary/supplemental benefits 23% 27% Source: 2004 EBN-Hay Survey on Benefits Management (Among those with products through workplace) 0% 40% 60% Auto Consumer product ownership by source of workplace funding Medical Banking services 80% 100% Most important employee benefits strategies Benefits to help work/life balance 43% 39% Employee decision support tools 29% 23% Cost shifting to employees 26% 21% Retirement planning 25% 28% Wider array of voluntary benefits 22% 401(k) investment education 21% 28% Common platform for administration 22% Internet access for all employees 18% 12% General financial planning 14% 13% Employee self service on net 10% 13% Outsourcing benefits administration 8% 11% Build or expand benefits Web site 5% 12% 2003 2002 Dental Home/Renter insurance Basic term life AD&D Disability Vision care Mortgage Dependent term life Financial plan Optional/Supplemental life Travel/Accident Critical illness Long term care Group legal Employer pays all Estate planning Employer pays some Pet Employee pays all Concierge Source: The MetLife Study of Employee Benefits Trends, 2003 Source: The MetLife Study of Employee Benefits Trends, 2003 10

Percentage of large firms (200 or more workers) that report they were likely to make the following changes in 2004 Increase the amount employees pay for health insurance 52% 31% 9% 7% 1% Increase the amount employees pay for prescription drugs 18% 37% 32% 12% 1% Increase the amount employees pay for deductibles 14% 38% 32% 16% 1% Increase the amount employees pay for office visit copays or coinsurance 14% 38% 33% 14% 1% Introduce tiered cost sharing for doctor visits and hospital stays 2% 24% 39% 34% 2% Restrict employee eligibility for coverage 2% 7% 37% 53% Drop coverage entirely 1% 4% 94% 1% Very likely Somewhat likely Not too likely Not at all likely Don't know Source: Kaiser/HRET Survey of Employer Sponsored Health Benefits: 2004 Ten-year view of annual percentage change in national spending for selected health services Hospital care 19.7 15% Physician and clinical services Prescription drugs 15.2 16.4 15.9 15.3 12.8 10% 5% 8.2 8.4 7.4 5.9 6.1 6.3 3.9 4.6 6.6 3.4 4.8 11.2 3.4 4.0 10.5 3.5 5.0 3.0 6.6 3.9 5.5 5.0 7.2 8.6 7.5 9.5 7.7 0% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Source: Kaiser Family Foundation, Trends and Indicators in the Changing Health Care Marketplace, 2004 Update, from Centers for Medicare and Medicaid Services, 2002 National Health Care Expenditures 11

HEALTH PLANS Percentage of employers providing a choice of health plans, by firm size, 2004 4% 12% 84% One plan Two plans Three or more plans 3% 11% 24% 33% 60% 40% 86% 43% 26% 16% 24% 12% 0% All Firms All Small Firms Midsize Firms* Large Firms* Jumbo Firms* (3-199 workers) (200-999 workers) (1,000-4,999 workers) (5,000+ workers) *Distribution is statistically different from All Firms at p<.05. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2004 50% 72% 100% 80% 50% 40% 30% 10% 0% 5% 10% All Firms Firms offering high-deductible health plans to employees Somewhat likely to offer 21% 6% 5% 10% 2003 2004 2005-2006 2003 2004 2005-2006 2003 2004 2005-2006 2003 2004 2005-2006 2003 2004 2005-2006 All Small Firms (3-199 workers) Very likely to offer 6% 5% 7% 28% 7% Midsize Firms (200-999 workers) 5% 9%* 25% 11% Large Firms (1,000-4,999 workers) 17% Jumbo Firms (5,000+ workers) 28% 22% *Estimate is statistically different from previous year shown at p<.05. Column total is statistically different from All Firms at p<.05. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2000, 2001, 2002, 2003, 2004. Growth in consumer-driven health plans Consumer-driven health available currently or within 2005 0% 40% 60% 80% 100% Offer a CDH plan Offer a high-deductible plan Offer a tiered provider network 29% 89% 48% 96% 17% 42% 2003 survey 2004 survey Source: Milliman Group Health Insurance Survey, 2004 The largest percentage of your employees are covered in what type of medical plan (including being in several different plans of the same type)? Preferred Provider Organization 63% Traditional indemnity/ fee-for-service 3% Point-of-Service 10% HMO 23% Health Reimbursement Account (company-paid) with high-deductible plan 1% Consumer-driven option, where the company contributes a specified amount per employee for medical coverage and the employee chooses from various plans 1% Source: 2004 EBN-Hay Survey on Benefits Management 12

60% 50% 40% 30% 10% 0% 48% 27% 19% 7% 1993 29% 27% 14% 1995 Percent of all covered employees National employee health plan enrollment 35% 30% 15% 1997 43% 30% 46% 33% 54% 16% 14% 14% 11% 1999 7% 2001 58% PPO 27% 27% HMO 5% 2003 10% POS 4% TIP.1% CDHP 2004 Source: Mercer's National Survey of Employer-Sponsored Health Plans, 2004 Employers offering retiree health coverage, by plan type 50% 40% 30% 46% 41% 38% 40% 35% 31% Offer coverage to Medicare-eligible 35% 28% Offer coverage to pre-medicare-eligible 29% 28% 28% 23% 21% 10% 1993 1995 1997 1999 2001 2003 2004 Based on employers with 500 or more employees Source: Mercer's National Survey of Employer-Sponsored Health Plans, 2004 Average annual deductibles for covered workers, by plan type $600 $500 1993 2000 2002 2003 2004 $400 $300 $200 $100 $0 $170 $175 $251 * $275 $287 $289 $340 $466 * $561 * $558 ^ $70 $54 $113 * $210 ^ $352 $409 * $442 $575 PPO Preferred PPO Non-Preferred POS Preferred POS Non-Preferred Provider Provider Provider Provider * Estimate is statistically different from the previous year shown at p<.05. ^ Information was not obtained for HMO plans prior to 2003, or for POS plans in 1988 and 1993. Note: Average deductibles include covered workers who do not have a deductible or report a $0 deductible. For example, 30% of covered workers in PPO plans do not have a deductible for preferred providers. Among single workers enrolled in a PPO plan who do have a deductible greater than $0, the average annual preferred provider deductible is $410 and the average nonpreferred provider deductible is $595. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2000, 2002, 2003, 2004; KPMG Survey of Employer-Sponsored Health Benefits: 1993; The Health Insurance Association of America (HIAA): 1988 13

BENEFITS MANAGEMENT Examples of CarePatterns, Caremark s Disease Management Program Outcomes The CarePatterns Health Management Programs cover over 3 million lives nationally, and the first to receive both physician and participant based NCQA accreditation. Outcomes are monitored and reported on clinical, quality and economic indicators for each population. The Asthma program summarizes the improvement in key clinical measure achieved. Source: Caremark Inc. All Rights Reserved. The CarePatterns Health Management Programs cover over 3 million lives nationally, and the first to receive both physician and participant based NCQA accreditation. Outcomes are monitored and reported on clinical, quality and economic indicators for each population. The Diabetes program summarizes the improvement in key clinical measure achieved. Source: Caremark Inc. All Rights Reserved. Caremark is the first and only PBM to achieve Full Patient and Practitioner Accreditation from NCQA for asthma, CHF, coronary artery disease and diabetes disease management programs. (Effective 9/02-9/05) 14

Specialty Pharmaceuticals Source: JP Morgan Industry Update, Specialty Pharmacy: Conduit of Growth for Biotechnology, March 14, 2003. 2005 Caremark Inc. All Rights Reserved. Rank Area Number of Drugs in Development* 1 Cancer 574 2 Infections 190 3 Pain/Inflammation 177 4 Cardiovascular Disorders 138 5 Psychological Disorders 108 6 Respiratory Disorders 107 7 Diabetes 93 8 Gastrointestinal Disorders 92 9 Blood Disorders 82 10 Dermatological Disorders 72 *Includes compounds in preclinical development, Phase I, Phase II, Phase III, and awaiting FDA approval. Source: Top 10 Areas of Research, R&D Directions, Oct. 2004, Vol. 10, No.9, p.36. 2005 Caremark Inc. All Rights Reserved. Source: IMS Health, JP Morgan Industry Update, Specialty Pharmacy: Conduit of Growth for Biotechnology, March 14, 2003, Bear Stearns Health Care Distribution, Specialty Pharmacy Services: Among the Fastest-Growing Areas of Health Care, November 2003, Caremark Estimates. 2005 Caremark Inc. All Rights Reserved. Source: Nov. 2004. 2005 Caremark Inc. All Rights Reserved. 15

BENEFITS MANAGEMENT Gearing Up: The New Medicare Law Analysis Focuses on Beneficiaries Expected to Enroll in Part D Plans in 2006 20.3 million Not Participating in Part D: 13.6 million Projected Part D Participants: 29 million 8.7 million Total = 42.6 Million Medicare Beneficiaries Note: Other non-participants includes federal retirees with drug coverage through FEHBP or TRICARE. Low-income subsidy recipients include 6.4 million dual eligibles and 2.3 million others with incomes <150% FPL. Source: Congressional Budget Office, July 2004; Kaiser Family Foundation: Estimates of Medicare Beneficiaries Out-of-Pocket Drug Spending in 2006, Modeling the Impact of the MMA, November 2004. 2/3 of Part D Participants are Projected to Spend Less Under the MMA in 2006 Percent of Total Part D Participants with Lower Spending $1,001-1,500 = 12% $1,501-2,000 = 3% > $2,000 = 6% Average Reduction in Out-of-Pocket Spending = $919 Total = 29 Million Part D Participants *Part D participants with no change in out-of-pocket spending have $0 total spending. Note: Estmates exclude premiums and assume no supplementation of Part D coverage. Source: Actuarial Research Corporation analysis for the Kaiser Family Foundation, November 2004. Gap in Standard Part D Benefit Could Leave Many Part D Participants Vulnerable to High Out-of-Pocket Spending 8.6 million 10.5 million 6.9 Million Part D Participants Reach the Doughnut Hole in 2006 3.0 million Total = 29 Million Part D Participants Note: Estmates exclude premiums and assume no supplementation of Part D coverage. Source: Actuarial Research Corporation analysis for the Kaiser Family Foundation, November 2004. 16

Medicare Part D Analysis continued Part D Participants with Drug Spending Above the Initial Coverage Limit are Disproportionately in Poor Health; 1.9 Million Low Income, 3.8 Million Female Health Status Excellent/Very Good 29% Good 29% Fair/Poor 42% Income <150% FPL 28% 150% - 300% FPL 49% >300% FPL 24% Sex Male 45% Female 55% Note: Numbers may not add to 100% due to rounding. Source: Actuarial Research Corporation analysis for the Kaiser Family Foundation, November 2004. The Part D Premium is Projected to Reduce the Value of the MMA for Beneficiaries Who Lack Drug Coverage Prior to Part D Participation $1,593 23% reduction $1,218 50% reduction $798 Estimated Average Part D Premium in 2006: $420 Baseline Under the MMA Total = 8.5 Million Part D Participants Not Receiving Low-Income Subsidies in 2006 Note: Estimates assume no supplementation of Part D coverage. Source: Actuarial Research Corporation analysis for the Kaiser Family Foundation, November 2004. The MMA is Projected to Reduce Average Out-of- Pocket Spending by Part D Participants With Spending Above Catastrophic Threshold $5,980 37% reduction $3,784 Baseline Under the MMA Total = 3.1 Million Part D Participants Who Exceed Catastrophic Threshold in 2006 Note: Estimates exclude premiums and assume no supplementation of Part D coverage. Source: Actuarial Research Corporation analysis for the Kaiser Family Foundation, November 2004. 17

BENEFITS MANAGEMENT In the next year, which of the following benefits will you INTRODUCE for the first time, INCREASE the value of, MAINTAIN at the current level, DECREASE the value of (i.e., by increasing cost sharing, deductibles, etc.) or DROP? Note: N/A indicates a particular benefit is not offered nor will it be introduced. INTRO INCR MNTN DECR DROP N/A HEALTH PLANS: Traditional indemnity plan 1% 1% 13% 2% 2% 81% Preferred Provider Network (PPO) 2% 5% 71% 11% 1% 12% HMO 2% 1% 35% 8% 2% 51% Point-of-Service 2% 2% 3% 1% 71% Health Reimbursement Account with high-deductible plan option 16% 3% 4% 0% 0% 77% Consumer-driven voucher option 5% 1% 2% 0% 0% 90% Health Care Consumerism (Educating employees concerning importance to them of containing costs and how to do it) 29% 31% 13% 0% 0% 28% Disease Management (Management of chronic disease where patient self-care can improve health) 23% 21% 22% 0% 0% 34% Health benefits for retirees 1% 1% 22% 5% 0% 71% Pharmacy 1% 4% 74% 15% 0% 7% RETIREMENT PLANS: Defined benefit (DB) plan 1% 1% 21% 2% 0% 74% Hybrid DB Plan (cash balance, etc.) 0% 0% 5% 0% 0% 92% Savings plans - 401(k)/403(b)/457 1% 9% 81% 2% 0% 8% Profit sharing plan 2% 3% 31% 1% 1% 61% ESOP 1% 1% 10% 1% 0% 87% Money purchase plan 0% 0% 4% 0% 0% 94% Broad-based stock option plan 1% 0% 5% 1% 0% 91% Stock purchase plan 1% 1% 12% 0% 0% 84% OTHER BENEFITS: Financial education/advice 9% 12% 31% 1% 0% 47% Full flex/cafeteria plan 3% 3% 39% 1% 0% 54% Flexible spending accounts 6% 7% 67% 1% 0% 19% Disability -- STD 3% 3% 80% 2% 0% 14% Disability -- LTD 2% 3% 87% 2% 0% 8% AD&D 2% 2% 88% 2% 0% 7% Voluntary whole/universal life 3% 3% 47% 1% 0% 46% Voluntary long-term care 12% 3% 25% 1% 0% 60% Mental health care 1% 2% 75% 2% 0% 21% EAP & substance abuse 5% 4% 70% 1% 0% 21% Child care (facility and/or cash subsidy) 0% 1% 8% 1% 0% 89% Child care referral services 1% 1% 22% 1% 0% 75% Eldercare 1% 1% 13% 0% 0% 84% Dental 2% 4% 88% 4% 0% 4% Vision 5% 4% 68% 2% 0% 22% Hearing 1% 1% 38% 0% 0% 61% Wellness 10% 19% 44% 2% 0% 26% Group legal 4% 1% 19% 1% 0% 75% Relocation assistance 1% 1% 40% 1% 0% 56% Transportation/parking assistance 1% 2% 26% 1% 0% 69% Paid time off plan 2% 5% 67% 2% 0% 24% Flexible hours 2% 5% 59% 1% 0% 34% Dependent care days 0% 1% 18% 1% 0% 80% Life insurance living benefits 0% 1% 36% 1% 0% 62% Employee self-service technology 13% 18% 16% 1% 0% 51% Work at home policy 2% 2% 36% 1% 0% 59% Domestic partner health coverage 5% 2% 22% 1% 0% 70% Casual dress day 1% 2% 77% 1% 0% Convenience (concierge) services 2% 2% 10% 1% 0% 85% Training 4% 28% 57% 2% 0% 9% Source: 2004 EBN/Hay Survey on Benefits Management 18

2211 Sanders Road Northbrook, IL 60062 800.927.3727 www.caremark.com 2005 Caremark. All Rights Reserved. Reprinted from Benefit Source Book 2005. One State Street Plaza, 25 th Floor, New York, NY 10004 20564-0904