Our Annual PPO Survey Part II Welcome to Part II of our seventh annual PPO survey.

For this survey, 10 PPOs in California diligently answered direct questions about their plans. Our readers, who are savvy health brokers, suggested many of the questions.

7. Describe your drug formulary. (Three tier etc.) If itีs a closed formulary, what happens if a non-formulary drug is needed?

Aetna: The formulary may be open or closed, depending on the
benefit plan. In plans with an open formulary, both formulary and non-formulary drugs are generally covered subject to applicable limitations and conditions. With a closed formulary, formulary and non-formulary drugs are generally covered, except for drugs on the formulary exclusions list. Formulary exclusions provide less value than therapeutically equivalent formulary drugs. The memberีs physician can request approval for coverage for a formulary exclusion.

Blue Cross: Non-formulary or non-preferred drugs that have a
formulary or non-prescription equivalent are not covered unless the prescribing doctor indicates that the drug should be dispensed as written on the prescription.

Blue Shield: The Blue Shield three-tiered open formulary benefit allows members to get generic drugs at the lowest co-payment, brand-name drugs at a higher brand co-payment, and non-formulary drugs at the highest non-formulary co-payment. There is a prior authorization program for selected drugs on the formulary and for non-formulary drugs. This is to promote appropriate first-line therapy or reserve the use of certain medications with specialized uses or a significant potential for misuse or overuse. The Pharmacy and Therapeutics Committee is responsible for establishing and oversight of the drug prior authorization policies and procedures and the maintenance of the medication policy coverage criteria.

Cigna: We offer several kinds of formularies including open,
closed, and tiered.

Health Net: The most common pharmacy-benefit structure is a
three-tier plan, although a small number of employers have chosen a closed formulary. When members with access to a closed formulary get a prescription for a non-formulary drug, coverage for the drug typically is not available unless it meets medical necessity guidelines.

Kaiser Permanente: The HSA PPO plan has an open formulary. All FDA approved drugs are covered for the member except for those listed in the E&L. The member pays a co-pay based on generic ($15) or brand ($40).
Nationwide Health Plans: We have a three-tiered drug benefit
with an open formulary.

Nippon Life: Nippon Life uses an open drug formulary for the three-
tier plans. We pay for non-formulary drugs at the third tier.
UnitedHealthcare: Unlike a formulary, the prescription drug list
does not imply any drug therapy recommendations. We assign a co-payment tier to prescription medications based on an evaluation of clinical, economic, and pharmacoeconomic evidence. Unlike our competitors, some brand drugs are placed in tier one and some generic drugs are placed in tier two or tier three based on the lowest net cost that they offer our clients.

UnitedHealth Pharmaceutical Solutionsี (UHPS): offers a three-tier plan and an open benefit design. Tier one drugs represent the lowest co-payment option and include many generic drugs. Tier two drugs represent a middle co-payment option and include many brand name drugs. Tier three drugs represent the most costly drugs -- often with tier one or tier two alternatives and, therefore, have the highest co-pay option. A drug's tier placement is subject to change when its value changes as a result of a patent expiration; new product introduction; or other important clinical, safety, or economic information. When a generic drug costs more than the brand drug during the six-month exclusivity arrangement period, UHPS may place the generic in Tier two and move it to Tier one once the price decreases.

8. Which requested procedures are denied most frequently on the basis of าexperimental/investigativeำ or าnot medically necessaryำ exclusions?

Aetna: We seek to minimize the number of claims denied
based on medical necessity through our extensive patient management program, which includes features such as pre-certification, concurrent review, and close communication between our staff and attending physicians.

Blue Cross: It varies greatly. Each request is reviewed on a
case-by-case basis to determine medical necessity based on the latest medical standards.

Blue Shield: Each request is reviewed on an individual basis to
determine medical necessity. We do not have statistics on which procedures are most frequently denied.

Cigna: CIGNA has a comprehensive policy for ensuring the effi-
cacy of the latest medical treatments. It includes review of outside professional literature and input from physicians to determine the safety and efficacy of procedures and interventions. We work closely with members and physicians to help determine treatment protocols that ensure appropriate and quality care, while reducing the number of denials.

Health Net: N/A.

Interplan Health Group: It is determined by plan design

Kaiser Permanente: There is not enough data to support this
request.

Nationwide Health Plans: Due to continued review, there are
no specifics.

Nippon Life: We do not track denied claims in this manner.

UnitedHealthcare: UnitedHealthcare does not deny proce-
dures on the basis of medical necessity and our benefit plans do not contain medical necessity exclusions. We believe that healthcare consumers and their doctors are best qualified to make decisions about healthcare. Denials on the basis of experimental or investigative are very rare. If an individual has a life-threatening sickness or condition (one that is likely to cause death within one year of the request for treatment), we may determine that an experimental, investigational, or unproven service meets the definition of a covered health service for the sickness or condition. This determination is based on whether we find the procedure or treatment promising and we find that the service uses research protocol that meets standards equivalent to those defined by the National Institutes of Health.

9. Do you capitate PPO providers? If not, how are they compensated?

Aetna: No, physicians are paid based on a negotiated fee
schedule, which compensates physicians at the lesser of their usual charge or the negotiated fee. Each of our networks has a unique fee structure. We incorporate the federal governmentีs RBRVS methodology for procedure-related services while allowing for local differences for office and hospital visit services.

Blue Cross: No, payment is determined by applying available
member benefits to a pre-determined fee schedule.
Blue Shield: No, PPO contracted providers (physicians includ-
ing ancillary providers) have agreed to accept Blue Shieldีs allowances as payment in full, which are valued-based and reviewed annually.

Cigna: No, we reimburse physicians on a maximum allowable
fee schedule or a discounted fee-for-service arrangement.

Health Net: PPO physicians are typically reimbursed at a dis-
counted-contract-fee schedule.

Interplan Health Group: Interplan Health Groupีs physicians
are not capitated. They are paid based on a negotiated fee schedule, which compensates providers at the lesser of their usual charge or the negotiated fee.

Kaiser Permanente: Our PPO providers are part of the PHCS
network. PHCS contracts with the providers to negotiate a lower rate for services rendered. Providers are paid based on claims submitted for covered services.

Nationwide Health Plans: N/A.

Nippon Life: No, providers are paid on a fee-for-service basis.

UnitedHealthcare: The majority of physicians in our networks
are reimbursed according to a maximum allowable fee schedule based on the Resource Based Relative Value Scale Fee Schedule (RBRVS). Our fee schedule is established by applying a conversion factor to RBRVS values. The conversion factor is based on competitive market conditions, medical expense expectations, and physician acceptance. The advantage of this funding arrangement is that we reimburse physicians only for services rendered based on time and intensity with adjustments for geographical differences. We employ prepayment (capitation) for some high-cost specialists to manage expenses for high-cost services to a planned target.

10. What happens when a member provider bills a participant inappropriately for services?

Aetna: Balance billing of the patient is not permitted. The
provider-relations staff monitors compliance and educates providers. A provider who is found to have inappropriate balance billing may have his or her contract terminated.|

Blue Cross: Customer service works with the member and
provider to resolve billing issues. Dispute-resolution procedures are available to members and providers.

Blue Shield: Network providers are prohibited from balance
billing patients. When a participant is billed inappropriately for services, customer service representatives can usually resolve it by contacting the providerีs office to clarify the memberีs benefit and the Blue Shield reimbursement schedule.

Cigna: Our contracts prohibit balance billing by physicians. The
member should contact the health plan about the issue. The plan will investigate.

Health Net: Health Net will intervene on the memberีs behalf
by dealing directly with the providerีs office.
Interplan Health Group: Our contracts prohibit providers from
balance billing the patient. When a provider has balanced billed a patient, a provider relations representative will educate the provider. A provider who is found to have inappropriately balance billed may have their contract terminated.

Kaiser Permanente: In the unfortunate event a provider bills a
member inappropriately; the member should contact the KPIC customer service line. If the issue requires any type of special handling, the KPIC Operations staff will intervene in reconciling the claim.
Nationwide Health Plans: We contact the provider and request
they take their contractual write-off. If the provider refuses, we go to our rental network and request their intervention.

Nippon Life: If a participating provider bills an insured for ser-
vices inappropriately, we give our insured the necessary information to have the problem resolved. If necessary, we communicate directly with the physician.

UnitedHealthcare: Our physician and other healthcare profes-
sional contracts preclude physicians and other healthcare professionals from balance billing enrollees. The contracts also address how physicians and other healthcare professionals must submit claims. We take appropriate action if network physicians or other healthcare professionals attempt to balance bill enrollees or bill enrollees for covered services in breach of their contract requirements. We protect our customers from claims liability by fulfilling all state mandates concerning participation in guaranty associations; maintaining state contingency reserve requirements; or getting reinsurance agreements. Our standard hospital contracts also contain provisions to protect individuals receiving health services from balance billing when an insurer becomes insolvent. If a network physician or other healthcare professional becomes insolvent or is otherwise unable to continue to provide healthcare services, we help reassign individuals enrolled in our plans to other physicians.

11. Do you have a registered nurse on call 24 hours a day for questions at the plan level and the PPO level?

Aetna: Yes, nurses provide information on a broad spectrum of
health issues virtually 24 hours a day, seven days a week. They also provide ongoing follow-up information as needed and perform customized research when appropriate. Standard service is included in the full-risk, prospectively rated PPO plan. The health line may be purchased as an additional service for self-funded or retrospectively rated PPO plans with 1,000 or more enrolled employees. The minimum group size can be a mix of active employees and retirees (For example, 800 active and 200 retirees).

Blue Cross: Yes, most PPO members have access to professional, reliable healthcare information toll-free, 24 hours a day, seven days a week. Registered nurses answer questions and help with decisions. Members also have access to educational audiotapes on more than 200 health topics.

Blue Shield: Yes, Blue Shieldีs Lifepath Advisers is a service
for all of our fully insured groups in California. It provides a nurse-line, which is staffed 24 hours a day, seven days a week with registered nurses and masterีs-level counselors. Any member of a fully insured Blue Shield health plan in California can take advantage of this service at no extra charge.

Cigna: Yes.

Health Net: Yes, Health Netีs Decision Power health coaches
are available 24/7. The health coaches are easily accessible at www.healthnet.com.
Interplan Health Group: Yes, through Careline, we provide a
24/7 program, providing health information and triage including an information library, the ability to talk to a nurse, and member communications.
Kaiser Permanente: The PPO plan does not have a 24-hour on
call nurse that members can call with questions directly. They have access to KP Healthy Solutions to get personal health coaching, online information, and access to the KP Healthwise database.

Nationwide Health Plans: Yes.
Nippon Life: A registered nurse is on call 12 hours a day for
questions. A conversant message system is available after hours.

UnitedHealthcare: Optum, the UnitedHealth Group care management company, provides toll-free, 24-hour, 365-day access to NurseLine. Experienced registered nurses discuss treatment options and help individuals get the appropriate level of care. Some services must be purchased as a buy-up based on the funding arrangement of the plan.

12. What is the plan or PPO doing to have online systems for eligibility, administrative changes, referrals, etc.?

Aetna: EZLink streamlines several benefits and HR functions.
It links to our enrollment and billing systems and provides real-time eligibility; online enrollment, account maintenance, online billing, and electronic-funds transfer for payment.

Blue Cross: Our Website offers online services to providers
and members for eligibility, claim status, and benefit inquiries. Other features include a provider finder and a wide variety of Web and organizational resources.

Blue Shield: Mylifepath.com has a password-protected section
with personalized health plan account information. Members view detailed benefit information and find customer service phone numbers and addresses. Via e-mail, they can reach customer service, submit changes to account information, and request a new personal physician. Blue Shield can offer online enrollment to all our employer groups through our partnership with leading on-line vendors -- BeneTrac and BISNet. This partnership gives benefit administrators direct access to the eligibility system as set up by the vendor. They can conduct eligibility tasks, such as employee eligibility tracking, plan enrollment, open enrollment, and life event enrollment transactions. Additionally, as an outside vendor, BISNet can incorporate benefit design from more than one carrier, providing employer groups with a single online enrollment service.

Cigna: CIGNA has enhanced the myCIGNA.com portal, which
enables members to personalize their site for their individual use. They can review hospital quality data; gather disease information; track claims; and explore less expensive drug alternatives.

Health Net: Health Netีs secure Website (www.healthnet.com)
requires a personalized identification number (PIN). Members, employers, doctors, and brokers can perform a wide range of online administrative functions. The eServices Internet billing and enrollment program offers 24-hour online access for employers. Health Netีs Broker Solutions online services features online applications, product and rate information, provider directories, e-mail access, and more. Enhancements are ongoing.
Interplan Health Group: Interplan Health Group is a growing
company looking to incorporate technology and put electronic systems in place wherever it will benefit our client base.

Kaiser Permanente: KP offers online billing and administrative
functions to its employer groups through a system called าCAS.ำ

Nationwide Health Plans: There are none at this time, but we are exploring these possibilities for future convenience.

Nippon Life: All of our information about eligibility, administra-
tive changes, etc. is available on our mainframe computer. Online services are under development.
UnitedHealthcare: Members, physicians, and employers have
access to their data and can communicate directly with us online.
At (myuhc.com) consumers can do the following:
- Choose a plan.
- Locate network professionals.
- Access claims history and explanations of benefits (EOBs).
- Complete a health assessment and develop an action plan.
- Order ID cards and print temporary ones.
- Communicate with a nurse.
- Compare hospitals.
Healthcare professionals can do the following:
- Verify patient eligibility, applicable co-payment amounts, and YTD and out-of-pocket accumulators.
- Search the notification database and complete multiple notifications in one sessio
- Submit claims.
- Receive payment statements and reimbursement.
- Perform online reconciliation and electronic funds transfer.
- Submit credentialing data online.
- Complete online CE programs.

The following features are available through Employer eServices:
- Receive Web-based eligibility management.
- Get simplified invoices, real-time calculations, and downloadable data.
- Do customer reporting
- Get claim status information.

13. What is the relationship of your HMO provider network (if you have one) to your PPO provider network? Do HMO providers have to participate in the PPO Network? How big is your PPO network compared to your HMO network?

Aetna: Standard provider contract provisions generally apply to
all of our plans and products that the provider participates in. However, it is not mandatory for a provider to participate in all products.

Blue Cross: All of our California networks are proprietary,
whether they are PPO, HMO, or EPO. A provider may participate in one or more of our plan products, but it is not mandatory to participate in all products. Our PPO network has 46,449 physicians and our HMO network has 31,434 physicians.

Blue Shield: Blue Shield of Californiaีs HMO and PPO networks
are separate. The HMO network is capitated based on medical group and IPA contracts throughout the state with some directly contracted networks in specific geographies. With the PPO, there are valued-based allowances and contracts with individual physicians and medical groups. Not all HMO providers have to participate in our PPO network, though many of them do. According to our most recent totals, Blue Shield of Californiaีs PPO network has more than 57,500 physicians (defined by access points) and 355 hospitals and our HMO network has more than 30,000 physicians (defined by access points) and more than 300 hospitals.

Cigna: Cigna does not require PPO network physicians to par-
ticipate in the HMO or vice versa. The HMO network is contracted with CIGNA HealthCare of California Inc. The PPO network is contracted with Connecticut General Life Insurance Company (a CIGNA company). While there is considerable overlap, we have many physicians just in one network (For example, PPO only). In California, our HMO network is 80% of the size of our PPO Network

Health Net: Health Net of Californiaีs HMO network includes
36,000 providers and the PPO network includes 48,000. More than 73% of Health Netีs PPO network providers also participating in the HMO network.

Interplan Health Group: Interplan Health Group does not offer
an HMO network

Kaiser Permanente: Our PPO and HMO networks do not have
any affiliation with each other. KPIC contracts with PHCS Network to provide access to providers and facilities nationwide. They have more than 450,000 providers and 4,000 facilities nationally and more than 65,000 providers in California. Our HMO offers over 8,000 providers and 160 facilities in California.
Nationwide Health Plans: N/A.

Nippon Life: We do not have an HMO network of providers.
UnitedHealthcare: UnitedHealthcare has a network of 500,000 physicians and healthcare professionals and 4,600 hospitals nationwide. In general, UnitedHealthcare's contracts apply to all of our commercial products to give employees a consistent experience throughout the country. Providers are not required to participate in all our products, but the majority of them do. The UnitedHealthcare Select or Choice HMO networks apply locally and are subject to state laws.