Presentation to the Board IT Activities and Strategic Decisions December 12, 2011

1. Presentation to the Board IT Activities and Strategic Decisions December 12, 2011

2. Overview • Activities of the IT and Implementation Committee • Acquisition Scope and Strategy • Acquisition Process, Timeline and Key Activities • Preliminary Cost Estimates for System and Services • Level of Interoperability between COHBE and State Medicaid Systems and Business Processes • Recommendations of the IT and Implementation Committee and Decisions before the Board

3. Activities of the IT and Implementation Committee

4. Activities of the IT and Implementation Committee • Met 2x since last Board meeting • Good participation from Board members and some public input • Presented proposed approach, options and issues to triangulate on and to refine acquisition scope, strategy, process, timeline, participants, etc. • Performed additional research and follow-up to questions raised and issues identified • Shared understanding of the urgency and need to move quickly to meet aggressive timelines

5. Review of Committee and Board Meetings Leading to Start of Formal Acquisition Process

6. Definitions of IT Terms • Commercial-Off-the-Shelf Software (COTS) – standard software application sold to multiple customers; normally upgraded periodically to provide customers additional capabilities. • Software as a Service (SaaS) – business arrangement were software application and all related support services to utilize the application are furnished by the vendor; normally on a per month or per unit (i.e. person basis); Service Level Agreements often negotiable. • Software Application Licensing – conveys the right to restricted use the application in exchange for upfront licensing fee; terms and conditions vary; e.g. right to modify the application, right to interface or integrate the application with other applications. • Application Maintenance and Support – agreement normally with application vendor for product support and access to enhancements; 20% per year fee is standard but can vary. • Hosting and Operations – vendor provides facility, hardware, software infrastructure (firewalls), networking, application monitoring, communications, continuity of operations for a monthly fee.

7. Definitions of IT Terms • Exchange Administrative Services – services needed to support business processes (some of these services are associated with the system); includes call center, print/mail, financial management, carrier support, broker support, regulatory support, content management. • Application Configuration – activities performed during system implementation to set-up the software application to meet the business requirements, e.g. branding, workflow, business rules, security – does not involve changing the code. • Application Customization – activities performed during system implementation to modify the software code to enable the application to perform business functions that can not be met through configuration. • Application Upgrades – periodic releases of enhanced functionality or other capabilities; significant effort to upgrade an application that has many customizations. • Request For Information (RFI) – structured process to obtain information from target vendor community to inform acquisition decisions. • Request for Proposals (RFP) – solicitation sent to potential vendors with whom a partnership is being considered; typically reflects the strategy and short/long-term business objectives, providing detailed insight for suppliers to offer a perspective and creative solutions.

8. Acquisition Scope and Strategy

9. Acquisition Scope and Strategy • Three core areas: • Software application and maintenance and support • Application hosting and operations • Administrative services • Teaming OK but single point of accountability, i.e. “prime” contractor for all three areas • Fixed-price – by scope element and implementation vs. operating (granularity of pricing is under development and will be very structured); per person per month for admin services • Strict adherence to SLAs w/ material penalties for non-performance • At least one team member in healthcare exchange business for three years. • Software application licensing proposed as an option (not mandatory); preliminary research indicates potential for significant savings in out years and provides COHBE opportunity to take full advantage of federal funding • Pricing requested for 1, 3 and 5 years • Call center must be located in US; “extra credit” for call center operations (and jobs) located in CO

10. Acquisition Process, Timeline and Key Activities

11. RFI Data Gathering and Market Intelligence • RFI status: • Three vendors have provided in-depth product demonstrations and four more are scheduled over next two weeks • Most vendors indicate they will “team” with other vendors to provide the core systems and services needed by COHBE • Collecting preliminary cost information – pricing models, price points, have cost information from KS • End-to-end solutions viewed to-date range from small gaps to significant gaps which will require design, development and implementation by vendor(s) (i.e. scope and schedule risk) • Few states currently in the Exchange Acquisition process; “first mover” advantage • Vendors anxious to present solutions, get a foothold in market and begin implementation for leading states • Actual cost data will be available in early-May when proposals are received

12. Acquisition Process and Timeline • 01/23 – Release RFP • 02/27 – Vendors submit proposals • 03/09 – Down select to 2 - 4 vendor finalists • 03/19 – Conduct demos/orals/discovery with finalists • 03/26 – Develop Best and Final Offer (BAFO) guidance • 04/02 – Review and rank BAFOs and select vendor(s) for negotiations • 04/09 – Negotiate with vendor(s) including Statement of Work • 05/04 – Award contract • 05/11 – Project Kick-off

13. Acquisition Process and Timeline

14. Acquisition Process • Analysis and ranking of proposals • Solution Fit/Coverage and Gaps – single vendor or teaming arrangement must provide required system and services that constitutes entire solution • End user experience, i.e. application usability • Experience and wherewithal of vendor in exchange space and knowledge of healthcare reform • Company qualifications and resources (Corporate and Proposed Project Team) • Cost (implementation, 3-Year, Option Years); total lifecycle costs • Strategic fit of exchange business and COHBE in vendor’s overall corporate strategy • Partnership fit • References • Exceptions to proposed contract Terms & Conditions • Other factors, e.g. call center • Beyond meeting minimum requirements, weighting matters; will propose approach to weighting later, i.e. during evaluation team orientation (mid-Feb)

15. Acquisition Process • Outline of RFP: • Purpose of RFP, Vision, Concept of Operations • COHBE Background • General and Administrative Procurement Information and Timeline • Scope of Implementation and On-going Services • Proposal Response – System, Implementation Services, On-going Operations and Administrative Services: • Solution Proposal (business, technical) • Cost Proposal (cost model will be provided ; line items broken down between implementation and on-going costs to insure ability to accurately compare costs) • Proposed Contract Terms and Conditions • Appendices: • Appendix A – Business Process Models • Appendix B – Business Requirements (functional, technical) • Appendix C – Interoperability with State Medicaid Systems and Business Processes • Appendix D – Reporting and Business Intelligence • Appendix E – Technical Architecture • Appendix F – Operations, SLAs, and Continuity of Operations • Appendix G – Interfaces • Appendix H – Conversions • Appendix I – Deliverables • Appendix J – Turnover • Procurements will be: • Well-structured • Efficient • Competitive • Fair • Transparent

16. Acquisition Process • Evaluation Committee • Seeking Board members to participate in COHBE vendor selection; crucial decision which can only be made once (for several years); leverage experience and perspective of diverse group will lead to better decision • Duties and time commitment: • Review and rank proposals using evaluation sheets provided; note areas of concern, be available to discuss evaluation and proposal rankings (need to be able to review all qualified proposals) • Depending on number of quality proposals received likely 40 hours during first two weeks of March • Demonstrations/orals likely 20 hours in late March • BAFO review and recommendation 16 hours in early April • HCPF participation • Approximately 200 – 300 hours required for legal services; may be able to supplement need for legal services with procurement support services

17. Preliminary Cost Estimate for System and Services

18. Preliminary Cost Estimate for System and Services • RFI process in KS involved six Exchange solution providers • Results indicated that there may be substantial cost savings from licensing the application (i.e. sizeable upfront payment) • As mentioned in Slide #9, licensing option may provide COHBE to take full advantage of temporary federal funding and reduce on-going operations costs by several millions of dollars per year • Some vendors amenable to licensing option and some are not • Will have cost estimates and better perspective on current market in two weeks after receiving RFI responses from critical mass of vendors • Administrative services will drive operational costs and are likely to be 10x – 15x annual system-related costs • “Thickness” vs. “Thinness” of COHBE includes both system capabilities and services

19. Solution Cost Estimate – Cost Drivers 1 of 3

20. Solution Cost Estimate – Cost Drivers 2 of 3

21. Solution Cost Estimate – Cost Drivers 3 of 3

22. Preliminary Cost Estimate for System and Services SaaS model yields annual costs of $20M – $60M at 750K enrollment. Enrollment 550K 650K 720K 750K 760K 770K * Rates remains flat over the years for these scenarios. SaaS – Software-as-a-Service PMPM – per member per month 22

23. Preliminary Cost Estimate for System and Services maintenance/support hosting operations ~$3.00 pmpm $5M Licensing model estimates by component. Implementation – $2M $30M $25M $20M $15M $10M $5M software – $3M Enrollment (December) 550K 650K 720K 750K 760K 770K 23

24. Preliminary Cost Estimate for System and Services Acquisition model results in $14M – $18M annual savings based on the assumptions. $5 pmpm $17M—$18M/yr; $ 1.88 pmpm (Services $3 pmpm) Enrollment (December) 550K 650K 720K 750K 760K 770K 24

25. Level of Interoperability between COHBE and State Medicaid Systems and Business Processes

26. What is the “optimal” level of “interoperability” and coordination with the State’s Medicaid/CHIP systems, business processes and existing customer support services? Interoperability Between COHBE & State Medicaid/ CHIP Systems and Business Processes CBMS/PEAK & Medicaid/CHIP Eligibility & Enrollment Business Processes COHBE Eligibility & Enrollment Systems and Business Processes Extent of “interoperability” (i.e. amount of overlap) between COHBE system and business processes and CBMS/PEAK and associated State eligibility and enrollment business processes increase s complexity and schedule risk but improves some consumer populations’ experience

27. What is the “optimal” level of “interoperability” and coordination with the State’s Medicaid/CHIP systems, business processes and existing customer support services? • Interoperability design principles and best practices: • Shared MAGI eligibility process • Maximize “no touch” eligibility • Simplify eligibility and enrollment for “mixed” households (i.e. combination of SHOP, subsidized private coverage and Medicaid/CHIP) • Single sign-on/account management • Unified master person index • Data only entered 1x and shared among systems • Request only information needed for medical coverage determination • Interfaces to/from PEAK and CBMS to support “no wrong door” • Provide links to non-medical eligibility processes and pre-populate w/ all relevant consumer data previously collected

28. Interoperability Decision Criteria

29. What is the “optimal” level of “interoperability” and coordination with the State’s Medicaid/CHIP systems, business processes and existing customer support services? • Working closely with HCPF to define interoperability options and analyzing cost/benefit (and to whom do costs and benefits accrue)

30. Decisions before the Board

31. Recommendations of the IT and Implementation Committee and Decisions before the Board • Agree on acquisition scope, strategy, process and timeline • Agree to release RFP on or about 01/23 – prior to award of Level 1 grant • Agree on composition of Evaluation Committee; participation begins in review of RFP late-December and early-January

32. Wrap-up

33. Background Material

34. COHBE Implementation and Start-up Timeline Note: Accompanying timeline for required enhancements to PEAK & CBMS not shown

35. Draft COHBE Guiding Principles for Systems and Implementation

36. Role of IT and Implementation Committee • Role is to provide guidance to COHBE executive leadership and early input into major strategic decisions such as IT investments, acquisition of services and Acquisition strategy • These initial acquisition decision(s) will likely be in the order of tens of millions of dollars over the first 3 – 5 years • Acquisitions will be structured to be competitive, fair and transparent • Due to the political sensitivities and visibility surrounding the COHBE, it is important that there be no real or apparent conflicts of interest in Acquisitions activities and operational decisions • Meet weekly leading up to the start of the formal acquisition process