1. 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 Underwriters Fall Sales Conference Sept. 14, 2005

2. 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

3. 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

4. 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

5. 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 Key Dates • Oct. 1, 2005 • Oct. 15, 2005 • Oct. 20, 2005 • Nov. 15, 2005 • Jan. 1, 2006 • May 15, 2006 • May 16, 2006

6. 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

7. What are Employers Doing for 2005? Source: Caremark survey of employer clients, June 2005

8. Employer SubsidyHow to Ensure Your Groups Qualify Five-step process for 2006: • Submit application by Sept. 30 • Extension recently granted to Oct. 31 • Include actuary’s attestation that plan meets actuarial equivalence standard, which is a CMS requirement • Certify that the plan will notify enrollees of the creditable coverage status of the plan • Submit and periodically update enrollment information • Submit aggregate data about incurred drug costs and reconcile costs at the end of the year

9. Employer SubsidyHow Your PBM Can Help

10. 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

11. 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

12. MAPD/PDP SupportHow Your PBM Can Help • Claims processing • Mail service/specialty • Formulary development, P&T review • Reporting • Rebate processing and billing • Electronic prescribing • Compliance/audit • 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

13. 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

14. 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

15. 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

16. 62% eligible for full subsidy 20% eligible for reduced subsidy 19% not eligible because of assets Looking ForwardDual Eligibles and Low-Income Subsidy Dual eligibles (6.3 million beneficiaries) Nondual eligibles >150% of poverty (23.6 million beneficiaries) 16% Nondual eligibles <150% of poverty (9.4 million beneficiaries) 60% 24% All Medicare beneficiaries: 39.4 million Nondual eligibles <150% of poverty: 9.4 million beneficiaries Note: 100% of poverty is equal to $9,310/single: $12,490/couple in 2004. Source Congressional Budget Office, November 2003.

17. 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

18. Questions?