1. Health Reform Bracketology2010 Congressional Election MadnessStandings as of October 4, 2010 Overview As the 2010 election approaches, Leavitt Partners has engaged a collection of our policy experts and senior advisors to identify provisions within the recently passed health reform legislation that are subject to potential disruption. Health reform continues to be an important topic with voters, and our firm believes that certain scenarios regarding the future congressional makeup could have a material impact on the timing and nature of the implementation of PPACA and related health care reform efforts. HOUSE SENATE Republican Republican ? ? Democrat Democrat Republican Republican Current Public Polls Suggest* Democrat Democrat Democrats Republicans Democrats Republicans Republican Republican 190 38 207 48 5 47 Democrat Democrat Republican Republican Toss Up Toss Up House Senate Democrat Democrat Republicans Democrats *Prediction based on analysis using data from www.RealClearPolitics.com, October 4 2010 © Leavitt Partners 2010

3. Employer Penalty:

4. Premium Subsidies:

5. Medicaid Expansion:

6. Medical Loss Ratio:

8. Employer Penalty:

9. Premium Subsidies:

10. Medicaid Expansion:

11. Medical Loss Ratio:

13. Employer Penalty:

14. Premium Subsidies:

15. Medicaid Expansion:

16. Medical Loss Ratio:

17. Medicare Funding Cuts:© Leavitt Partners 2010

18. Individual MandateStandings as of October 4, 2010 Current Public Polls Suggest* HOUSE SENATE Republicans Democrats Republicans Democrats Democrats Republicans LP Coach’s Poll Prediction 51% Chance of Disruption if Republicans take the House and Democrats retain the Senate. See below for type of disruption. Alternative Scenario Alternative Scenario House Senate House Senate Republicans Republicans Democrats Democrats 80% Chance of Disruption 17% Chance of Disruption Commentary:Leavitt Partners believes that both Democrats and Republicans are unhappy with the Individual Mandate as currently constituted, making it a likely target. Although unpopular, the need to address adverse selection in insurance pools is acknowledged. If repealed, one discussed substitute is an auto-enrollment process with an opt-out provision. Likely modifications include raising the income threshold of those exempt from the requirement, or denying funding to the IRS to hire new staff to enforce the provision. Like some other controversial provisions of PPACA, the individual mandate does not take effect until 2014, allowing reasonable time for disruption. © Leavitt Partners 2010 *Prediction based on analysis using data from www.RealClearPolitics.com, October 4 2010

19. Employer PenaltyStandings as of October 4, 2010 Current Public Polls Suggest* HOUSE SENATE Republicans Democrats Republicans Democrats Democrats Republicans LP Coach’s Poll Prediction 40% Chance of Disruption if Republicans take the House and Democrats retain the Senate. See below for type of disruption. Alternative Scenario Alternative Scenario Repeal House Senate House Senate Republicans Republicans Democrats Democrats 80% Chance of Disruption 23% Chance of Disruption Modify Stall Commentary:With the campaign season in full sway, look for Republican candidates to speak out against penalties and fines levied against employers not offering sufficient insurance, citing the detrimental impact on employment. Possible modification scenarios could include exempting more businesses through hardship waivers, defunding enforcement capabilities, or lowering the penalties. *Prediction based on analysis using data from www.RealClearPolitics.com, October 4 2010

20. Premium SubsidiesStandings as of October 4, 2010 Current Public Polls Suggest* HOUSE SENATE Republicans Democrats Republicans Democrats Democrats Republicans LP Coach’s Poll Prediction 37% Chance of Disruption if Republicans take the House and Democrats retain the Senate. See below for type of disruption. Alternative Scenario Alternative Scenario Repeal House Senate House Senate Republicans Republicans Democrats Democrats 63% Chance of Disruption 23% Chance of Disruption Modify Stall Commentary:Lower health insurance premiums are especially appealing to both parties in the current economic and political environment. However, premium subsidies to large numbers of Americans remains a highly contentious issue. Potential compromises could involve lowering the amount of subsidy to the target population (below 400% of the Federal Poverty Level), or changing the eligibility criteria to reduce the number of eligible individuals who qualify based upon household income. With subsidies not scheduled to begin until 2014, plenty of time remains to modify this provision. *Prediction based on analysis using data from www.RealClearPolitics.com, October 4 2010

21. Medicaid ExpansionStandings as of October 4, 2010 Current Public Polls Suggest* HOUSE SENATE Republicans Democrats Republicans Democrats Democrats Republicans LP Coach’s Poll Prediction 27% Chance of Disruption if Republicans take the House and Democrats retain the Senate. See below for type of disruption. Alternative Scenario Alternative Scenario Repeal House Senate House Senate Republicans Republicans Democrats Democrats 50% Chance of Disruption 7% Chance of Disruption Modify Stall Commentary:Leavitt Partners believes that the Medicaid expansion will be a difficult provision to disrupt. This expansion was really the plan “B” for the so called “public option” that Democrats originally championed, and is politically challenging to roll back. Consequently, none of our experts believe that the provision will be repealed. However, possible modifications could include offering Medicaid eligible populations the option of receiving a voucher for use in purchasing insurance through state exchanges. *Prediction based on analysis using data from www.RealClearPolitics.com, October 4 2010

22. Medical Loss RatioStandings as of October 4, 2010 Current Public Polls Suggest* HOUSE SENATE Republicans Democrats Republicans Democrats Democrats Republicans LP Coach’s Poll Prediction 60% Chance of Disruption if Republicans take the House and Democrats retain the Senate. See below for type of disruption. Alternative Scenario Alternative Scenario Repeal House Senate House Senate Republicans Republicans Democrats Democrats 80% Chance of Disruption 30% Chance of Disruption Modify Stall Disruption Type Commentary:The new Medical Loss Ratio requirements could have a negative impact on the attractiveness of the Individual Insurance market to traditional insurance providers. Several states, including Maine, Iowa and possibly Florida have asked HHS for leniency in allowing a “phase-in” of this provision. Also, 30 state-insurance commissioners recently met with the White House and “urged the Obama administration to consider phasing in the 80% requirement over several years to avoid disruption of insurance markets.” www.nytimes.com/2010/09/23/business/23states.html, September 22, 2010 *Prediction based on analysis using data from www.RealClearPolitics.com, October 4 2010

23. Medicare Funding CutsStandings as of October 4, 2010 Current Public Polls Suggest* HOUSE SENATE Republicans Democrats Republicans Democrats Democrats Republicans LP Coach’s Poll Prediction 70% Chance of Disruption if Republicans take the House and Democrats retain the Senate. See below for type of disruption. Alternative Scenario Alternative Scenario Repeal House Senate House Senate Republicans Republicans Democrats Democrats 87% Chance of Disruption 63% Chance of Disruption Modify Stall Commentary:Medicare funding , including the IPAB (Independent Payment Advisory Board), Medicare Advantage program, and market basket updates, represent an extremely large portion of funding and contentious area of debate. Early legislative action in the 112th congress could result in an executive branch invitation to a ‘Budget Summit’, a forum for negotiating a budget that both Congress and the President can tolerate. Such a summit would be high stakes political theater that could create “winners” or “losers” out of the new congress. *Prediction based on analysis using data from www.RealClearPolitics.com, October 4 2010

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