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    Strength H Stability H Peace of Mind 2 0 16 ANNUAL REPORT


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    1 Download the free 2 Scan the image on 3 Watch the video. Blippar App to your the front cover of this mobile device. Annual Report with your mobile device.


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    Strength H Stability H Peace of Mind A Letter from Our Chairman CEO & President This year, Horizon Blue Cross plan to begin providing pre-paid And while a milestone such as Blue Shield of New Jersey is hospital coverage. We have been our 85th Anniversary is an celebrating our 85th Anniversary. a New Jersey-based company important occasion at which to Started during the Great ever since, providing health look back and take pride in a long Depression, and known then as coverage and a comprehensive history of service excellence, it is the Associated Hospitals of portfolio of products and services truly the men and women of Essex County, Inc., our Company to generations of families and Horizon BCBSNJ that we was the first multi-hospital service businesses in our great state. celebrate. I believe that the ability of our employees to look forward, guided by an unwavering commitment to provide our members with access to affordable, quality care amidst an ever-changing and increasingly challenging environment, is one of our Company’s greatest strengths. Today, all health care stakeholders, including patients, health care professionals and payers, are facing significant change once again as the new Administration reassesses every component of the Affordable Care Act (ACA). And while it is hard to predict how health care will be redefined, Horizon BCBSNJ remains as dedicated as ever to providing our customers with strength, stability and peace of mind. Our members know they can count on us to be here when they need us, as we have been for more than eight and a half decades. Our passionate commitment to advocating for our members, and championing access to affordable, quality health care, remains our top priority. 1


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    Strength H Stability H Peace of Mind This commitment was at the heart of several key accomplishments and milestones in 2016. We had a full year of collaboration with our OMNIASM Health Alliance, a joint effort of health care leaders across New Jersey with a shared commitment to accelerate New Jersey’s change from the traditional fee-for-service system, to one where hospitals and doctors are rewarded for the quality, not the quantity, of care they provide to patients. Together, we are creating the initiatives and programs to transform health care in New Jersey, with a focus on access quality, affordable care. members enrolled during the first patient-centered, value-based That is why we introduced our year. Of that enrollment, more care. The OMNIA Health Alliance OMNIA Health Plans. The plans than 41,000 of the new enrollees is enhancing health care in were developed in response to in the Individual market were New Jersey by providing more consumer and employer demands previously uninsured. organized, personalized and to change the status quo and provide them with access to We are proud to have been coordinated care, powered by affordable, high-quality health recognized by the U.S. the secure sharing of information, care options. Department of Health and Human processes and best practices to Services (HHS) last year when help our members get and stay OMNIA Health Plans offer Horizon BCBSNJ was spotlighted healthy. The doctors and hospitals significantly lower premiums, as one of the nation’s ACA success that participate in the OMNIA access to the largest network stories, particularly among Health Alliance share the following in New Jersey1, and the option previously uninsured consumers. critical objectives: to save more money on Our success was cited in the F Improve the health of out-of-pocket costs when seeking context of the Exchange as being New Jersey’s residents and care from certain doctors and "a laboratory for innovations and communities hospitals. The OMNIA Health strategies that are helping us build Plans, on average, cost 15 percent a better health care system." F Enhance the patient less than our comparable broad experience network plans and do not sacrifice In addition to our OMNIA Health cost or access for quality. The Plans, Horizon BCBSNJ offers F Lower the overall cost of care response has been extremely our customers a comprehensive Our innovative strategy to positive from individuals portfolio of products and services transform health care in purchasing health coverage both to meet their health care needs. New Jersey was a welcome on and off the Federally relief to consumers and businesses Our Government Programs Facilitated Marketplace being crushed by the rising cost Division continues to be a key (Exchange) and from our group of health care. Customers told us growth area in terms of the clients. Our OMNIA Health Plan they needed a better health care service we provide to underserved enrollment exceeded experience and better solutions to residents and seniors in our state. expectations, with nearly 290,000 1 Based on physician data as of January 21, 2017. 2


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    Strength H Stability H Peace of Mind Medicaid expansion under the A Dual Eligible Special Needs Medicare Advantage PPO plan for ACA increased the number of Plan is a Medicare Advantage nearly 60,000 State Health Benefits New Jersey residents covered coordinated care plan for Program (SHBP) retirees. With under Medicaid by nearly 500,000 members who are entitled to their Horizon Medicare Advantage over the last three years, for a total both Medicare and Medicaid. NJ DIRECT (PPO) plan, these of 1.7 million Medicaid members. It includes: members: This helped to reduce the uninsured rate in the state by F A team of doctors, specialists F Can access all doctors, 35 percent in that same and care managers working specialists and other health timeframe. Throughout 2016, together for the DSNP member care professionals eligible we focused our efforts on to receive Medicare payments F A Model of Care that calls for restructuring and enhancing how and who agree to provide individual care plans for to better integrate, coordinate health care services to members and deliver benefits to members the member eligible for both Medicaid and F One health plan to coordinate F Are covered for all Medicare. We re-entered the all Medicare and Medicaid Medicare-eligible services Dual Eligible Special Needs Plan managed care benefits, (DSNP) market last fall with our including pharmacy and F Have no referrals Horizon NJ TotalCare (HMO SNP) managed long-term services F Have access to product for 2017. and supports for the member Horizon BCBSNJ’s tools, Last year, we also delivered on a support services and programs key implementation of a new to manage their health 3


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    Strength H Stability H Peace of Mind Horizon BCBSNJ developed and for HorizonBlue.com and our Our Promise delivered an extensive education Member Online Services portal, and outreach program, helping with a focus on simple navigation F To serve with excellence and SHBP retirees transition to the and a clean, modern appearance dedication. Horizon Medicare Advantage to deliver an enhanced user NJ DIRECT (PPO) plan. The experience for our customers. F To provide peace of mind for program included education and We made it easier for our those who depend on us. outreach efforts detailing what members to find essential F To enrich the lives and health members could expect, online information about their of our members and the resources, and more than Horizon BCBSNJ coverage, communities we serve. 230 statewide and out-of-state quickly and effortlessly on their education sessions for these desktop, smartphone and tablet. retirees to learn more about the Our Vision plan, ask questions and get Behind these and all the answers. 2016 accomplishments F We will continue to lead the highlighted throughout this transformation of health care As part of our Company’s strategy report, are the men and in New Jersey by closely to improve quality, lower costs women of Horizon BCBSNJ. collaborating with hospitals and enhance the patient They are the leaders, innovators and physicians, improving experience, we made significant and champions who work to bring quality and enhancing patient changes to our website Our Promise and Our Vision experience, and lowering the and digital tools. Last fall, we to life. total cost of care. introduced a new look and feel 4


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    Strength H Stability H Peace of Mind Horizon BCBSNJ employees are Employees are the heart and soul For 85 years, Horizon BCBSNJ an extraordinary group whose of our Company. They are a has been a proud part of our commitment and compassion trusted resource for helping great state. Our commitment to come through for our 3.8 million members navigate an often providing access to affordable, members time and time again. complicated and confusing health quality health care is as strong Team Horizon brings a diversity care system and helping them today as when we first started the of talents, perspectives and access the care that they need. Company. We are excited about experiences that inform and They are also an integral part of the innovative new ways we are enable all that we do for our the communities that we serve, finding to collaborate with health customers and the communities volunteering their time and care leaders across the state to we serve. Their fierce energy to the organizations improve quality of care, enhance determination to do their striving to make New Jersey a your health care experience, lower best every day resulted in better place for all of us. You will the overall cost of care, and put Horizon BCBSNJ being find Horizon BCBSNJ employees your health and well-being at the recognized as the Most always bring a helping hand, front and center of everything we Recommended Health Insurer a giving spirit and a bright smile do. We are at the forefront of in America according to whether they are planting trees in redefining the future of health care Insure.com’s 2016 national parks, helping at food banks and and we will be here for you when survey results. Horizon BCBSNJ soup kitchens, fundraising for you need us. also received an overall schools in need or supporting satisfaction score that earned shelters for women and children. us top honors among health insurance companies offering health plans in the Garden State. Bob Marino May 2017 5


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    Strength H Stability H Peace of Mind Patient-Centered, A review of our 2015 claims data Horizon BCBSNJ launched showed that patient-centered care other value-based initiatives in Value-Based Care is having the intended effect, as 2016 designed to help deliver Horizon BCBSNJ continues to members receiving care from on the Triple Aim. collaborate with physicians and patient-centered practices, hospitals across the state to In June, Horizon BCBSNJ compared to those members transform our health care system launched a pilot program that receiving care from traditional to one that is consistent with the offers eligible members a Personal practices, had a: Triple Aim – to improve quality of Health Assistant. The Personal care, lower the total cost of care Health Assistant provides eligible and enhance the patient experience. 12% members with care coordination services to address primarily lower cost of care non-clinical barriers they are for members with A key driver of our Health Care DIABETES experiencing. These barriers can Value strategy is the continued negatively impact their health, growth and development of the care they receive and/or their our patient-centered programs, including the OMNIA Health 2% ability to reach treatment goals. The Personal Health Assistant is higher rate in Alliance, Patient-Centered a Horizon BCBSNJ employee who Medical Home, Accountable BREAST CANCER works telephonically, one-on-one SCREENINGS Care Organization and with eligible members to help Episodes of Care programs. make it easier and simpler to use Our patient-centered programs the health care system and get take a holistic approach to the care individuals receive to ensure 5% the care they need. lower rate of that they get the right care, at the As part of this pilot program, EMERGENCY ROOM Horizon BCBSNJ engaged 2,900 right time, to manage their overall (ER) VISITS health and well-being. These members as of December 2016, programs also offer shared with the following results: savings to incent physicians and 2% F We reached 19 percent of hospitals to achieve better care lower rate of members on the telephone. coordination and improved quality HOSPITAL of care while reducing costs. ADMISSIONS F Of the members reached, 45 percent participated. By the end of 2016, approximately 1.4 million Horizon BCBSNJ Overall, patient-centered practices F Of the members participating, members were participating in helped patients avoid more than 45 percent had at least one patient-centered programs. 3,500 Emergency Room visits in barrier to receiving health care, In 2015, patient-centered 2015, resulting in a projected 51 percent needed help practices and hospitals received savings of more than $2.6 million. understanding their plan, $58.9 million in care coordination And the success of our and 29 percent needed help and shared savings payments for patient-centered programs finding a provider or scheduling achieving quality and savings continues to attract more an appointment. goals. These value-based members of the medical These early results indicate that payments were in addition to community, with approximately many of the participating what the providers were paid 60 percent of all Horizon BCBSNJ members benefited from speaking through traditional fee-for-service medical claims spending in with their Personal Health reimbursements. New Jersey during 2015 going Assistant. to patient-centered network physicians and hospitals. 6


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    Strength H Stability H Peace of Mind Best-in-Class Episodes of Care (EOC) Programs While the success of all of our patient-centered programs is encouraging, the success of our 18 Episodes of Care programs has led to Horizon BCBSNJ being recognized as an industry leader throughout the nation. Since our introduction of programs for five episodes of care in 2014, our members in EOC practices have consistently had lower hospital readmission rates and experienced other high-quality outcomes, compared to members receiving the same services from non-EOC practices. These high-quality outcomes include: No hospital The EOC Program has grown significantly over the last several years, with our projections indicating that we exceeded 15,000 episodes readmissions for in 2016, with total savings of $20 million. knee arthroscopy In 2016, we launched the following five new EOC programs: F Coronary artery bypass grafting (CABG) 37% fewer hospital F Hysterectomy readmissions for hip replacement F Prostate cancer F Prostatectomy F Crohn’s Disease (with fully integrated behavioral health) 22% fewer hospital readmissions for In 2017, we are adding EOC programs for: knee replacement F Gastroesophageal reflux disease (GERD) F Diverticulitis 32% reduction in unnecessary F Low back pain/laminectomy cesarean sections F Shoulder replacement 7


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    Strength H Stability H Peace of Mind OMNIA Health Alliance In the fall of 2015, Horizon BCBSNJ announced the formation of the OMNIA Health Alliance – a first-of-its-kind collaboration between Horizon BCBSNJ, some of the state’s leading hospitals, and a major multi-specialty physician group, all of which share our vision to transform the way health care is financed and delivered in New Jersey. Their involvement is instrumental to our efforts to build and nurture a value-based care system due to the large populations of patients risk, and care management Plans, as the OMNIA product line they treat, as well as their abilities arrangements that will capitalize was successfully launched across to leverage their significant on clinical transformation and all of our Commercial market resources and technological encourage the elimination of segments. In total, nearly 290,000 capabilities to deliver more unnecessary costs. people enrolled in an OMNIA effective and efficient care to Health Plan in 2016, including While the OMNIA Health Alliance patients. 163,000 Individual health care is a prominent feature of consumers, 41,000 of whom were In 2016, the OMNIA Health Horizon BCBSNJ’s strategy to previously uninsured. This helped Alliance made great strides to provide our members options for boost our leading market share bring our vision to life as we access to quality care at a lower in the Individual market from established Joint Executive cost, equally important was the approximately 57 percent to Committees to guide clinical introduction of our OMNIA Health 62 percent. transformation activities that Plans. These lower-cost, tiered integrate care coordination and health products were designed to We also saw enrollment numbers develop population health goals. enable consumers to save money in our Small Group (56,000 Through these collaborations, while receiving high-quality care. members) and Midsize Group supported by secure data (59,000 members) markets that As part of this product exchanges that offer a complete exceeded our projections, and implementation, Horizon BCBSNJ view of patients’ health, our had some key Large Group placed most of its network of members will get more effective, customers switch to an OMNIA physicians and hospitals into two high-quality care. Health Plan offering. groups, called tiers. Members in Shared-savings models that OMNIA Health Plans benefit from The popularity of the OMNIA reward OMNIA Health Alliance lower monthly premiums and have Health Plans demonstrates how members and their associated the opportunity to pay lower well these products answer market physicians for providing the right out-of-pocket costs (copayments, demand, and reinforces our belief level of care, at the right time coinsurance and deductibles) that it is possible to create a and at the lowest cost possible, when seeking care from OMNIA value-based health care system are key to these arrangements. Tier 1-designated physicians and and products that provide our Ultimately, this will lead to hospitals. The results of our 2016 members with quality care at financial models that are designed enrollment speak well to lower costs and an enhanced to enable Alliance members to consumers’ and businesses’ member experience. transition to assuming full financial reactions to the OMNIA Health 8


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    Strength H Stability H Peace of Mind Tackling the Opioid Crisis Pharmacy Initiatives F Triple Therapy Alert Program With over 5,000 lives lost to Horizon BCBSNJ provides • Identifies members who are opioid misuse and addiction in resources and information to assist receiving a combination of a New Jersey over the last decade2, in improving the quality of care narcotic, a benzodiazepine Horizon BCBSNJ has long been patients receive. Physicians and a muscle relaxant from committed to helping our receive comprehensive, fact-based two or more prescribers members and providers combat and actionable risk reports created F Concurrent Drug Utilization this growing problem. We have by Horizon BCBSNJ. Our Review integrated several programs and pharmacy team uses tools to key initiatives throughout the predict future probabilities and • Screens prescriptions at continuum of care to help ensure trends to educate health care point of service our members receive the right professionals about their own care at the right time without prescribing behaviors and their • Compares dosage on a claim relying on opioids. They range patients’ risk behaviors. to the recommended dosage from free prevention programs for a member’s age group The Horizon Pharmacy program in New Jersey schools to public • Determines effects of using a has several initiatives that awareness campaigns in our combination of medicines integrate pharmacy and medical communities. We have also claims. They identify prescribing • Helps prevent duplicate created predictive tools for and dispensing patterns and refills or therapy prescribing doctors to help them outliers that can assist in identify members who are at • Provides opportunities to preventing abuse, addiction risk for substance abuse and improve patient safety and and fraud. Our programs help referral programs for behavioral quality of care members and prescribers take health services, as appropriate. action and make informed decisions. 2 nj.com/news/index.ssf/page/welcome_to_herointown_ new_jerseys_4th_largest_city.html 9


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    Strength H Stability H Peace of Mind F Controlled Substance Horizon BCBSNJ also offers Prolonged use of pain medication Alert Program coverage of Medication-Assisted is tracked as one quality measure Treatment (MAT) such as for orthopedic EOC programs (hip • Identifies members with Suboxone and Vivitrol for replacement, knee replacement claim histories suggesting substance use disorder recovery. and knee arthroscopy) and the patterns of misuse or abuse, pregnancy (cesarean section and notifies prescribers Through these programs and delivery) EOC program. Measures other utilization management • Tracks and evaluates track opioid use within 90 days of and operational initiatives, the outcomes the end of the episode. Horizon Pharmacy program helps • Reduces overuse of ensure treatment of underlying controlled substances psychiatric problems and helps Behavioral Health refer members to behavioral Integration F Opioid Outlier Program health services, as appropriate. Horizon BCBSNJ is committed • Identifies members who Horizon BCBSNJ also supports to providing patient-centered are on high doses of the New Jersey Prescription coordination of medical and opioids as outliers based Monitoring Program, which aims behavioral care. Through the on morphine-equivalent to reduce member drug-seeking Horizon Behavioral Health dose (MED) behaviors and promote program, we integrate medical, appropriate provider prescribing behavioral health and substance F Pharmacy Lock-in Program behaviors. use disorder services. This • Identifies members who integration helps ensure the are at risk for substance use Support through Episodes treatment of underlying issues. disorder based on their of Care (EOC) Programs We support the full continuum usage, and has them of care for mental health and Horizon BCBSNJ’s EOC programs evaluated by a pharmacist addiction care. are quality-based and use for pharmacy lock-in standard quality measures unique • Requires members to fill all to the procedure or disease state. of their prescriptions at one pharmacy, if appropriate Tackling the Opioid Crisis Pharmacy Episodes Behavioral Community Initiatives of Care Health Engagement Programs Integration 10


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    Strength H Stability H Peace of Mind Community Engagement November 2018, and will help shed light on opioid abuse, Our team engages the community prevention and awareness. through the Blue To You Van, They are based on the Surgeon our Care-A-Vans and select General’s recommendation to pharmacies to help educate galvanize the public, policymakers members and the public on and communities to raise how to correctly dispose of awareness, educate, reduce medicines through the New Jersey stigma and change attitudes on Project Medicine Drop. addiction, and to ultimately In addition, The Horizon reduce and prevent opioid abuse. Foundation for New Jersey Horizon BCBSNJ is also working supports Partnership for a with 35 independent Blue Cross Drug-Free New Jersey (PDFNJ), Since 2004, The Foundation and Blue Shield Plans in a national a multimedia substance misuse has given over $180,000 through commission convened by the and abuse prevention public 12 grants to support the Fifth Blue Cross and Blue Shield health campaign that was created Grade Parent Alert, a brochure Association to reduce the in 1992 to provide free prevention provided to all fifth-grade classes devastating consequences of programs and initiatives to in New Jersey that encourages the opioid crisis. We continue to New Jersey schools and parents and guardians to discuss collaborate with thought leaders communities, as well as parent the dangers of substance abuse in New Jersey to combat the education training and drug-free with their children. In 2017, state’s opioid issue, while helping workplace assistance. Additionally, The Foundation is proud to to improve the quality of care, Horizon BCBSNJ’s Chairman, sponsor the PDFNJ Knock Out lower its cost and enhance the CEO & President Bob Marino is Opioid Abuse Town Hall Series. patient experience for our on the Executive and Steering These meetings are being held members. Committees of PDFNJ. throughout the state through 11


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    Strength H Stability H Peace of Mind Improving the Digital Strategy In 2016, we successfully implemented the first phase of Customer Experience As part of a multi-year digital our digital strategy initiative, Our continued efforts to transform strategy, our goal is to deliver which involved the redesign of to a consumer-centric, digital easier access – and peace of HorizonBlue.com, our corporate environment to better engage mind – through a series of website, and Member Online and connect with our members enhancements that include: Services, our authenticated has been driven by the creation F Better tools to allow member portal. Through a of an end-to-end customer members to manage their series of online surveys, member experience that empowers health care quality and cost focus groups and data analyses, members to be more educated these digital properties were and knowledgeable about how F Clearer online updated to provide clearer paths to live healthier lives. communications to help to content and functions. members’ understanding F User-friendly websites and easier mobile access to improve the member experience 12


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    Strength H Stability H Peace of Mind Our new website and portal Claims – Members can review ID Cards – Members can print, make it easier for customers to recent claim activity, including any view or request a member ID card. find what they need with whatever amount we paid and the amount Wellness – This section features device they are using. The new the member owes, if applicable. discounts and savings on tools, layout is not only cleaner and My Coverage – This section resources and programs to help better organized, but also features tools and resources to members live healthier. designed to work seamlessly help members get the most out across desktops, smartphones Get Care – In this section, of their benefits, including a and tablets. Improvements in members can search for a doctor view of services covered and our technology platform now using our Online Doctor & whether specific benefits require provide our customers with easier Hospital Finder, and read patient prior authorization. access to helpful tools and reviews and recommendations of valuable resources, including My Account – Members can view participating doctors using our a secure paperless option. The their premium billing overview, Physician Review Tool. Members simplified navigation on billing history and payment history. can also access the Horizon Member Online Services has They can even make a premium Pharmacy and Horizon Behavioral made it easier for members to payment. This section also has Health programs from this section. find essential information on their Health Savings Account (HSA), Horizon BCBSNJ coverage. The Additional enhancements are Health Reimbursement Account portal’s welcome page currently underway for 2017 and beyond (HRA) and Flexible Spending features six sections to help as we continue to transform how Account (FSA) information and a guide users to the information we serve and engage our roll-up of total out-of-pocket they need: customers. costs, as applicable. Members only see the information that applies to their plan. 13


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    Strength H Stability H Peace of Mind Online Contact Channels Members embraced a series of new online contact channels available to them, including Live Chat, FAQs and My Messages. From January through December of 2016: F Our newest channel which launched in 2016, Live Chat, handled more than 63,000 chat sessions. F FAQ visits increased by 77.4 percent compared to the same period in 2015. F Use of the My Messages feature increased by 306 percent compared to 2015. Live Chat FAQs My Messages gives members the provide members with is a secure, online tool that opportunity to chat answers to questions about allows members to send online in real time with enrollment, benefits, us their questions through a Member Services premium payments and Member Online Services. Representative, Monday more. They also give A Member Services through Friday during step-by-step instructions Representative researches normal business hours. on how a member can the answer and responds find his or her specific to the member within information once signed in two business days. to Member Online Services. As part of our commitment to continually improve the member experience, in 2016 Horizon BCBSNJ also: F Updated FAQs for easier member search F Updated FAQ content to reflect member feedback F Rewrote and redesigned On Exchange premium bills and letters to improve member understanding F Successfully rolled out a portal for individual health customer conversions and renewals, reducing the turnaround time for application processing from under five days to almost same-day processing, resulting in faster payment posting and collateral delivery to members 14


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    Strength H Stability H Peace of Mind An Evolving Marketplace F Guiding them through a new F Hosting a Spanish-language Spanish-language section of website (HorizonAzul.com), In addition to re-entering the our Member Online Services, and offering a dedicated team Dual Eligible Special Needs Plan where they can manage their of Spanish-speaking agents and market and implementing our premium payments and find a Spanish-language phone new Medicare Advantage culturally specific resources to hotline to assist Hispanic PPO product, we made great help them locate providers and consumers and businesses strides in 2016 in increasing our maintain good health presence in other traditionally F Establishing remote service and underserved communities. The other ways that Horizon sales locations at New Jersey BCBSNJ has helped and will malls and staffing them with Recognizing the tremendous continue to help connect Hispanic Spanish-speaking agents growth opportunity in consumers to coverage and New Jersey’s Hispanic market F Collaborating with the improve their health literacy and to expand our reach in Hispanic business community include: central New Jersey, we opened to create new channels of our second exclusive F Holding regular grassroots cultural outreach brokerage service center for education events in F Providing support and Spanish-speaking consumers. Hispanic-owned restaurants guidance to navigators and This new service location helps to navigate language in-person assistants through Spanish-speaking consumers differences and improve workshops, presentations find affordable health care health literacy and onsite visits coverage and assists them with F Educating members about all their benefits needs. The Through digital, grassroots, the value-added benefits new HolaDoctor® Insurance marketing and education efforts and rewards onsite with Services in Perth Amboy is the over the last two years to Café Con Leche sessions second installment of our engage Hispanic consumers, brick-and-mortar approach to Horizon BCBSNJ recorded a reaching Hispanic consumers. nearly 400 percent increase Visitors to either of our among Hispanic membership. HolaDoctor Centers are offered one-on-one assistance with trained bilingual agents who help them with: F Full enrollment services in Spanish, including assisting consumers with obtaining any financial assistance for which they may be eligible through the Exchange F Completing a Health Risk Assessment 15


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    Strength H Stability H Peace of Mind Specialty Products Among the key initiatives for in 2016. We also built new the SPS team in 2016 was the stop-loss capabilities to allow and Services launch of new dental products for us to compete against other In addition to targeting new Individual consumers, which was stop-loss carriers. Additionally, membership in emerging markets, supported by a new ability to our Horizon Casualty Services we also continue to aggressively automatically bundle one of these division deployed a new growth promote and sell additional new plans with a medical plan strategy, partnering with bill products and services beyond on our consumer portal. This review companies. Overall, the our core medical business. cross-selling opportunity was also efforts of the SPS team resulted We created a dedicated Specialty key to driving growth for a new in a 5 percent increase in its Products and Services (SPS) set of vision products introduced revenue in 2016. management team in 2016, with a clear alignment to our sales and account management teams to ensure we are meeting our customers’ needs, while International Coverage STOP-LOSS growing and diversifying our revenue. Initially focused on growing DENTAL VISION LIFE our Dental and Vision business and expanding partner Life and Disability offerings, SPECIALTY SPS also includes: F International Coverage PRODUCTS (GeoBlue) F Stop-Loss AND SERVICES F Telemedicine F Wellness DISABILITY WELLNESS F Worksite/Critical Illness WORKSITE/CRITICAL ILLNESS Telemedicine 16


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    Strength H Stability H Peace of Mind Diversity at Work We work hard to foster and support an environment of Asian-American Women LEAD MUSLIM AFFINITY GROUP diversity and inclusion at Horizon BCBSNJ, and the abilities and skills of our diverse and talented Affinity Group community of employees help us meet today’s business AFFINITY MILITARY challenges with strength and creativity. Spectrum GROUP Members of our Diversity Council and our seven Affinity Affinity Groups make a personal commitment to: Group F Sponsor events on topics of interest to employees Enlightenment F Provide opportunities for networking and F Support service to community groups Empowerment Enterprise F Raise awareness of our diverse workforce LATIN AMERICAN CULTURAL F Foster a culture of respect and understanding ORGANIZATION in our workplace During 2016, the Affinity Groups supported 16 diverse community organizations: Affinity Groups Community Organizations Asian-American Ridge Street Elementary School of Newark, Affinity Group Apostle House and Community FoodBank of New Jersey Enlightenment and FP YouthOutCry Foundation and Camden Street Elementary School Empowerment Enterprise Latin American Cultural Belleville Public Schools, Junior Achievement, New Brunswick Little League, Organization (LACO) Autism Speaks, Community FoodBank of New Jersey and Newark Public Library Hispanic Heritage Wing Project Military Affinity Group United States War Dogs Association, Disabled American Veterans, the East Orange Campus of the U.S. Department of Veterans’ Affairs and Community FoodBank of New Jersey Muslim Affinity Group The Building Blocks of New Jersey and Community FoodBank of New Jersey Spectrum Affinity Group Hetrick-Martin Institute of New Jersey Women LEAD Newark Renaissance House 17


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    Strength H Stability H Peace of Mind The Diversity Council teamed F Lunch and learn seminars on Diversity Showcase with employee volunteers to topics such as Work/Life support Arts High of Newark Balance and Caring for Aging In 2016, the annual Diversity with donations and events that Loved Ones Showcase was held in three benefit students at the school. Horizon BCBSNJ locations. F Diversity training for employees This special event highlights the Activities included cleaning, on “Cultural Competency and many cultures and traditions our organizing and planting shrubs Turning Differences Into employees celebrate and gives to improve the school’s Strengths” employees an opportunity to meet appearance; donating book bags filled with school supplies members of Horizon BCBSNJ’s F Expanding the diversity library for students; and supplying coats, seven Affinity Groups, speak with to two locations, and publishing hats, scarves and gloves to Company officers, listen to live monthly Diversity Council book underprivileged students. musical performances and enjoy reviews on the Company’s the foods and festivities of many Diversity microsite In other activities, the Diversity countries and cultures. Council and Affinity Groups sponsored and participated in: All proceeds from ticket sales were donated to local organizations. F A diversity symposium addressing leadership, mentoring, networking, work/life balance, building careers and other topics 18


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    Strength H Stability H Peace of Mind The Horizon Foundation for New Jersey The Horizon Foundation for New Jersey, the philanthropic arm of Horizon BCBSNJ, is committed to working alongside organizations that can help us improve our neighbors’ health, inform their health decisions and inspire them to lead healthier, more fulfilling lives. In 2016, The Foundation awarded 94 grants totaling over $4.2 million. Since its inception in 2004, The Foundation has awarded 1,319 grants totaling more than $47.8 million. In 2016, The Foundation also KOHP joins The Foundation’s Healthy U, implemented in launched its third signature other two signature programs, all 21 counties throughout program, the Kids’ Oral Health Breathe Easier with Asthma New Jersey through the Program (KOHP). This $500,000 Management (BEAM) and New Jersey YMCA State Alliance, two-year pilot initiative is Healthy U. The BEAM program is designed to prevent childhood designed to improve oral raises awareness about asthma obesity by instituting behavioral health-related awareness, and educates youth and their changes around nutrition and education, prevention and parents or caregivers about the exercise in children ages 3 to 13 treatment for young people. disorder and how best to manage years, and by engaging parents The program also includes it. Nearly 300,000 children in to get more involved with helping funding to support professional New Jersey have been diagnosed their children to lead a healthier development for health care with asthma. The Foundation lifestyle. Healthy U has reached professionals and promote best made a $500,000 grant to the Boys more than 60,000 children at practices in 10 New Jersey & Girls Clubs in New Jersey to 480 YMCA sites and 90 public counties where dental health implement the BEAM pilot schools. The Foundation has needs among children are acute. program in 12 Boys & Girls Club invested nearly $5 million in grants sites located in nine counties for the program, which spans where childhood asthma is from January 2008 through prevalent. December 2019. 19


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    2016 FINANCIALS 21


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    Strength H Stability H Peace of Mind MANAGEMENT’S DISCUSSION AND ANALYSIS Horizon BCBSNJ is a Health Service Corporation In the fall of 2015, Horizon BCBSNJ announced incorporated as Horizon Healthcare Services, Inc. and the formation of the OMNIA Health Alliance. is New Jersey’s sole licensed Blue Cross Blue Shield The OMNIA Health Alliance is a first-of-its-kind Plan (Blue Plan). Horizon BCBSNJ operates solely collaboration between Horizon BCBSNJ, some of in New Jersey and is the state’s largest provider of the state’s leading hospitals and a major health care coverage, insuring approximately multi-specialty physician group. It represents a 3.8 million members as of December 31, 2016. unique alliance focused on a Triple Aim of improving Horizon BCBSNJ offers fully-insured products to the quality of health care, enhancing how patients large groups, small groups and individuals. experience care and lowering the total cost of that Horizon BCBSNJ also offers administrative services care for New Jersey consumers. From a product only (ASO) products to national accounts and perspective, the OMNIA Health Alliance is a other large groups. Horizon BCBSNJ participates prominent feature of Horizon BCBSNJ’s OMNIA in a variety of government-sponsored businesses, Health Plans. These lower-cost, tiered health plans both as a direct federal contractor of programs such allow members in OMNIA Health Plans to benefit as Medicare Advantage, Medicaid and the Federal from lower monthly premiums and to have Employee Program®, and as a state contractor for the opportunity to pay lower out-of-pocket costs various non-federal governmental plans, including (copayments, coinsurance and deductibles) when New Jersey’s State Health Benefits Program (SHBP) seeking care at OMNIA Tier 1 doctors and hospitals. and its School Employees’ Health Benefits Program By the end of 2016, Horizon BCBSNJ had nearly (SEHBP). It has the exclusive right to market products 290,000 members enrolled in OMNIA Health Plans. and services using the Blue Cross and Blue Shield names and marks in New Jersey under licensing agreements with the Blue Cross and Blue Shield Association. Over the last several years, Horizon BCBSNJ has collaborated with doctors and hospitals across the state to develop patient-centered programs, including Patient-Centered Medical Home, Accountable Care Organization and Episodes of Care programs. Patient-centered programs take a holistic approach to the care individuals receive to ensure that they get the right care, at the right time, to manage their overall health and well-being. By the end of 2016, Horizon BCBSNJ had 1.4 million members attributed to doctors and hospitals who participate in its patient-centered programs. 22


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    Strength H Stability H Peace of Mind Medical Membership — December 31, 2016 Compared to December 31, 2015 Membership counts include both subscribers and their covered dependents. For membership reporting purposes, we have displayed our enrollment by customer type and funding method. Our membership as of December 31, 2016 compared to December 31, 2015 was as follows (in thousands): As of Increase/ Percent 2016 2015 (Decrease) Change Customer type: Large Group 1,556 1,579 (23) (1.4%) State Health Benefits Program 712 725 (13) (1.9%) Federal Employee Program 127 127 - - Small Group 225 236 (11) (4.9%) Individual 196 168 28 16.6% Medicaid 892 841 51 6.1% Medicare 116 122 (6) (4.8%) Total members 3,824 3,798 26 0.7% Funding method: Fully-insured 1,936 1,912 24 1.2% Self-funded 1,888 1,886 2 0.2% Total members 3,824 3,798 26 0.7% Overall enrollment increased by approximately 26,000 members in 2016. We had continuing success in the Individual market, growing by 28,000 members, and our Medicaid enrollment grew by 51,000 members as a result of Medicaid expansion. These increases were partially offset by declines in our Large Group, SHBP and Small Group businesses. These membership declines were driven by groups downsizing due to economic conditions. Our overall market share has stayed constant at 49% for 2016 and 2015. 23


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    Strength H Stability H Peace of Mind Results of Operations for the Year Ended December 31, 2016 (2016) as Compared to the Year Ended December 31, 2015 (2015) Insured premiums increased $717.4 million, or 6.6%, Selling, general and administrative (SG&A) expenses to $11.64 billion in 2016 from $10.92 billion in 2015. were $1.88 billion for 2016 compared to $1.85 billion Insured premiums in our Medicaid and Individual for 2015, an increase of $30.9 million, or 1.7%. books of business increased primarily as a result of Included in SG&A expenses were taxes, fees and the enrollment growth noted on the prior page. assessments of $444.5 million in 2016 compared to $422.1 million in 2015. Despite this increase in taxes, Investment income was $117.9 million for 2016 fees and assessments, our administrative cost ratio compared to $118.9 million for 2015, a decrease of decreased 70 basis points to 15.6% for 2016 from $1.0 million. This decrease was driven by lower 16.3% for 2015, as a result of our ongoing strategy re-investment yields in the held-to-maturity bond to improve operating efficiencies and control costs portfolio. The average balance in our cash and year over year. investments portfolio increased to $3.97 billion in 2016 compared to $3.77 billion in 2015, driven by Income tax expense was $91.0 million for both 2016 the re-investment of interest income, financial and 2015. The effective tax rate increased to 51.9% in market conditions and strong cash flow. 2016 from 46.0% in 2015. The increase in the effective tax rate was primarily due to the non-deductibility We recognized $5.0 million of net realized losses in of a health care reform-related fee in proportion to 2016 compared to $22.0 million of net realized gains lower pre-tax income and higher state income taxes during 2015. The decrease of $27.0 million was as we generated greater income from our Medicaid primarily driven by approximately $15.1 million of book of business. other-than-temporary impairment write-downs resulting from adverse experience in the financial Net income for 2016 decreased to $84.6 million from markets early in the year. $106.7 million in 2015. Medical and other benefit costs were $10.11 billion Capital reserves grew $154.6 million to $2.98 billion in 2016 compared to $9.42 billion in 2015, an increase as of December 31, 2016, primarily due to net income of $690.4 million, or 7.3%. Medical and other benefit for the year and unrealized gains on investments of costs increased year over year driven by the increase $70.9 million, net of deferred income taxes. in the fully-insured enrollment and the rising cost of On a statutory basis, our capital reserves increased health care. The medical cost ratio increased 60 basis $80.0 million to $2.39 billion as of December 31, 2016, points to 86.9% in 2016 from 86.3% in 2015, driven primarily due to unrealized gains on our investment primarily by higher-than-expected claims in the portfolio. Our Health-Risk Based Capital (RBC) Individual and Large Group commercial markets and percentage decreased by 27% to 620% as of higher-than-expected payments to out-of-network December 31, 2016 from 647% as of hospitals and physicians. In 2016, we experienced December 31, 2015. The decrease was due to higher-than-expected utilization in Platinum and an increase in capital requirements resulting Gold plans in the Individual market. from growth in our business. 24


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    Strength H Stability H Peace of Mind HORIZON HEALTHCARE SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2016 AND 2015 (dollars in thousands) ASSETS 2016 2015 Current assets: Cash and cash equivalents $ 224,028 $ 219,944 Investments available-for-sale, at fair value 2,601,807 2,436,342 Investments held-to-maturity, at amortized cost 23,173 82,980 Premiums and other receivables, net 1,121,923 1,027,658 Prepaid expenses and other current assets 156,468 113,768 Total current assets 4,127,399 3,880,692 Investments held-to-maturity, at amortized cost 525,208 481,971 Restricted investments, at amortized cost 594,735 567,247 Property and equipment, net 613,551 609,773 Other assets 99,265 109,661 Total assets $ 5,960,158 $ 5,649,344 LIABILITIES AND CAPITAL RESERVES Current liabilities: Medical and other benefits payable $ 1,034,839 $ 954,010 Unearned premiums 131,636 140,792 Accounts payable and accrued expenses 604,471 586,740 Managed cash overdrafts 491,305 401,106 Income taxes payable 7,551 - Short-term borrowings 216,913 139,987 Other current liabilities 362,316 362,454 Total current liabilities 2,849,031 2,585,089 Obligations for employee benefits 130,389 134,894 Mortgage payable and capital lease obligations, less current portion 2,706 105,885 Total liabilities 2,982,126 2,825,868 Commitments and contingencies Capital reserves: Retained earnings 2,915,860 2,831,225 Accumulated other comprehensive income/(loss) 62,172 (7,749) Total capital reserves 2,978,032 2,823,476 Total liabilities and capital reserves $ 5,960,158 $ 5,649,344 25


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    Strength H Stability H Peace of Mind HORIZON HEALTHCARE SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (dollars in thousands) 2016 2015 Revenues: Insured premiums $ 11,638,534 $ 10,921,167 Administrative service fee income 387,618 375,649 Other revenues 32,511 34,356 Total operating revenues 12,058,663 11,331,172 Investment income 117,899 118,921 Net realized (losses)/gains (5,016) 21,966 Total revenues 12,171,546 11,472,059 Expenses: Medical and other benefit costs 10,113,879 9,423,507 Selling, general and administrative expenses 1,881,804 1,850,865 Total expenses 11,995,683 11,274,372 Income before income tax expense 175,863 197,687 Income tax expense (91,228) (90,980) Net income $ 84,635 $ 106,707 26


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    Strength H Stability H Peace of Mind 27


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    Strength H Stability H Peace of Mind Most Recommended Top 10 List Health Insurer of Regional Companies in America Employee Resource Group of the Year LATINA Style Inc. A W A R D S A C C U.S. Secretary of One of the top five Defense Pro Patria “Best Companies award for support of for Multicultural National Guard and Women” military reservists Working Mother One of the 50 best Magazine companies for Latinas to work for in the United States LATINA Style Inc. 28


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    Strength H Stability H Peace of Mind Top 50 Best Places ® Military Friendly for Diverse Managers Above & Beyond Award Employer and Women to Work from Diversity Best G.I. Jobs Magazine Diversity MBA Magazine Practices, a division of Working Mother Media O M P L I S H M E N T S Anti-Fraud Efforts Brand Innovation Award Since 2005, Blue Cross and Blue Shield Horizon BCBSNJ’s Association (BCBSA) anti-fraud efforts have saved members $290 million. Ranked #3 CSO50 Award in InformationWeek CSO, Elite 100 Users of Chief Security Business Technology Officer Magazine 29


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    In Memory Alfred C. Koeppe November 14, 1946 – December 6, 2016 The passing of my longtime friend Al Koeppe is a devastating loss for New Jersey. He was a truly legendary figure whose impact was felt in literally every corner of the state. Al was a longtime member on Horizon Blue Cross Blue Shield of New Jersey’s Board of Directors and made sure we always put New Jersey first. Al was someone whose wisdom, advice and counsel I often relied upon and will sorely miss. He was a true leader and gentleman in every sense of the word and there is a reason why every governor for the last four decades relied on Al to help make New Jersey a better place to live. His love for New Jersey was surpassed only by his love for Newark. Al was often referred to as “Mr. Newark” because of his devotion to the city. He will be greatly missed. Bob Marino 30


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    Board of Directors STANDING, Lawrence R. Codey SEATED, President & Chief Operating Officer (Retired) LEFT TO RIGHT: Public Service Electric & Gas Company LEFT TO RIGHT: Todd C. Brown Peter G. Stewart Vincent J. Giblin Vice Chairman (Retired) Senior Partner (Retired) President (Retired) ShoreBank Corporation Carella, Byrne, Cecchi, Olstein, International Union of Operating Engineers Brody & Agnello, PC Joanne Pace Aristides W. Georgantas Managing Director & Russell L. Hewit Executive Vice President (Retired) Chief Operating Officer (Retired) Shareholder and Director Chase Manhattan Corporation Morgan Stanley Investment Management Dughi, Hewit & Domalewski, PC Joseph J. Roberts Barbara Bell Coleman Former Assembly Speaker President (Retired) State of New Jersey BBC Associates, LLC Leonard G. Feld, MD, Mary E. O’Dowd PhD, MMM Executive Director for Health Systems and Population Integration President, Physician Enterprise Rutgers Biomedical and Health Services Pediatric Specialists of America Miami Children’s Health System Carlos A. Medina Chairman, Statewide Hispanic Robert A. Marino Chamber of Commerce Chairman of the Board, President, Robinson Aerial Surveys, Inc. Chief Executive Officer & President Horizon Blue Cross Blue Shield of New Jersey 31


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    Strength H Stability H Peace of Mind Horizon BCBSNJ Senior Officers Robert A. Marino David R. Huber Chairman, Chief Executive Officer & Senior Vice President, President Chief Financial Officer & Treasurer Kevin P. Conlin Allen J. Karp Executive Vice President & Senior Vice President, Chief Operating Officer Healthcare Management Mark L. Barnard Christopher M. Lepre Senior Vice President, Senior Vice President, Service Market Business Units Douglas E. Blackwell Minalkumar A. Patel, MD, MPH Senior Vice President & Senior Vice President & Chief Information Officer Chief Strategy Officer William J. Castner, Jr., Esq. Erhardt H. L. Preitauer Senior Vice President, Senior Vice President, Corporate and Regulatory Affairs Government Programs Margaret M. Coons Linda A. Willett, Esq. Senior Vice President, Senior Vice President, Human Resources General Counsel & Secretary 32


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    Horizon Blue Cross Blue Shield of New Jersey is an independent licensee of the Blue Cross and Blue Shield Association. The Blue Cross® and Blue Shield® names and symbols and the Federal Employee Program® name are registered marks of the Blue Cross and Blue Shield Association. The Horizon® name and symbols are registered marks, and OMNIASM is a service mark, of Horizon Blue Cross Blue Shield of New Jersey. The OMNIA Health Alliance doctors, hospitals, and other health professionals referenced herein are independent entities, engaged to assist Horizon BCBSNJ in population health management activities for Horizon BCBSNJ members living and receiving care in the state of New Jersey. Hola Seguros, DBA HolaDoctor® Insurance Services is a registered mark of HolaDoctor Inc. Facebook® is a registered mark of Facebook, Inc. TwitterTM is a registered trademark of Twitter, Inc. Instagram is a trademark of Instagram, LLC in the United States and elsewhere. YouTubeTM is a trademark of Google, Inc. LinkedIn, the LinkedIn logo, the IN logo and InMail are registered trademarks or trademarks of LinkedIn Corporation and its affiliates in the United States and/or other countries. LATINAStyle is a registered trademark of LATINA Style, Inc. Military Friendly® Employer is a registered trademark of Victory Media, Inc. All other trademarks and service marks are the property of their respective owners. © 2017 Horizon Blue Cross Blue Shield of New Jersey. Three Penn Plaza East, Newark, New Jersey 07105.


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