avatar Horizon Healthcare Services, Inc. Finance, Insurance, And Real Estate
  • Location: New Jersey 
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    HorizonBlue.com Healthier communities are on our Horizon 2017 ANNUAL REPORT

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    A Message from Our Chairman, CEO & President Health care is at a critical inflection As part of this transformation, we are laser focused on a singular mission: improving the health of our point. As a nation, we continue to 3.8 million members in New Jersey. To stay true to this strive to deliver the kind of high goal, all of us at Horizon BCBSNJ this year realigned quality, affordable care that will and reaffirmed our mission: allow all our citizens to lead We empower our members to achieve their best healthy and productive lives. health by leading with strength, integrity and innovation to generate substantial improvements In many respects, health care is in health care quality, affordability and member the defining issue of our times. experience. At Horizon Blue Cross Blue Shield of New Jersey, As the only New Jersey-based health plan, we are we believe that addressing this challenge requires uniquely positioned to carry out this mission. We are nothing less than the transformation of our health an integral part of the communities we serve. We live care system. We have embarked on such a and work here. We raise our families here. And we transformation here in New Jersey. And in my have history here. In 2017, Horizon BCBSNJ new role as Chairman, CEO and President of celebrated its 85th anniversary, a significant milestone Horizon BCBSNJ, I would like to report on our by any measure and a reminder of our heritage of progress in creating a transformed, best-in-class not-for-profit service and deep commitment to the health care system – a system that is delivering people of our state. Also this fall, Horizon NJ Health, continuous and substantial improvements in quality, our fully-owned Medicaid subsidiary, celebrates its affordability and member experience. 25th anniversary. We are extremely proud of our role in providing coverage to the state’s most vulnerable adults and children, as well as people with disabilities and those in need of long-term care services. 1

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    But let me tell you more about our transformation We also expanded our members’ access to health journey. At the heart of this journey is a shift from care in new and innovative ways. Our Horizon traditional fee-for-service models of health care Get Care app, for example, connects members with delivery to value-based models. Value-based care a nurse who can provide health care advice directly, aims to improve patient results through better offer an immediate telehealth doctor visit or schedule coordinated and personalized care that empowers an in-person visit. members to achieve their best health, improve their We are also placing added emphasis on our health care experience and lower their overall costs. OMNIA SM Health Plan suite of products. These plans, Last year, we continued to collaborate closely with introduced in 2016, continue to be in demand by health leaders across the state – hospitals, physician both consumers and employers seeking an innovative groups, health systems and others – in expanding this health care option that delivers high-quality care at kind of care. Today, I am pleased to report that more lower costs. As part of our OMNIA Health Plans, we than 1.5 million of our members participate in such collaborate closely with doctors, hospitals and other value-based programs. And we are seeing results, health care professionals who share our goals of including: value-based care. In 2017, more than 238,000 of the approximately 276,000 individuals who purchased a • 4% lower total cost of care trend Horizon BCBSNJ plan during the open enrollment • 4% lower rate of hospital inpatient admissions period selected an OMNIA Health Plan. This brings the total number of OMNIA Health Plan members to • 6% higher rate of colorectal screenings more than 450,000. An estimated 27,500 of new enrollees in the Individual market were previously • 7% higher rate of breast cancer screenings uninsured. 4% lower total cost 4% lower rate of hospital of care trend inpatient admissions 6% higher rate of 7% higher rate of colorectal breast cancer screenings screenings One way we are able to achieve these improvements is by sharing real-time health information through Horizon BCBSNJ’s new data services platform, HealthSphere. This platform facilitates the timely exchange of data between doctors and hospitals with a 360 -degree view of a patient’s health record to help them treat members more effectively. 2

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    Turning to our Government Programs Division, last year we successfully implemented several new plan options that serve our State’s most vulnerable residents and seniors. These include: • The launch of Horizon NJ TotalCare (HMO SNP) that delivers integrated and coordinated benefits to members eligible for both Medicaid and Medicare • The successful launch of the new Horizon Medicare Blue Advantage (HMO) plan that provides access to a subset of the Horizon Managed Care Network for a zero-cost premium. Over the past year, we also stepped up efforts to combat the opioid crisis, which has devastated families in New Jersey and across the country. In collaboration with prescribers, pharmacies and patients, we have developed programs that between 2013 and 2017, have dramatically reduced the number of opioid prescriptions. We also had the highest rate of compliance with CDC-recommended dose and duration guidelines among all Blue Cross Blue Shield plans nationally. In this same period, we also increased spending to treat opioid use disorder – by 350 percent. Through The Horizon Foundation for New Jersey, we supported Partnership for a Drug-Free New Jersey (PDFNJ) and were a proud sponsor of the PDFNJ Knock Out Opioid Abuse Town Hall Series – which helped increase awareness of opioid abuse and prevention in communities across our state. Horizon BCBSNJ will remain at the forefront of this fight to save lives until this crisis is conquered. Our transformation journey is continuing this year. Thanks to a recent federal tax refund, we plan to provide $150 million to benefit our customers and to invest another $125 million over the next five years in: • Expanding programs and platforms that connect members with behavioral health services and accelerating initiatives that fully integrate medical and behavioral health services 3

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    • Providing members with more access to primary In our 86th year of serving New Jersey, we are care and addressing social factors that can be a proud of our achievements in transforming health barrier to achieving good health with an emphasis care in our state, and serving as a model for the on members living in underserved areas nation for bringing about positive change. We understand the immense challenges of this • Further increasing Horizon BCBSNJ’s already ever-changing and dynamic health care marketplace. extensive efforts to prevent substance abuse We strive to safeguard our members from the and help members with addiction and substance uncertainties of changing health care laws and work use disorders. proactively to bring new ideas and solutions to the Horizon BCBSNJ has earned national recognition table. At Horizon BCBSNJ, we are listening to our for our efforts to collaborate with health care members and our customers; collaborating with professionals and organizations to improve care health care professionals and leaders; exploring for New Jerseyans. This shared vision and our new and innovative ways to improve health care ongoing partnership with the state’s health care quality, affordability and member experience; and leaders and other health care professionals are always working to ensure healthier communities essential to delivering on these initiatives over are on our Horizon. the next several years. Key to our transformation and at the heart of everything Horizon BCBSNJ stands for are the Kevin P. Conlin 5,600 employees committed to serving our members each and every day with excellence. Thanks to their passion and caring, Horizon BCBSNJ is ranked highest by J.D. Power: “Highest Member Satisfaction among Commercial Plans in New Jersey, 2 Years in a Row.” And Insure.com has ranked Horizon BCBSNJ the #1 Recommended Health Insurer in 2017 and the #1 Health Insurer for Customer Satisfaction in the nation in 2018. 4

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    MISSION We empower our members to achieve their best health by leading with strength, integrity and innovation to generate substantial improvements in health care quality, affordability and member experience. 5

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    • Involving the community and its resources in a Transforming Health Care deliberate and active manner to ensure the patient in New Jersey receives social services key to achieving better In 2017, Horizon BCBSNJ made substantial health. improvements in health care in New Jersey. Doctors and other health care professionals can In many cases, we had the opportunity to access comprehensive health care data for the fundamentally change the lives of the members community, including clinical and socioeconomic we serve by providing them with access to quality data, and leverage analytics that provide actionable care that was not previously available. A critical insights into the critical needs of their patients. The part of our progress was due to the collaborative Newark Initiative is currently focused on identifying approach we took to work with health care leaders high-risk members in the community facing across our state. We introduced new chronic conditions such as diabetes, and innovative ways to help our hypertension and obesity, many of members manage their health whom also have related risks and well-being, including such as behavioral health the Newark Initiative, issues. The Newark Mental and Physical Initiative supports Care integration, Opioid Education and Nurse members with a multi- the expansion of our disciplinary team that value-based coordinates a variety of programs. resources including: Social Personal Worker Member Health Assistant • Nurses who meet the clinical needs The Newark of the members Initiative Community Health worker • Social workers who understand and work to Partnering with RWJBarnabas resolve socioeconomic challenges Health and local community that are often a barrier to members agencies, Horizon BCBSNJ launched achieving improved health the Newark Initiative, a value-based transformation effort focused on improving the health • Community health workers who support of Newark residents. Previously, many of these patients and their families by connecting them residents did not receive regular care and often used to community resources, such as faith-based the Emergency Room (ER) as their primary source of organizations basic health care services. • A personal health assistant who can answer The initiative takes a holistic approach to care by: members’ benefit questions and help them with access to health care and scheduling issues • Breaking down the traditional silos of care management to coordinate across the Results for members participating in the initiative continuum of care to ensure the patient’s needs have been very positive during the first 12 months are supported; and and include a 20% reduction in utilization for inpatient admissions, 24% reduction in ER visits, 25% reduction in specialty visits and 35% increase in behavioral health visits. 6

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    Integrating Behavioral Health Care It’s estimated that one in five Americans suffer from a behavioral health condition resulting in health care costs of $57 billion annually. Historically, behavioral health care has been separate from primary health care, and the lack of care coordination between these systems of care has resulted in poor health outcomes and higher costs for patients. That’s why integrating primary and behavioral health care is a key area of focus for Horizon BCBSNJ. By applying advanced data analytics, we are identifying members who are likely to have an underlying behavioral health condition, which has been undiagnosed and/or untreated. By working closely with our participating Primary Care Physicians (PCPs) and providing them with the resources to recognize and treat behavioral health conditions, we can help ensure that our members receive the appropriate level of care and treatment. Horizon BCBSNJ’s network of PCPs are offered telephonic consults with psychiatrists and receive updates on the patient’s progress throughout the members with multiple, complex behavioral and course of treatment. physical health needs receiving treatment from a Horizon BCBSNJ also helps our members manage multidisciplinary care team in a primary care setting. the stress and anxiety they may experience because Horizon BCBSNJ also introduced its first Episode of of chronic health issues and/or life-changing medical Care program for Substance Use Disorder (SUD) events through telephonic coaching and counseling treatment in collaboration with a Certified Community by licensed behavioral health clinicians and health Behavioral Health Clinic, as well as an Episode of coaches. Members can receive this support by phone Care program for individuals with Inflammatory or videoconferencing as part of their benefits. Bowel Disease (IBD) and related anxiety and depression issues. Episode of Care programs We are currently implementing several behavioral reimburse health care professionals for all of a health-related value-based programs that reimburse patient’s care related to a specific condition or health care professionals based on improved health procedure. outcomes and lower costs. One solution focuses on 7

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    A Public Health Emergency 8 The “National Principles In 2017, the U.S. Department of Health and of Care for Substance Use Human Services declared the country’s opioid Disorder Treatment” are: crisis a public health emergency. The Centers for Disease Control and Prevention estimates that 72,000 people died from opioid-related drug overdoses in 2017. Additionally, more than 11 million people misused prescription opioids and more than two 1 Universal screening for SUDs across medical care settings million people had an opioid use disorder. The heartbreaking toll of the opioid epidemic also brings significant economic costs, estimated at $1 trillion since 2001, and expected to grow by $500 billion over 2 Personalized diagnosis, assessment, and treatment planning the next three years. That’s why Horizon BCBSNJ joined a groundbreaking 3 Rapid access to appropriate SUD care coalition committed to improving access to, and the quality of, evidence-based addiction treatment. As a part of a national group of health insurers, 4 Engagement in continuing long-term outpatient care with monitoring and adjustments to treatment Horizon BCBSNJ adopted the eight National Principles of Care. These evidence-based principles are designed to improve the quality of care for the 21 million Americans who have a Substance Use 5 Concurrent, coordinated care for physical and mental illness Disorder (SUD). The eight “National Principles of Care for Substance Use Disorder Treatment” are: 6 Access to fully-trained and accredited behavioral health professionals • Universal screening for SUDs across medical care settings 7 Access to FDA-approved medications • Personalized diagnosis, assessment and treatment planning 8 Access to non-medical recovery support services • Rapid access to appropriate SUD care • Engagement in continuing long-term outpatient care with monitoring and adjustments to treatment • Concurrent, coordinated care for physical and mental illness • Access to fully-trained and accredited behavioral health professionals • Access to FDA-approved medications • Access to non-medical recovery support services 8

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    As the state’s largest and most experienced health benzodiazepine and a muscle relaxant from two or insurer, Horizon BCBSNJ is at the forefront of a critical more prescribers and contacts those prescribers; the movement to prevent, detect and treat SUDs. We are Opioid Outlier Program, which identifies members a member of the Substance Use Disorder Treatment who are on high doses of opioids as outliers based Task Force, launched in April 2017 by Gary Mendell, on morphine-equivalent dose (MED); and the founder and CEO of Shatterproof, and Horizon Behavioral HealthSM program, which Dr. Thomas McLellan, founder and chairman of the integrates medical, behavioral health and Treatment Research Institute. Shatterproof, founded substance use disorder services. in 2011, is a national nonprofit organization that works Our efforts are making a difference. In a study to end the stigma of addiction and foster a conducted earlier this year based on examining community of support for prevention, treatment four years of medical and prescription claims data, and recovery. we found that: “The standard for every major disease in our country is treatment within our health care • Horizon BCBSNJ’s commercially insured members filling at least one opioid prescription annually system using research-based medications dropped by 28%. and therapies – except addiction,” said Gary Mendell, CEO of Shatterproof and • Sixty-two percent of Horizon BCBSNJ’s founder of the Substance Use Disorder commercially insured members’ cumulative opioid Treatment Task Force. use in 2017 was within the CDC-recommended dose and duration guidelines, which is an “For the first time in history, leading health improvement from 55% in 2013 ─ the highest care insurers and other third-party payers nationally among all Blue Cross Blue Shield plans. from across our nation have come together • In 2016, opioid use disorder (OUD) in the and agreed to identify, promote and reward commercial population peaked with slightly more one core set of evidence-based principles for than 7 in 1,000 members diagnosed. This diagnosis addiction treatment. Payers will now begin rate remained stable in 2017. to establish an accountability process that Earlier this year, we announced a five-year, will systemically change and significantly $125 million investment of refunds resulting from improve the way that treatment for addiction federal tax reform in significant initiatives that will is delivered in our country.” drive improvements in health care in several areas, For the past decade, Horizon BCBSNJ has been a including behavioral health, substance abuse leading voice in New Jersey to combat substance prevention and addiction and recovery. addiction and use. Our Company’s efforts include programs and initiatives focused on education, prevention, detection, treatment and recovery support. Examples of that commitment include initiatives such as the Partnership for a Drug-Free New Jersey Knock Out Opioid Abuse Town Hall Series, which is based on the Surgeon General’s recommendation to raise awareness, educate the public and prevent opioid abuse; the Triple Therapy Alert Program, which identifies members who are receiving a combination of a narcotic, a 9

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    population in New Jersey. We will continue to work Expanding Services for with Sanitas to expand throughout New Jersey. Multicultural New Jerseyans Improving access to care is an important part of how we help our members get and stay healthy. That’s why Value-Based Care one of our key initiatives last year was working with Sanitas, a multinational health care provider, to A few years ago, we announced the OMNIA Health increase the availability of primary care services Alliance, a joint effort of health care leaders across for the Hispanic community by New Jersey with a shared vision to establishing neighborhood accelerate New Jersey’s change from medical centers in Essex and the traditional fee-for-service system Hudson counties. to one where hospitals and Primary care Specialty care doctors are rewarded for the Currently, there are quality of care they provide to two medical centers in our members. operation in New Jersey that are accessible via Since then, the OMNIA Health public transportation Disease Alliance partners have been management Comprehensive and offer same-week and wellness urgent care working closely to bring this programs appointments, same-day lab vision to life as we establish tests and diagnostic imaging Joint Executive Committees to and walk-in appointments for Laboratory and guide our efforts, implement diagnostic imaging services processes to securely share data urgent care. and develop shared population health The collaboration between Horizon BCBSNJ goals and initiatives. and Sanitas Medical Centers launched an innovative, high-performing and culturally-relevant primary care model to New Jersey. The Sanitas Medical Centers are owned and operated by Sanitas, and provide a one-stop solution to patients’ everyday health needs. All Horizon BCBSNJ members can go to the centers seven days a week to get: • Primary care • Specialty care • Comprehensive urgent care • Laboratory and diagnostic imaging services • Disease management and wellness programs This collaboration with Sanitas reflects Horizon BCBSNJ’s commitment to the Hispanic community, which comprises 20% of the uninsured 10

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    Changing provider reimbursement models from • 6% lower medical cost trend for patients with fee-for-service to models based on the quality congestive heart failure and results of the health care our members • 2% reduction in potentially avoidable ER visits year receive continue to drive the transformation of over year care in New Jersey. Today, more than 1.5 million Horizon BCBSNJ members currently participate in one of Horizon BCBSNJ’s patient-centered, value-based programs. The review of 2017 claims data for members receiving care from value-based practices compared to members receiving care from all primary care practices in the same year show that patient-centered practices are delivering more cost-effective and efficient care, which is helping to ensure members receive the right care at the right time in an appropriate care setting. Specifically, the results show that members participating in patient-centered practices, as compared to those members in all practices, had a: • 4% lower total cost of care trend • 4% lower rate of hospital inpatient admissions • 6% higher rate of colorectal screenings • 7% higher rate of breast cancer screenings 24% lower rate of readmissions 11% improvement in Many patient-centered practices have care for patients with diabetes diabetes management coordinators who provide additional patient support, information and outreach for patients with chronic conditions. They actively coordinate the work of specialists and other health care professionals and provide an increased focus on wellness, preventive 6% lower medical cost trend 2% reduction in potentially for patients with avoidable ER visits and follow-up care. congestive heart failure year over year Members with chronic conditions managed by patient-centered practices have: • 24% lower rate of readmissions for patients with diabetes • 11% improvement in diabetes management 11

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    The OMNIA Health Plan product offerings give consumers another innovative choice alongside Horizon BCBSNJ’s broad array of products and services. In just two years, over 41,000 previously uninsured individuals chose an OMNIA Health Plan to meet their health care needs. These members now have medical coverage and access to important preventive care and health screenings. We will continue to listen to consumers, employers, brokers and consultants and work to provide them with value and choice. HealthSphere Horizon BCBSNJ recently introduced a new data In 2017, Horizon BCBSNJ reimbursed $104 million of services platform tool, HealthSphere. This is part of value-based payments to 5,000 primary care doctors our commitment to making significant investments in and thousands of specialists participating in data analytics that would enable the OMNIA Health Horizon BCBSNJ’s patient-centered programs. Alliance, value-based practices and Horizon BCBSNJ to securely share members’ health information. This Giving consumers more health care coverage tool provides a 360-degree view of a patient’s health solutions was another critical area of focus for record, also known as a Longitudinal Patient Record Horizon BCBSNJ. We conducted extensive research (LPR). HealthSphere electronically collects clinical and received clear feedback from consumers, patient information from different health care employers, brokers and consultants to understand information sources and systems, such as physicians’ the kind of health care options that would meet their Electronic Medical Records, and merges it with needs for a value-based health plan – options that information maintained by Horizon BCBSNJ. These would provide access to quality care at a lower cost. information sources can include member claims, When Horizon BCBSNJ introduced the OMNIA pharmacy benefit management information, Health Plans to consumers, families, small businesses laboratory results, health risk scoring, hospitalization, and large employers, our intention was to provide medical reviews historical data recorded in the new products with access to all doctors and health patient’s electronic health record and more. care professionals in our Horizon Managed Care Through HealthSphere, we aim to improve patient Network and the entire Horizon Hospital Network. outcomes, lower costs and enhance the patient Today, the OMNIA Health Plans feature lower experience with: premiums and give members the choice to receive care from any participating doctor or hospital, as • Easy and secure access to real-time patient well as the opportunity to save on out-of-pocket information costs when they receive care from OMNIA Tier 1 designated doctors, hospitals and other health care • Enhanced communications with care team professionals. members and notifications of identified deficiencies within existing workflows 12

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    • Comprehensive, reliable information flow allowing for timely interventions, improved health outcomes and proactive monitoring of chronic disease management across the continuum of care • Electronic Medical Record information at the point of care • Ability to identify diagnostic and treatment opportunities • Care coordination and transition of care improvement opportunities • Capability to help eliminate duplicate or unnecessary testing Currently, Horizon BCBSNJ is using HealthSphere with select in-network, patient-centered practices and will expand access to more health care professionals in a phased implementation. 13

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    experience provides improved efficiency and Digital Transformation accuracy, and makes this popular search tool a As we continue to revolutionize the way that our quick and easy way to find in-network health care members interact and connect with us, we’re making professionals and facilities. it even easier for them to manage their health plan • A new Document Center featuring a central coverage with online tools that simplify their health repository for documents available on the site. care experience. We make finding important information effortless In 2017, we were excited to launch the next phase of by storing essentials in one location. The our digital strategy ─ the newest version of our secure Document Center will continue to grow website to select groups of members. over time. The latest version of our member website includes Whether through the products and programs we key enhancements such as: offer or the online tools available to members, Horizon BCBSNJ continues to provide our members • An authenticated Online Doctor & Hospital Finder. with service excellence. We are currently rolling out With a new look and feel, the Online Doctor & our new Horizon Blue member app that helps our Hospital Finder now delivers a more personal members get the care and support they need right experience by automatically defaulting to the in the palm of their hands. member’s specific health plan and home location. Having that data embedded directly in the web 14

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    The marketing track challenged students to develop a The Health Care marketing campaign that would help better explain Transformation Challenge one of the categories below to millennials: Navigating today’s health care system can be a 1. Shopping for plans based on individual needs confusing and complex process, especially for individuals who are new to the system. To help 2. Getting preventive care ensure we meet the needs of our community, 3. Taking advantage of wellness benefits Horizon BCBSNJ sponsored the first-ever Health The technology track asked students to design an Care Transformation Challenge to generate new innovative product or service that would enable and innovative ideas directly from undergraduate young people to take control of their health in the students attending New Jersey colleges and same categories listed above. universities. Sixteen student teams submitted innovative marketing The Health Care Transformation Challenge sought and technology ideas aimed to improve how their ideas from students in two tracks – marketing peers take an active role in their health care. Eight and technology – with a focus on helping the finalist teams from six New Jersey schools came to students and their peers take a more active role in Horizon BCBSNJ’s headquarters to pitch their their health care. solutions to a panel of marketing and technology judges. More than $15,000 in prizes were awarded for the first, second and third place entries in each category. The Health Care Transformation Challenge was a great success and will now be an annual challenge sponsored by Horizon BCBSNJ in New Jersey. 15

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    2017 Financials

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    Management’s Discussion and Analysis Background Affordable Care Act Horizon Blue Cross Blue Shield of New Jersey In 2017, the federal government initiated changes to (we, us, our) is a Health Service Corporation two key provisions of the Affordable Care Act (ACA): incorporated as Horizon Healthcare Services, Inc. the elimination of the Cost Sharing Reduction (CSR) and has the exclusive right to market products and payments and weakening enforcement of the services using the Blue Cross and Blue Shield names Individual Mandate. In addition, the health insurer and marks in New Jersey under license agreements fee was reinstated under the ACA for 2018 and our with the Blue Cross and Blue Shield Association. share of this fee is estimated to be $217 million. We serve approximately 3.8 million members and These changes did not materially impact us in 2017; offer policies for every market segment in every one however, they are the principal drivers of a 24% of New Jersey’s 565 municipalities as of average premium increase for Individual products in December 31, 2017. We provide a wide array of 2018. Ongoing uncertainty in Washington continues insured products and services to individuals, small to produce volatility in the marketplace; however, groups and large groups, including administrative New Jersey’s state government is working to bolster services only (ASO) products to national and other the stability of the Individual market and changes large group accounts. We participate in a variety of are expected in 2019. government-sponsored businesses, both as a direct federal contractor of programs such as Medicare Tax Cuts and Jobs Act Advantage (MA), Medicaid and the Federal Employee Program® (FEP®), and as a state contractor for The Tax Cuts and Jobs Act (Tax Act), which was New Jersey’s State Health Benefits Program (SHBP) signed at the end of 2017, included the repeal of and the School Employees’ Health Benefits Program the corporate Alternative Minimum Tax (AMT), a (SEHBP). reduction in the U.S. federal corporate income tax rate from 35% to 21% and modifications to many We have led the effort to transform health care in business deductions. We have paid the AMT since New Jersey, and over the last several years, we have 1986 and consequently paid federal taxes that were collaborated with doctors and hospitals across our higher than we would have under standard corporate state to develop value-based programs, including tax rates. As a result, we earned AMT credits which Patient-Centered Medical Home, Accountable Care now total approximately $560 million. Per the Tax Act, Organization and Episodes of Care programs. companies with AMT tax credits are expected to be In 2015, we launched the OMNIA Health Alliance refunded the full value of those credits with a portion (Alliance), a first-of-its-kind collaboration with some being refunded in each of the next five years of the state’s leading health systems with the singular (2018-2022). We therefore recorded a one-time purpose of achieving the triple aim: improved quality non-cash tax benefit of $560 million in 2017 and of health care, a better patient experience and a subsequently announced that we will return and lower total cost of care for New Jersey consumers. invest approximately one half of this windfall for From a product perspective, the OMNIA Health Plans the benefit of our members. leverage that Alliance, offering consumers lower premiums and empowering them to take greater control of their health costs and spending with lower out-of-pocket costs (copayments, coinsurance and deductibles) when seeking care at OMNIA Tier 1 doctors and hospitals. By the end of 2017, we had over 1.8 million members (47% of our membership) participating in one of our value-based programs. 18

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    Medical Membership — December 31, 2017 Compared to December 31, 2016 Membership counts include both subscribers and their covered dependents. Our membership as of December 31, 2017 compared to December 31, 2016 was as follows (in thousands): As of Increase/ Percent 2017 2016 (Decrease) Change Commercial: Individual 229 196 33 17.0% Small Group 220 225 (5) (2.2%) Large Group 2,258 2,395 (137) (5.7%) Total Commercial 2,707 2,816 (109) (3.9%) Government Programs: Medicaid 869 892 (23) (2.6%) Senior 177 116 61 52.3% Total Government Programs 1,046 1,008 38 3.7% Grand Total 3,753 3,824 (71) (1.9%) Funding method: Fully insured 2,002 1,936 66 3.4% Self-funded 1,751 1,888 (137) (7.3%) Grand Total 3,753 3,824 (71) (1.9%) The decrease in our Commercial enrollment was primarily related to lower employment levels in our self-funded group business and the conversion of approximately 58,000 self-funded SHBP retirees into a Medicare Advantage (MA) product, reported within our Senior segment. Our estimated market share was 48% and 49% for 2017 and 2016, respectively. 19

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    Results of Operations Net Investment Gains Operating revenues increased by 10.2% to almost Investment income was $119 million for 2017 $13.3 billion. compared to $117.9 million for 2016, an increase of $1.1 million. This modest increase was a result of Approximately $800 million of this growth was in our higher average balances in our investment portfolio Senior business, largely resulting from the new partially offset by lower reinvestment yields. The fully insured MA product for SHBP retirees. average balance in our cash and investments portfolio increased to $4.12 billion in 2017 compared Medical and other benefit costs increased by 13.3% to $3.97 billion in 2016, driven primarily by the to almost $11.5 billion, reflecting the increased costs reinvestment of interest income. of health care and growth in fully insured enrollment. We recognized $34.1 million of net realized gains on Our medical cost ratio (MCR) in 2017 was 88.9% sales of investments in 2017 compared to net realized compared to 86.9% in 2016. Revenue increases did losses of $5.0 million in 2016. This increase was driven not keep pace with the increase in medical costs in by normal portfolio rebalancing activities in a very the Medicaid and Individual markets. positive financial market environment. Selling, general and administrative expenses decreased due to a one-year suspension of the Net Income ACA’s health insurer fee. Our selling, general and administrative expenses included a $58 million Net income for 2017 increased to $653.4 million from guaranty fund assessment as a result of the $84.6 million in 2016. The increase in net income was liquidation of a long-term care carrier. Despite this primarily due to the one-time $560 million tax benefit assessment, our administrative cost ratio (ACR) and realized gains from investments, partially offset improved by 170 basis points to 13.9%. by the $58 million guaranty fund assessment. Capital Reserves The one-time, non-cash tax benefit was the primary driver of growth in capital reserves, which increased $725.2 million to $3.70 billion as of December 31, 2017. Unrealized gains on investments of $73.3 million, net of deferred income taxes, also contributed to the increase in capital reserves. 20

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    Statutory Financial Information Health Risk-Based Capital We are required to file financial statements with Due to a change in state law in 2017, we are now the New Jersey Department of Banking and required to maintain a Health Risk-Based Capital Insurance (DOBI). Such financial statements are (RBC) ratio within a range of 550% to 725%. Our prepared in accordance with statutory accounting RBC increased from 620% in 2016 to 636% as of practices prescribed or permitted by DOBI, December 31, 2017, primarily as a result of the tax which differ from generally accepted accounting benefit, partially offset by higher risk charges principles (GAAP). The significant differences associated with the SHBP retirees moving to an between statutory accounting practices and GAAP MA product. include the treatment of subsidiary earnings, the non-recognition of certain assets (accounts receivable aged over 90 days, leasehold improvements, software, deferred taxes and prepaid expenses) and the carrying value of highly rated fixed income securities. Changes in deferred taxes are recorded as changes in capital reserves and do not flow through earnings. We recorded a one-time tax benefit of $360 million in 2017 under statutory accounting practices that bolstered our statutory capital reserves by $360 million but did not impact statutory net income. Statutory capital reserves as of December 31, 2017 and net income for the years then ended as reported to DOBI, were: (Dollars in thousands) 2017 2016 Statutory capital reserves $ 2,772,209 $ 2,385,937 Statutory net income/(loss) $ 56,667 $ (82,981) 21

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    HORIZON HEALTHCARE SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2017 AND 2016 (dollars in thousands) ASSETS 2017 2016 Current assets: Cash and cash equivalents $ 272,297 $ 224,028 Investments available-for-sale, at fair value 2,726,729 2,601,807 Investments held-to-maturity, at amortized cost 83,960 23,173 Premiums and other receivables, net 1,141,214 1,121,923 Prepaid expenses and other current assets 245,472 156,468 Total current assets 4,469,672 4,127,399 Investments held-to-maturity, at amortized cost 518,966 525,208 Restricted investments, at amortized cost 650,253 594,735 Property and equipment, net 601,334 613,551 Other assets 641,518 99,265 Total assets $ 6,881,743 $ 5,960,158 LIABILITIES AND CAPITAL RESERVES Current liabilities: Medical and other benefits payable $ 1,078,298 $ 1,034,839 Unearned premiums 130,725 131,636 Accounts payable and accrued expenses 713,208 604,471 Cash overdrafts 477,505 491,305 Income taxes payable 3,837 7,551 Short-term borrowings, including current portion of term loan and capital lease obligations 154,469 216,913 Other current liabilities 399,453 362,316 Total current liabilities 2,957,495 2,849,031 Obligations for employee benefits 130,349 130,389 Term loan and capital lease obligations, less current portion 90,653 2,706 Total liabilities 3,178,497 2,982,126 Commitments and contingencies Capital reserves: Retained earnings 3,569,237 2,915,860 Accumulated other comprehensive income 134,009 62,172 Total capital reserves 3,703,246 2,978,032 Total liabilities and capital reserves $ 6,881,743 $ 5,960,158 22

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    HORIZON HEALTHCARE SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (dollars in thousands) 2017 2016 Revenues: Insured premiums $ 12,885,181 $ 11,638,534 Administrative service fee income 360,995 387,618 Other revenues 36,960 32,511 Total operating revenues 13,283,136 12,058,663 Net investment income 118,965 117,899 Net realized gains/(losses) 34,077 (5,016) Total revenues 13,436,178 12,171,546 Expenses: Medical and other benefit costs 11,457,413 10,113,879 Selling, general and administrative expenses 1,843,235 1,881,804 Total expenses 13,300,648 11,995,683 Income before income tax benefit/(expense) 135,530 175,863 Income tax benefit/(expense) 517,847 (91,228) Net income $ 653,377 $ 84,635 23

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    Awards & Accomplishments

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    Chief Security Officer Magazine CSO50 Award Diversity Inc. Top Regional Companies Diversity MBA Magazine “Best Places, for Diverse Managers and Women to Work” G.I. Jobs Magazine Military Friendly® Company G.I. Jobs Magazine Military Friendly® Employer Insure.com INSURE.COM 2017 #1 Recommended #1 Recommended Health Insurer Health Insurer J.D. Power “Highest Member Satisfaction among Commercial Health Plans in New Jersey, 2 Years in a Row” LATINA Style Inc. One of the 50 best companies for Latinas to work for in the United States New Jersey Special Investigators Association, Inc. New Jersey Investigators Association (NJSIA) 2017 Partnership Award NOD Leading Disability Employer Seal™ Standard & Poor’s (S&P) “A” rating Working Mother Magazine “Best Companies for Multicultural Women” Working Mother Magazine 100 Best Companies 25

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    Horizon BCBSNJ Board of Directors Kevin P. Conlin John J. Ballantyne Michele A. Brown Todd C. Brown Chairman of the Board, Chairman, New Jersey Sports and Former Chief Executive Officer, Vice Chairman (Retired), Chief Executive Officer & Exhibition Authority Choose New Jersey ShoreBank Corporation President, Horizon Blue Cross Blue Shield of New Jersey Aristides W. Georgantas Michelle A. Gourdine, MD Brian M. Kinkead Joseph M. Kyrillos Executive Vice President (Retired), Senior Vice President, Vice Chairman (Retired), Former New Jersey Chase Manhattan Corporation Population Health and Primary Care, Global Healthcare Group State Senator; University of Maryland Medical System Bank of America Merrill Lynch Principal, SK Partners Horizon BCBSNJ Officers Kevin P. Conlin Mark L. Barnard Douglas E. Blackwell Chairman of the Board, Executive Vice President, Senior Vice President & Chief Executive Officer & Government Programs & Chief Information Officer President Operations Allen J. Karp Christopher M. Lepre Linda A. Willett, Esq. Executive Vice President, Executive Vice President, Senior Vice President, Healthcare Management Commercial Business General Counsel & & Transformation Secretary 26

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    Lawrence R. Codey Leonard S. Coleman, Jr. Laurence M. Downes Leonard G. Feld, MD President & Chief Operating Officer (Retired), Former President of the National Chairman and Chief Executive President, Leonard G. Feld, MD, LLC; Public Service Electric & Gas Company League of Professional Baseball Clubs Officer, New Jersey Resources President (Retired), Pediatric Specialists of America Carlos A. Medina Joseph M. Muniz Joanne Pace Joseph J. Roberts Chairman, Statewide Hispanic Board Secretary, Hudson Managing Director & Former Assembly Speaker, Chamber of Commerce; County Schools of Technology; Chief Operating Officer (Retired), State of New Jersey President, Robinson Aerial Surveys Chairman, North Hudson Morgan Stanley Community Action Corporation Investment Management Margaret M. Coons William D. Georges David R. Huber Senior Vice President, Senior Vice President & Senior Vice President & Human Resources Chief Strategy Officer Chief Financial Officer 27

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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® and FEP® 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. 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. © 2018 Horizon Blue Cross Blue Shield of New Jersey. Three Penn Plaza East, Newark, New Jersey 07105. EC001105 (1118)

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