DELOITTE CONSULTING PRESENTS

Tanushree Chellam Inez Foong Anthony Lorubbio Carlos Gil Neel Nadkarni Nishant Kondamudi

Ecclestone Association, Montana

AGENDA

¢ Background ¢ Proposed Solutions ¢ Changes Made

¢ Conclusion

- Background Analysis Solution Benefits -

ECCLESTONE HEALTH OF MONTANA

¢ Core Administrative Processing System

¢  ICD-10 standards

¢ Capabilities – gauging operating level

STAKEHOLDER ROLES

- Background Analysis Solution Benefits -

Board of Directors • Cost savings to

firm

Clients • Better products

Banking institutions • Better outlook for

EoM • Easier to obtain

loans

Government • Concerned about

loss of jobs • Compliance with

new regulations

October 1, 2012

• Must meet 80% parity criteria in • Customer • Network • Medical • I/T

February 1, 2013

• Must meet 80% parity criteria in • Sales • Product • Billing • Claims

June 1, 2013

• Must meet 80% parity criteria in Leading Ecclestone plans

June 1, 2014

• ICD-10 Compliance

- Background Analysis Solution Benefits -

CRITICAL DEADLINES - UPDATED

PROPOSED SOLUTIONS

Short Term: Functional Outsourcing

Long Term: Functional Outsourcing + Merger with Idaho

• Will allow EoM to meet deadlines on time with minimal cost and optimal improvement in Capabilities

- Background Analysis Solution Benefits -

ASSUMPTIONS FOR SHORT AND LONG TERM PLAN ¢ Time taken to reach first internal mandate ≈ 8

months ¢  Idaho will agree to the merger. ¢ Worst case scenario still includes two month

buffer.

- Background Analysis Solution Benefits -

Today 10-1-12 2-1-13 6-1-13 10-1-13

Only 3 out of 8 capabilities above 80% threshold.

First 80% deadline

Second 80% deadline Third 80% deadline ICD-10

Compliance deadline

- Background Analysis Solution Benefits -

ORIGINAL TIMELINE

Career transition assistance , emphasize openness and trust, support innovation, outsourcing starts.

12-6-12: Begin talks with Idaho for Partnership (8 months)

4-6-13: Finish Outsource

6-2-13: Finalize merger terms with Idaho

6-1-14

6-1-13 8-1-13 10-1-13 2-1-14 4-1-14

Second Phase of Outsourcing

1: Analyze both Internal and vendor culture

2: Analyze cross-culture with Idaho

Checkpoint for merger

- Background Analysis Solution Benefits -

CULTURE TIMELINE

Risk: if cultural assimilation fails – analyze competing firms for egs

6-1-14

ICD-10

Risk: if cultural assimilation fails – Remediation

ASSUMPTION

¢ Cultural transformation strategy financed from the savings through outsourcing

ANALYZE CULTURE – PHASE 1 (INTERNAL + VENDOR)

¢ Due diligence ¢ Learn from success stories

ANALYZE CULTURE – PHASE 2 (CROSS-CULTURE)

¢  3-day Project Manager Swap �  Happy hours

¢ Duplicate role outing �  Reduce job insecurity

MITIGATE CULTURAL RISKS

- Background Analysis Solution Benefits -

¢ Phase 1 (Internal + Vendor): �  Analyze competing firms for role-model examples

¢ Phase 2 (Cross-culture): �  Fall back: remediation – if proposed merged culture

not assimilating �  Small initial investment – low cost of failure

MITIGATING RISK IN 3 AREAS – ORIGINAL PLAN

¢ Outsourcing Risk

¢ Partnership Risk

¢ General Risk

- Background Analysis Solution Benefits -

LONG-TERM PLAN

Innovative Change

Partner with Ecclestone

Idaho

Culture Component

Enhancements

EoM University

PARTNER WITH ECCLESTONE IDAHO

¢ Opens doors to: �  CAPEX Resources to

be used throughout company ¢  $2.3 million

¢ Good Fit between companies

¢ EoM university

- Background Analysis Solution Benefits -

• EoM • EoI

• EoM • EoI

Bad I/T Improved I/T

Low CAPEX

Higher CAPEX

*At time of merger

BENEFITS OF OUR SOLUTION

¢  Improved product �  Propelled by improvements in processes and structure

¢  Increase market share �  Gain traction by merging with Idaho

¢ Attract more clients �  Larger company therefore better able to handle

clients

¢ Better IT �  Greater IT resources $

¢ Attract new talent

- Background Analysis Solution Benefits -

CALL TO ACTION

QUESTIONS

CAPABILITY AREAS Functional Area Does EoM meet audit

criteria?

Sales Force and Broker Distribution Channel

Network Management – Provider Network

Product

Medical Benefits Management

Sales, Marketing & Underwriting Operations

Enrollment & Billing

Claims Processing

Customer & Provider Service

Network Management

Information Technology

- Background Analysis Solution Benefits -

Savings after Merge

Montana IdahoTotal  Organizational  Capability  Investment  (millions) $17 $8.50Overall  Lives 601,220 220,250Cost  per  person $28 $38.50

0

0.5

1

1.5

2

2.5

Savings (millions)

Outsourcing model

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

2011 2012 2013 2014 2015

Current Operation costs

Outsourcing cost

Savings

Investment

Projected Profitability

-15

-10

-5

0

5

10

15

20

25

30

35

40

2012 2013 2014 2015

Cost

Outsourcing Savings

Merger Savings

Total Organizational Capability Investment

Projected Profits (millions)

FUNDS ALLOCATED TO CHANGE MANAGEMENT

¢  $1.5 million ¢  EoM University to support our forward-thinking technological

initiative => attract young talent in a sustainable way ¢  Internally, employees and externally, clients will be affected.

Change will happen over a 5 year period – many solutions in place to mitigate negative reactions to change by focusing on the benefits of the change and will serve as communication, training plan and change management.

¢  Build a guiding coalition. ¢  Strong communication strategy => brown bag lunches,

anonymous index card approach ¢  All employees should be involved => bottom-up projects ¢  Measure the progress of key soft factors by keeping track of

time, cost, quality, and flexibility. ¢  Reinforce the pertinence of the change vision and strategies -

CTA

LONG TERM PARTNERSHIP

Divestiture

Due Diligence Integration

Strategy Target Screening

Transaction Execution

- Background Analysis Solution Benefits -

TERMS OF MERGER

¢ Terms – �  After thorough valuation analysis, the numbers

were negotiated between board of directors �  Estimated increased CAPEX valuation: $2.3 million �  Estimated increased cost of I/T: $6.1 million per

year (covered by EoI’s existing I/T budget)

CULTURE COMPONENT ENHANCEMENT

¢ Allocate resources from Idaho partnership to team-building events

¢ Team-building events: �  Brown-bag lunches �  Monthly outings �  Site visits to partner

company

MENTORSHIP PROGRAM

¢ Option for retirees to use last 2 years of employment to capitalize on enhanced retirement benefits in exchange for knowledge transfer to new hires

06-02-15 06-02-17

Mentorship Program

ANALYSIS OF OPTIONS

- Background Analysis Solution Benefits -

Remediate Current Systems

Implement Package

Functional Outsourcing

Affiliation or Merger

STAKEHOLDER ROLE IN MERGER

- Background Analysis Solution Benefits -

Employees of EoM • Openly

communicate • Understand

reasons behind changes

Board of Directors • Promote

Innovative change

EoM Consumers • Use improved

online system • Critique, provide

feedback

Government • Advocate job

security – keep employment rate high

STAKEHOLDERS

- Background Analysis Solution Benefits -

Stakeholder Concern

Employees of EoM Job security, salary, company culture stability

Board of Directors ROI, Merge Terms

EoM Consumers Product Quality

Government Employment

CURRENT CULTURE

Weaknesses Strengths

Embrace change Commitment to Results

Openness & Trust Formalization

Structural/Consistency Control Focus on Consumer

Support Innovation

- Background Analysis Solution Benefits -

FUNCTIONAL OUTSOURCING – VENDOR SELECTION

¢ Technoglobe �  Based in India �  Highly skilled employees �  Low cost �  Follow-the-sun �  Good infrastructure �  Tier 2 IT Outsourcing company

¢  Ensure that EoM is treated as an important client

- Background Analysis Solution Benefits -

“The biggest industry players made enormous strides in capabilities improvements because of the capital saved from outsourcing certain functional components”

- Chris Jameson, CEO

EOM UNIVERSITY

¢ Supports forward-thinking technological initiative

¢ Sustainable Talent Acquisition �  Attract young, tech-

driven talent

- Background Analysis Solution Benefits -

$8 Million, 2015

MITIGATING OUTSOURCING RISK

¢ Maintain level of quality ¢ Maintain control over key functions ¢ Diversify outsourcing vendor ¢ Workforce reductions ¢ Communities of Practice (COP) ¢ Knowledge Transfer

MITIGATING RISKS WITH PARTNERING

¢ Back up plans 1.  Look into merging with other Ecclestone branches 2.  Remediation

¢ Achieving Consistency between branches �  Decision making �  Client database management system

GENERAL RISK

¢ Career Transition Assistance �  Ensuring job placement for employees

¢ Transferring Knowledge in 2 ways: �  Outsourcing �  Retirements

¢ Culture Clash

MITIGATING OUTSOURCING RISK

¢ Maintain level of quality ¢ Maintain control over key functions ¢ Diversify outsourcing vendor ¢ Workforce reductions ¢ Communities of Practice (COP) ¢ Knowledge Transfer

MITIGATING RISKS WITH PARTNERING

¢ Back up plans 1.  Look into merging with other Ecclestone branches 2.  Remediation

¢ Achieving Consistency between branches �  Decision making �  Client database management system

GENERAL RISK

¢ Career Transition Assistance �  Ensuring job placement for employees

¢ Transferring Knowledge in 2 ways: �  Outsourcing �  Retirements

¢ Culture Clash