Strength H Stability H Peace of Mind · Strength H Stability H Peace of Mind This commitment was at...

Strength H Stability H Peace of Mind

2016ANNUAL REPORT

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This year, Horizon Blue Cross Blue Shield of New Jersey iscelebrating our 85th Anniversary.Started during the GreatDepression, and known then asthe Associated Hospitals of Essex County, Inc., our Companywas the first multi-hospital service

plan to begin providing pre-paidhospital coverage. We have beena New Jersey-based companyever since, providing healthcoverage and a comprehensiveportfolio of products and servicesto generations of families andbusinesses in our great state.

And while a milestone such as our 85th Anniversary is animportant occasion at which tolook back and take pride in a longhistory of service excellence, it istruly the men and women of Horizon BCBSNJ that wecelebrate. I believe that the abilityof our employees to look forward,guided by an unwaveringcommitment to provide ourmembers with access toaffordable, quality care amidst anever-changing and increasinglychallenging environment, is one ofour Company’s greatest strengths.

Today, all health care stakeholders,including patients, health careprofessionals and payers, arefacing significant change onceagain as the new Administrationreassesses every component ofthe Affordable Care Act (ACA).And while it is hard to predict how health care will be redefined,Horizon BCBSNJ remains asdedicated 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 theyneed us, as we have been formore than eight and a halfdecades. Our passionatecommitment to advocating for our members, and championingaccess to affordable, quality healthcare, remains our top priority.


CEO & President

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ChairmanA Letter from Our

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This commitment was at the heartof several key accomplishmentsand milestones in 2016. We had a full year of collaboration with our OMNIASM Health Alliance, ajoint effort of health care leadersacross New Jersey with a sharedcommitment to accelerate New Jersey’s change from thetraditional fee-for-service system,to one where hospitals anddoctors are rewarded for thequality, not the quantity, of carethey provide to patients.

Together, we are creating theinitiatives and programs totransform health care in New Jersey, with a focus onpatient-centered, value-basedcare. The OMNIA Health Allianceis enhancing health care in New Jersey by providing moreorganized, personalized andcoordinated care, powered by the secure sharing of information,processes and best practices tohelp our members get and stayhealthy. The doctors and hospitalsthat participate in the OMNIAHealth Alliance share the followingcritical objectives:

F Improve the health of New Jersey’s residents andcommunities

F Enhance the patient experience

F Lower the overall cost of care

Our innovative strategy totransform health care in New Jersey was a welcome relief to consumers and businessesbeing crushed by the rising cost of health care. Customers told usthey needed a better health careexperience and better solutions to

access quality, affordable care.That is why we introduced ourOMNIA Health Plans. The planswere developed in response toconsumer and employer demandsto change the status quo andprovide them with access toaffordable, high-quality healthcare options.

OMNIA Health Plans offersignificantly lower premiums,access to the largest network in New Jersey1, and the option to save more money on out-of-pocket costs when seekingcare from certain doctors andhospitals. The OMNIA HealthPlans, on average, cost 15 percentless than our comparable broadnetwork plans and do not sacrificecost or access for quality. Theresponse has been extremelypositive from individualspurchasing health coverage bothon and off the FederallyFacilitated Marketplace(Exchange) and from our groupclients. Our OMNIA Health Planenrollment exceededexpectations, with nearly 290,000

members enrolled during the firstyear. Of that enrollment, morethan 41,000 of the new enrollees in the Individual market werepreviously uninsured.

We are proud to have beenrecognized by the U.S.Department of Health and HumanServices (HHS) last year whenHorizon BCBSNJ was spotlightedas one of the nation’s ACA successstories, particularly amongpreviously uninsured consumers.Our success was cited in thecontext of the Exchange as being

"a laboratory for innovations andstrategies that are helping us builda better health care system."

In addition to our OMNIA HealthPlans, Horizon BCBSNJ offers our customers a comprehensiveportfolio of products and servicesto meet their health care needs.

Our Government ProgramsDivision continues to be a keygrowth area in terms of the service we provide to underservedresidents and seniors in our state. 1Based on physician data as of January 21, 2017.

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Medicaid expansion under theACA increased the number ofNew Jersey residents coveredunder Medicaid by nearly 500,000over the last three years, for a totalof 1.7 million Medicaid members.This helped to reduce theuninsured rate in the state by 35 percent in that sametimeframe. Throughout 2016, we focused our efforts onrestructuring and enhancing howto better integrate, coordinateand deliver benefits to memberseligible for both Medicaid andMedicare. We re-entered the Dual Eligible Special Needs Plan(DSNP) market last fall with our Horizon NJ TotalCare (HMO SNP)product for 2017.

A Dual Eligible Special Needs Plan is a Medicare Advantagecoordinated care plan formembers who are entitled to both Medicare and Medicaid. It includes:

F A team of doctors, specialistsand care managers workingtogether for the DSNP member

F A Model of Care that calls forindividual care plans formembers

F One health plan to coordinateall Medicare and Medicaidmanaged care benefits,including pharmacy andmanaged long-term services and supports for the member

Last year, we also delivered on akey implementation of a new

Medicare Advantage PPO plan fornearly 60,000 State Health BenefitsProgram (SHBP) retirees. Withtheir Horizon Medicare Advantage NJ DIRECT (PPO) plan, thesemembers:

F Can access all doctors,specialists and other healthcare professionals eligible to receive Medicare payments and who agree to providehealth care services to the member

F Are covered for all Medicare-eligible services

F Have no referrals

F Have access to Horizon BCBSNJ’s tools,support services and programsto manage their health


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Horizon BCBSNJ developed anddelivered an extensive educationand outreach program, helpingSHBP retirees transition to theHorizon Medicare Advantage NJ DIRECT (PPO) plan. Theprogram included education andoutreach efforts detailing whatmembers could expect, onlineresources, and more than 230 statewide and out-of-stateeducation sessions for theseretirees to learn more about theplan, ask questions and getanswers.

As part of our Company’s strategyto improve quality, lower costs and enhance the patientexperience, we made significantchanges to our website and digital tools. Last fall, weintroduced a new look and feel

for HorizonBlue.com and ourMember Online Services portal, with a focus on simple navigation and a clean, modern appearanceto deliver an enhanced userexperience for our customers. We made it easier for ourmembers to find essentialinformation about their Horizon BCBSNJ coverage,quickly and effortlessly on theirdesktop, smartphone and tablet.

Behind these and all the 2016 accomplishmentshighlighted throughout thisreport, are the men and women of Horizon BCBSNJ. They are the leaders, innovatorsand champions who work to bring Our Promise and Our Vision to life.

Our PromiseF To serve with excellence and

dedication.

F To provide peace of mind forthose who depend on us.

F To enrich the lives and health of our members and thecommunities we serve.

Our VisionF We will continue to lead the

transformation of health care in New Jersey by closelycollaborating with hospitals and physicians, improvingquality and enhancing patientexperience, and lowering thetotal cost of care.

http://www.HorizonBlue.com

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Horizon BCBSNJ employees arean extraordinary group whosecommitment and compassioncome through for our 3.8 millionmembers time and time again.Team Horizon brings a diversity of talents, perspectives andexperiences that inform andenable all that we do for ourcustomers and the communitieswe serve. Their fiercedetermination to do their best every day resulted in Horizon BCBSNJ beingrecognized as the MostRecommended Health Insurer in America according toInsure.com’s 2016 nationalsurvey results. Horizon BCBSNJalso received an overallsatisfaction score that earned us top honors among healthinsurance companies offeringhealth plans in the Garden State.

Employees are the heart and soulof our Company. They are atrusted resource for helpingmembers navigate an oftencomplicated and confusing healthcare system and helping themaccess the care that they need.They are also an integral part ofthe communities that we serve,volunteering their time and energy to the organizationsstriving to make New Jersey abetter place for all of us. You willfind Horizon BCBSNJ employeesalways bring a helping hand, a giving spirit and a bright smilewhether they are planting trees inparks, helping at food banks andsoup kitchens, fundraising forschools in need or supportingshelters for women and children.

For 85 years, Horizon BCBSNJ has been a proud part of our great state. Our commitment toproviding access to affordable,quality health care is as strongtoday as when we first started theCompany. We are excited aboutthe innovative new ways we arefinding to collaborate with healthcare leaders across the state toimprove quality of care, enhanceyour health care experience, lowerthe overall cost of care, and putyour health and well-being at thefront and center of everything wedo. We are at the forefront ofredefining the future of health careand we will be here for you whenyou need us.

Bob MarinoMay 2017

http://www.insure.com

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Patient-Centered, Value-Based CareHorizon BCBSNJ continues tocollaborate with physicians andhospitals across the state totransform our health care systemto one that is consistent with theTriple Aim – to improve quality ofcare, lower the total cost of careand enhance the patientexperience.

A key driver of our Health CareValue strategy is the continuedgrowth and development of our patient-centered programs,including the OMNIA HealthAlliance, Patient-CenteredMedical Home, Accountable Care Organization and Episodes of Care programs. Our patient-centered programstake a holistic approach to thecare individuals receive to ensurethat they get the right care, at the right time, to manage their overallhealth and well-being. Theseprograms also offer shared savings to incent physicians andhospitals to achieve better carecoordination and improved qualityof care while reducing costs.

By the end of 2016, approximately1.4 million Horizon BCBSNJmembers were participating inpatient-centered programs. In 2015, patient-centered practices and hospitals received$58.9 million in care coordinationand shared savings payments forachieving quality and savingsgoals. These value-basedpayments were in addition to what the providers were paidthrough traditional fee-for-servicereimbursements.

A review of our 2015 claims datashowed that patient-centered careis having the intended effect, asmembers receiving care frompatient-centered practices,compared to those membersreceiving care from traditionalpractices, had a:

Overall, patient-centered practiceshelped patients avoid more than3,500 Emergency Room visits in2015, resulting in a projectedsavings of more than $2.6 million.And the success of our patient-centered programscontinues to attract moremembers of the medicalcommunity, with approximately 60 percent of all Horizon BCBSNJmedical claims spending in New Jersey during 2015 going to patient-centered networkphysicians and hospitals.

Horizon BCBSNJ launched other value-based initiatives in2016 designed to help deliver on the Triple Aim.

In June, Horizon BCBSNJlaunched a pilot program thatoffers eligible members a PersonalHealth Assistant. The PersonalHealth Assistant provides eligiblemembers with care coordinationservices to address primarily non-clinical barriers they areexperiencing. These barriers cannegatively impact their health, the care they receive and/or theirability to reach treatment goals.The Personal Health Assistant is a Horizon BCBSNJ employee whoworks telephonically, one-on-onewith eligible members to helpmake it easier and simpler to usethe health care system and get the care they need.

As part of this pilot program,Horizon BCBSNJ engaged 2,900members as of December 2016,with the following results:

F We reached 19 percent ofmembers on the telephone.

F Of the members reached, 45 percent participated.

F Of the members participating,45 percent had at least onebarrier to receiving health care,51 percent needed helpunderstanding their plan, and 29 percent needed helpfinding a provider or schedulingan appointment.

These early results indicate thatmany of the participatingmembers benefited from speakingwith their Personal HealthAssistant.

12%lower cost of care for members with DIABETES

2%higher rate in BREAST CANCERSCREENINGS

lower rate ofEMERGENCY ROOM(ER) VISITS

5%

2%lower rate of HOSPITALADMISSIONS

Best-in-Class Episodes of Care (EOC) ProgramsWhile the success of all of ourpatient-centered programs isencouraging, the success of our18 Episodes of Care programs hasled to Horizon BCBSNJ beingrecognized as an industry leaderthroughout the nation. Since ourintroduction of programs for fiveepisodes of care in 2014, ourmembers in EOC practices haveconsistently had lower hospitalreadmission rates andexperienced other high-qualityoutcomes, compared to membersreceiving the same services from non-EOC practices. These high-quality outcomesinclude:

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The EOC Program has grown significantly over the last several years,with our projections indicating that we exceeded 15,000 episodes in 2016, with total savings of $20 million.

In 2016, we launched the following five new EOC programs:

F Coronary artery bypass grafting (CABG)

F Hysterectomy

F Prostate cancer

F Prostatectomy

F Crohn’s Disease (with fully integrated behavioral health)

In 2017, we are adding EOC programs for:

F Gastroesophageal reflux disease (GERD)

F Diverticulitis

F Low back pain/laminectomy

F Shoulder replacement

hospital readmissions for knee arthroscopy

No

fewer hospital readmissions for hip replacement

37%

fewer hospital readmissions forknee replacement

22%

reduction in unnecessarycesarean sections32%


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OMNIA Health AllianceIn the fall of 2015, HorizonBCBSNJ announced the formationof the OMNIA Health Alliance – a first-of-its-kind collaborationbetween Horizon BCBSNJ, someof the state’s leading hospitals,and a major multi-specialtyphysician group, all of which shareour vision to transform the wayhealth care is financed anddelivered in New Jersey. Theirinvolvement is instrumental to our efforts to build and nurture avalue-based care system due tothe large populations of patientsthey treat, as well as their abilitiesto leverage their significantresources and technologicalcapabilities to deliver moreeffective and efficient care topatients.

In 2016, the OMNIA HealthAlliance made great strides tobring our vision to life as weestablished Joint ExecutiveCommittees to guide clinicaltransformation activities thatintegrate care coordination anddevelop population health goals.Through these collaborations,supported by secure dataexchanges that offer a completeview of patients’ health, ourmembers will get more effective,high-quality care.

Shared-savings models thatreward OMNIA Health Alliancemembers and their associatedphysicians for providing the rightlevel of care, at the right time and at the lowest cost possible,are key to these arrangements.Ultimately, this will lead tofinancial models that are designedto enable Alliance members totransition to assuming full financial

risk, and care managementarrangements that will capitalizeon clinical transformation andencourage the elimination ofunnecessary costs.

While the OMNIA Health Allianceis a prominent feature of Horizon BCBSNJ’s strategy toprovide our members options foraccess to quality care at a lowercost, equally important was theintroduction of our OMNIA HealthPlans. These lower-cost, tieredhealth products were designed toenable consumers to save moneywhile receiving high-quality care.

As part of this productimplementation, Horizon BCBSNJplaced most of its network ofphysicians and hospitals into twogroups, called tiers. Members inOMNIA Health Plans benefit fromlower monthly premiums and havethe opportunity to pay lower out-of-pocket costs (copayments,coinsurance and deductibles)when seeking care from OMNIATier 1-designated physicians andhospitals. The results of our 2016enrollment speak well toconsumers’ and businesses’reactions to the OMNIA Health

Plans, as the OMNIA product linewas successfully launched acrossall of our Commercial marketsegments. In total, nearly 290,000people enrolled in an OMNIAHealth Plan in 2016, including163,000 Individual health careconsumers, 41,000 of whom werepreviously uninsured. This helpedboost our leading market share in the Individual market fromapproximately 57 percent to 62 percent.

We also saw enrollment numbersin our Small Group (56,000members) and Midsize Group(59,000 members) markets thatexceeded our projections, andhad some key Large Groupcustomers switch to an OMNIAHealth Plan offering.

The popularity of the OMNIAHealth Plans demonstrates howwell these products answer marketdemand, and reinforces our beliefthat it is possible to create a value-based health care systemand products that provide ourmembers with quality care atlower costs and an enhancedmember experience.

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Tackling the Opioid CrisisWith over 5,000 lives lost to opioid misuse and addiction inNew Jersey over the last decade2,Horizon BCBSNJ has long beencommitted to helping ourmembers and providers combatthis growing problem. We haveintegrated several programs andkey initiatives throughout thecontinuum of care to help ensureour members receive the rightcare at the right time withoutrelying on opioids. They rangefrom free prevention programs in New Jersey schools to publicawareness campaigns in ourcommunities. We have alsocreated predictive tools forprescribing doctors to help themidentify members who are at risk for substance abuse andreferral programs for behavioralhealth services, as appropriate.

Pharmacy Initiatives

Horizon BCBSNJ providesresources and information to assistin improving the quality of carepatients receive. Physiciansreceive comprehensive, fact-basedand actionable risk reports createdby Horizon BCBSNJ. Ourpharmacy team uses tools topredict future probabilities andtrends to educate health careprofessionals about their ownprescribing behaviors and theirpatients’ risk behaviors.

The Horizon Pharmacy programhas several initiatives thatintegrate pharmacy and medicalclaims. They identify prescribingand dispensing patterns andoutliers that can assist inpreventing abuse, addiction and fraud. Our programs helpmembers and prescribers takeaction and make informeddecisions.

F Triple Therapy Alert Program

• Identifies members who arereceiving a combination of anarcotic, a benzodiazepineand a muscle relaxant fromtwo or more prescribers

F Concurrent Drug UtilizationReview

• Screens prescriptions atpoint of service

• Compares dosage on a claimto the recommended dosagefor a member’s age group

• Determines effects of using acombination of medicines

• Helps prevent duplicaterefills or therapy

• Provides opportunities toimprove patient safety andquality of care

2 nj.com/news/index.ssf/page/welcome_to_herointown_ new_jerseys_4th_largest_city.html

http://www.nj.com/news/index.ssf/page/welcome_to_herointown_new_jerseys_4th_largest_city.html

Tackling the Opioid Crisis

Pharmacy Initiatives

Episodesof Care

Programs

BehavioralHealth

Integration

CommunityEngagement

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F Controlled Substance Alert Program

• Identifies members withclaim histories suggestingpatterns of misuse or abuse,and notifies prescribers

• Tracks and evaluatesoutcomes

• Reduces overuse ofcontrolled substances

F Opioid Outlier Program

• Identifies members who are on high doses of opioids as outliers based on morphine-equivalent dose (MED)

F Pharmacy Lock-in Program

• Identifies members who are at risk for substance usedisorder based on theirusage, and has themevaluated by a pharmacist for pharmacy lock-in

• Requires members to fill allof their prescriptions at one pharmacy, if appropriate

Horizon BCBSNJ also offerscoverage of Medication-AssistedTreatment (MAT) such asSuboxone and Vivitrol forsubstance use disorder recovery.

Through these programs andother utilization management and operational initiatives, theHorizon Pharmacy program helpsensure treatment of underlyingpsychiatric problems and helpsrefer members to behavioralhealth services, as appropriate.Horizon BCBSNJ also supportsthe New Jersey PrescriptionMonitoring Program, which aimsto reduce member drug-seekingbehaviors and promoteappropriate provider prescribingbehaviors.

Support through Episodesof Care (EOC) Programs

Horizon BCBSNJ’s EOC programsare quality-based and usestandard quality measures uniqueto the procedure or disease state.

Prolonged use of pain medicationis tracked as one quality measurefor orthopedic EOC programs (hipreplacement, knee replacementand knee arthroscopy) and thepregnancy (cesarean sectiondelivery) EOC program. Measurestrack opioid use within 90 days ofthe end of the episode.

Behavioral HealthIntegration

Horizon BCBSNJ is committed to providing patient-centeredcoordination of medical andbehavioral care. Through theHorizon Behavioral Healthprogram, we integrate medical,behavioral health and substanceuse disorder services. Thisintegration helps ensure thetreatment of underlying issues. We support the full continuum of care for mental health andaddiction care.

Community Engagement

Our team engages the communitythrough the Blue To You Van, our Care-A-Vans and selectpharmacies to help educatemembers and the public on how to correctly dispose ofmedicines through the New Jersey Project Medicine Drop.

In addition, The HorizonFoundation for New Jerseysupports Partnership for a Drug-Free New Jersey (PDFNJ), a multimedia substance misuse and abuse prevention publichealth campaign that was createdin 1992 to provide free preventionprograms and initiatives to New Jersey schools andcommunities, as well as parenteducation training and drug-freeworkplace assistance. Additionally,Horizon BCBSNJ’s Chairman, CEO & President Bob Marino is on the Executive and SteeringCommittees of PDFNJ.

Since 2004, The Foundation has given over $180,000 through 12 grants to support the FifthGrade Parent Alert, a brochureprovided to all fifth-grade classesin New Jersey that encouragesparents and guardians to discussthe dangers of substance abusewith their children. In 2017, The Foundation is proud tosponsor the PDFNJ Knock OutOpioid Abuse Town Hall Series.These meetings are being heldthroughout the state through

November 2018, and will helpshed light on opioid abuse,prevention and awareness. They are based on the SurgeonGeneral’s recommendation togalvanize the public, policymakersand communities to raiseawareness, educate, reducestigma and change attitudes onaddiction, and to ultimatelyreduce and prevent opioid abuse.

Horizon BCBSNJ is also workingwith 35 independent Blue Crossand Blue Shield Plans in a nationalcommission convened by the Blue Cross and Blue ShieldAssociation to reduce thedevastating consequences of the opioid crisis. We continue tocollaborate with thought leadersin New Jersey to combat thestate’s opioid issue, while helpingto improve the quality of care,lower its cost and enhance thepatient experience for ourmembers.

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Improving the Customer ExperienceOur continued efforts to transformto a consumer-centric, digitalenvironment to better engage and connect with our membershas been driven by the creation of an end-to-end customerexperience that empowersmembers to be more educatedand knowledgeable about how to live healthier lives.

Digital StrategyAs part of a multi-year digitalstrategy, our goal is to delivereasier access – and peace of mind – through a series ofenhancements that include:

F Better tools to allow members to manage theirhealth care quality and cost

F Clearer online communications to helpmembers’ understanding

F User-friendly websites andeasier mobile access toimprove the memberexperience

In 2016, we successfullyimplemented the first phase of our digital strategy initiative, which involved the redesign ofHorizonBlue.com, our corporatewebsite, and Member OnlineServices, our authenticatedmember portal. Through a series of online surveys, memberfocus groups and data analyses,these digital properties wereupdated to provide clearer pathsto content and functions.

https://www.horizonblue.com/

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Our new website and portal make it easier for customers tofind what they need with whateverdevice they are using. The newlayout is not only cleaner andbetter organized, but alsodesigned to work seamlesslyacross desktops, smartphones and tablets. Improvements in our technology platform nowprovide our customers with easieraccess to helpful tools andvaluable resources, including a secure paperless option. Thesimplified navigation on Member Online Services hasmade it easier for members to find essential information on their Horizon BCBSNJ coverage. Theportal’s welcome page currentlyfeatures six sections to help guide users to the informationthey need:

Claims – Members can reviewrecent claim activity, including anyamount we paid and the amountthe member owes, if applicable.

My Coverage – This sectionfeatures tools and resources tohelp members get the most out of their benefits, including a view of services covered andwhether specific benefits requireprior authorization.

My Account – Members can viewtheir premium billing overview,billing history and payment history.They can even make a premiumpayment. This section also hasHealth Savings Account (HSA),Health Reimbursement Account(HRA) and Flexible SpendingAccount (FSA) information and aroll-up of total out-of-pocketcosts, as applicable. Membersonly see the information thatapplies to their plan.

ID Cards – Members can print,view or request a member ID card.

Wellness – This section featuresdiscounts and savings on tools,resources and programs to helpmembers live healthier.

Get Care – In this section,members can search for a doctorusing our Online Doctor &Hospital Finder, and read patientreviews and recommendations ofparticipating doctors using ourPhysician Review Tool. Memberscan also access the HorizonPharmacy and Horizon BehavioralHealth programs from this section.

Additional enhancements areunderway for 2017 and beyond as we continue to transform howwe serve and engage ourcustomers.

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As part of our commitment tocontinually improve the memberexperience, in 2016 Horizon BCBSNJalso:

F Updated FAQs for easier member search

F Updated FAQ content to reflectmember feedback

F Rewrote and redesigned On Exchange premium bills andletters to improve memberunderstanding

F Successfully rolled out a portal for individual health customerconversions and renewals, reducingthe turnaround time for applicationprocessing from under five days toalmost same-day processing,resulting in faster payment postingand collateral delivery to members

FAQsprovide members withanswers to questions aboutenrollment, benefits,premium payments andmore. They also give step-by-step instructions on how a member can find his or her specificinformation once signed into Member Online Services.

My Messagesis a secure, online tool thatallows members to sendus their questions throughMember Online Services.A Member ServicesRepresentative researchesthe answer and responds to the member within two business days.

Live Chat gives members theopportunity to chatonline in real time with a Member ServicesRepresentative, Mondaythrough Friday duringnormal business hours.

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.

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An Evolving MarketplaceIn addition to re-entering the Dual Eligible Special Needs Planmarket and implementing our new Medicare Advantage PPO product, we made greatstrides in 2016 in increasing ourpresence in other traditionallyunderserved communities.

Recognizing the tremendousgrowth opportunity in New Jersey’s Hispanic market and to expand our reach in central New Jersey, we openedour second exclusive brokerage service center for Spanish-speaking consumers. This new service location helps Spanish-speaking consumers find affordable health carecoverage and assists them with all their benefits needs. The new HolaDoctor® InsuranceServices in Perth Amboy is thesecond installment of our brick-and-mortar approach toreaching Hispanic consumers.Visitors to either of ourHolaDoctor Centers are offeredone-on-one assistance withtrained bilingual agents who help them with:

F Full enrollment services inSpanish, including assistingconsumers with obtaining any financial assistance forwhich they may be eligiblethrough the Exchange

F Completing a Health RiskAssessment

F Guiding them through a newSpanish-language section ofour Member Online Services,where they can manage theirpremium payments and findculturally specific resources tohelp them locate providers andmaintain good health

The other ways that HorizonBCBSNJ has helped and willcontinue to help connect Hispanicconsumers to coverage andimprove their health literacyinclude:

F Holding regular grassrootseducation events in Hispanic-owned restaurants to navigate languagedifferences and improve health literacy

F Educating members about the value-added benefits and rewards onsite with Café Con Leche sessions

F Hosting a Spanish-languagewebsite (HorizonAzul.com),and offering a dedicated teamof Spanish-speaking agents and a Spanish-language phonehotline to assist Hispanicconsumers and businesses

F Establishing remote service andsales locations at New Jerseymalls and staffing them withSpanish-speaking agents

F Collaborating with the Hispanic business communityto create new channels ofcultural outreach

F Providing support andguidance to navigators and in-person assistants throughworkshops, presentations and onsite visits

Through digital, grassroots,marketing and education effortsover the last two years to engage Hispanic consumers, Horizon BCBSNJ recorded anearly 400 percent increaseamong Hispanic membership.

http://www.horizonazul.com/

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Specialty Products and ServicesIn addition to targeting newmembership in emerging markets,we also continue to aggressivelypromote and sell additionalproducts and services beyond our core medical business. We created a dedicated SpecialtyProducts and Services (SPS)management team in 2016, with a clear alignment to our sales and account managementteams to ensure we are meetingour customers’ needs, whilegrowing and diversifying our revenue.

Initially focused on growing our Dental and Vision business and expanding partnerLife and Disability offerings, SPS also includes:

F International Coverage(GeoBlue)

F Stop-Loss

F Telemedicine

F Wellness

F Worksite/Critical Illness

Among the key initiatives for the SPS team in 2016 was thelaunch of new dental products forIndividual consumers, which wassupported by a new ability toautomatically bundle one of thesenew plans with a medical plan on our consumer portal. Thiscross-selling opportunity was alsokey to driving growth for a new set of vision products introduced

in 2016. We also built new stop-loss capabilities to allow us to compete against other stop-loss carriers. Additionally, our Horizon Casualty Servicesdivision deployed a new growthstrategy, partnering with billreview companies. Overall, theefforts of the SPS team resulted in a 5 percent increase in its revenue in 2016.

International CoverageDENTAL

STOP-LO

SSVISION

LIFE

DISABILITY WELLNESS

TelemedicineWORKSITE/CRITICAL ILLNESS

SPECIALTYPRODUCTS

SERVICESAND

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Affinity Groups Community Organizations

Asian-American Affinity Group

Ridge Street Elementary School of Newark, Apostle House and Community FoodBank of New Jersey

Enlightenment and Empowerment Enterprise

FP YouthOutCry Foundation and Camden Street Elementary School

Latin American Cultural Organization (LACO)

Belleville Public Schools, Junior Achievement, New Brunswick Little League, 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

During 2016, the Affinity Groups supported 16 diverse community organizations:

Diversity at WorkWe work hard to foster and support an environment ofdiversity and inclusion at Horizon BCBSNJ, and theabilities and skills of our diverse and talentedcommunity of employees help us meet today’s business challenges with strength and creativity.

Members of our Diversity Council and our seven Affinity Groups make a personal commitment to:

F Sponsor events on topics of interest to employees

F Provide opportunities for networking

F Support service to community groups

F Raise awareness of our diverse workforce

F Foster a culture of respect and understanding in our workplace

Asian-AmericanAffinity Group

MUS

LIM

AFF

INIT

Y G

ROUP

Enlightenment and

Empowerment Enterprise Wo

men L

EAD

MIL

ITA

RYA

FFIN

ITY

GRO

UP

LATIN AMERICAN CULTURAL ORGANIZATION

SpectrumAffinity Group

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The Diversity Council teamed with employee volunteers tosupport Arts High of Newark with donations and events thatbenefit students at the school.Activities included cleaning,organizing and planting shrubs to improve the school’sappearance; donating book bags filled with school supplies for students; and supplying coats,hats, scarves and gloves tounderprivileged students.

In other activities, the DiversityCouncil and Affinity Groupssponsored and participated in:

F A diversity symposiumaddressing leadership,mentoring, networking,work/life balance, buildingcareers and other topics

F Lunch and learn seminars ontopics such as Work/LifeBalance and Caring for AgingLoved Ones

F Diversity training for employeeson “Cultural Competency andTurning Differences IntoStrengths”

F Expanding the diversity libraryto two locations, and publishingmonthly Diversity Council bookreviews on the Company’sDiversity microsite

Diversity ShowcaseIn 2016, the annual DiversityShowcase was held in threeHorizon BCBSNJ locations. This special event highlights themany cultures and traditions ouremployees celebrate and givesemployees an opportunity to meetmembers of Horizon BCBSNJ’sseven Affinity Groups, speak withCompany officers, listen to livemusical performances and enjoythe foods and festivities of manycountries and cultures.

All proceeds from ticket sales weredonated to local organizations.

The Horizon Foundationfor New Jersey The Horizon Foundation for New Jersey, the philanthropic arm of Horizon BCBSNJ, iscommitted to working alongsideorganizations that can help usimprove our neighbors’ health,inform their health decisions andinspire 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 hasawarded 1,319 grants totalingmore than $47.8 million.

In 2016, The Foundation alsolaunched its third signatureprogram, the Kids’ Oral HealthProgram (KOHP). This $500,000two-year pilot initiative isdesigned to improve oral health-related awareness,education, prevention andtreatment for young people. The program also includesfunding to support professionaldevelopment for health careprofessionals and promote bestpractices in 10 New Jerseycounties where dental healthneeds among children are acute.

KOHP joins The Foundation’sother two signature programs,Breathe Easier with AsthmaManagement (BEAM) and Healthy U. The BEAM programraises awareness about asthmaand educates youth and theirparents or caregivers about thedisorder and how best to manageit. Nearly 300,000 children in New Jersey have been diagnosedwith asthma. The Foundationmade a $500,000 grant to the Boys& Girls Clubs in New Jersey toimplement the BEAM pilotprogram in 12 Boys & Girls Clubsites located in nine countieswhere childhood asthma isprevalent.

Healthy U, implemented in all 21 counties throughout New Jersey through the New Jersey YMCA State Alliance,is designed to prevent childhoodobesity by instituting behavioralchanges around nutrition andexercise in children ages 3 to 13years, and by engaging parents to get more involved with helpingtheir children to lead a healthierlifestyle. Healthy U has reachedmore than 60,000 children at 480 YMCA sites and 90 publicschools. The Foundation hasinvested nearly $5 million in grantsfor the program, which spans from January 2008 through December 2019.

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2016F INANC IALS

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Horizon BCBSNJ is a Health Service Corporationincorporated as Horizon Healthcare Services, Inc. andis New Jersey’s sole licensed Blue Cross Blue ShieldPlan (Blue Plan). Horizon BCBSNJ operates solely in New Jersey and is the state’s largest provider ofhealth care coverage, insuring approximately 3.8 million members as of December 31, 2016.Horizon BCBSNJ offers fully-insured products to large groups, small groups and individuals. Horizon BCBSNJ also offers administrative servicesonly (ASO) products to national accounts and other large groups. Horizon BCBSNJ participates in a variety of government-sponsored businesses,both as a direct federal contractor of programs suchas Medicare Advantage, Medicaid and the FederalEmployee Program®, and as a state contractor forvarious non-federal governmental plans, includingNew Jersey’s State Health Benefits Program (SHBP)and its School Employees’ Health Benefits Program(SEHBP). It has the exclusive right to market productsand services using the Blue Cross and Blue Shieldnames and marks in New Jersey under licensingagreements with the Blue Cross and Blue ShieldAssociation.

Over the last several years, Horizon BCBSNJ hascollaborated 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 righttime, to manage their overall health and well-being.By the end of 2016, Horizon BCBSNJ had 1.4 millionmembers attributed to doctors and hospitals whoparticipate in its patient-centered programs.

In the fall of 2015, Horizon BCBSNJ announced the formation of the OMNIA Health Alliance. The OMNIA Health Alliance is a first-of-its-kindcollaboration between Horizon BCBSNJ, some of the state’s leading hospitals and a major multi-specialty physician group. It represents a unique alliance focused on a Triple Aim of improvingthe quality of health care, enhancing how patientsexperience care and lowering the total cost of thatcare for New Jersey consumers. From a productperspective, the OMNIA Health Alliance is aprominent feature of Horizon BCBSNJ’s OMNIAHealth Plans. These lower-cost, tiered health plansallow members in OMNIA Health Plans to benefitfrom lower monthly premiums and to have the opportunity to pay lower out-of-pocket costs(copayments, coinsurance and deductibles) whenseeking care at OMNIA Tier 1 doctors and hospitals.By the end of 2016, Horizon BCBSNJ had nearly290,000 members enrolled in OMNIA Health Plans.

MANAGEMENT’S DISCUSSION AND ANALYSIS

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Membership counts include both subscribers and their covered dependents. For membership reportingpurposes, 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):

Medical Membership — December 31, 2016 Compared to December 31, 2015

Overall enrollment increased by approximately 26,000 members in 2016. We had continuing success in theIndividual market, growing by 28,000 members, and our Medicaid enrollment grew by 51,000 members as aresult of Medicaid expansion. These increases were partially offset by declines in our Large Group, SHBP andSmall Group businesses. These membership declines were driven by groups downsizing due to economicconditions. Our overall market share has stayed constant at 49% for 2016 and 2015.


As of Increase/ Percent2016 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%

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Insured premiums increased $717.4 million, or 6.6%,to $11.64 billion in 2016 from $10.92 billion in 2015.Insured premiums in our Medicaid and Individualbooks of business increased primarily as a result ofthe enrollment growth noted on the prior page.

Investment income was $117.9 million for 2016compared to $118.9 million for 2015, a decrease of$1.0 million. This decrease was driven by lower re-investment yields in the held-to-maturity bondportfolio. The average balance in our cash andinvestments portfolio increased to $3.97 billion in2016 compared to $3.77 billion in 2015, driven by the re-investment of interest income, financial market conditions and strong cash flow.

We recognized $5.0 million of net realized losses in2016 compared to $22.0 million of net realized gainsduring 2015. The decrease of $27.0 million wasprimarily driven by approximately $15.1 million ofother-than-temporary impairment write-downsresulting from adverse experience in the financialmarkets early in the year.

Medical and other benefit costs were $10.11 billion in 2016 compared to $9.42 billion in 2015, an increase of $690.4 million, or 7.3%. Medical and other benefitcosts increased year over year driven by the increasein the fully-insured enrollment and the rising cost ofhealth care. The medical cost ratio increased 60 basispoints to 86.9% in 2016 from 86.3% in 2015, drivenprimarily by higher-than-expected claims in theIndividual and Large Group commercial markets andhigher-than-expected payments to out-of-networkhospitals and physicians. In 2016, we experiencedhigher-than-expected utilization in Platinum and Gold plans in the Individual market.

Selling, general and administrative (SG&A) expenseswere $1.88 billion for 2016 compared to $1.85 billionfor 2015, an increase of $30.9 million, or 1.7%.Included in SG&A expenses were taxes, fees andassessments of $444.5 million in 2016 compared to$422.1 million in 2015. Despite this increase in taxes,fees and assessments, our administrative cost ratiodecreased 70 basis points to 15.6% for 2016 from 16.3% for 2015, as a result of our ongoing strategy to improve operating efficiencies and control costsyear over year.

Income tax expense was $91.0 million for both 2016and 2015. The effective tax rate increased to 51.9% in2016 from 46.0% in 2015. The increase in the effectivetax rate was primarily due to the non-deductibility of a health care reform-related fee in proportion tolower pre-tax income and higher state income taxesas we generated greater income from our Medicaidbook of business.

Net income for 2016 decreased to $84.6 million from$106.7 million in 2015.

Capital reserves grew $154.6 million to $2.98 billion as of December 31, 2016, primarily due to net incomefor the year and unrealized gains on investments of$70.9 million, net of deferred income taxes.

On a statutory basis, our capital reserves increased$80.0 million to $2.39 billion as of December 31, 2016,primarily due to unrealized gains on our investmentportfolio. Our Health-Risk Based Capital (RBC)percentage decreased by 27% to 620% as ofDecember 31, 2016 from 647% as of December 31, 2015. The decrease was due to an increase in capital requirements resulting from growth in our business.

Results of Operations for the Year Ended December 31, 2016 (2016) as Compared to the Year Ended December 31, 2015 (2015)

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HORIZON HEALTHCARE SERVICES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2016 AND 2015

(dollars in thousands)

ASSETS 2016 2015Current 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 RESERVESCurrent 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

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HORIZON HEALTHCARE SERVICES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015(dollars in thousands)

2016 2015Revenues:

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

Strength H Stability H Peace of MindStrength H Stability H Peace of Mind

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Most RecommendedHealth Insurer

in America

Employee ResourceGroup

of the Year LATINA Style Inc.

Top 10 List of Regional Companies

U.S. Secretary ofDefense Pro Patriaaward for support ofNational Guard andmilitary reservists

One of the 50 bestcompanies for

Latinas to work for in the United States

LATINA Style Inc.

One of the top five“Best Companies for Multicultural

Women” Working Mother

Magazine

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A W A R D S A C C

Military Friendly®Employer

G.I. Jobs Magazine

Top 50 Best Places for Diverse Managersand Women to Work

Diversity MBA Magazine

Above & Beyond Award from Diversity Best

Practices, a division ofWorking Mother Media

Ranked #3 in InformationWeekElite 100 Users of

Business Technology

CSO50 AwardCSO,

Chief Security Officer Magazine

Anti-Fraud Efforts Since 2005,

Horizon BCBSNJ’s anti-fraud efforts

have saved members$290 million.

Brand Innovation AwardBlue Cross and Blue Shield

Association (BCBSA)

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O M P L I S H M E N T S

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In Memory

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

Alfred C. KoeppeNovember 14, 1946 – December 6, 2016

Board of DirectorsSTANDING, LEFT TO RIGHT:

Todd C. BrownVice Chairman (Retired)ShoreBank Corporation

Joanne Pace Managing Director & Chief Operating Officer (Retired)Morgan Stanley Investment Management

Joseph J. RobertsFormer Assembly SpeakerState of New Jersey

Leonard G. Feld, MD,PhD, MMMPresident, Physician EnterprisePediatric Specialists of AmericaMiami Children’s Health System

Robert A. MarinoChairman of the Board,Chief Executive Officer & PresidentHorizon Blue Cross Blue Shieldof New Jersey

Lawrence R. CodeyPresident & Chief Operating Officer (Retired)Public Service Electric & Gas Company

Peter G. StewartSenior Partner (Retired)Carella, Byrne, Cecchi, Olstein,Brody & Agnello, PC

Russell L. HewitShareholder and DirectorDughi, Hewit & Domalewski, PC

Barbara Bell ColemanPresident (Retired)BBC Associates, LLC

Mary E. O’DowdExecutive Director for Health Systems and Population IntegrationRutgers Biomedical and Health Services

Carlos A. Medina Chairman, Statewide Hispanic Chamber of CommercePresident, Robinson Aerial Surveys, Inc.

SEATED, LEFT TO RIGHT:

Vincent J. GiblinPresident (Retired)International Union of Operating Engineers

Aristides W. GeorgantasExecutive Vice President (Retired)Chase Manhattan Corporation

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Horizon BCBSNJSenior OfficersRobert A. MarinoChairman, Chief Executive Officer &President

Kevin P. ConlinExecutive Vice President & Chief Operating Officer

Mark L. BarnardSenior Vice President, Service

Douglas E. BlackwellSenior Vice President & Chief Information Officer

William J. Castner, Jr., Esq.Senior Vice President, Corporate and Regulatory Affairs

Margaret M. CoonsSenior Vice President, Human Resources

David R. HuberSenior Vice President, Chief Financial Officer & Treasurer

Allen J. KarpSenior Vice President, Healthcare Management

Christopher M. LepreSenior Vice President, Market Business Units

Minalkumar A. Patel, MD, MPHSenior Vice President & Chief Strategy Officer

Erhardt H. L. PreitauerSenior Vice President, Government Programs

Linda A. Willett, Esq.Senior Vice President, General Counsel & Secretary


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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