To meet the changing needs of our customers, we recently introduced BlueChoices, a new consumer-directed product portfolio designed to replace, over time, most of our current traditional, preferred and managed care product offerings. Our first BlueChoices members will be effective January 1, 2004. BlueChoices represents a streamlined number of products and provider networks. We believe that simplifying our product and network choices will create greater efficiencies for our health plan and for you as you work with our members.

BlueChoices offers flexible options in benefits, deductibles and four of our existing provider networks (Participating, Preferred Provider Plan [PPP] and Access). The resulting benefit-deductible-network combinations produce a wide range of coverage and premiums. The BlueChoices benefit design represents the first time we have offered products that were not tied to a specific provider network.

Three products are offered under the BlueChoices suite:

• BlueEssentials^SM, a cost effective solution that provides comprehensive coverage and encourages cost-sharing by employees,
• BluePreferred®, offering extended coverage with numerous advantages, including predictable copayments for high-demand services, and
• BlueClassic^SM, providing the highest benefit levels with the lowest out-of-pocket expenses for maximized health care

BlueChoices will allow Regence BCBSO to become more competitive in the marketplace by simplifying administration and streamlining products and networks. Members will be more involved in their health care decisions, and our out-dated products will be replaced.

BlueChoices is being offered to employer groups who renew or become effective on or after January 1, 2004. For small Oregon groups, BlueChoices is the only product option. BlueChoices is not yet being offered to individual members, although consumer-directed products for these members are being planned.