The Employee Benefit Research Institute in a 2000 report stated that approximately 33% of the 150 million private health plan participants receive benefits through self-funded plans. The number of these self- funded members that have been provided care in a managed care setting is relatively low in most geographical locations. The pressure on providers to negotiate agreements, establish preventative target goals, and be individually graded based on performance, efficiency and quality has been relatively low. The upcoming changes dictated by Medicare and Medicaid plans nationwide will not only change how health is delivered for Governmental plans but eventually lead to commercial health plans following the Governments lead. The uncontrolled traditional indemnity plans have operated with little consideration for resources spent. Managed Care Plans that use financial incentives to improve care and influence both patients and providers will become the dominant way health care is delivered nationwide. This transformation to managed care principles by providers nationwide will change the face of how healthcare is delivered and consumed. The totally unmanaged way that most fully insured and self-funded plans have operated will no longer be able to compete with managed care plans that increase quality and effectively use limited resources.

The strategy of Focus Health Solutions is to not only provide management services for Clinically Integrated Networks but to allow them to offer their own insurance product. One that can compete with the large insurers, uses managed care principals, and the best in class sales and management. The access to the Small Employer Trust (SET) plans allows Focus to offer insurance products to large and small companies alike. This will occur with the much of the competition still operating under the less effective fee for service model. The working relationship between Focus and its Clinically Integrated Networks and the ability to more effectively manage risk contracts will separate Focus and its insurance products from its competition.