President Obama speaks about the Affordable Care Act at the White House on May 10.

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2 POLITICAL LANDSCAPE Washington s political dynamic is fractured House actions are tempered by conservative pressure and tight Democratic majority in the Senate and President Obama GOP is struggling with health reform strategy,as is the Democratic leadership Democrats running for reelection in 2014 are currently the most solution-oriented group Business groups are an important and often under heard constituency States are dealing with a host of health reform issues Exchanges Medicaid Expansion Budget Concerns Extreme variances in attitudes about implementation and implementation successb President Obama speaks about the Affordable Care Act at the White House on May 10.

3 UNDERSTANDING: CURRENT MINDSET & LANDSCAPE Know very little. Those most likely to benefit know even less. Negative experiences frame expectations. Very high levels of skepticism. Most have been uninsured for two years or more. There is interest in exchanges, but interest is soft. Vast majority have low education and literacy levels. Testing on Perceptions of Affordability Testing using the KFF calculator 53% feel premium amount is in the unaffordable range 59% of uninsured $210 for individual or $412 for family of four If you had to look for health insurance now, what feelings do you think you would feel??? Source : Enroll America webinar

4 . How is health reform going to impact premium rates and the amount people actually pay for coverage? Right now with coverage extensions, exchange enrollment unknowns and the huge number of employers who took a December 1, 2013 renewal option, we will not know the true impact until this time next year

5 MARKETPLACE OPEN ENROLLMENT: THE VISION

6 MARKETPLACE OPEN ENROLLMENT: THE REALITY

7 UNDERSTANDING: LIMITED PUBLIC AWARENESS 78% 83%

8 UNDERSTANDING: LIMITED PUBLIC AWARENESS 78% 83%

9 UNDERSTANDING: LIMITED PUBLIC AWARENESS 78% 83%

10 MARKETPLACE OPTIONS

11 MEDICAID EXPANSION

12 Critical Concepts: Minimum Essential Coverage Affordable Coverage Minimum Value Coverage TERMS TO KNOW All employers of all sizes who offer any type of coverage need to know if the coverage they offer meets these concept tests. All Americans need to understand Minimum Essential Coverage for individual mandate compliance. All employees of all types (FT, PT, seasonal, etc.) need to know what kinds of coverage has been offered to them if they if they seek a subsidy through the exchanges. Health Care

13 RULE ON MINIMUM ESSENTIAL COVERAGE Minimum Essential Coverage Includes: Insurance policies sold in the small or large group market Employer-sponsored group health plans (a group health plan is a welfare arrangement under ERISA that provides medical care to employees or dependents through insurance, reimbursement or otherwise) Minimum Essential Coverage Does Not Include: Stand-alone HRAs that are not integrated with a group health plan HIPAA-excepted benefits such as: stand-alone vision or dental, cancer-only policies, indemnity plans (hospital or disease), accident or disability plans, on-site medical clinics and other types of coverage listed in PHSA 2791(c)

14 INDIVIDUAL MANDATE Are you: Part of a religious group with an exception Incarcerated Undocumented resident American Indian Pay more than 8% of take-home pay for employer coverage So low-income you don t pay federal income taxes Someone who fall into a Medicaid expansion coverage hole Some other hardship exemption or Do you have: Coverage through a job Coverage through an exchange/at least bronze individual coverage Medicaid, Medicare, CHIP Tricare or VA Care Student Health Plan Grandfathered plan OR WAS YOUR PLAN CANCELLED in 2014? YES NO No Penalty Penalty 2014 Greater of 1% family income or $95 adult/$285 family maximum 2015 Greater of 2% family income or $325 adult/$975 family maximum 2016 Greater of 2.4% family income or $695 adult/$2085 family maximum

15 COVERAGE TESTS AFFORDABLE MINIMUM VALUE Employee s share of the premium cannot exceed 9.5% of household income. Affordability test is based on the cheapest minimum value plan the employer offers. HRA contributions under certain circumstances are factored into the affordability calculation. Test is also based on the employee-only rate, regardless of whether or not the employee selects family or dependent coverage Lowest tier plan must be at least a 60% actuarial value Actuarial value is based on cost-sharing and out-of pocket expenses, not premiums Employer contributions to account-based plans will factor into actuarial value Administration has a calculator and there are other safe harbors employer can use Small groups that offer Bronze QHPs or higher meet the minimum value standard but there is no safe harbor for grandfathered plans, self funded plans or 2013 plans that extend into 2014.

16 What are the employer responsibility penalties? Applicable employers can be penalized for : Failing to offer coverage to full-time employees Offering coverage to full-time employees where the cost of the coverage exceeds 9.5% of family income Key considerations: What is your mix of full and part-time employees? Could an adjustment of employee status reduce your penalty exposure? If you provide coverage today, how does the cost of that coverage compare to your total penalty exposure? Consider all options, including nonmonetary concerns. The penalty for the failure to offer coverage is $2,000 x full-time employees not covered, minus the first 30 employees, i.e. your first 30 full time employees are exempt from the calculation. The penalty for the failure to offer affordable coverage is the lesser of two penalty calculations: $3,000 per applicable employee or $2,000 times every full-time employee, minus the first 30 employees. At least one employee must receive subsidized coverage in the exchange to trigger penalties. DELAYED until 2015 SLIDE COURTESY OF NATIONAL RETAIL FEDERATION

17 FULL-TIME STATUS DETERMINATION NEW employee is hired Is employee expected to be full-time? (30 hours of service per week/130 hours service per month) If YES, then If unknown, cannot be reasonably determined then Offer coverage to employee within 90 days of hire Start the Initial Measurement Period (IMP) to determine if the employee averages 30 or more hours per week Did the employee average 30 hours in the IMP? If YES, then If No, then Offer coverage for stability period or potentially pay a penalty No offer of coverage is required

18 NEW EMPLOYER MANDATE REGULATION FEBRUARY 2014 Small Businesses with less than 50 employees will not be required to offer cover OR fill out any reporting forms Large employers with 100 or more employees will not be penalized for not offering coverage if they offer to at least 70% in 2015 (previously 95%). Offer requirement of 95% will be required beginning in Employers with 50 to 99 employees will have to report on workers and what was offered in 2015 but will not be subject to any penalties until 2016

19 OTHER EMPLOYER RESPONSIBILITIES: IT S NOT JUST THE MANDATE Employers are also responsible for maintaining a PPACA-compliant plan, which includes adherence to market reform requirements, notice requirements, etc. While health insurance carriers assume some responsibility for fully insured plans, there are compliance burdens for all size employers too The Department of Labor has enforcement authority. Primary enforcement means is audits, and significant resources and funds have been dedicated for audits in 2014 and on forward. Top audit trigger employee complaints! Others include IRS memorandum of understanding, third party vendors and form 5500 filings. Fines can be significant up to $100 per day per violation for each impacted beneficiary.

20 EMPLOYER COVERAGE MARKET REQUIREMENTS Employer Coverage Requirements Policies sold in the small or large group market and employer-sponsored group health plans must comply with market reforms under the ACA and certain other HIPAA/ERISA/COBRA benefit rules (including but not limited to): dependent child coverage to age 26, prohibition on preexisting condition exclusions, preventive services with no cost sharing, prohibition on annual/lifetime dollar limits on any EHBs offered, waiting period limitations, cost-sharing limits group health plan reporting and disclosure clinical trials coverage mental health parity, etc. Policies sold in the small or large group insurance market must also comply with state insurance market reforms and state benefit mandates

21 OTHER EMPLOYER REQUIREMENTS IRS Nondiscrimination Rules Currently delayed enforcement but rules governing all fully insured plans expected before 2015 W2 Reporting Large employers must report health plan value on 2012 W2s on forward Requirement currently optional for employers that issue less than 250 W2s For informational purposes, not the taxation of benefits Auto Enrollment Employers with more than 200 employees will have to begin auto-enrolling new employees in benefit plans Still need regulations on how opting out will work, coverage waivers, waiting periods, etc. Effective date is unclear not until 2015 at least

22 PLANNING AHEAD The nicest thing about not planning is that failure comes as a complete surprise, rather than being preceded by a period of worry and depression - Sir John Harvey-Jones 22

23 PLANNING AHEAD Preparation Count Assess Costs Decisions Implement Current requirements for compliance: SBC distribution, new notices, W2, fees PCORI fee, HIT tax, Reinsurance fee, determine affordability and MV. Consider control group rules, current full-time eligibility, safe harbor measurement periods, newly eligible under HCR, understand shared responsibility counting. Forecast Pay or Play options use the BB&T tools and Predictive Modeling to help in the assessment including contribution and plan offerings. Tax implication and workforce restructuring. What is best for your culture? Consider talent recruitment and operations. Implementation: Plan design changes, new offerings, CDHPs, contributions. Reporting IRS reporting and internal measurements.

24 WHICH PROVISIONS APPLY? Provision Employer Mandate (Must offer FT employees affordable and minimum value coverage) W2 Reporting (Must report value of health benefits just reporting, no taxation) Group Size 50+ FT Equivalents Uses a new definition of FT employee of 30 hours/week PT employees count on a pro-rata basis to determine applicability but do not need to be offered coverage Controlled Group Rules Apply Mandatory for groups that issue 250 or more W2s. Currently optional for other groups for but will eventually apply to all. Applicability "based upon the rule in 6011(e) that exempts employers from filing returns electronically if they file fewer than 250 returns." Groups should verify with CPA but generally can apply on a separate employer basis unless the group uses a common paymaster. Cadillac Tax (begins in 2018) Auto-Enrollment (effective date unclear but at least 2015) All group health plans All groups of 200 or more employees 24

25 WHICH PROVISIONS APPLY? Provision Group Size Applicability Market Reforms (Required to buy a qualified health plan, EHBs, metal levels, MCR, etc.) State definition of small group until December 31, 2015 Effective January 1, 2016 small group definition becomes for all states If a state allows large groups in the exchange after 2017, then market rules apply to them too Grandfathered plans exempt Small Group Deductible Cap State definition of small group until December 31, 2015 Effective January 1, 2016 small group definition becomes for all states Grandfathered plans exempt Impact currently mitigated by temporary HHS relief that expires in 2016b Maximum Out-of-Pocket Limits Tied to annual HSA limits and includes deductibles and other costs sharing Applies to all non-grandfathered plans, including large group and self-funded plans Stacked limits allowed in 2014 for separate vendors, but aggregated limit by 2015 Exchanges Individual plans (only policies that are eligible for premium subsidy) State definition of small group for SHOP exchange until 2016 Effective January 1, 2016 small group definition becomes for all states Sole proprietors currently not SHOP eligible Post January 1, 2017 a state may elect to allow larger groups into the SHOP exchange Grandfathered plans exempt 25

26 WHICH PROVISIONS APPLY? Provision 105 H Non Discrimination Rules Summary of Benefits and Coverage Age 26, Rescissions, Prohibitions on benefit limits Preventive Care, Claims appeals and provider choice and out-of-network emergency care New National Premium Tax Group Size Applicability All fully insured and self-funded group health plans except grandfathered plans Currently not enforced for fully insured plans, but rules specially designed for these plans expected to be promulgated in 2015 All individual and group plans All individual and group plans All individual and group plans except grandfathered plans Individual and fully insured groups Employer Reporting to Exchanges New National Reinsurance Fee All group plans guidance pending All individual and group plans 26

27 COMPLIANCE CHALLENGES SYNOPSIS Determining whether you are an Applicable Large Employer (ALE) How to structure workforce Use of measurement periods and stability periods Whom to offer health care coverage What coverage to offer Determining minimum value and affordability and use to your advantage Minimize penalties and cost of providing health care Common control issues

28 Q & A