Aetna Funding Advantage (AFA) Underwriting Brochure

Quality health plans & benefits Healthier living Financial well-being Intelligent solutions Aetna Funding Advantage (AFA) Underwriting Brochure Plans effective January 1, 2016 For businesses with 10 enrolled 100 eligible full-time employees www.aetna.com AFA (07/15/2016) Page 1 of 8

Underwriting Guidelines This material is for informational purposes only and is not intended to be all inclusive. These guidelines are established in support of state requirements regulating AFA s stop loss coverage component. Other policies and guidelines may apply. Note: Federal legislation/regulations and some state legislation/regulations, take precedence over any and all underwriting rules. Exceptions to underwriting rules require approval of the Director of Underwriting. This information is the property of Aetna and its affiliates ( Aetna ), and may only be used or transmitted with respect to Aetna products and procedures, as specifically authorized by Aetna, in writing. All underwriting guidelines are subject to change without notice. Product Availability The Aetna Funding Advantage Product may be offered on a standalone basis or with fully-insured ancillary coverage. Billing First month s binder check not required for AFA. Monthly Costs are funded via an ACH Debit. Payment via check is not allowed with this product. Bills are sent around the 25 th of the month and the ACH Debit takes place the 2 nd business day of the next month. If the self-funded employer is not set up in time for their first bill, an off-cycle bill may be sent around the 10 th of the following month with the ACH Debit taking place approximately one week later. All subsequent bills will be sent on the normal billing cycle. No separate bank account required. The self-funded employer will need to complete the Electronic Enrollment, Billing/Payment and Access Agreement section on the AFA Employer Case Submission Dates COBRA Application indicating which account they would like to use to fund the monthly bills. All new case submissions must be received by Aetna by the: - 25 th of the previous month for the 1 st of the month effective dates; and If not received by this date, the effective date will be moved to the next available effective date, with potential impact to the Monthly Costs. Any cases received after the cutoff date will be considered on an exception basis only, as approved by the Underwriting Manager. Employers with 20 or more employees, both full and part-time, are required to offer COBRA coverage. COBRA applies to employers with 20 or more employees on more than 50% of its typical business days in the previous calendar year. - Include: full-time, part-time, seasonal, temporary, union, owners, partners, officers. - Exclude: self-employed persons, independent contractors (1099), directors. - Each part-time employee counts as a fraction of an employee, with the fraction equal to the number of hours the part-time employee worked divided by the hours an employee must work to be considered full-time. Because COBRA is directed at employers, the decision to comply with COBRA should be made by the employer. In situations where it may appear the employer is not subject to COBRA, for example a three-life case requesting COBRA, we will ask the self-funded employer to validate the number of employees in the prior calendar year in order to determine the number of employees for COBRA purposes. Companies under common ownership are included in the count. COBRA beneficiaries are not billed separately and are included with the self-funded employer s bill. If the COBRA beneficiary does not reside in an Aetna service area, they are only eligible for Outof-Network benefits, if applicable; or urgent/emergency care. Life and Disability COBRA beneficiaries are not eligible. Eligible beneficiaries are required to be included on the census. The qualifying event, length, start date and end date must be provided. COBRA beneficiaries are not to be included for the purpose of counting employees to determine the size of the case. Once the size of the case has been determined according to the law applicable to the employer, COBRA beneficiaries can be included for coverage subject to normal underwriting guidelines. State Continuation/Mini-COBRA/Spousal Continuation beneficiaries are not eligible to enroll with the Aetna Funding Advantage product. AFA (07/15/2016) Page 2 of 8

Counting Employees To Determine Case Size Dependent Eligibility To determine case size in Aetna Funding Advantage with employer sizes of 10 enrolled - 100 eligible full-time employees, the total number of eligible full-time employees is used. The employer should employ a minimum of 10 enrolled full-time employees and no more than 100 eligible full-time employees to be eligible for Aetna Funding Advantage 10-100. Spouse of employee, domestic partners (same and opposite sex) - if both husband and wife/partner work for the same company, they may enroll together or separately. Children - Children are eligible as defined by the self-funded employer in accordance with applicable federal laws, up to the end of the month the dependent turns age 26, regardless of financial dependency, employment, eligibility of other coverage, student status, marital status, tax dependency or residency. This requirement applies to natural and adopted children, stepchildren and children subject to legal guardianship. Children can only be covered under one parent s plan when both parents work for the same company. When the child works for the same company as the parent, the child may enroll separately as an employee or as a dependent under the parent s plan. Grandchildren are eligible if court ordered. A copy of the court order must be submitted. Incapacitated child - attainment of limiting age will not terminate the coverage of the child while the child is and continues to be both incapable of self-sustaining employment by reason of mental retardation or physical handicap and chiefly dependent upon the employee or spouse/domestic partner for support and maintenance. Proof of incapacity and dependency shall be furnished to Aetna within 31 days of the child s attainment of the limiting age and subsequently as we may require it, but not more frequently than annually after the two-year period following the child s attainment of the limiting age. - dependents must enroll in the same benefits as the employee. Individuals cannot be covered as an employee and dependent under the same plan, nor may children eligible for coverage through both parents be covered by both under the same plan. Effective Date The effective date must be the 1 st of the month. The Plan s effective date may be requested up to 60 days in advance. Employee Eligibility Eligible employees include a sole proprietor or the partners of a partnership, but does not include an employee who works on a seasonal, temporary or substitute basis. Eligible employee shall include any employee who is not actively at work, but is covered under the small employer's health insurance plan pursuant to workers' compensation and COBRA. Beneficiaries enrolled in State or Spousal Continuation Coverage are NOT considered eligible employees. Eligible employee means an employee who works a normal work week of 30 or more hours and is what will be used to determine the case size. Coverage must be extended to all employees meeting the above conditions, unless they belong to a union class excluded as the result of a collective bargaining arrangement. Employees not eligible for coverage include leased, part-time, temporary, seasonal or substitute employees, uncompensated employees, employees making less than equivalent minimum wage, volunteers, inactive owners, directors, shareholders, officers, outside consultants, managing individuals who are not active, investors or silent partners. Union employees are included in the total count of eligible employees in determining case size. For 10-50 eligible AFA cases, retirees are not eligible for any coverage. For 51-100 eligible AFA cases, retirees may be covered if it is less than 10% of the total eligible employees. The retiree must be currently enrolled in the current plan (must be shown on the bill roster or provide a copy of the ID card). If there is an employee due to retire on or after the Plan s effective date, that retiree must be an active employee and be listed on the most current bill roster. The census for retirees should be split by over and under age 65. Retirees are NOT included in the total count to determine the case size. A high percent of retirees may result in an additional adjustment to the Monthly Costs. Employee Enrollment Employee enrollment may be submitted via the AFA Individual Questionnaire (AFA Enrollment/Change Request Form) paper enrollment or Aetna s elist Tool. The preferred method is the elist Tool. If the elist Tool is used, be sure the self-funded employer keeps a copy of the paper applications on file for auditing purposes. The elist Tool is available on Producer World at AFA (07/15/2016) Page 3 of 8

Employer Contribution 10 Enrolled - 50 Eligible Employer Definition 51-100 Eligible Employer Definition https://www.aetna.com/producer/smallgroup/elist/index.html Sold cases may submit enrollment via the elist Tool. IMPORTANT: Be sure and download a fresh elist Tool from Producer World for every case instead of saving one version to your desktop. Enable the macros prior to entering data. The elist tool must be completed in full. The elist Tool format should not be amended in any manner. When the elist Tool is used, the employee enrollment forms do not need to be included in the sold case submission. All the required information must be entered into the elist Tool. Plan Selection column - be sure to include the Benefit Plan Option Name or Benefit Plan Option ID for each enrolling employee and dependent. Waivers must be recorded in the elist tool. COBRA beneficiaries should be included and noted as COBRA. We require the employer pay 50% of the total contributions for the cost of coverage or 50% of employee only contributions for the cost of coverage. Small employer means any person, firm, corporation, limited liability company, partnership or association actively engaged in business or self-employed for at least three consecutive months who, on at least 50% of its working days during the preceding 12 months, employed no more than 50 eligible employees. ** Small employer includes a self-employed individual. For the purposes of determining the number of eligible employees under this subdivision: - Companies that are affiliated companies, or that are eligible to file a combined tax return for purposes of taxation shall be considered one employer; - Employees covered through the employer by health insurance plans or insurance arrangements issued to or in accordance with a trust established pursuant to collective bargaining subject to the federal Labor Management Relations Act shall not be counted; - Employees who are not actively at work, but are covered under the small employer's health insurance plan pursuant to workers' compensation, continuation of benefits or other applicable laws shall not be counted; and - Employees who work a normal work week of less than 30 hours shall not be counted. The definition of a small employer shall continue to apply until the anniversary date following the date the employer no longer meets the requirements of this definition. Small employer means an employer that employed at least 10 but not more than 50 employees on business days during the preceding calendar year and covers at least 10 employees on the first day of the Plan Year. Small employer does not include a sole proprietorship that employs only the sole proprietor or the spouse of such sole proprietor. The number of eligible employees shall be determined by: - The number of full-time employees for each month who work a normal work week of 30 hours or more. ** For CO, the small employer definition extends through 100 eligible full-time employees. Large employer means any person, firm, corporation, limited liability company, partnership or association actively engaged in business or self-employed for at least three consecutive months who, on at least 50% of its working days during the preceding 12 months, employed no more than 100 eligible employees. For the purposes of determining the number of eligible employees under this subdivision: - Companies that are affiliated companies, or that are eligible to file a combined tax return for purposes of taxation shall be considered one employer; - Employees covered through the employer by health insurance plans or insurance arrangements issued to or in accordance with a trust established pursuant to collective bargaining subject to the federal Labor Management Relations Act shall not be counted; - Employees who are not actively at work, but are covered under the small employer's health insurance plan pursuant to workers' compensation, continuation of benefits or other applicable laws shall not be counted; and - Employees who work a normal work week of less than 30 hours shall not be counted. A large employer shall continue to apply until the anniversary date following the date the employer no longer meets the requirements of this definition. Large employer means an employer that employed at least 51 but not more than 100 employees on business days during the preceding calendar year and employs at least 51 employees on the first day of the Plan Year. AFA (07/15/2016) Page 4 of 8

Employer Eligibility Excluded Class/Carve-Out Monthly Costs Information Late Applicants The number of eligible employees shall be determined by: - The number of full-time employees for each month who work a normal work week of 30 hours or more. Companies that are affiliated companies or that are eligible to file a combined tax return for purposes of taxation under chapter 208 shall be considered one employer. Employees covered through a collective bargaining agreement shall not be counted. Employees who work a normal work week of less than thirty hours shall not be counted. There must be at least one eligible W-2 employee who is not an owner and not the owner s spouse. Partners and LLCs filing as a partnership are eligible even if there are no W-2 employees. Organizations must not be formed solely for the purpose of obtaining health coverage. plans can be offered to sole proprietorships with 10 or more eligible employees, partnerships or corporations. Connecticut domiciled employers must have at least 51-100 eligible employees and a minimum of 38 enrolled employees. Delaware domiciled employer must have at least 16 eligible employees and a minimum of 12 enrolled employees. North Carolina domiciled employers must have at least 26 eligible employees and a minimum of 20 enrolled employees. All other AFA states not mentioned above must have at least a minimum of 10 enrolled employees. Associations, Taft-Hartley groups, professional employers organizations (PEO)/employee leasing firms and closed groups (groups that restrict eligibility through criteria other than employment) and groups where no employer/employee relationship exists are not eligible. Dental, life and disability have ineligible industries. - The dental ineligible list does not apply when dental is sold in combination with medical. Union employees, as a class, may be excluded by a self-funded employer as not being eligible for coverage if covered under a collective bargaining agreement. Management carve-outs and other carve-outs are not permitted. Monthly Costs are based on final enrollment and require that: - No portion of the Participant s cost sharing, including but not limited to, copayments, deductibles and/or coinsurance balances, will be subsidized or funded by the employer, with the exception of a federally qualified Health Reimbursement Account (HRA) or Health Savings Account (HSA), whether insured or self-funded, including but not limited to a partially selffunded Section 105 wraparound, now or in the future; and - If the employer funds the deductible of the quoted health plan through an HRA or HSA in excess of 50% annually, an additional factor will apply. All quotes are subject to change based on additional information that becomes available in the quoting process and during case submission/installation, including any change in census. All Monthly Costs will be quoted on a four-tier structure: employee, employee + spouse, employee + child(ren) and family. The Monthly Costs may be revised if enrollment changes by more than +/- 10% from the initial quote enrollment projection. If any of the information we receive is determined to be incomplete or incorrect, we reserve the right to adjust the quoted Monthly Costs. An employee or dependent enrolling for coverage more than 31 days (60 days for newborns) from the date first eligible is considered a late enrollee. Applicants without a qualifying life event (e.g. marriage, divorce, newborn child, adoption, loss of spousal coverage, etc.) are subject to the late entrant guidelines. Voluntary termination of coverage is not a qualifying event unless it is done at open enrollment. For example, if a spouse is covered through his/her employer and voluntarily terminates the coverage, it is not a qualifying event to be added to the other spouse s plan. The spouse who cancelled the coverage must wait until the next open enrollment to be eligible to enroll. However, if each spouse has different open enrollment dates and drops coverage during their annual open enrollment period, the spouse is eligible to enroll. Late applicants without a qualifying life event (e.g. marriage, divorce, newborn child, adoption, loss of spousal coverage, etc.) are not allowed and will be deferred to the next Agreement and Stop Loss Policy Renewal Date of the Plan and must re-apply for coverage 30 days before the AFA (07/15/2016) Page 5 of 8

Licensed, Appointed Producers Underwriting Medicare Secondary Payer for CMS Reporting Municipalities and Townships Newly Formed Business Option Sales Out-of-State (OOS) Employees Participation Plan s renewal date. Only appropriately licensed agents/producers appointed by Aetna may market, present, sell and be paid consultant fees on the sale of Aetna AFA products. License and appointment requirements vary by state and are based on the employer situs state of the case being submitted. To become appointed with Aetna go to www.aetna.com/insurance-producer/index.html and click Start working with Aetna. Self-funded employers enrolling less than 20 employees must complete the AFA Individual Questionnaire. Employers enrolling less than 20 employees must complete the AFA Individual Questionnaire. Employers or individuals seeking an Aetna product for the first time (virgin groups) with no current medical coverage are required to complete the AFA Individual Questionnaire. Full disclosure of all claims in excess of $25,000 is required at time of quote with copies of existing carrier s/administrator s source reports. conditions of COBRA beneficiaries and retirees are included in the Monthly Costs calculation. claims may be reviewed for any individuals who had prior Aetna coverage and used along with the health information included on the AFA Individual Questionnaire and included in the overall medical assessment of the case. Each year, all self-funded employers must report to CMS (Centers for Medicare & Medicaid Services) the number of Medicare secondary payer (MSP) employees, based on the number of employees covered by the Plan. MSP is the term used by Medicare when Medicare is not responsible for paying first. This is generally when the Plan would pay primary to Medicare for active employees and would pay first when there are 20 or more total employees (full and part-time) for 20 or more weeks during this calendar year or prior calendar year. - Include: full-time, part-time, seasonal, temporary, union, owners, partners, officers. - Exclude: self-employed persons, independent contractors (1099), directors, leased employees. A township is generally a small unit that has the status and powers of local government. A municipality is an administrative entity composed of a clearly defined territory and its population, and commonly denotes a city, town or village. A municipality is typically governed by a mayor and city council, or municipal council. W-2: elected or appointed officials and trustees may be eligible for coverage under the Plan based on the charter or legislation. If so, they may not be on the QWTS; rather, they may be paid via W-2. In that case, provide a copy of their prior year W-2. - If elected officials are to be covered, provide a copy of the charter or contract indicating which classes or employees are to be covered, the minimum hours required to work per week to be eligible for coverage, and confirmation that coverage will be offered to all employees meeting the minimum number of required hours and that minimum participation will be maintained. A company must have been in business for a minimum of three months to be eligible for an AFA quote. All plans (medical, dental, life and disability) must be offered on a full-replacement basis. No other employer-sponsored plan can be offered. Other insurance offered by the same employer is not a valid waiver. Out-of-state Participants residing outside of the Choice POS II Network, may enroll in the AFA Plan and receive the Out-of-Network benefits. Non-contributory plans (self-funded employer pays all Plan contributions) 100% excluding valid waivers. Contributory plans (Plan contributions are paid by both the self-funded employer and enrolled Employees) 75% excluding valid waivers, rounding down. Waivers All employees waiving coverage must complete the waiver section of the AFA Individual Questionnaire (AFA Enrollment/Change Request Form). Waivers can be submitted on the elist Tool - it must include the employee name, reason for waiving, number of hours worked per week and date of hire (date of hire only required if the selffunded employer is not waiving the benefit waiting period). Be sure the self-funded employer AFA (07/15/2016) Page 6 of 8

PEO (Professional Employer Organization) Groups Covered Under a PEO Plan Change Participant Level Plan Change Benefit Level Prior Aetna Coverage Replacing Other Group Coverage Signature Dates Tax Documents 10 Enrolled to 100 Eligible Employees Two or More Companies Affiliated Associated Multiple Companies Common Ownership keeps a copy of the paper applications on file for auditing purposes. Valid waivers include: - Spousal group coverage - Parental group coverage - Medicare - Medicaid - TriCare, Champus/ChampVA - Military coverage - Retiree coverage through a previous employer - Group coverage through a second full-time job All plans Dependent participation is not required. Groups that use the services of a PEO do not meet the definition of a small employer as the transfer of employees to the PEO in effect ends/severs the employer/employee relationship. The employees become part of the large PEO group, are considered employees of the PEO and are paid by the PEO. Groups currently with a PEO that have health coverage available through the PEO are not eligible for Aetna s AFA product. Groups currently with a PEO who indicate health coverage is not available must provide a letter from the PEO indicating health coverage is not available and include a copy of their contract. Groups that indicate they have terminated their PEO contract must provide a copy of the contract termination letter sent from the PEO to the client (employer) business. This letter must verify the cancellation of the leasing arrangement as well as the cancellation date. Groups only using payroll services are eligible subject to meeting the standard underwriting guidelines. Must provide most recent Quarterly Wage & Tax Statement (QWTS) no matter the case size. ** Maine and Maryland s State Legislation prohibits the PEO from covering groups for health coverage under the PEO plan. Therefore, we would provide an AFA quote to those PEO groups domiciled in Maine and Maryland. Plan Participants are not eligible to change Benefit Plan Options until the Plan s open enrollment period, which must also coincide with the Agreement Period (except for qualified special enrollment events). Plan changes can be made on the Agreement anniversary date only. Fully-insured groups that we have terminated for non-payment must pay all premiums still owed on the prior Aetna plan before the new AFA Agreement will be issued. Do not cancel any existing medical coverage until the employer has been notified of approval. The Aetna Employer Application and all enrollment applications must be signed and dated before and within 90 days of the requested effective date. All enrollment applications must be completed by the employee himself/herself. No QWTS (Quarterly Wage and Tax Statement) is required unless requested by the underwriter. All persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986 shall be treated as one employer. Employers who have more than one business with different tax identification numbers (TINs) may be eligible to enroll as one AFA Client if the following are met: - One owner has controlling interest of all businesses to be included; or - The owner files (or is eligible to file) an Affiliations Schedule, IRS Form 851, a combined tax return for all companies to be included. If they are eligible but choose not to file Form 851, please indicate as such. - A copy of the latest filed tax return must be provided; and - All businesses filed under one combined tax return will be considered a single self-funded employer. For example, if the self-funded employer has three businesses and files all three under one combined tax return, then all three businesses must be enrolled for coverage in the one self-funded Plan. If the request is for only two of the three businesses to be enrolled, the case will be considered a carve-out. - There are 100 or fewer employees in the combined employer businesses. All full-time employees of affiliated companies, under common ownership, or a part of a controlled group AFA (07/15/2016) Page 7 of 8

along with employees under a common group in other states must be included in the enrollment count. - Businesses with equal controlling interest may be considered, if the owners of the company designate an individual to act on behalf of all the businesses. - Underwriting reserves the right to final underwriting review, and may consider common ownership on a case-by-case basis. Example One owner has controlling interest of all companies to be included: Company 1 - Jim owns 75% and Jack owns 25% Company 2 - Jim owns 55% and Jack owns 45% Both companies can be written as one case since Jim has controlling interest in both businesses. Waiting Period At initial submission of the case, the benefit waiting period (BWP) may be waived upon the selffunded employer s request. This should be checked on the employer application. The BWP for future employees may be the 1 st of the month following 0 days, 30 days, 60 days, or exactly 90 days following the employee s date of hire. Date of hire BWP is not available. One or two BWPs may be selected and must be consistently applied within a class of employees as defined by the self-funded employer, such as management versus non-management, hourly versus salaried, etc. A change to the BWP may only be made on the Agreement s anniversary date. No retroactive changes will be allowed. BWP must be consistently applied to all Plan Participants, including newly hired key employees. For new hires, the eligibility date will be the first day of the calendar month following the waiting period, not to exceed 90 calendar days from the date of hire. Calendar month refers to the Plan Year effective date of the 1 st. - If 0 days is selected, and the Plan has a 1 st of the month bill cycle, and the employee is hired on the 1 st of the month, the effective date will be the date of hire. - If Exactly 90 Days is selected, the enrollment eligibility date will begin 90 calendar days from the date of hire. Examples 1 st of the month following the BWP 0 days Date of hire: 4/1 Effective date: 4/1 0 days Date of hire: 4/18 Effective date: 5/1 30 days Date of hire: 4/18 Effective date: 6/1 60 days Date of hire: 4/18 Effective date: 7/1 90 days Date of hire: 4/18 exact Effective date: 7/16 not 8/1 exactly 90 days from the date of hire Aetna is the brand name used for products and services provided by one or more of the Aetna group of subsidiary companies, including Aetna Life Insurance Company and its affiliates (Aetna). This material is for information only and is not an offer or invitation to contract. An application must be completed to obtain coverage. Rates and benefits may vary by location. Health/dental benefits, health/dental insurance and life insurance plans/policies contain exclusions and limitations. Health information programs provide general health information and are not a substitute for diagnosis or treatment by a physician or other health care professional. Plan features and availability may vary by location and group size. Investment services are independently offered through PayFlex, Inc. Aetna HealthFund HRAs are subject to employer defined use and forfeiture rules and are unfunded liabilities of your employer. Fund balances are not vested benefits. Providers are independent contractors and not agents of Aetna. Provider participation may change without notice. Aetna does not provide care or guarantee access to health services. Not all health, dental and life services are covered. See plan documents for a complete description of benefits, exclusions, limitations and conditions of coverage. Plan features are subject to change. Aetna receives rebates from drug manufacturers that may be taken into account in determining Aetna s Preferred Drug List. Rebates do not reduce the amount a member pays the pharmacy for covered prescriptions. The Aetna Personal Health Record should not be used as the sole source of information about the member s medical history. Information is believed to be accurate as of the production date; however, it is subject to change. For more information about Aetna plans, refer to www.aetna.com. www.aetna.com 2016 Aetna Inc. AFA (04/2016) AFA (07/15/2016) Page 8 of 8