Presented by Clay Peek, PEEK PERFORMANCE INC. (864) PPI office Our Featured Guest Contributor Keith Prettyman, Partner, Woods/Aitken Law Firm

Opportunities Abound! Major Medical The individual Major Medical plans are still selling – but there is great uncertainty about the pricing of those plans after Jan. 1, 2014 While commissions will decline a little, the reduction in commissions will be more than made up in the increase in volume due to a shrinking Group market and currently uninsured becoming eligible for plans. Subsidies will be available for lower income buyers and will enable many to purchase “qualified” MM plans. Some people will still not be able to afford a MM plan, even with the subsidies. PPI agents are able to sell subsidized MM plans.

Gap Plans, Life, Accident, Critical Illness! Gap Plans (SLAICO/CUL) will help cover deductibles, copays and coinsurance You’ll find a TON of opportunities to offer affordable Life insurance to families A significant percentage of medical claims are Accidents … and we have great plans! Critical Illness can not only help cover the medical costs, but can also cover your household expenses while you recover or seek additional remedies

How American’s Get Health Insurance Now 1.Group Employer – 145 million (incl. dependents) 2.Personal Policies – 40 million (up from 12 million in 2002) 3.Medicare – 47 million (incl. 12 million in MA) 4.Medicaid – 45 million (incl. 8 million over 65 or disabled) 5.Uninsured – 40 million (PC #, closer to 10 million)

How American’s Will Get Health Insurance Personal Policies – May increase to 185 million (more with GOP plans) 3.Medicare – 47 million (incl. 12 million in MA) 4.Medicaid – 45 million (less with GOP plans) 1.Group Employer – May drop to 20 million (incl. dependents) Lose 125M here 5.Uninsured –20 million Lose 20m

How American’s Will Get Health Insurance Group Employer – 20 million (incl. dependents) 2.Personal Policies – 185 million (more with GOP plans) 3.Medicare – 47 million (incl. 12 million in MA) 4.Medicaid – 45 million (less with GOP plans) 5.Uninsured –20 million From 28 million 1 to 125 million 2 consumers will change how and where they get their insurance in 2014 Sources: 1 Congressional Budget Office, 2 McKinsey Consulting

48 Contiguous States and DC Source: Federal Poverty Guidelines

Example : Family of 4 making $55k a year premium of $14,556. Single premium $5400 Employer Contribution Employee Contribution Government Contribution Minimum contribution from ER (9.5% AGI) $175$14,381$0 50% of single $2,800$11,756$0 100% of single $5,400$9,156$0 50% of family $7,278 $0 Offer no coverage $0/2k$4,135$10,421

“Private vs “Group” Insurance” Opportunity AON Hewitt survey of 562 U.S. Employers, Nov 2011 CHANGE Rising Costs Reform Exchanges New/Other Benefit Models Traditional Group Benefits Disruptive Solutions Dynamic Marketplace OPPORTUNITY 72% - Planning on ExchangesWhat Models? 86% - Reduce costs 45% - Improve access to quality plans 43% - Enhance wellness programs 43% - Increase healthcare choices Why? Disruptive Solutions Dynamic Marketplace OPPORTUNITY

About the Penalty/Tax Very severe for Employer Groups 50+ In 2015, $2000 per FT EE’s (less 30) for ER’s who don’t provide qualified coverage In 2016, $3000 per FT EE’s (less 30) for ER’s that don’t provide qualified coverage. In 2015, $3000 per ee (less 30) if ER offers coverage, but the cost to ee is above 9.5% of income. Fewer Individuals/Families than you might think (who don’t purchase an ACA qualified MM plan) will end up paying the tax because of the “8%” guideline on policy cost.

Net Result? Prices are going up on MM plans. But they’ll be GI. Still, more “Individual” (as opposed to “Group”) plans will be sold. Our “Personal & our “Private” Insurance Exchanges” may help you capture combo sales with individuals and also capture large group multi location sales. Yes, even MM plans with subsides. So, Sell the Plans yourself! Your Clients don’t need no Navigator ! Some people will still not be able to afford or will simply choose to not to purchase a MM plan … and many of them won’t pay a penalty A Limited Medical plan is much better than no plan at all! Adding Cancer plans, Accidental Injury, Critical Illness, etc., helps provide coverage for some of the exposures, when a MM is not an option.

OVERVIEW OF HEALTHCARE REFORM - Keith Prettyman’s Notes General Approach of PPACA Individuals must have mandated coverage or may pay an income tax penalty. No employer mandate per se, but employers with 50+ employees face penalties if employees are not provided mandated coverage Plans in existence (and not significantly modified since) at the time of enactment (3/23/10) are “Grandfathered” Intends to expand Medicaid to % of federal poverty level/FPL Establishes Federal or State-based “Exchanges” for individual and small group insurance purchases. Federal subsidies apply to low income individuals who purchase coverage through the exchange. New federal health insurance regulations and mandates

OVERVIEW OF HEALTHCARE REFORM Grandfathered Plans “If you like your current coverage, you can keep it.” Defined: Comprehensive MM Coverage provided by a health plan in which an individual was enrolled on March 23, 2010 – and not significantly modified Grandfathered plans are exempt from some, but not all, of the mandates Unless qualified for significant subsidies, encourage prospects to consider the costs before changing their grandfather plans.

Exchanges (RE: State &/or Federal, not Private) Effective 2014, states must have an “American Health Benefit Exchange” About 15 states have indicated that they’d construct one – 35 may not. CO indicates 1.4% excise tax to pay for exchange, Feds – may charge 3.5% Brings health insurance buyers and sellers together via web-based standardized policies, applications and processes Allows ONLY “qualified health plans” to be sold Eliminates underwriting practices Subsidizes premiums for households with incomes up to 400% FPL Premium subsidies in the form of tax credits provided on a sliding income scale, but usually taken in decreased monthly premium. Cost Sharing for those making under 250% of the FPL Private sector plans only.

NAVIGATORS State/Federal Exchanges must establish a Navigator program Navigators will advise (but not enroll) applicants Navigators can be professional associations, community nonprofit groups, fishing/ranching/farming organizations, chambers of commerce, unions and licensed agents Funding may not be from the federal funds used to establish the exchange Navigators CANNOT be compensated by carriers for their service Feds have indicated $50.00 per applicant is sufficient Why would you ever do this?

Fees and Costs Colorado has recently announced a 1.4% excise fee on the cost of health plans Other states will likely follow a similar pattern Feds have indicated that they will likely place a 3.5% excise tax on health premiums on plans sold on the Federal Exchange. Other fees will also apply: “Cadillac Coverage” fees, “Reinsurance fees” … and more.

Fees and Costs HHS has published it’s final rule on regulations for the “Transitional Reinsurance Program Contribution Fee” or “Reinsurance Fee.” “HHS has established a per capita contribution rate of $5.25 per member, per month for the 2014 benefit year. Market segments affected include Fully Insured and Self Insured Group, Cobra and Individual under 65 market … unless exceptions apply.”

COVERAGE CHANGES Prohibition on Lifetime and Annual Dollar Limits on Benefits Prohibition on Pre-Existing Condition Exclusions for Children Under 19 Coverage of Preventive Health Services Extension of Coverage for Children up to Age 26 Mandated Appeals Process Prohibitions on Certain Rescissions Patient Protections W-2 Requirement Summary of Benefits and Coverage

COVERAGE CHANGES Prohibition of Lifetime and Annual Dollar Limits on Benefits Effective for plan years beginning after 9/23/2010 Applies to grandfathered plans Absolute prohibition on lifetime limits Phase-in of annual limits - 9/23/10 – 9/23/11 - $750, /23/11 – 9/23/12 - $1,250, /23/12 – 12/31/13 - $2,000,000 Restrictions on annual limits only applies to “essential benefits”

COVERAGE CHANGES Prohibition on Pre-Existing Exclusions for Children under 19 Coverage of Preventive Care Does not apply to grandfathered plans Definition of “preventive” is extensive - Evidence based services having an “A” or “B” rating from U.S. Preventive Services Task Force - Immunizations recommended by Advisory Committee on Immunization Practices - Screenings for infants, children and women recommended by the Health Resources and Services Administration Must be provided without any cost-sharing (100%)

COVERAGE CHANGES Extension of Coverage for Children up to Age 26 “Children” are natural children, adopted children and stepchildren Dependency is NOT required For grandfathered plans, until 2014, extension is not required if the adult child has employer-based coverage available Does NOT extend coverage to adult child’s spouse or children Does not mandate that dependent coverage must be provided (until 2014), but if it is provided these rules apply

COVERAGE CHANGES Mandated Appeals Process - Delayed Does not apply to grandfathered plans Internal process as required by ERISA External process at a level of the NAIC External Review Act Prohibition on Certain Rescissions Applies to grandfathered plans Rescission is a retroactive termination Rescissions can only be made for fraud, material misrepresentation or nonpayment of premium

COVERAGE CHANGES Patient Protections Does not apply to grandfathered plans Pediatricians and OB-GYN’s as primary physicians Coverage of emergency services without preauthorization (no differential in PPO/HMO for out of network emergency costs) ER’s must provide W-2 re value/cost of insurance if more than 250 EE’s ER’s must provide adequate Uniform Summary of Benefits documents to EE’s

INDIVIDUAL MANDATE “Cornerstone” of national health care reform All “applicable individuals” are required to have “minimum essential coverage” or pay a tax penalty - “ Applicable individuals” are American citizens other than those who qualify for an exemption - Who has “Minimum essential coverage?” - Government sponsored programs (Medicare, Medicaid, Tri-Care, SCHIPS) - Qualifying employer coverage - Grandfathered coverage - Qualifying individual coverage Penalty is assessed as a Federal Tax Liability – No Criminal Penalties, Liens or Levies.

INDIVIDUAL MANDATE Penalty Unless “exempt” an individual who does not have minimum essential coverage will pay an annual penalty as part of their tax return which is the greater of: Year Dollar Amount Max or % of Income 2014 $95/A, $47.50/C $285 1% 2015 $325/A, $162.50/C $975 2% 2016 $695/A (indexed) $ % Exempt - Those whose lowest premium would exceed 8% of household income - Those who do not file a 1040 due to income - Members of Indian Tribes - Those with religious exemptions - Incarcerated individuals - Undocumented aliens

EMPLOYER “PLAY-OR-PAY” MANDATE – Delayed to 2015 Applies to “large employers” – those with more than 50 FTEs Waiver for 30 FT EE’s Full time is defined as 30 or more hours per week Part time hours are combined for any month and divided by 120 to determine FTE “Full Time Equivalent” Must include part time EE’s to determine if employer is subject to mandate, but the penalty only applies to full time

EMPLOYER PAY-OR-PLAY MANDATE - Illustration: 1. Currently 100 employees – If ER reduces hours to save FT # (keep below 50) - 49 are now Full Time Calculate hours of the 51 PT ee’s – Pay penalty based 49 FT – (30 ee’s exemption) ee’s - 30 waiver = 30 FT EE’s = No penalty

EMPLOYER PAY-OR-PLAY MANDATE Two types of penalties $2,000 per EE per year in 2015 ($166.67/month) for each FT employee (over the first 30) who is not provided minimum essential coverage AND at least one FT employee gets subsidized coverage through an exchange. Applies to employers who DO NOT provide qualifying coverage. $3000 per EE per year in $3,000 per year ($250/month) for each employee who acquires coverage through an exchange if the employee’s required contribution for the employer’s coverage would exceed 9.5% of W-2 income or the employer pays less than 60% of the premium. Applies to employers who DO provide qualifying coverage. What about exposure to the ER who offers qualified & affordable coverage that the EE chooses not to use? No penalty to ER. EE can’t go to the exchange.

OTHER JANUARY 1, 2014 MANDATES Prohibition of pre-existing condition exclusions for adults Guaranteed issue and renewal of all qualified insurance Prohibition on charging higher premiums based on health status of an applicant Limits on premium differentials - Cannot vary by more than 3 to 1 for age - Cannot vary by more than 1.5 to 1 for tobacco use No waiting periods in excess of 90 days (There will be pre-set “Open Enrollment Periods”) 1 st year Oct. 1 – March 30, 2014 Limits on deductibles for Fully Insured Group health plans (does not apply to grandfathered plans or “Self Funded” group plans). $2,000 per individual and $4,000 per family. HSA plans still viable

10 ESSENTIAL HEALTH BENEFITS Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance abuse services Prescription drugs Rehabilitative and Habilitative services and devices Laboratory services Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care

5 “Ferrari” Plan Formats Bronze – Higher Coinsurance/OOP, fewer copays, if any. Silver - Higher Coinsurance/OOP, some copays Gold - Lower Coinsurance/OOP, more copays Platinum - Lower Coinsurance/Copays/OOP, many companies don’t offer this plan Catastrophic Plans* All plans have the same “out of pocket max ” which is $6350 for Individuals, $12,700 family. Not all plans OOP will be that high. * Only individuals under 30 or whose costs of insurance exceeds 8% of their income can purchase Catastrophic Plans

The “Consequences” Congressional study dated March, 2013 Increased premiums in the individual market due solely to PPACA will be between 30 – 106% Premiums for year-olds will average individual premium increases of 189% (200% = 3 x increased!!) Lower income persons will pay less due to subsidy Increases are due to: guarantee issue, community rating, essential health benefits and taxes and fees on plans, drugs and medical devices, & no pre ex. Dramatic uptick in Medicaid enrollment Dramatic loss of Individual coverage: 10 – 20 million?

48 Contiguous States and DC Source: Federal Poverty Guidelines

Medicaid In many states Medicaid has been expanded to cover those in FPL up to 138% In most of PPI’s market, Medicaid was NOT expanded … those not earning at least 100% of the FPL cannot get a subsidy. Children and Women with Children earning less than 100% of the FPL can usually qualify for Medicaid in these states. Agents don’t get paid for Medicaid referrals. The 100 – 138% FPL income block is an SEP group and can be written year round in non Medicaid Expansion states.

Majority of Americans better off if Employer Doesn’t offer coverage AVG Group Single Premium 2012 – $ AVG Group Single Premium 2012 – $ AVG Group Single + 1 Premium 2012 – $ AVG Group Single + 1 Premium 2012 – $ AVG Group Family Premium 2012 – $1, AVG Group Family Premium 2012 – $1,312.08

2 Kinds of Subsidy Reduction in Premium (AKA Premium Tax Credit) Reduction in Costs/Cost Sharing: Reducing Out of Pocket, Deductible, Copays, and Coinsurance (100 – 250% FPL) $28,725 – Ind or $58,875 – Family of 4 “Benchmark” plan is the second lowest cost Silver plan that each insurer offers in each area. Rates can vary geographically (by county) based on Actuarial claims, rate of network discount, etc. If client chooses a Silver plan they may have a higher premium, but they may benefit from lower usage costs If a Bronze plan is chosen, the premium could be $0, but there is no reduction of out of pocket costs/ “Cost Sharing.” But, You could use the premium savings to purchase other insurance coverage!

48 Contiguous States and DC Source: Federal Poverty Guidelines

Tale of 2 Men Bob is 24. Makes $22,980 per year – 200% of FPL. His max contribution is 6.3% or $1448 per year, $121 per month) If his premium is $ $1448 max contribution = $1348 subsidy John is 64. Makes $22,980 per year. – 200% of FPL. His max contribution is 6.3%, $1448 per year, $121 per month His premium could be 3x that of the 24 year old. It is $9288 per year - $1448 max contribution = $7840 subsidy

Cost Sharing Help 100 – 150% of FPL - 94% (94%of the OOP is covered by the “Cost Sharing Subsidy, leaving client only 6% to pay) 150 – 200% - 87% 200 – 250% - 73% Cost sharing only available for Silver plan, not Bronze. HHS notifies eligible beneficiary and makes payment to insurer. Or, do a Combo sale w/ Bronze - Sell with Accident, Gap, Critical Illness and Life to utilize premium savings and provide great benefits!

How “Affordability” is Achieved The FPL/Annual Income drives the amount of subsidies that citizens receive – which reduce the premium and even out of pocket expenses % of FPL % of Income/Premium Monthly Cost 100 – 133% 2% $ – 150% 3 - 4% $38 – – 200% 4 – 6.3% $57 – – 250% 6.3 – 8.1% $193 – – 300% 8.1 – 9.5% $272 – – 350% 9.5% $318 – 364 So, an individual making $12,000 a year can only pay ___ per month? $12000 x.02% = $240 per year, divided by 12 = $20 per month

Are “Limited Benefit Plans” VIABLE AFTER 1/1/14? First Choice is an “Excepted Benefit” – but not an ACA Qualified Plan - Excepted Benefits are NOT subject to PPACA. They are viewed as Accident or Disability income insurance - Limited scope dental, vision and LTCI If offered separately and are not part of the health plan - Coverage for specified disease, hospital indemnity and other fixed indemnity if offered as independent, non-coordinated benefits FC is guaranteed issue (for those who are employed 27+ hours/week) AC & SLAICO is simplified issue w/ no work requirement. FC & SLAICO are guaranteed renewable (once you get it, you can keep it, regardless of work through age 65)

The PPI Value We’ll keep you abreast of the new “Health Reform” era marketplace. Cutting Edge Marketing Technology – A Free Personal Exchange We’ll offer Marketing instruction for greater sales The best product offerings to meet market needs Management opportunities … with “Turn Key Marketing” programs … and we’re eager to work with small agencies too. All tools and training available 24/7 online! Our “Private Insurance Exchange” for Group Selling

PPI Resources Agency site Our “Private Insurance Exchange” Limited Medical Contracting - Rachael Wadsworth Agent Marketing - Gary Peek, Jeff Coppins, Micah Peek, Jeff Presley, Daniel Peek Health Agent Support - Terry Wayne, Katey Gray, Anna Peek Contracting Manager & Senior Market - Terri Schlarb Clay Peek – Agency Marketing & Training Office, Fax All s are first name/last ppisales.info...

Other Important Webinars “Are Benefits Beneficial” – Selling Individual Health to Group ER’s “Face to Face Selling” and “Opening Group Sales” Our “Technology” and “TPA” classes “Selling Easy Issue/Quick Paying Term Life” AMERICO Great “GAP” & Limited Benefit CUL Plans!

Plans Humana One (GA, AL, MS, TN, LA, TX, AZ, FL, OH, UT, IL, MI, CO, KY) BCBS of SC, TN, GA, NC, (TX/OK/NM)* Coventry / Aetna (SC/NC) Consumer’s Choice (SC/TN) Assurity Life, Medico, AMERICO, CUL, SLAICO, Security Life, American General, NIA You’ll see the list on our “contracting” link. * pending