June, 2013 Small Business Update

2 5/8/2013 | © Kaiser Permanente All Rights Reserved. Small business

3 5/8/2013 | © Kaiser Permanente All Rights Reserved. Promotions

Your clients will lock in rates for May 1 to September 1 effective dates, and you’ll get a bonus. Guaranteed RAF based on the number of new subscribers enrolled with Kaiser Permanente  New groups with 1-5 subscribers1.10 RAF  New groups with 6+ subscribers.90 RAF Bonus for every new small group plan you sell that has 6 or more Kaiser Permanente subscribers  New groups with 6-9 subscribers$500  New groups with subscribers$750  New groups with 16+ subscribers$1, /8/2013 | © Kaiser Permanente All Rights Reserved. Rate adjustment factor (RAF) and bonus program

5 5/8/2013 | © Kaiser Permanente All Rights Reserved. Rate changes

All HMO copay, deductible HMO, HSA, and HRA plans RegionYear-over-year6-month Northern California 6.1%3.9% Southern California 6.1% Includes CalChoice, HSA California, and Choice Solution plans 5/8/2013 | © Kaiser Permanente All Rights Reserved. 6 July 2013 rate changes

POS and PPO plans RegionYear-over-year6-month Northern CaliforniaPOS 5.0%0.0% PPO 1.9%0.0% Southern CaliforniaPOS 3.0%0.0% PPO 1.9%0.0% Includes Choice Solution plans 5/8/2013 | © Kaiser Permanente All Rights Reserved. 7 July 2013 rate changes

8 5/8/2013 | © Kaiser Permanente All Rights Reserved. New policies and reminders

 Effective immediately, any new group employer application must be received by the 1st of the month in which it is effective.  July 2013 rates will be available on June 15 to quote online. In the meantime, please send your quote requests to  New enrollment material is posted on BrokerNet ( brokernet.kp.org ) as of May 1, Please refer to BrokerNet for the most up-to-date materials. 5/8/2013 | © Kaiser Permanente All Rights Reserved new group updates

A small group that has a management carve-out wants to meet employer shared responsibility. What are their options?  Groups with 51 to 100 total employees can add non-covered employees to current small group policy by purchasing insurance directly through Kaiser Permanente, but they are not eligible for SHOP.  Groups with 101 or more employees will transfer to large group. 10 5/8/2013 | © Kaiser Permanente All Rights Reserved. What to do when your small group may be “large”?

 Small Business Unit will handle small to large group transfer.  Groups with total employees will remain in small group.  Groups with 101 or more total employees will transfer from small to large group. 5/8/2013 | © Kaiser Permanente All Rights Reserved. 11 Transferring groups from small to large

12 5/8/2013 | © Kaiser Permanente All Rights Reserved. Rating changes under the ACA

Multiple plan offering Tax credit Guaranteed availability 3:1 rating ratio Valid waivers Member level rating Grandfathered or non-GF Carrier-direct or SHOP 13 5/8/2013 | © Kaiser Permanente All Rights Reserved. Small business considerations

Today  7 age bands, no ratio rules  Family tier rating  7 rate areas  Based on employer ZIP code  Risk adjustment factors ( ) 2014 and beyond  45 age bands, 3:1 max ratio  Member level rating  19 rating areas  Based on employee ZIP code  No risk adjustment factors  Groups with grandfathered plans will continue to be rated in 2014 as we do today.  Groups with nongrandfathered plans will be rated based on the 2014 and beyond methodology.  Groups with grandfathered and nongrandfathered plans will be rated using both methodologies. 14 5/8/2013 | © Kaiser Permanente All Rights Reserved. How rating will change in 2014

Many factors will impact an employer's rates in Groups with grandfathered plans will be impacted less than groups with nongrandfathered plans. Here are some factors that will impact a small employer: Rate impactsGrandfathered plansNongrandfathered plans Trend Yes Fees Yes SHOP participation fee NoYes Benefit & plan changes NoYes Elimination of risk adjustment factor (RAF) NoYes Market-based risk adjustment NoYes Member level rating NoYes 15 5/8/2013 | © Kaiser Permanente All Rights Reserved. Why grandfathered status matters

Current rates $30 plan Age EEEE + SPEE + CHFAM <30 $303$847$833$1, $335$910$856$1, $432$994$821$1, $563$1,170$928$1, $711$1,493$1,063$1, $877$1,666$1,173$1, $995$2,150$1,496$2,363 Age Rate Age Rate 0-20 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $408 Illustrative ACA-compliant rates Compare and contrast the rate structure for a $30 copay plan at a 1.0  Current rate structure Based on the subscriber age and family tier  ACA-compliant rate structure Based on each family member age 16 5/8/2013 | © Kaiser Permanente All Rights Reserved. Member level rating

Example 1 of member level rating impact Age EEEE + SPEE + CHFAM <30 $303$847$833$1, $335$910$856$1, $432$994$821$1, $563$1,170$928$1, $711$1,493$1,063$1, $877$1,666$1,173$1, $995$2,150$1,496$2,363 Current rates ACA Compliant Member Rates Age Rate Age Rate Age Rate Age Rate 0-20 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $687 5/8/2013 | © Kaiser Permanente All Rights Reserved. 17 Employee: Joe, age 53, with a spouse and 4 children Member level rating family premium: $1,719 Family member Joe, age 53 Spouse, age 48 Child, age 18 Child, age 16 Child, age 14 Child, age 12 Family coverage tier premium: $1,495 $1,719 Rate $628 $503 $196 $0

Example 2 of member level rating impact Age EEEE + SPEE + CHFAM <30 $303$847$833$1, $335$910$856$1, $432$994$821$1, $563$1,170$928$1, $711$1,493$1,063$1, $877$1,666$1,173$1, $995$2,150$1,496$2,363 Current rates ACA Compliant Member Rates Age Rate Age Rate Age Rate Age Rate 0-20 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $687 5/8/2013 | © Kaiser Permanente All Rights Reserved. 18 Employee: Joe, age 53, with a spouse and 1 child Member level rating family premium: $1,327 Family member Joe, age 53 Spouse, age 48 Child, age 18 Family coverage tier premium: $1,495 $1,327 Rate $628 $503 $196

 Kaiser Permanente will support grandfathered plans.  Other insurance carriers may support or eliminate grandfathered plans. 19 5/8/2013 | © Kaiser Permanente All Rights Reserved. Can your clients maintain grandfathered status?

 At a group’s 2014 renewal, we will map them to an aligned plan.  We will align as closely as possible based on actuarial value, and then also on product plan design.  Preserve product type (copay, deductible HMO, HSA, HRA). Goals for mapping: 5/8/2013 | © Kaiser Permanente All Rights Reserved. 20 Nongrandfathered mapping to ACA metal plans

 Birthday billing eliminated for grandfathered and nongrandfathered plans.  Rates will be adjusted based on age at contract renewal.  New hires will be rated based on the age that they were at the beginning of the contract year. 21 5/8/2013 | © Kaiser Permanente All Rights Reserved. Rating rules

Covered California standard plan options by metal as released on March 27, 2013 PlatinumGoldSilverBronzeCatastrophic Copay Copay $20 Ded Not applicable IP/OP $250 per day (up to 5 days) Rx $5/$15 – No brand deductible OOP Max $4,000 Copay $30 Ded Not applicable IP/OP $600 per day (up to 5 days) Rx $20/$50 – No brand deductible OOP Max $6,350 Copay $45 Ded $2,000 (IP only) IP/OP 20% Rx $25/$50 – $250 brand deductible OOP Max $6,350 Copay $60 Ded $5,000 (integrated Med/Rx deductible) IP/OP 30% Rx $25/$50 (integrated Med/Rx deductible) OOP Max $6,350 Copay $0 Ded $6,350 (integrated Med/Rx deductible) IP/OP $0 Rx $0 (integrated Med/Rx deductible) OOP Max $6,350 Coinsurance Copay $20 Ded Not applicable IP/OP 10% Rx $5/$15 – No brand deductible OOP Max $4,000 Copay $30 Ded Not applicable IP/OP 20% Rx $20/$50 – No brand deductible OOP Max $6,350 Copay $45 Ded $2,000 (IP only) IP/OP 20% Rx $25/$45 – $250 brand deductible OOP Max $6,350 HSA Copay 40% Ded $4,500 (integrated Med/Rx deductible) IP/OP 40% Rx 40% (integrated Med/Rx deductible) OOP Max $6, /8/2013 | © Kaiser Permanente All Rights Reserved standard individual exchange plans

Covered California standard plan options by metal as released on March 27, 2013 PlatinumGoldSilverBronze Copay Copay $20 Ded Not applicable IP/OP $250 per day (up to 5 days) Rx $5/$15 – No brand deductible OOP Max $4,000 Copay $30 Ded Not applicable IP/OP $600 per day (up to 5 days) Rx $20/$50 – No brand deductible OOP Max $6,350 Copay $45 Ded $1,500 (IP only) IP/OP 20% Rx $25/$50 – $500 brand deductible OOP Max $6,350 Copay $60 Ded $5,000 (integrated Med/Rx deductible) IP/OP 30% Rx $25/$50 (integrated Med/Rx deductible) OOP Max $6,350 Coinsurance Copay $20 Ded Not applicable IP/OP 10% Rx $5/$15 – No brand deductible OOP Max $4,000 Copay $30 Ded Not applicable IP/OP 20% Rx $20/$50 – No brand deductible OOP Max $6,350 Copay $45 Ded $1,500 (IP only) IP/OP 20% Rx $25/$45 – $500 brand deductible OOP Max $6,350 HSA Copay 20% Ded $1,500 (integrated Med/Rx deductible) IP/OP 20% Rx 20% (integrated Med/Rx ded) OOP Max $6,350 Copay 40% Ded $4,500 (integrated Med/Rx deductible) IP/OP 40% Rx 40% (integrated Med/Rx deductible) OOP Max $6, /8/2013 | © Kaiser Permanente All Rights Reserved standard small group exchange plans

 Employee choice of carrier with no minimum participation  Consolidated billing and enrollment  Defined benefits platform  Plan comparison tools  Tax credit  Choice of all SHOP plans + extra non-SHOP plans  Group can choose multiple metal tiers  Retain grandfathered plans  No re-enrollment needed  Ongoing relationship SHOP Carrier access Carrier direct Broad plans 24 5/8/2013 | © Kaiser Permanente All Rights Reserved. Benefits of the SHOP vs. a direct carrier

 ACA limits waiting periods for new hires to a maximum of 90 days.  Some states (like California) have reduced this to a 60-day maximum waiting period. Employers can also have waiting periods of 0 or 30 days.  Waiting period maximums apply to small business regardless of whether they have grandfathered or nongrandfathered plans.  Kaiser Permanente will offer the following waiting period options: —1st of the month following date of hire —1st of the month following 30 days from date of hire —60 days following date of hire (premiums will be prorated)  Existing small groups with waiting periods in excess of 60 days will be mapped to an ACA-compliant waiting period at their renewal in /8/2013 | © Kaiser Permanente All Rights Reserved. How waiting periods will be impacted for small business

 Kaiser Permanente will support customer early renewals in Q  Some disadvantages with early renewal Some groups will benefit from rating changes under the ACA. It will delay access to the SHOP, new benefit plans, and enhanced small employer tax credit. 26 5/8/2013 | © Kaiser Permanente All Rights Reserved. Early renewal available for small groups

 Definition of small employer under the ACA does not include sole proprietorships or S corporations unless they enroll at least one non-spouse, common-law employee, i.e., non-owner employee who receives a W-2 and is listed on a DE9C.  CA AB 1083: “For plan years commencing on or after January 1, 2014, the definition of an employer, for purposes of determining whether an employer with one employee shall include sole proprietors, certain owners of ‘S’ corporations, or other individuals, shall be consistent with Section 1304 of ACA.”  ACA Section 1304 defines employer by reference to PHS Act 2891, which incorporates by reference ERISA Section 3(5). Federal law does not classify an individual and his or her spouse as employees when the trade or business is wholly owned by the individual or by the individual and his or her spouse. 27 5/8/2013 | © Kaiser Permanente All Rights Reserved. Sole proprietors and S corps: What’s required?

28 5/8/2013 | © Kaiser Permanente All Rights Reserved. Individuals and families

 Kaiser Permanente will map individuals with nongrandfathered plans to new ACA-compliant plans as of January  Consumers who buy or renew policies in 2013 that are not grandfathered will need to renew as of January 2014 with an ACA- compliant plan. 29 5/8/2013 | © Kaiser Permanente All Rights Reserved. Individuals in 2014

30 5/8/2013 | © Kaiser Permanente All Rights Reserved. Preparing for 2014

Kaiser Permanente timeline May 2013July/August 2013 September 2013 October 2013January 2014 Business line updates January 2014 Plan Highlights, rates and materials available Exchanges open Enrollment begins SHOP and HIX go live Minimum value, employer shared responsibility, ACA taxes in rates in effect Broker resources HCR information and tools on BrokerNet HCR broker webinar Broker BOB tool Broker Market Update Employer communication HCR employer guide Letter with early renewal and guidance on how plans will change & what needs to be done. January 2014 renewals released 31 5/8/2013 | © Kaiser Permanente All Rights Reserved.

What we’re doing to prepare for member growth  Opening new facilities and maintaining or expanding existing ones  Assessing and updating workforce  Providing alternatives to traditional office visits 5/8/2013 | © Kaiser Permanente All Rights Reserved. 32 Health care reform readiness