1 Healthcare Reform and Employee Benefit Trends: What’s the Latest in Both?

2 Presenters Nancy Sylvester, CPCU, ARM-P – Managing Director, Arthur J. Gallagher & Co. Eric Pearson – Area Vice President, Gallagher Benefit Services, Inc. Justin Sylvester – Benefit Consultant, Gallagher Benefit Services, Inc. Petula Workman, J.D. CEBS – Compliance Consultant, Gallagher Benefit Services, Inc.

3 PPACA

4 The Supreme Court Decision Four Basic Issues Standing Constitutionality of Individual Mandate Severability of Individual Mandate if unconstitutional Constitutionality of Medicaid Expansion requirements

5 Individual Mandate – Exceptions The Individual Mandate – Exceptions and Exemptions: – Unaffordability Required contribution exceeds 8% of the individual’s household income – Household income below income tax filing threshold – Native Americans – Short lapses Lack Minimum Essential Coverage for a period of less than 3 months – Prisoners – Undocumented aliens – Religious Exceptions Health Care Sharing Ministry Conscientious objections

6 Individual Mandate – Exceptions The Individual Mandate Exception – Tax Filing Threshold IF your filing status is...AND at the end of 2011 you were... * THEN file a return if your gross income was at least... ** singleunder 65$9, or older$10,950 head of householdunder 65$12, or older$13,650 married, filing jointlyunder 65 (both spouses)$19, or older (one spouse)$20, or older (both spouses)$21,300

7 Individual Mandate – Penalties Individual Penalty Amount *Halved for dependents under age 18 (but do not halve when determining 300% cap on dollar amount for those not insured by taxpayer) Penalty YearFlat Dollar Amount* % of Income 2014$ $ $ After 2016$695, indexed for inflation in $50 increments 2.5

8 Timeline of Key Changes for Plan Sponsors OTC drug reimbursements HSA penalties Employee notification requirements OTC drug reimbursements HSA penalties Employee notification requirements Comparative Effectiveness Research Fee FSA limits to $2,500 Itemized medical expense deduction changes Medicare tax increase Part D drug subsidy deduction eliminated Employee Exchange notification Comparative Effectiveness Research Fee FSA limits to $2,500 Itemized medical expense deduction changes Medicare tax increase Part D drug subsidy deduction eliminated Employee Exchange notification Coverage expansion mandates Patient protections Coverage expansion mandates Patient protections Early retiree reinsurance High-risk pools Early retiree reinsurance High-risk pools Employer and individual mandates Insurance exchanges Patient protections “Cadillac” plan excise tax (2018) Employer and individual mandates Insurance exchanges Patient protections “Cadillac” plan excise tax (2018) W-2 Reporting “CLASS” LTC program (Suspended) Uniform Explanation of Coverage (Delayed) W-2 Reporting “CLASS” LTC program (Suspended) Uniform Explanation of Coverage (Delayed)

9 Key Changes – New claims and appeals regulations – Expansion of Women’s Preventive Services – Cap on employee contributions to healthcare FSAs – Removal of lifetime dollar maximums – Expansion of dependent coverage to age 26 – Waiting periods no longer than 90 days beginning in 2014

10 Reporting and Disclosure Form W-2 Reporting – Mandatory for Form W-2s issued for 2012 Summary of Benefits and Coverage – First open enrollment beginning on or after 9/23/12 Quality of Care Reporting – ???? Employer Explanation of Exchange – March 1, 2013 Employer Reporting of Health Insurance Coverage to IRS – 2014

11 Revenue Raisers for 2013 Comparative Effectiveness (or PORCI) Fees Cap on healthcare FSA contributions Medical Device Tax Tax on unearned income Additional Social Security Taxes Limits on itemized deductions

12 Revenue Raisers for 2014 Transitional Reinsurance Fee Annual Fee on Health Insurance Premiums Employer Shared Responsibility Penalties Individual Mandate Penalties

13 Individual Mandate OROR Exception Minimum Essential Coverage Premium Assist. Penalty Penalty

14 Exchanges Large Group Government Subsidy Individuals Small Group PROVIDERS CHOICE POOL Bronze Plan Silver Plan Gold Plan Platinum Plan Catastrophic Plan CONSISTENT MARKET RULE BASE

15 No penalty applies! Lesser of: $3,000 per FTE receiving tax credit* $3,000 per FTE receiving tax credit*or $2,000 per FTE (minus first 30) $2,000 per FTE (minus first 30) Lesser of: $3,000 per FTE receiving tax credit* $3,000 per FTE receiving tax credit*or $2,000 per FTE (minus first 30) $2,000 per FTE (minus first 30) $2,000 penalty per FTE (minus first 30) if at least one FTE receives the tax credit * No penalty applies! Is coverage affordable? Plan provides minimum required value? Offer Coverage? *Only applies to FTEs with household incomes of 400% of FPL or less Employer Shared Responsibility Have at least 50 FTEs?

16 Model Potential Impact of Mandates

17 Impact of Medicaid Expansion Decision Around 150,00 Louisiana residents would be Medicaid eligible under PPACA’s Medicaid expansion provisions If the Governor continues to state that Louisiana will NOT expand Medicaid eligibility, then all of those from % of FPL will be Exchange eligible Increased likelihood for Employer Shared Responsibility penalties

18 Online Healthcare Reform Resources GBShealthcarereform.com

19 Louisiana 33,364 3,630 5

20 Thank You! The intent of this analysis is to provide you with general information regarding the provisions of PPACA. It does not necessarily fully address all of your organization’s specific issues. It should not be construed as, nor is it intended to provide, tax or legal advice. Questions regarding specific issues should be addressed by your organization’s general counsel or an attorney who specializes in this practice area.