2014 Benefit Changes in response to the ACA HR Pros - April, 2013 Office of Human Resources

The “Affordable Care Act” …by any other name… ACA Patient Protection and Affordable Care Act (PPACA) Health Care Reform Obamacare …may, or may not, be a rose

Is the ACA a good thing? Many more Americans will have coverage –but not everyone Many with poor coverage have better coverage –but many won’t have quite as good coverage as now This will come at a cost –More out-of-pocket costs in our plan. More taxes going to the Feds. –It may take longer to get an appointment with a provider. Health care delivery in America does need reforming! –Costs more and produces worse outcomes. –Why? Providers get paid for the wrong thing: Services instead of Results. In the end, you will have to decide whether it’s a good thing.

Will it effect the UPlan? HCR has already affected the UPlan… …but not as much as many other employer plans! 2011: Adult child coverage to age 26 –That’s currently costing roughly $2M a year 2013: Health Care Exchanges begin Enrollment –Challenge for us to help employees understand what’s happening Healthcare Flexible Spending Account limited to $2,500 Some minor changes in benefits Changes in the way that appeals are handled Value of your 2012 tax-exempt medical insurance shows on W-2

Effects on UPlan 2014: January 1: Exchanges deliver coverage –Like most large employers, we will “play” (pay or play) –Benefits remain a key component of our employee value proposition Requires a complicated way of determining Full Time eligibility 2015 (2016?): Auto-enrollment required New employees will automatically be enrolled for employee-only coverage. They will have to enroll their dependents to get coverage, and can opt out if desired. Overrules MN State Law 2018: (here’s the “biggie”) An Excise (“Cadillac”) Tax will be imposed on “high value” plans

UPlan is a “High Value” plan “Plan Value” is defined by the ACA as the sum of: Employer contribution to premium + Employee contribution to premium + any Health Flexible Spending Account amounts Out-Of-Pocket costs are not included! A “High Value” plan is any plan that exceeds these annual amounts in 2018: –$10,200 for individual; $27,500 for family –UPlan has options at $8,000 individual; $21,000 family now!

When the “Cadillac Tax” hits… A tax rate of 40% of the Plan Value in excess of the maximum allowed will be imposed. Five year ( ) estimate of UPlan exposure: $48,000,000 –Assumes we do nothing The University must not pay this tax! –For financial reasons –For political (public relations) reasons

Our Goals… Maintain quality, affordability, and choice in the UPlan Avoid the Excise Tax Continue to manage healthcare trend

Changes begin in 2014 Why this early? Must have plan value calibrated before 2016 to ensure safe harbor Need a minimum 18 months of experience to measure impact of changes, plus time to make adjustments prior to 2016 Also, high risk of making changes for 2015 because of overlap with ESUP Pushes us to January 1, 2014

We must reduce Plan Value Three strategies –Ongoing cost-effective care initiatives –Adjusting the benefit design –Miscellaneous other changes

2014 medical changes Increase Out-Of-Pocket costs. In ‘traditional’ plans: –Introduce deductibles on all non-copay items $100/$200 on Medica Elect Essential $200/$400 on Medica Insights and Choice –Increase primary care and related copays by $10 Primary, internal medicine, OB/GYN, pediatrics Also chiropractic, acupuncture, physical, occupational & speech therapy, MH/SA –Introduce higher copays for specialty care $15 higher than primary care ($10 higher in ACO plan)

2014 medical changes In Health Savings Account Plan –$250 / $500 reduction in HSA account –$500 / $1,000 increase in out-of-pocket maximum

2014 medical changes Introduce a new, ACO (Affordable Care Organization) Plan in our choices –High-quality, cost effective, but restrictive –Benefits slightly higher than Base Plan –Costs slightly lower – a “buy down” plan –Four Twin Cities ACOs within this plan Fairview, HealthEast, Park Nicollet, Ridgeview –Fairview currently includes UMP specialists, but not UMP primary care –Park Nicollet does not include HP primary or specialty Some potential to include Duluth care system

2014 medical changes ACO Plan continued –Annual Elections - Employee & all family members must be in same ACO for the full year –No referrals needed within ACO network. –BUT referrals outside the ACO highly unlikely! –Travel benefit covers care outside service area Emergency, urgent & non-emergency care –Care within service area, but outside of ACO, is out of network –Expect providers to reach out to new members

2014 pharmacy changes Increase Tier 3 – Non-formulary brand copay to $75 –Encourages use of Tier 1 and Tier 2 clinically appropriate, cost effective medications –Current appeals & Prior Authorization provisions remain in effect

Plan comparison – Elect / Essential & ACO Medica Elect/ Essential & New Medica ACO Plan Elect/Essential Current Design Elect/Essential New Deductible & Co-pay Design ACO Plan New Deductible & Co-pay Design (Lower Premium than Elect/Essential) CategoryIn NetworkOut of NetworkIn NetworkOut of Network In Network (specific ACO) Out of Network DeductibleNone$600/$1200 $100/200 or $200/400 $600/$1200 $100/200 or $200/400 $600/$1200 Preventive care100% Physician care$15 copayDeductible/70% $25 PCP/$40 SPC Deductible/70%$20 PCP/$30 SPCDeductible/70% Convenience care$10 copayDeductible/70%$15 copayDeductible/70%$15 copayDeductible/70% Urgent Care$15 copay $25 copay$40 copay$20 copay Emergency room$90 copay $100 copay Lab100%Deductible/70%Deductible/100%Deductible/70%Deductible/100%Deductible/70% MRI$30 copayDeductible/70%Deductible/100%Deductible/70%Deductible/ 100%Deductible/70% Hospital100%Deductible/70%Deductible/100%Deductible/70%Deductible/100%Deductible/70% Other copays: chiro, MH, etc. $15Deductible/70% $25 PCP/$40 SPC Deductible/70%$20 PCP/$30 SPCDeductible/70% Rx benefits $10/30/60 copay with $750/$1,500 OOP max. $75 copay for Tier 3 medications Annual OOP limits$2,500/$4,000

Plan comparison - Insights Medica InsightsInsights - Current Design Insights - New Deductible & Co-pay Design CategoryIn NetworkOut of NetworkIn Network Out of Network Deductible None$600/$1200$200/400 $600/$1200 Preventive care 100% Physician care (Tiers 1/2/3) $15/$30/$50Deductible/70%$25/$40/$65 Deductible/70% Convenience care $10 copayDeductible/70%$25 copay Deductible/70% Urgent Care $15/30/50 $40 copay Emergency room $90 copay $100 copay Lab 100%Deductible/70%Deductible/100% Deductible/70% MRI $30 copayDeductible/70%Deductible/ 100% Deductible/70% Hospital 100%/$200 copay /$200copay Deductible/70%Deductible/100% Deductible/70% Other copays: chiro, MH, etc. $15 copayDeductible/70%$25 PCP/$40 SPC Deductible/70% Rx benefits $10/30/60 copay with $750/$1,500 OOP max. $75 copay for Tier 3 medications Annual OOP limits $2,500/$4,000

Plan comparison – Choice Nat’l Medica Choice National Medica Choice National - Current Design Medica Choice National – New Deductible & Co-pay Design CategoryIn NetworkOut of NetworkIn NetworkOut of Network Deductible None$600/$1200$100/200 or $200/400$600/$1200 Preventive care 100% Physician care $30 copayDeductible/70%$40 PCP/$55 SPCDeductible/70% Convenience care $10 copayDeductible/70%$20 copayDeductible/70% Urgent Care $30 copay $55 copay Emergency room $90 copay $100 copay Lab 100%Deductible/70%Deductible/100%Deductible/70% MRI $30 copayDeductible/70%Deductible/ 100%Deductible/70% Hospital $200 copay then 100%Deductible/70%Deductible/100%Deductible/70% Other copays: chiro, MH, etc. $30 copayDeductible/70%$40 PCP/$55 SPCDeductible/70% Rx benefits $10/30/60 copay with $750/$1,500 OOP max.$75 copay for Tier 3 medications Annual OOP limits $2,500/$4,000

Plan comparison - HSA

Shift some costs out of the rates Move costs for internal administrative costs, and Wellness Incentives, out of the premiums –Costs charged to fringe pool, but not to UPlan Medical program –Reduces cost of all plan options

Multiple base plans cause tax exposure

Combining base plans helps Combining the Twin Cities, Duluth, and Greater-MN base plans into one reduces the excise tax exposure. –Same benefits, total cost, and employee cost for new single base plan –Networks will differ –Non-metro costs will come down; very slight increase for Twin Cities costs

Family tier cost causes exposure

Combining tiers helps Spouse/SSDP and Family tiers are combined. This reduces exposure to the Excise Tax by pulling down the cost of the Family tier. However, this significantly increases cost for employees currently in the Spouse/SSDP tier Coverage Tiers2014 Coverage Tiers Employee only Employee + Child/Children Employee + Spouse/SSDP Employee + Family

Premiums (Standard)$ Change% Change Premiums (Wellness)$ Change% Change EE Only E/E & Choice Reg. $ $ % $ $ % ACO * $ $ (0.63)-1.8% $ $ (0.63)-2.6% Insights $ $ % $ $ % Choice National $ $ (0.20)-0.3% $ $ (0.20)-0.4% HSA $ $ % $ $ % EE & Sp/SSDP ** E/E & Choice Reg. $ $ % $ $ % ACO * $ $ % $ $ % Insights $ $ % $ $ % Choice National $ $ % $ $ % HSA $ $ % $ $ % EE & Child(ren) E/E & Choice Reg. $ $ % $ $ % ACO * $ $ (1.78)-1.9% $ $ (1.78)-2.2% Insights $ $ % $ $ % Choice National $ $ (0.44)-0.3% $ $ (0.44)-0.3% HSA $ $ % $ $ % Family E/E & Choice Reg. $ $ (11.79)-7.6% $ $ (11.80)-8.5% ACO * $ $ (16.95)-11.0% $ $ (16.95)-12.2% Insights $ $ (14.02)-6.6% $ $ (14.03)-7.1% Choice National $ $ (25.08)-10.4% $ $ (25.09)-11.2% HSA $ $ (11.46)-7.4% $ $ (11.47)-8.2% * Trend is measured against base plan ** Trend is measured against family coverage 2014 Premium Changes

Premiums (Standard)$ Change% Change Premiums (Wellness)$ Change% Change EE Only E/E & Choice Reg. $ $ % $ $ % ACO * $ $ (0.63)-1.8% $ $ (0.63)-2.6% Insights $ $ % $ $ % Choice National $ $ (0.20)-0.3% $ $ (0.20)-0.4% HSA $ $ % $ $ % EE & Sp/SSDP ** E/E & Choice Reg. $ $ % $ $ % ACO * $ $ % $ $ % Insights $ $ % $ $ % Choice National $ $ % $ $ % HSA $ $ % $ $ % EE & Child(ren) E/E & Choice Reg. $ $ % $ $ % ACO * $ $ (1.78)-1.9% $ $ (1.78)-2.2% Insights $ $ % $ $ % Choice National $ $ (0.44)-0.3% $ $ (0.44)-0.3% HSA $ $ % $ $ % Family E/E & Choice Reg. $ $ (11.79)-7.6% $ $ (11.80)-8.5% ACO * $ $ (16.95)-11.0% $ $ (16.95)-12.2% Insights $ $ (14.02)-6.6% $ $ (14.03)-7.1% Choice National $ $ (25.08)-10.4% $ $ (25.09)-11.2% HSA $ $ (11.46)-7.4% $ $ (11.47)-8.2% * Trend is measured against base plan ** Trend is measured against family coverage 2014 Premium Changes

Concluding notes We are consulting with BAC now Negotiating with Labor Represented groups Planning massive communication campaign, including: –Facts of ACA Clear message that Obamacare is the driver –Impact on UPlan

Questions?