Health Care Reform Update Presented by: Andy Impastato Vice President – Legal & Compliance

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Agenda Political Outlook Marketplace (Exchange) Individual Mandate Employer Mandate Plan Design Changes Wellness Rules Action Items

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Political Outlook Awareness of PPACA? –42% of Americans unsure if still law –12% of Americans believe Congress repealed law 39 “show” votes to repeal in House since law’s passage –7% of Americans believe Supreme Court struck down law

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Political Outlook Administration under attack? –Medicaid expansion –Exchange (Marketplaces) –SHOP delayed –Discrimination rules delayed –Employer mandate delayed –Automatic enrollment delayed

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Political Outlook Will PPACA be de-funded? –House passed bill last week Includes request to de-fund PPACA in its entirety –Senate will now substitute its own version Stripping defunding language –Final vote on CR expected this weekend –Individual mandate delay?

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Political Outlook Mid-term elections –Senate makeup 52 Democrats 2 Independents 46 Republicans –House makeup 234 Republicans 201 Democrats

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Political Outlook Mid-term elections –PPACA will be front and center (again) –Job growth –Super majority? Senate + 21 seats House + 56 seats

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Marketplace Overview –Now called “Marketplace” –Effective 1/1/14 –Mississippi’s will be federally run –Vision is to be a one-stop shop for consumers –Vision is to decrease costs through competition and subsidies –Carrier participation is weak –Plan design and network sufficiency

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Marketplace Notice –Disclosure Requirement Employer is responsible Deadline is October 1, 2013 Description of services provided by Marketplace May be eligible for subsidy Consequences for dropping employer coverage Model Notices available Penalty?

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Individual Mandate Overview –Individuals must maintain “minimum essential coverage” or pay a penalty –Effective for 1/1/14 –Penalty is greater of percentage of salary or flat fee 1% (2014), 2% (2015) and 2.5% (2016-) $95 (2014), $325 (2015) and $695 (2016-) –Certain exemptions –Penalty assessed on individual tax filing

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Employer Mandate Overview –Only applies to large employers –Requires large employer to offer coverage that meets certain requirements or pay a penalty –Original effective for January 1/1/14 –Government recently announced delay –No penalties will be assessed until 2015

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Employer Mandate Big (“Sledge Hammer”) Penalty –Mechanics “Large” employers that fail to “offer” “minimum essential coverage” to “substantially all” of its “full- time employees” and their “dependents” will be subject to a $2,000 per employee penalty if any full-time employee goes to an Exchange and qualifies for a subsidy. Penalty is calculated based on the total number of full-time employees (minus 30).

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution “Large Employer” Status –Average of 50 or more full-time employees on business days –Look at preceding calendar year (2014) –“Full-time” defined as 30 or more hours of service per week –Part-time employees represent FTEs (total hours / 120) –Aggregation rules (controlled group) apply Employer Mandate

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Employer Mandate “Offer” of Coverage Employee must have an effective opportunity to accept coverage at least once during the plan year –Electronic offer permissible –Facts and circumstances –No “offer” for a month unless coverage available for every day of month

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Employer Mandate “Minimum Essential Coverage” –Employer-sponsored GHP plan offered on the small or large group market

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Employer Mandate “Substantially All” –An employer will be deemed to have offered covered to “substantially all” full-time employees and their dependents if: Coverage is offered to 95% of full-time employees and their dependents (or, if greater, 5 employees) Failure to offer to 5% need not be inadvertent (i.e., planning opportunity) Does not eliminate penalty for 5%

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Employer Mandate “Full-Time Employees” Part-time employees are excluded Full-time employees only –30 “hours of service” per week –130 “hours of service” per month –Hours worked v. “hours of service” Common law definition of “employee” Full-time status measured monthly on an ongoing basis Safe harbors mitigate impact of month-to-month analysis

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Employer Mandate Variable Hour Employees –Measurement period 3 to 12 months Standard (ongoing employees) (SMP) Initial (new employees) (IMP) –Administrative period Optional Up to 90 days –Stability period Generally same as SMP or IMP

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Employer Mandate Variable Hour Employees –Transition relief is gone –All large ER’s must comply with mandate on 1/1/14 –ER’s with VHEs will commence safe harbors in /3/13 to 10/1/14 SMP 10/1/14 to 12/31/14 Administrative period 1/1/15 to 1/1/16 Stability period

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Employer Mandate “And Their Dependents” –The employer is required to offer coverage to “dependents” Does not include spouse –Spousal carve out? Does include son, daughter, stepson, stepdaughter, adopted child, child placed for adoption, and foster children up to age 26)

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Example –No coverage (or coverage but not to substantially all): Employer A has 100 full-time employees. Employer A does not offer coverage to any of its employees. Employer A owes $2,000 for each full-time employee minus 30, so Employer A owes a total penalty of $140,000 (100 – 30 = 70; 70 x $2,000 = $140,000) Employer Mandate

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Employer Mandate Little (“Tack Hammer”) Penalty –Mechanics Large employers that offer coverage will be subject to a $3,000 per employee penalty if the coverage is either not “affordable” or does not meet “minimum value,” and as a result, any full-time employee qualifies for a subsidy. Penalty is calculated based on the number of full-time employees who obtain a subsidy (with a maximum penalty cap).

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution “Affordable” Employee’s premium for single coverage is greater than 9.5% of employee’s household income –W-2 safe harbor –Rate of pay safe harbor –FPL safe harbor Employer Mandate

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Employer Mandate “Minimum Value” Employer pays less than 60% of total allowed costs Not a contribution rate Tests –MV Calculator –Safe Harbor Checklists (waiting) –Actuary

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Example –No “affordable” coverage Employer B offers health coverage and has 100 full-time employees, 20 of whom receive a tax credit and enroll in the Exchange. Employer B owes $3,000 for each employee receiving a tax credit, so it owes a penalty of $60,000. (20 X $3,000 = $60,000) The penalty is capped at the amount Employer B would have to pay if it offered no coverage at all. Employer Mandate

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Questions/Issues –Transition Relief? Fiscal Year or 1/1/14 for everyone –FTE going from 30 to 40? –Subsidies on Federal Exchanges? Judicial scrutiny –Difference in Eligibility for Subsidies Americans v. non-Americans Employer Mandate

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Plan Design Changes Probationary Periods –Effective for plan years beginning on or after 1/1/14 –Cannot exceed 90 days –90 days exact –Calendar days (not business days) –EEs currently serving probationary period –Cumulative hours standard OK –Substantive eligibility standard OK

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Cost Sharing Limits –Out of pocket Effective 1 st day of plan year beginning on or after 1/1/14 GF plans excluded $6,350 / $12,700 Everything accrues to OOP –Deductible, Co-payments, Rx Co-payments Transition relief for plans using separate TPAs Plan Design Changes

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Plan Design Changes Prohibition on pre-existing condition exclusions Prohibition on annual limits Clinical Trials

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Wellness Rules Overview –Effective 1 st day of plan year beginning on or after 1/1/14 –Codified existing HIPAA guidelines –Increased employer incentives

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Wellness Rules Overview –Participatory programs –Health contingent programs Activity based Outcome based –ER has flexibility in design

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Wellness Rules Health-Contingent Programs –Limited reward 30% or 50% if tied to tobacco use –Annual qualification –Reasonable in design –Reasonable alternative Difference between activity and outcome-based programs –Plan disclosure Availability of reasonable alternative Physician accommodation Contact information

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Between now and 1/1/15 –Restructure part-time workforce –Independent contractor verification –Begin measurement periods –Compliance test wellness programs Affordability for tobacco-free programs Action Items

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code. Proprietary and Confidential. Not for Distribution Questions & Answers 34