The ACA: Navigating the Next Wave Gallagher Benefit Services, Inc. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™

Where we stand today On the horizon for 2016 Cadillac tax Strategic considerations Today’s Agenda © 2014 GALLAGHER BENEFIT SERVICES, INC.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Supreme Court ruling, approving of premium assistance Additional guidance on 6055/6056 SBCs – 2015 (for 2016) and 2016 (for 2017) Additional latitude for movement on/off Exchanges under Section 125 Health FSAs – status on indexation for 2016? View, comments on Cadillac tax –Guidance this fall? Federal Landscape © 2014 GALLAGHER BENEFIT SERVICES, INC.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 2015 – interim year –70% of FTEs: 95% in 2016 –Pay or play mandate “exemption” goes from 80 to –Pay or play penalty, originally at $2,000, goes to $2,084* –Penalty for failure to offer affordable benefits to an FTE, originally at $3,000, goes to $3,126* –Out of pocket maximum increase to $6,850-single & $13,700-family Single maximum must apply to anyone in “family” coverage – embedded OOP maximum –HDHPs!!! * Source: Kaiser Family Foundation Employer Shared Responsibility © 2014 GALLAGHER BENEFIT SERVICES, INC.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Penalties going up: –Greater of $325 per person or 2% of income in 2015 –Greater of $695 per person or 2.5% of income in 2016 Public exchanges –Open enrollment: Nov 1, 2015 – Jan 31, 2016 –1411 certifications Marketplace notifies employer of employee gaining coverage with premium assistance Employer may appeal within 90 days Individual Mandate © 2014 GALLAGHER BENEFIT SERVICES, INC.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Minimum Essential Coverage (MEC) Reporting (Section 6055) –Lets individuals and the IRS know if an employer is providing minimum essential coverage and if an individual satisfied the individual mandate for the preceding calendar year Employer Mandate Reporting (Section 6056) –Lets individuals and the IRS know if an employer is complying with the employer mandate, minimum value and affordability Employer Reporting © 2014 GALLAGHER BENEFIT SERVICES, INC.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Separate “plan”? HRA – considered a plan –Eliminates eligibility for premium assistance on public exchange –PCORI, possibly –6055, 6056 reporting Retirees © 2014 GALLAGHER BENEFIT SERVICES, INC.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ $2,084 in 2016 (indexed) per employee is less costly than most employer medical costs. Other considerations: –Recruiting & retention? –Some employees eligible for premium assistance through Exchange –Loss of tax favored treatment – employer & employee contributions –Any additional employer “compensation” also subject to taxation –Collective bargaining? Strategic Considerations - Pay or Play? © 2014 GALLAGHER BENEFIT SERVICES, INC.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Who is eligible? –Part-timers under 30-hours per week? Why? –Retirees? Why? –Measurement method –Risk assessment vs workforce? Tiers – number of tiers –2-tier, 3-tier, etc. –Aligned with other employers? Public Exchanges? Spouses Eligibility © 2014 GALLAGHER BENEFIT SERVICES, INC.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Insured versus self- funded –Previous reasons for self-funding still apply –Added value Health insurer fee Some flexibility with defining essential health benefits Risk Management © 2014 GALLAGHER BENEFIT SERVICES, INC. Claims Pooling - 10% Retention - 10% Retention - 6% Insurer Fee - 3% 7-9% Savings Premium Tax- 2% Illustrative comparison

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Medical plan positioning –In relation to total rewards –Versus market Plan Design and Funding © 2014 GALLAGHER BENEFIT SERVICES, INC. Total Effective Cost Share

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Plan design –Number of options –Network size & care coordination –Rational consumerism 2016 out of pocket limits for “family” coverage –Adverse (or favorable) selection versus Public Exchange –Alignment with well-being philosophy –Telehealth, onsite clinics/pharmacies HSA qualification? –Cadillac tax Plan Design © 2014 GALLAGHER BENEFIT SERVICES, INC.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Affordability –Dynamic –Safe harbor –Plan design versus plan options Employer contributions –Employee versus spouses, dependents –Other employer coverage –Implicit subsidization – dependents, retirees –Defined contribution Contributions © 2014 GALLAGHER BENEFIT SERVICES, INC.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Multi-generational view –Choice –Personal responsibility Ancillary benefits –Dental, vision – employer contributions –Paid time off continuum Credit-based plans – “back to the future”? Voluntary benefits Private exchanges –Buyer beware! Health & Welfare Benefits Alignment © 2014 GALLAGHER BENEFIT SERVICES, INC.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Fundamental reassessment –Logic –Value –Coverage versus financing –Public exchanges Age related implicit subsidy Premium assistance –FAS 106, GASB 45 Retirees © 2014 GALLAGHER BENEFIT SERVICES, INC.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ “Cadillac” Tax © 2014 GALLAGHER BENEFIT SERVICES, INC. COBRA Rate ≥ $10,200 for individual or $27,500 for family Special Provisions High risk professions Early retirees Age & gender = 40% of plan value that exceeds threshold Excise Tax

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Compelling additional reason to look at underlying philosophy of plan provisions –Evolving network considerations Plan design –Rational, aligned cost sharing Flexible spending accounts HRAs If HDHP: –Employer HSA contributions –Employee HSA contributions, if through Section 125 Onsite clinics Implicit subsidization –Employees versus dependents –Retirees Cadillac Tax Preparation © 2014 GALLAGHER BENEFIT SERVICES, INC.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 1,600 employees Cadillac tax modeling Concurrent compensation study, objectives Total rewards alignment 3-year, phased approach –Additional cost-sharing Aligned with Total Effective Cost Share objectives Consumerism –More focused population health management –Gradual, pragmatic shift in employer contributions to achieve migration –Concurrent evaluation, movement toward concentric, high performing network Case Study © 2014 GALLAGHER BENEFIT SERVICES, INC.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Questions? ajghealthcarereform.com © 2014 GALLAGHER BENEFIT SERVICES, INC.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Questions: Don Heilman, Area Sr. V.P