1. Mark III Employee Benefits Updated HCR, Reporting (Section 6056)/(Section 6055), and Medical Plan Trends HEALTH CARE REFORM UPDATE April 24, 2014

2. Mark III Employee Benefits Mark III Customers 2

3. Mark III Employee Benefits 3 What School Systems should be doing TODAY to prepare for 2015: Track variable hour employees (substitute teachers, bus drivers, etc). Determine what look back period will be used to determine medical plan eligibility (30 hour rule). Determine how the organization will control the hours for variable hour employees. Budget for additional medical plan costs. Health Care Reform Update

4. Mark III Employee Benefits Critical Health Care Reform Issues Mark III School Client Process and Solutions for the 30 hour rule: o The School System looked back 12 months. o There were up to 100 employees that could be eligible for Health Insurance, that are currently not receiving coverage. Substitutes make up the bulk of this population. The cost per added employee per month for 2014 is $448.12. This represents $537,744 of additional funding. 4

5. Mark III Employee Benefits Critical Health Care Reform Issues Options: Permanent Substitutes o Option 1: Each School receives 1 Substitute per School location. 5

6. Mark III Employee Benefits Critical Health Care Reform Issues Options: Permanent Substitutes o Option 2: A pool of Permanent Substitutes for all Schools to draw from. 6

7. Mark III Employee Benefits Critical Health Care Reform Issues Options: We met with the Principals. They voted for Option 3: o Option 3 Allow the existing process to continue. The School locations choose the Substitutes that work best for the location. The actual expected number of Substitutes that will be eligible for Medical coverage is 38. 7

8. Mark III Employee Benefits Critical Health Care Reform Issues Options: o Option 3 One of the reasons that Option 3 was chosen, is the competitive market for substitutes where the district is located. 8

9. Mark III Employee Benefits Critical Health Care Reform Issues Other Considerations: o Limit Hours worked for Substitutes per Day: Some have considered limiting substitute hours to less than 7 ½ hours per day to have more days available. Such as, 7 hour work day for substitutes would give 4 work days, below the 30 hour thresh hold. 9

10. Mark III Employee Benefits Critical Health Care Reform Issues Other Considerations: o Limit Hours worked for Substitutes per Day: Some have considered limiting substitute hours to less than 7 ½ hours per day to have more days available. Such as, 7 hour work day for substitutes would give 4 work days, below the 30 hour thresh hold. 10

11. Mark III Employee Benefits Critical Health Care Reform Issues o Most Important Consideration: o GET PREPARED!!!! o Whatever your organization decides is the best solution for the 30 Hour Rule, do not delay in implementing!!!!! 11

12. Mark III Employee Benefits Health Care Reform Update Why Prepare for 2015? Employer Penalties – 2015: Transitional Rule – February 2014 Employer is required to cover all employees working 30 hours or more or face penalties. Coverage must meet minimum value and be affordable to avoid penalties: Employer must cover 70% of all full-time employees or face penalty (Section 4980H(a) for 2015. The employer is penalized $2,000 times the number of full-time employees employed during the year, if the 70% rule is not met. 12

13. Mark III Employee Benefits Health Care Reform Update Employer Penalties – 2015: If the 70% rule is met and: One or more full-time employees enrolls in the Marketplace (Exchange) and receives a premium tax credit or cost-sharing reduction. (if the plan is not affordable or meets minimum value) The employer is penalized $3,000 times the number of full-time employees who enroll. 13

14. Mark III Employee Benefits March 7, 2014 Final Rules Released on Information Reporting for Employers and Insurers On March 5, 2014, the Department of Treasury and the Internal Revenue Service (IRS) released final rules on two provisions: Reporting health insurance coverage by large employers, and reporting minimum essential coverage by insurers and employers of self-insured plans. The guidance provides a streamlined process for reporting duplicate information required by both provisions – to both the IRS and respective employees. While the first reporting will not be required until early 2016 for the 2015 calendar year, employers are encouraged to voluntarily report coverage information in 2015 for the 2014 calendar year. 14 Health Care Reform Update

15. Mark III Employee Benefits March 7, 2014 – Final Rules Released on Information Reporting for Employers and Insurers Who must report to whom? Employers with 50 or more full-time (including full-time equivalent) employees need to report all of the employees offered coverage throughout the calendar year to the IRS. Respectively, all employees named in this report must also be provided with a statement, and can simply be given a copy of the IRS form. Minimum essential coverage must also be reported annually to both the IRS and any individual named in the report as having such coverage. What information must be reported? The final rules provide for a single, consolidated form to streamline the information being reported. Employers and insurers can complete their respective portions of the form and submit them separately. Large self-funded employers can complete both parts of the combined form for information reporting. This form can be used for reporting to both the IRS and employees. 15 Health Care Reform Update

16. Mark III Employee Benefits March 7, 2014 – Final Rules Released on Information Reporting for Employers and Insurers The forms have not yet been provided by the IRS, but will require information to help determine eligibility for the premium tax credit, such as: Employer information, including contact information and the number of full-time employees The lowest cost employee monthly premium for self-only coverage for minimum value coverage offered to the employee Information on each full-time employee to whom coverage was offered and identifying information, such as Social Security Number The bottom half of the form includes information for insurers or self-insured employers to report, which will help administer compliance of the individual mandate and eligibility of premium tax credits: Information about the insurer or entity providing coverage, including contact and other business information Which individuals are enrolled, identifying information of those individuals, and the months in which they are enrolled Special rules to further simplify Special rules have been provided to further simplify reporting and offer transitional relief for employers that provide a “qualifying offer” to any of their full-time employees. A qualifying offer is two-fold: 1) offering an employee self-only coverage that meets minimum value (60% of costs) and provides self-only coverage at a cost of no more than 9.5% of the Federal Poverty Level, and 2) offering coverage for the employee’s family, including spouses and children. Large employers can take advantage of simplified reporting obligations when they extend qualifying offers to employees for all 12 months of the year. They can report basic employee identification data and the fact that they received a full-year qualifying offer. These employers can also give the named employees a copy of that notice or a standard statement confirming the full-year qualifying offer. Large employers who extend a qualifying offer to employees for fewer than 12 months of the year can use a code to report to both the IRS and the named employees. This code indicates that the qualifying offer was made for each of those months. A phased-in option for 2015 is available for large employer who can certify they have made a “qualifying offer” to at least 95 percent of their full-time employees and their families (spouses and children). These employers will have simplified reporting method for their entire employee population, and can provide employees a standard statement regarding the coverage offered and potential eligibility for premium tax credits. Large employers that can certify they have offered affordable minimum value coverage to at least 98% of the employees named in the report do not have to identify full-time status. Can employee statements be provided electronically? The regulations do allow for statements to be provided electronically, but only if an employee agrees in writing to receive them electronically. The electronic statement and consent must satisfy strict requirements and an employee must be permitted to withdraw consent. When are the first reports and employee statements due? The first reports to the IRS will be required no later than March 1, 2016 for 2015 calendar- year coverage (February 28 is a Sunday). However, if the report is filed electronically, it will be due no later than March 31, 2016. The first statements to employees will be required no later than January 31, 2016 for the 2015 calendar year. 16 Health Care Reform Update

17. Mark III Employee Benefits March 7, 2014 – Final Rules Released on Information Reporting for Employers and Insurers Special rules to further simplify Special rules have been provided to further simplify reporting and offer transitional relief for employers that provide a “qualifying offer” to any of their full-time employees. A qualifying offer is two-fold: 1)offering an employee self-only coverage that meets minimum value (60% of costs) and provides self-only coverage at a cost of no more than 9.5% of the Federal Poverty Level, and 2)offering coverage for the employee’s family, including spouses and children. Large employers can take advantage of simplified reporting obligations when they extend qualifying offers to employees for all 12 months of the year. They can report basic employee identification data and the fact that they received a full- year qualifying offer. These employers can also give the named employees a copy of that notice or a standard statement confirming the full-year qualifying offer. 17 Health Care Reform Update

18. Mark III Employee Benefits March 7, 2014 – Final Rules Released on Information Reporting for Employers and Insurers Special rules to further simplify Large employers who extend a qualifying offer to employees for fewer than 12 months of the year can use a code to report to both the IRS and the named employees. This code indicates that the qualifying offer was made for each of those months. A phased-in option for 2015 is available for large employer who can certify they have made a “qualifying offer” to at least 95 percent of their full-time employees and their families (spouses and children). These employers will have simplified reporting method for their entire employee population, and can provide employees a standard statement regarding the coverage offered and potential eligibility for premium tax credits. Large employers that can certify they have offered affordable minimum value coverage to at least 98% of the employees named in the report do not have to identify full-time status. 18 Health Care Reform Update

19. Mark III Employee Benefits March 7, 2014 – Final Rules Released on Information Reporting for Employers and Insurers Special rules to further simplify Can employee statements be provided electronically? The regulations do allow for statements to be provided electronically, but only if an employee agrees in writing to receive them electronically. The electronic statement and consent must satisfy strict requirements and an employee must be permitted to withdraw consent. When are the first reports and employee statements due? The first reports to the IRS will be required no later than March 1, 2016 for 2015 calendar- year coverage (February 28 is a Sunday). However, if the report is filed electronically, it will be due no later than March 31, 2016. The first statements to employees will be required no later than January 31, 2016 for the 2015 calendar year. 19 Health Care Reform Update

20. Mark III Employee Benefits 1. Avoid the excise tax. Many employers are already making changes to their medical plans in anticipation of the excise tax in 2018. Also known as the Cadillac tax, it’s a 40% tax on the value of medical benefits over a set threshold. Organizations likely to hit the threshold have time to plan for a “soft landing” by phasing in changes to reset benefit cost at a lower level now, Mercer says. The most common strategies are adding in low-cost consumer-directed health plans and eliminating the highest-cost plan offered today. 20 Health Care Reform Trends

21. Mark III Employee Benefits 2. Rethink dependent coverage. All employers should take a closer look at how they subsidize dependent and spousal coverage, Mercer suggests. Employers are increasingly implementing working spouse provisions that either eliminate coverage for spouses with health insurance offered elsewhere or imposing a surcharge on their coverage. 21 Health Care Reform Trends

22. Mark III Employee Benefits 3. Consider coverage options for part-time and variable hour employees. Extending coverage to all employees working 30 or more hours per week will make up a large part of the increase in health benefit spending due to the ACA. They include limiting the number of hours worked for some employees:  Extending coverage to all eligible employees  Adding a low-cost plan for newly eligible employees  Simply paying the shared responsibility assessment. 22 Health Care Reform Trends

23. Mark III Employee Benefits 4. Embrace next-generation wellness strategies Many employers will add or expand health- management/wellness programs in an effort to reduce health care spending by improving workforce health. The ACA allows employers to increase the value of incentives from 20% to 30% of total plan costs, and up to 50% for tobacco nonuse. 23 Health Care Reform Trends

24. Mark III Employee Benefits Health Care Reform Update 24 2014 Health Care Reform Costs Dependent coverage for adult children up to age 26 - 2%2% 100% coverage for preventive services in network - 2%2% No lifetime or annual coverage limits on essential benefits - 1.5%1.5% No pre-existing condition exclusion for children -.2%0.2% Women's Health Benefits - 1%1.0% Elimination of all pre-existing condition limitations in 2014 -.2%0.2% Fee for Comparative Effectiveness Research Agency - July 31, 2014 - $1 per Member Transitional Reinsurance Fee - 2014 - 2016 - First Payment Due Jan. 15, 2015 - $63 per Member Medical Copays Apply to Out of Pocket Maximum - 20152% Additional Cost Per Year9% 2015 Health Care Reform Costs - Fully Insured Plans Fully Insured Medical 3% Fully Insured Dental 3% Fully Insured Vision 3%

25. Mark III Employee Benefits