1. { Holmes Murphy & Associates } We’re for you. Health Care Reform – Ready or Not Presented by: Jeff Kirke Holmes Murphy & Associates jkirke@holmesmurphy.com 1

2. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis Disclaimer Neither Holmes Murphy nor the Holmes Murphy Compliance Team engages in the practice of law, meaning we provide neither legal advice nor legal opinions. While Holmes Murphy strives to help our clients maintain compliance with all laws relating to employee benefits, the information contained in this presentation is not and should not be construed to constitute legal advice. 2

3. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis Agenda 1.ACA Update 2.Where are we now, and do you have any responsibility? 3.Share/Shift/Influence 3

4. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis ACA Update 4

5. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis ACA Update 5

6. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis ACA Update 6

7. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis ACA Update 7

8. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis ACA Update 8

9. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis Elements of Market Reform Exchanges Penalties Mandates Subsidies 9

10. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis ©2010 Steptoe & Johnson LLP Exchanges - 2014 A web portal “marketplace” for health insurance Federal Government Sets criteria for plan participation and purchaser eligibility Provides subsidies for individuals Manages state Exchange if a state fails to Individuals No subsidies for ones offered employer-based coverage, unless that coverage is “unaffordable” or doesn’t meet quality test Small Businesses Groups of up to 100 employees, can buy unsubsidized coverage through the Exchange States Each sets up own Exchange structure and governance Will be involved in premium rate reviews; can approve/reject as provided under state law Grandfathered, self-insured and large fully insured plans not eligible to participate 10 SHOP

11. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis ACA Exchange Activity By State 11

12. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis Percent of Uninsured Potentially Eligible for Marketplaces* *Lowest cost bronze premium for a 27-year-old in 36 states. 12

13. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis A Peek At Exchanges Young, Healthy, and Wealthy Perspective Cost for a similar plan is over 300% higher Why? – 3 to 1 underwriting ratio – New taxes and fees – Mandated coverage elements – Elimination of all medical underwriting 13

14. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis A Peek At Exchanges Young, Healthy, and Wealthy Perspective At $34,000 in annual income, this consumer does not qualify for a government subsidy because their cost for the 2 nd lowest silver plan is deemed “affordable” To keep their current choice of physicians, their cost increases an additional $767 which would have paid almost 8 months of coverage for the December plan 14

15. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis Percentage of Poverty Examples 2013 Persons inFPL family100%133.01%150%200%250%300%400% 1$11,490$15,283$17,235$22,980$28,725$34,470$45,960 2$15,510$20,630$23,265$31,020$38,775$46,530$62,040 3$19,530$25,977$29,295$39,060$48,825$58,590$78,120 4$23,550$31,324$35,325$47,100$58,875$70,650$94,200 5$27,570$36,671$41,355$55,140$68,925$82,710$110,280 6$31,590$42,018$47,385$63,180$78,975$94,770$126,360 7$35,610$47,365$53,415$71,220$89,025$106,830$142,440 8$39,630$52,712$59,445$79,260$99,075$118,890$158,520 Maximum Annual Premium Within Exchange Plan Value94% 87%73%70% # in Family2.00%3.00%4.00%6.30%8.05%9.50% 1$230$458$689$1,448$2,312$3,275$4,366 2$310$619$931$1,954$3,121$4,420$5,894 3$391$779$1,172$2,461$3,930$5,566$7,421 4$471$940$1,413$2,967$4,739$6,712$8,949 5$551$1,100$1,654$3,474$5,548$7,857$10,477 6$632$1,261$1,895$3,980$6,357$9,003$12,004 7$712$1,421$2,137$4,487$7,167$10,149$13,532 8$793$1,581$2,378$4,993$7,976$11,295$15,059 Federal Poverty Level (FPL) Thresholds 100%-400% of FPL Premiums Gov’t subsidy fixed on 2 nd lowest “silver” plan $35,325 x 4.0% = $1,413  Bob earns $35,325 per year as his family’s only breadwinner  Bob’s employer charges $100 per month for single coverage but doesn’t subsidize dependents  “Affordability” for Bob’s employer health plan is $280 per month or $3,356 per year  Family coverage costs $1,100 per month or $13,200 per year  No one in Bob’s family is eligible for a subsidy 15

16. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis Safe Harbor Trap Mary earns $38,000 per year She is single with two children Single Coverage $4800 annual premium Employer Subsidy $2000 Mary’s Cost $2800 Affordability @ 9.5% of W-2 $3610 Family Coverage $10,000 annual premium Employer Subsidy $4000 Mary’s Cost $6000 Affordability for family is not applicable 16

17. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis Pay or Play Penalties Penalties Individual 2014 $95 or 1% 2015 $325 or 2% 2016 $695 or 2.5% Employer <50 FTE No penalty No Plan $2000 First 30 Free Not Affordable $3000 per person with subsidy 17

18. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis July 4 th Delays 18  No employer penalty for 2014  Relaxation of individual income and eligibility verification requirements $0 $10 Billion Lost Revenue $14.5 Billion in Add’l Subsidies 1 Year net cost of $24.5 billion

19. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis Employer Play or Pay Delay Employer responsibility – Offer affordable coverage of appropriate value to full-time employees in 2014 – Pay penalty if coverage not offered to “substantially all” employees 95% rule – Pay penalty if coverage is not affordable – Report on coverage offered – Report on who received coverage 19

20. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis Employer Play or Pay Delay Two changes in 2014 – Penalty not applicable to employers – Reporting requirement not applicable to employers Employers urged to perform real world testing of reporting systems, plan designs Employers may offer coverage to full- time employees 20

21. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis Employer Play or Pay Delay What to do in 2014? – Don’t stop progress – Create tracking systems/hiring vendors/ gathering data – Track variable hour employees Start/end – Await further guidance 21

22. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis Still Applicable To Employers In 2014 Obligations that STILL apply to employers in 2014 – Maximum 90-day waiting period – No annual/lifetime dollar limits – Maximum out-of-pocket/cost-sharing limits ($6350,$12,700) – Clinical trial coverage – Guaranteed availability – Guaranteed renewability – End of pre-existing condition limits for adults – Essential health benefits (EHBs) Self-funded plans are not required to cover EHBs, but if they do, the ACA requires them to remove dollar limits Will require large employers to choose an EHB state 22

23. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis 23 Small Group Market Reform No pre-existing condition Age and region are the only criteria used for underwriting 3 to 1 age band requirement – Rates variance between 20 year old and 64 year old can only vary by 300% (currently 600%) 50% Smoker Premium (delayed until 2015)

24. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis Do I Offer Health Coverage? Attract and Retain Avoid Penalties Competition Its what we do! Allows Subsidies Can’t afford dependents Compliance 24

25. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis Share/Shift/Influence 25

26. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis Attack disease as the enemy Pass burden to shareholders, taxpayers, or customers Pass burden to employees Pressure on the Employer’s Doorstep Employer Network Produce Disease Medical Providers VariableQuality Gov’t Cost Shifting U.S. Health Status PriceUse 26

27. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis Metabolic Syndrome Clusters of Risk Can Create a Toxic Recipe 7x more likely to get diabetes 3x more likely to get heart disease High blood pressure Low HDL (good) cholesterol High triglycerides High blood sugar High waist circumference 2x more likely to have a stroke 4x higher medication spend 2x more lost work days Reverse Met-S and produce less heart attacks, strokes, diabetic events and cancer 27

28. Des Moines | Cedar Rapids | Dallas | Davenport | Kansas City| Madison Oklahoma City| Omaha | Peoria | Scottsdale | Sioux Falls | St. Louis Questions? 28