Hotel Asset Managers Association Healthcare Panel October 2010

Healthcare Reform Enacted March, 2010 –12/24/09 Senate passes Patient Protection and Affordable Care Act (H.R. 3590) –3/21/10 House passes H.R and Health Care ad Education Bill Reconciliation Act (H.R. 4872) –3/23/10 President Signs H.R –3/25/10 Senate passes H.R –3/30/10 President signs H.R Just Passed Six Month Anniversary –Substantial Deadlines for Business in 2012 (Form 1099 reporting) & 2014 (Employer and individual mandates) –Final Implementation 2020 What’s Next? –“Unknowns” –Post-Election Options –What AH&LA is Watching MAJOR ISSUES Healthcare Reform

What are the “Unknowns” Today? Regulations Why This Matters: Federal Agency Regulators can “write” substantial changes into final implementing Regulations Court Challenge Why This Matters: All or part of Healthcare Reform Package could be vacated by court on Constitutional grounds Elections Why This Matters: A Republican take-over of one or both Chambers gives Republicans substantial options to effect Healthcare Reform

Post-Election Options –No Substantial Change –Amend Existing Legislation –Repeal Healthcare Reform –Repeal and Replace Healthcare Reform Republican Pledge to America: –Repeal Patient Protection and Affordable Care Act –Medical Liability Reform –Health Savings Accounts –Access for Pre-Existing Conditions –Small Business Health Plans Across State Lines –Defund Healthcare Reform MAJOR ISSUES Healthcare Reform

AH&LA Activity on Health Care Reform Health Care web page for information AH&LA Healthcare Webinars Series Partner with law firm of Seyfarth, Shaw and others; Webinars on various topics (general, franchisees/small business; impact on collective bargaining, etc) Regular communications to AH&LA members letting them know effects of reform Legislative Action Summit & Grassroots Working with Coalition Partners MAJOR ISSUES Healthcare Reform

AH&LA Lobbying Congress & Administration IRS Form 1099 Reporting Menu Labeling Requirements Grandfathering Requirements State Based Exchanges Non-Discrimination Rules Reasonable Tax Credits MAJOR ISSUES Healthcare Reform

Kevin Maher Senior Vice President for Governmental Affairs (202) CONTACT INFORMATION

MAJOR ISSUES Healthcare Reform Health Reform Basics Individual Mandate – all individuals must obtain coverage or pay penalty rising to $695 (tax credits available to low-wage earners) Employer “Mandate” – Largest employers must offer coverage; Medium- sized employers (50 – 199 employees) must offer or pay $2,000 per employee penalty; Small employers (under 50 employees) have option to offer (with limited tax credit available); State-Based Health Insurance Exchange – Run by state or region; AH&LA supported Small Business Health Plans. Insurance Market Reforms – Many early changes affect insurance company policies on “adult-children”; Life-time & annual maximums; Waiting periods; pre-existing conditions, etc. No government-run public option; No guarantee of cost reductions;

MAJOR ISSUES Healthcare Reform Health Reform Basics Revenue Sources: Tax on high-wage earners; Health industry fees (Medical device manufacturers; Tanning bed services, etc); Tax on businesses and individuals who fail to offer or obtain coverage; Tax on high-end health plans valued over $10,200 ($27,000 for families); Massive increase in Form 1099 paperwork filing allowing IRS to more closely monitor taxable activity;

Implementation Timeline 2010 Prohibitions on certain lifetime and annual limits; Adult dependant coverage; Elimination of preexisting exclusions; Grandfather exemption; High-risk pool created; Tax credits available for small employers up to 35% of employer costs; 2011 W-2 reporting of value of health plan; Limits on HAS & FSA non-medical withdrawals; reporting for all transactions valued over $600; 2013 Tax increase on high wage earners; FSA contributions limited to $2,500; Medicare payroll tax 0.9% increase on high wage earners ($200,000 or $250,000 family); 2014 Employer and individual “mandates” begin; Federal government to define minimum qualifications for plans; $2,000 per-employee penalty for employers not offering coverage; Creation of state-based exchanges; Ban on annual limits and exclusions for pre-existing conditions; Limits on waiting periods; Wellness program incentives; 2018 Cadillac Tax on health plans valued over $10,200 or $27,500 family. MAJOR ISSUES Healthcare Reform

What Will Health Care Reform Cost You? Over 200 Employees Mandatory coverage for all employees ($2,000 penalty); 51 – 199 Employees No coverage offered to all employees? Penalty of $2,000 per employee (minus first 30 employees); Non-qualified plan offered? Cost of making changes to meet requirements; Costly plan (over 8.9% of income)? $3,000 penalty; Small Business with 50 or fewer employees Administrative Costs burden; Limited tax credits of up to 35% of employer cost for small businesses (employer must cover at least 50% of premiums, average wage no greater than $50,000, maximum 50 employees); Penalty on individuals failing to obtain coverage on own; Other Costs Tax on High Wage Earners; 40% Surtax on High Value “Cadillac” Plans ($10,200/$27,500 family); Paperwork Burden; Company A projects $60 - $100 million in new compliance costs; Company B projects $50 million in new compliance costs. MAJOR ISSUES Healthcare Reform

What To Do Now? Confer with benefits provider before you make any changes. Consider implications of any changes if your plan qualifies as a “Grandfather Plan”; Count your employees. Determine if you have 50/200 full time employees or “Full-Time Equivalents” which may trigger additional requirements; If you are a small business (under 50 employees) offering coverage (employer pays at least 50% of premium) confer with tax experts to determine if you are eligible for tax credits of up to 35% employer cost; Review current health benefits to ensure you meet new requirements (e.g. coverage for adult-children) and are ready for changes next year (e.g. W2 reporting of existing plan values); Participate in AH&LA webinars. MAJOR ISSUES Healthcare Reform