ESB Copyright 2012 American Fidelity Assurance Company FCCMA June 1, 2012

ESB Copyright 2012 American Fidelity Assurance Company What You Need to Know Today About Health Care Reform This is only a brief summary that reflects our current understanding of select provisions of the law, often in the absence of regulations. All of the interpretations contained herein are subject to change as the appropriate agencies publish additional guidance.

ESB Copyright 2012 American Fidelity Assurance Company Provide a road map for Health Care Reform Gain a high level familiarity with key provisions affecting plan sponsors Develop an immediate action plan and begin looking at plan sponsorship options long-term

ESB Copyright 2012 American Fidelity Assurance Company 1,000 pages of legislation drafted and enacted very quickly Rules are still being developed –Federal agency guidance –Role of states

ESB Copyright 2012 American Fidelity Assurance Company Only a portion of the rules impact plan sponsors Only a portion of those take effect in the near future Recommended path

ESB Copyright 2012 American Fidelity Assurance Company Plan design mandates Health FSA/HRA/HSA provisions Administrative requirements Plan sponsorship provisions

ESB Copyright 2012 American Fidelity Assurance Company

ESB Copyright 2012 American Fidelity Assurance Company PLAN DESIGN MANDATE EXCEPTIONS Truly stand alone retiree plans HSAs HIPAA excepted benefits ESB Copyright 2012 American Fidelity Assurance Company

ESB Copyright 2012 American Fidelity Assurance Company GRANDFATHERING Available for plans providing coverage on March 23, 2010 –Changes to benefits or contributions –Value of grandfathering –Notice/recordkeeping requirements –Special rule for insured collectively-bargained plans ESB Copyright 2012 American Fidelity Assurance Company

ESB Copyright 2012 American Fidelity Assurance Company 2010 MANDATES All plans must comply –Preexisting conditions –Lifetime limits –Annual limits –Adult children –Rescissions ESB Copyright 2012 American Fidelity Assurance Company

ESB Copyright 2012 American Fidelity Assurance Company 2010 MANDATES Additional requirements for non-grandfathered plans –Insured plan nondiscrimination –Preventive care –Provider access –Internal/external review claims procedures ESB

Copyright 2012 American Fidelity Assurance Company 2014 MANDATES All plans must comply –Waiting periods –Annual limit prohibition –Preexisting condition limits –Adult children – grandfathered plans –Wellness incentives (optional) ESB

Copyright 2012 American Fidelity Assurance Company 2014 MANDATES Additional requirements for non-grandfathered plans –Essential health benefits (insured small group plans) –Clinical trials –Limits on deductibles –Limits on out-of-pocket maximums –Provider nondiscrimination ESB Copyright 2012 American Fidelity Assurance Company

ESB Copyright 2012 American Fidelity Assurance Company ACTION PLAN Grandfathered plans –Reassess eligibility and value –Gather documentation Plans losing grandfathered status – Adopt additional plan design mandates – Revise employee communications Watch for nondiscrimination guidance ESB Copyright 2012 American Fidelity Assurance Company

ESB Copyright 2012 American Fidelity Assurance Company Plan design mandates Health FSA/HRA/HSA provisions Administrative requirements Plan sponsorship issues

ESB Copyright 2012 American Fidelity Assurance Company Coverage/reimbursement for adult children Over-the-counter drugs require a prescription –Supplies and insulin – no prescription needed –Restrictions on use of debit cards HSA non-qualified withdrawal penalty

ESB Copyright 2012 American Fidelity Assurance Company Health FSA limit –Employee contributions are limited to $2,500 –Effective January 1, 2013

ESB Copyright 2012 American Fidelity Assurance Company Remind participants about changes for over- the-counter drugs Amend plan, if necessary, to comply with the $2,500 limit on employee contributions to a Health FSA

ESB Copyright 2012 American Fidelity Assurance Company Plan design mandates Health FSA/HRA/HSA provisions Administrative requirements Plan sponsorship provisions

ESB Copyright 2012 American Fidelity Assurance Company 30-day open enrollment Automatic enrollment

ESB Copyright 2012 American Fidelity Assurance Company W-2 reporting of value of health coverage Quality reporting Coverage and workforce reporting Cadillac Tax reporting

ESB Copyright 2012 American Fidelity Assurance Company Notice of grandfathered status Patient protection notices Transparency disclosures Summary of Benefits & Coverage (SBC) 60 day notice of plan changes Employee educational information for new hires

ESB Copyright 2012 American Fidelity Assurance Company Create a plan for complying with the W-2 reporting requirements Complete/obtain and prepare to send Summary of Benefits and Coverage

ESB Copyright 2012 American Fidelity Assurance Company Plan design mandates Health FSA/HRA/HSA provisions Administrative requirements Plan sponsorship provisions

ESB Copyright 2012 American Fidelity Assurance Company Cornerstone year of Health Care Reform –State Exchanges –Individual mandate –Federal premium tax credit to purchase Exchange coverage –“Employer responsibility”

ESB Copyright 2012 American Fidelity Assurance Company Penalty may apply if: –No coverage offered to full-time employees and dependents –Coverage is “unaffordable” or “inadequate” –Employee receives federal premium tax credit for Exchange coverage

ESB Copyright 2012 American Fidelity Assurance Company Definitions: –Large employer –Full-time employee –Inadequate –Unaffordable

ESB Copyright 2012 American Fidelity Assurance Company Monthly penalty for no coverage: – 1/12 th x $2,000 per month/per employee (after 1 st 30 employees) Penalty for unaffordable/inadequate coverage: – 1/12 th x $3,000 per month/per employee with federal premium tax credit

ESB Copyright 2012 American Fidelity Assurance Company Effective 2018: 40% non-deductible excise tax Imposed on aggregate value of health coverage that exceeds threshold amounts

ESB Copyright 2012 American Fidelity Assurance Company General thresholds: –$10,200 individual coverage –$27,500 family coverage Indexed for inflation Applies for specified health coverage

ESB Copyright 2012 American Fidelity Assurance Company ESB Copyright 2012 American Fidelity Assurance Company

ESB Copyright 2012 American Fidelity Assurance Company Comparative Effectiveness Research (CER) Fee Exchange Reinsurance Fees Indirect Fees – Prescription drug manufacturer annual fee – Medical device excise tax – Health insurance company annual fee

ESB Copyright 2012 American Fidelity Assurance Company Insurers must provide rebates to enrollees if target loss ratios are not achieved –Individual & small group markets – MLR 80% –Large group market – MCR 85% Employers must allocate rebates to employees Rebates may be in the form of a premium credit, check, or by pre-paid debit card

ESB Copyright 2012 American Fidelity Assurance Company Distribute applicable MLR rebates that may be received May want to begin considering cost- management strategies or changes in health coverage

ESB Copyright 2012 American Fidelity Assurance Company Plan design mandates Health FSA/HRA/HSA provisions Administrative requirements Plan sponsorship issues

ESB Copyright 2012 American Fidelity Assurance Company Plan design mandates – reassess grandfathering, implement any new changes, watch for nondiscrimination guidance FSA/HRA/HSAs – plan for $2,500 FSA limit Administrative – address W-2 compliance, complete and prepare to send Summary of Benefits and Coverage

ESB Copyright 2012 American Fidelity Assurance Company Plan sponsorship – consider whether to begin reducing cost via plan design changes Communicate plans and changes to employees Fix slide template NEXT STEPS (cont’d) Plan sponsorship – distribute MLR rebates if applicable, consider whether to begin reducing cost via plan design changes and explore other expense management Communicate plans and changes to employees ESB Copyright 2012 American Fidelity Assurance Company

ESB Copyright 2012 American Fidelity Assurance Company LOOKING AHEAD

ESB Copyright 2012 American Fidelity Assurance Company Thank you! This is only a brief summary that reflects our current understanding of select provisions of the law, often in the absence of regulations. All of the interpretations contained herein are subject to change as the appropriate agencies publish additional guidance.