LOCKTON DUNNING BENEFITS University of Alaska Healthcare Reform

1 Healthcare Reform Regulation Limit Health FSAs to $2,500 (current is $5,000, will change at 7/1/2013).9% additional Medicare tax and 3.8% passive income tax on individuals earning +$200,000 ($250,000 for families) Health Insurance Taxes and Fees -Annual Excise Tax Pharmaceutical tax - $2.8B annually - Comparative Effective Research assessment increases to $2 per enrolled employee 2013 Regulation Plans required to produce 4 page plan summaries starting with 9/23/2012 – Open Enrollment April 2013 W – 2 reporting of health plan values (Requires 2012 reporting received Jan 2013) New appeals process with external review (most claim payers are in compliant with rule) Health Insurance Taxes and Fees - Annual Excise Tax Pharmaceutical tax -$2.8B annually -Comparative Effective Research assessment of $1 per enrolled employee (What healthcare treatments are appropriate in given circumstances) 2012

2 Regulation Free Rider Surcharge – Must offer qualifying coverage (60%) at an affordable cost (no more than 9.5% of household income) - $2,000 non- deductible penalty per FTE for not offering a plan ($3,000 for offering non-qualifying/non-affordable coverage) Automatic enrollment (deferred until regulations issued) Cover Clinical Trials - Insurers will be prohibited from dropping or limiting coverage because an individual chooses to participate in a clinical trial. This applies to all clinical trials that treat cancer or other life-threatening diseases All employees working more than 30hrs per week are eligible for coverage Transitional Reinsurance Program Fees – Estimated at $150 PEPY 2014 Regulation Cadillac Tax – 40% excise tax on health benefits for “high value” plans Healthcare Reform THE “EFFICIENT FRONTIER” Optimizing Plan Design and Contribution Strategies by modeling over 800 alternative plan design and contribution strategies to assist in finding an optimal strategy that minimizes cost to the employer – mostly by taking advantage of Exchange subsidies - and maximizes value for employees.

3 Pay or Play – Average Additional Costs (Losers) or Savings (Winners) under the Pay option

4 University of Alaska Health Reform Projections 2014

5 Illustrated 2014 Exchange Plan Design UA Plans – 76%

6 Healthcare Reform Options  Cost Before Reform  Estimated Employees in Plan of 3,942  Estimated University cost of $60,557,000  Estimated Employee cost of $37,930,000  Option 1 – Play and offer qualifying coverage  Estimated Employees in Plan of 4,155  Estimated University Cost of $65,214,000  Estimated Employee Cost of $40,902,000  Option 2 – Pay $2,000 per employee (+30 hours) Penalty  Estimated Employees in Exchange 4,794  Estimated University Cost of $10,871,000  Estimated Employee Cost of $68,784,000  Option 3 – Non-Qualifying Plan  Estimated Employees in Exchange of 119 and 4,083 in the plan (4,202)  Estimated University Cost of $63,795,000  Estimated Employee Cost of $39,112,000

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