1. THE AFFORDABLE CARE ACT: WHAT’S NEXT? Presented by: Michael O’Connor, RHU

2. **Confidential** I have spent my entire career servicing and writing Health Insurance and Employee Benefits. As a Registered Health Underwriter with over 20 years in the Health Insurance and Employee Benefit Industry, I have been able to work closely with Many clients consulting and advising on claims, benefit design and premium. 2 MICHAEL O’CONNOR

3. **Confidential**  The Philosophies of ACA: ◦ Coverage expansion ◦ Access expansion ◦ Health Care Cost Containment ◦ Administrative Simplification ◦ Improvements to Health Care Delivery System  The Elements of ACA: ◦ Individual Mandate ◦ Employer Penalties ◦ Health Exchanges ◦ Premium and Cost-Sharing Subsidies ◦ Medicaid Expansion ◦ Insurance Market Reform 3

4. **Confidential**  On June 28, 2012, the Supreme Court of the United States (SCOTUS) upheld ACA, including the individual mandate. The justices concluded that the individual mandate was not a valid exercise of Congress' commerce clause power, but was a proper use of Congress' taxing authority.  Because the Act was wholly upheld, employers must continue to comply with its requirements. 4

5. **Confidential**  Uniform summary of benefits and coverage (referred to as the “SBC”): ◦ Employers are required to distribute to all plan participants an SBC which consists of a 4-page summary of the material provisions of a health plan in a specified, uniform format. The SBC must also include a glossary of health coverage and medical terms.  Advance notice of modification to SBC content: ◦ The ACA requires that written notice of any material modification of coverage is provided at least 60 days in advance to all plan participants.  W-2 reporting for health coverage: ◦ The ACA requires employers (with some exceptions) to report the cost of coverage under an employer-sponsored group health plan on IRS Form W-2. W-2 reporting begins for 2012 which is provided to Employees issued in early 2013.  Coverage for women’s preventative care service begins: ◦ For plan years on or after August 1, 2012 certain services such as mammograms, screenings for cervical cancer, prenatal care, and others shall be covered with no cost sharing for new health plans. 5

6. **Confidential**  Flexible Spending Accounts will be subject to a contribution limit of $2,500 per plan year.  IRS Alert: Itemized deductions for unreimbursed medical expenses would increase to 10% of adjusted gross income (currently 7.5%).  The mandated essential health benefits cannot be lower than $2,000,000 annually.  The Medicare Tax Rate increases to 2.35% on earnings over $200,000 per individual, $250,000 per couple.  Notices to be sent by employers to employees about the Exchanges.  Exchanges will begin open enrollment. 6

7. **Confidential**  The Individual and SHOP (Small Business Health Options Program) health insurance exchanges will be fully operational.  The individual and small group market will be subject to the guarantee issue/renewability provisions in ACA.  The individual coverage mandate is effective: ◦ Most Americans will be required to buy health insurance or pay fines of $95 per individual, up to $285 per family or 1% of taxable household income, whichever is greater.  Government subsidies for Premium and Cost-Sharing available for those under 400% of the federal poverty level.  Employer Penalties begin: ◦ Large employers will be subject to an assessable payment if any full-time employee is certified to receive a premium assistance tax credit and either the employer does not offer full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an employer plan or the employer offers full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage that either is unaffordable or does not provide minimum value 7

8. **Confidential**  Dependent coverage to age 26, regardless of student, marital, or residence status will now apply to all plans (includes those with grandfathered status).  No annual dollar limits will now apply to all plans (includes those with grandfathered status).  No waiting period over 90 days will now apply to all plans (includes those with grandfathered status).  Limits on cost sharing $6250 per individual, $12,500 per family.  Limits on deductibles $2000 per individual, $4000 per family.  Employer Wellness Program Incentives begin.  States may expand Medicaid: ◦ The Medicaid Expansion allows low income Americans under the age of 65 to become eligible for Medicaid with incomes levels to133% of FPL or $29,327 for a family of 4).  Provider nondiscrimination provisions become effective: ◦ Plan participants would be allowed to select their primary care provider, or pediatrician, from any available participating providers. Additional requirements such as no prior authorization required for emergency services, whether in-network or out-of-network. 8 Continued..

9. **Confidential** Please contact: Michael O’Connor, RHU 9 This presentation is not intended or offered as legal advice. These materials have been prepared for educational and information purposes only. Receipt of these materials does not constitute, a lawyer- client relationship between First National Administrators, their employees, and you or any other user. No person should act or fail to act on any legal matter based on the contents of these materials. Always seek appropriate legal and tax guidance. © 2012 First National Administrators, Inc. and its affiliated entities. All Rights Reserved. These materials may not be reproduced for distribution without the prior consent of First National Administrators, Inc. Written by: Heather Reynolds, General Counsel, Operations and Regulatory Compliance

10. **Confidential** 10