1. Convergence Today. Tomorrow. Together. The Affordable Care Act: What does it mean to your business? Deborah Wilkinson VP Health Plan Options, URL Insurance Group Sarah Lockwood Church Partner, Saul Ewing LLC Dr. Paul Kaplan Sr. VP of Provider Strategy & Integration, Highmark

2. The Employer’s Changing Role Deb Wilkinson VP Health Plan Options November 6 th 2014

5. Notes: Survey of 583 Organizations w a collective $103billion in total 2012 health care expenditures. Source: Towers Watson/NBGH Confidence among employers that they will be offering health care benefits a decade from now

6. What is Your Strategy?

8. Group Coverage Non-ACA Grandmothered Plans SHOP Plans = Access Small Biz Tax Credit ACA Option (Non-SHOP) Self-Funded

9. Individual Coverage Sole-Prop? Individual or Family Dissolving Group Coverage - Group vs. Individual - Disadvantages & Challenges

10. Defined Contribution vs. Defined Benefit Fixed Budget for Employees & Employers Outlets for Coverage Options Hybrid Approach

11. Wellness Programs Bending the Cost Curve? Tobacco vs. Non-Tobacco Absenteeism = Lost Productivity

12. What IS your strategy?

13. Thank you for your time! Questions?

14. The Employers Changing Role Paul Kaplan MD MBA Senior VP Provider Strategy November 6, 2014

15. The Employers Changing Role … partnering with a Health Plan to impact: Cost Quality Experience 15

16. 16 Proprietary & Confidential Provider Relationships Product Innovations Key Considerations Technology & Capabilities

17. Provider Relationships 17

18. Cost & Quality : The Highmark’s Pay-for-Value (P4V) Program is a Differentiator in the Marketplace 18

19. Spectrum of Reimbursement Contracting Opportunities 19

20. More than 60% of members in Central Pennsylvania now receive care within a Pay-for- Value program Highmark’s P4V programs are making an impact West Virginia Quality Blue PCMH 92 practices representing 30 PCMH entities 383 practitioners 36,437 attributed members Central Pennsylvania Quality Blue PCMH 334 practices representing 57 PCMH entities 2,002 practitioners 335,402 attributed members Western Pennsylvania Quality Blue ACA/PCMH 438 practices representing 68 PCMH and 77 ACA entities 1,538 practitioners 548,540 attributed members More than 900 practices More than 4,000 practitioners More than 1,000,000 members members Note: figures are current as of September 30, 2014, Delaware PCMH Pilot 38 practices 113 practitioners 35,320 attributed members More than 69% of members in Western Pennsylvania now receive care within a Pay-for- Value program 20

21. Product Innovation 21

22. PROPRIETARY & CONFIDENTIAL Product Innovation Reference-Based Benefit (RBB) - a benefit feature that allows the plan sponsor to set a ‘reference cost’ on selected medical procedures PLAN SPONSOR: Potential to reduce costs when employees select lower cost/ high value providers; or partial cost shift to employees who elect to utilize higher cost providers May encourage providers to become more competitive (cost & quality) resulting in lower ‘reference cost’ on selected medical procedures 22 Community Blue Premier Flex: A tiered benefit design that helps groups and their employees control costs. The enhanced-value tier includes low cost providers and the standard-value tier includes higher cost providers. There is also an out-of-network tier which tends to be more expensive. This tiered benefit design maintains choice since members continue to have access to all network care providers, even at the standard value level. Members can choose high-quality providers from any tier but the enhanced- value tier will offer the lowest cost.

23. Technology and Innovation 23

24. Experience … partner with a health plan that provides 24 Administrative flexibility with National access Clear understanding of accountable care act More productive through wellness programs Data/reporting capabilities

25. Questions 25

26. THE AFFORDABLE CARE ACT What does it mean to your business? PNA Annual Convention November 6, 2014 Sarah (Sally) Lockwood Church

27. Disclaimer: The content of presentation materials has been prepared by Saul Ewing LLP for information purposes only. The provision and receipt of the information in these presentation materials should not be considered legal advice, does not create a lawyer-client relationship, and should not be acted on without seeking professional counsel who have been informed of the specific facts. Should you wish to contact a presenter to obtain more information regarding your company's particular circumstances, it may be necessary to enter into an attorney/client relationship. 27

28. Procrastination, Problems & Politics Constitutional Challenge to ACA Presidential Election Attempts to repeal, defund or modify Enforcement delays Other Litigation: Contraceptive Coverage Subsidies in Federally-facilitated Exchanges 28

29. Procrastination, Problems & Politics Impact of Mid-Term Elections. Repeal of ACA – unlikely; but on the list of potential changes: the definition of ACA full-time employee may change. What should employers do? Continue good faith compliance efforts. Work with industry groups. 29

30. What is the Employer Mandate? In a Nutshell: Generally, beginning in 2015, in order to avoid the risk of penalties called “assessable payments,” each separate member of an “applicable large employer” (as determined on a benefits controlled group basis) must “offer” “minimum essential coverage” that provides both “minimum value” and is “affordable” to its “ACA full-time employees” and their “dependents.” 30

31. What is the “pay” in pay or play? “No Offer” or “A” Penalty - $2,000 x all ACA full-time employees (minus 30, minus 80 for 2015 – allocated pro-rata among all ALE members) if minimum essential coverage is not offered to substantially all (95%/5, 70% for 2015) ACA full-time employees (and dependents), and just one ACA full-time employee gets subsidized Marketplace Coverage. “Inadequate Coverage” or “B” Penalty – Coverage is offered to substantially all ACA full-time employees (and dependents) but it either does not provide minimum value or is not affordable - $3,000 x each ACA full-time employees who get subsidized Marketplace Coverage. Both penalties are non-deductible Penalties are assessed for each calendar month coverage is not offered Penalties apply separately to each member of the ALE’s controlled group (ALE Member) 31

32. Are you subject to pay or play rules? Are you an ALE? OR – How to Count to 50! 50 or more ACA full-time (at least 30 hours of service a week) and/or full-time equivalent (FTE) employees Based on employees and hours of service during the preceding calendar year (for 2015 – look at 2014). Add all hours of service of part-time employees (up to 120 per employee a month) and then divide by 120 - FTEs Looks at your organization’s benefits “controlled group”- same as for testing retirement plans 32

33. When do you have to comply? Generally, 2015, but special transition rule MAY be available for ALEs that have 50 or more full-time/full- time equivalent employees, but less than 100. Non-calendar year transition rules MAY apply to avoid penalties being assessed for months prior to beginning of 2015 non-calendar year plan year. Transition rules require satisfaction of a number of requirements. 33

34. An ACA full-time employee is a common law employee who is credited with an average of at least 30 hours of service a week or 130 hours of service per month. NOTE: All hours of service paid or to which an employee is entitled to be paid (vacation, paid leaves, etc.) have to be counted, also unpaid hours for FMLA, Military Leave and jury duty. 34 Who are your "ACA full-time employees?

35. How do I determine who is full-time? Two Methods: Monthly and Look-back Monthly: ACA full-time status is determined by looking each month at an employee’s hours of service. (Cannot average hours). Look-back: ACA full-time status is determined for a future time period (called a “stability period”) by counting average hours of service in a prior period (“measurement period”) – part-time, variable hour and seasonal employees. 35

36. Who are your employee’s dependents? Children under age 26 (sons, adopted sons, daughters, adopted daughters – does not include stepchildren or foster children) Does not include spouses. Transition rule MAY delay offering dependent coverage for 2015 plan year, if employer taking steps to provide coverage in 2016. 36

37. What do you have to offer? ALE members required to offer “minimum essential coverage” to substantially all ACA full-time employees or risk assessable payments (“A” Penalty) “Minimum essential coverage” or MEC means (at least until further guidance) any health care coverage – but not vision or dental – “Skinny” plans. “Minimum value” - plan’s share of total allowed cost of benefits is at least 60% (“B” Penalty) If you have never offered coverage, what coverage is available and at what cost? 37

38. What is “affordable coverage?” Coverage is “affordable” if the employee pays no more than 9.56% of household income for employee-only coverage under the lowest cost minimum value plan offered. Three safe harbor rules for determining affordability. W-2 (Box 1) – Year-End Determination Rate of Pay – 9.56% x 130 hours x hourly rate or 9.56% x monthly salary Federal Poverty Level for a single person (based upon current FPL of $11,670) – 9.56% x $11,670 = $1,115.65 divided by 12 = $92.97 per month – can use FPL in effect up to six months before beginning of plan year. 38

39. Avoiding a “pay or play” penalty You are not required to offer group health coverage to any employee, but if you “play” – only have to offer coverage to employees who are ACA full-time employees. No penalty unless an ACA full-time employee receives a premium tax credit or cost-sharing reduction for Health Insurance Marketplace (Exchange) coverage. Individuals will not qualify for a premium tax credit or cost- sharing reduction unless their household income equals 100% to 400% of the federal poverty line Penalties do not apply for ACA full-time employees who qualify for Medicaid. 39

40. Who should be on your ACA team? Your ACA compliance game plan requires input from individuals with decision- making authority from: Finance, Human Resources, Benefits, Tax, Legal, Payroll and (if applicable) Labor Relations 40

41. Your ACA compliance game plan Recordkeeping will be a key element to successfully navigating employer mandate. Prepare for new employer reporting and employee statement requirements. Be able to substantiate whether or not an employee was ACA full-time and if there was an offer of coverage and why coverage was not offered during certain periods of time. Be prepared to adjust to changes in the law and additional guidance. 41

42. Questions? 42

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