1. Impact of ACA on the Health Insurance Industry

2. Agenda Impact of ACA on the Health Insurance Industry Planning for 2015 and Beyond Business Problems and Priorities

3. Health Insurance Pre-Affordable Care Act Pre-dominantly employer based coverage Individual segments heavily underwritten Well established national, regional, and niche competitors Limited federal oversight outside of Medicaid/Medicare Broad portfolios with variation in benefit, cost share, and network

4. Three Dates That Changed Everything Obama signs Health Care Reform into Law Insurance reform that broadens access and establishes consumer protections Supreme Court Upholds the Individual Mandate Last legal hurdle cleared to implement major reforms in 2014 Launch of heath care exchanges New market, technologies, channels with government oversight

5. BUT… Insurance Reform Added taxes and fees to cover costs Intended to protect consumers and ensure access to care Government controlled rate review and modification Community rating for individuals and small groups Standardized and mandated set of essential health benefits Rules to protect consumers

6. Individual Mandate 6 BUT… Intended to hold down costs and protect the insurance pool from adverse selection Penalty widely believed too low to have impact Young and healthy willing to gamble First payment is not until 2015 tax season

7. Introduction of Exchanges 7 Intended to expand access to coverage and increase choice State or federally operated market places to purchase insurance for individuals and small groups Insurers must meet minimum qualifications to participate Coverage must fall into one of four metal levels Essential health benefits must be covered Risk adjustment programs to control costs

8. The Last 5 years - Steady State of Change 8 Insurers consumed by Health Care Reform implementation Transformative decisions being made in an uncertain environment Existing financial and forecasting models no longer valid Regulations incomplete and continually changing Unknown competitive landscape On-going political churn

9. Costs will rise, making coverage unaffordable Chaotic roll out of exchange technology Extreme dumping of employer based coverage Consumer confusion over obligations, options, subsidies Mass movement of small/mid groups to self funding Significant downward pressure on provider reimbursement Increase in adverse selection Non-industry entrants in insurance space Early Predictions What Happened? Yes, for Federal Exchange Jury out, premium suppression mitigating No, virtually none year 1 No, limited to moderate Yes, significant and on-going Jury out Jury out, but age range suggests its likely New entrants were minimal, evidence of irrational pricing

10. Price stability will take several years Emergence of retail market will be slow, but it will come Consumer understanding and adoption of individual coverage will gradually evolve Demand for technology will not slow down Non-insurance sector competitors will continue to emerge Post-2014 Expectations

11. Planning for 2015 and Beyond 11

12. Exchanges are here to stay Employer based system largely maintained….for now Individual enrollment grew, but young and healthy didn’t buy Pricing, product, distribution and competitor environment continue to be unpredictable Reform implementation continues, indefinitely Health Insurance Landscape Today

13. Many Unknowns Impacting 2015 Planning Preparing for first year of re-certification and retention Stakeholders evaluating results and next moves Insurers analyzing year 1 impact to medical and administrative costs Employers assessing impacts of benefit mandates, taxes and penalties as they make decisions for 2015 Providers determining value of participation vs. reimbursement in new segments Consumers struggling to understand their benefits, cost share and networks

14. State controlled premium limits ability to project revenue and margin Market pricing masking true costs for consumers Premium disconnected from cost of care Impact of risk adjustment programs still unknown Continued political and legislative churn Evolving and unpredictable competitor strategies Cost vs. value of new distribution channels Challenges for 2015 and beyond

15. Areas of Focus for Health Insurers Provider payment innovation (Medical home, ACOs) Care management of individual segment Retail distribution (private exchanges, web enrollment, retail partnerships) Value based/high performance networks Consumer experience Web/Mobile technology (self service; wellness, health management)

16. Future Impacts for Employers 16

17. Regulations Still in Play Groups >100 Pay or Play Penalty in 2015 Groups 50-100 Pay or Play Penalty in 2016 Groups 50-100 Community Rated in 2016 Cadillac Tax in 2017 Discrimination Rules? Small Employers (<25) Lose Tax Credit in 2016

18. Top Questions for Employers Continue to Offer Coverage Drop Coverage Recruitment and Retention Employees Employer Plans vs. Individual Employee Satisfaction Business Impacts Employees Making Own Decisions Lose Tax Benefit for both business and employees May pay penalty No administrative oversight

19. New Trends Private Exchanges Large National Multi-Carrier Solutions Local Broker Branded Solutions Web Based Exchanges Insurer Based Exchanges

20. Private Exchange Questions Defined Contribution? Employer Contribution for Individual Policies Fees by Private Exchange Vendors Product Bundles and Choice Private Exchange Vendors – Who are they? Group vs. Individual and the ability to take care of all employees

21. Understand Upcoming Regulations How do they impact your business Do they change your decisions for healthcare What is the impact to your employees New trends will surface and be an option Technology will continue to evolve and will impact employer sponsored healthcare The Horizon for Employers

22. THANK YOU 22