1. 1 Employee Benefits Consultants April 17, 2015 ACA Compliance & Cost Containment

2. 2 Agenda The Affordable Care Act − Recent changes and updates − What you need to know for 2015 and beyond − Pay or Play requirements and associated penalties (Large groups) − DEMO: Calculating and tracking of full-time equivalent employees − Financial planning and budgeting for ACA (Tax and Fee Analysis) Cost Containment Strategies − Fully Insured vs. Self-Funding (brief overview) − Level-Funding and simplified Self-Insured solutions (funding, risk, potential) − Group Medical Stop Loss Captive programs for Self-Insured groups (risk, advantages) − Minimum Essential Coverage options –compliance and affordability Quick Intro to Veritas Risk Services Questions from the Audience 2

3. 3 Health Care Reform & The Affordable Care Act

4. 4 Health Care Reform Enacted in March 2010 Makes significant changes to health care system Implemented over several years Affordable Care Act Health care providers Government programs Health insurance issuers Employers/plan sponsors Individuals Provisions that impact: Most employers that offer health plans will be impacted in some way 4

5. 5 How Health Care Reform Works The Rule Definitions ExceptionSpecial Rule Partial delay More Special Rules Sub-special Rule Additional Special Rule Confusing Political Action Confusing Media Coverage Any questions? 5

6. 6 The effect of ACA on premiums *Wharton School of Business dataset 2013-2015 6 Illinois Men Aged 27Women Aged 27Men Aged 40Women Aged 40Men Aged 64Women Aged 64 Pre-ACA (2013) $91.00$124.00$150.00$182.00$387.00$319.00 Post-ACA (2015) $175.00 $214.00 $502.00 % Change 92%41%43%18%30%57%

7. 7 What’s new with Health Care Reform?

8. 8 2014 updates and changes HPID Delay for Large Groups (October 31 st, 2014) − CMS announced indefinite delay for groups to both obtain and use a Health Plan Identifier (HPID) − Initial deadlines were 11/5/2014 (+$5 million receipts) & 11/5/2015 (All others) − HPID is a standard unique health plan identifier required by HIPAA to “help with consistency” Minimum Value (November 4 th, 2014) − IRS/HHS ruled that “narrow minimum value plans” no longer meet Minimum Value − Minimum Value calculators should not be used to calculate MV with non-hospital/non-physician − Actuarial Value of plan must be greater than 60% to avoid subsidies and employer penalties Employer Reimbursement of Individual Premiums (November 6 th, 2014) − DOL/HHS ruled that employer reimbursements (pre and post-tax) now violate ACA’s market reforms − Much like Medicare, employers are no longer able to “incentivize” employees toward the Exchanges November Elections (November 7 th, 2014) − A Republican controlled Congress has vowed to try another repeal of “Obamacare” in 2015 − “Plan B” for Congress is to remove and dissect key parts of the law: (30 hours, Mandates, Subsidies) 8

9. 9 What do I need to know for 2015 and beyond?

10. 10 2015-2016 updates and changes 6055 & 6056 – Employer reporting of Health Coverage – (deadline 3/31/16 & 1/31/16) 10 TYPE OF REPORTINGAFFECTED EMPLOYERSREQUIRED INFORMATIONEFFECTIVE DATE Code 6055—Reporting of health coverage by health insurance issuers and sponsors of self-insured plans Employers with self-insured health plans Information on each individual provided with coverage (helps the IRS administer the ACA’s individual mandate) Delayed until 2015 The first returns will be due in 2016 for coverage provided in 2015 Code 6056—Applicable large employer (ALE) health coverage reporting Applicable large employers (those with at least 50 full- time employees, including full-time equivalents) Terms and conditions of health plan coverage offered to full- time employees (helps the IRS administer the ACA’s employer shared responsibility penalty) ALEs that sponsor self-insured plans ALEs that sponsor insured plans Non-ALEs that sponsor self-insured plans Non-ALEs that sponsor insured plans Complete: Form 1094-C Both sections of Form 1095-C Complete: Form 1094-C The section of Form 1095-C addressing the information under Section 6056 File: Form 1094-B Form 1095-B These employers are not required to report under either Section 6055 or Section 6056. To report: (1)Information under Section 6055 about health coverage provided; and (2)Information under Section 6056 about offers of health coverage. To satisfy the Section 6056 reporting requirements. These employers are not required to report under Section 6055. To satisfy the Section 6055 reporting requirements. These employers are not required to report under Section 6056.

11. 11 2015-2016 updates and changes “Small Group” Definition Changes − As of 2016, “small groups” will include the 51-100 employee segment as well as groups under 50 − Applies to Fully Insured groups only including those purchased in the SHOP marketplace − Groups under 100 will be pooled together for premium rating and affected by community rating. − ACA’s shared-responsibility provisions will apply to 50-99 market in 2016. *Double whammy Removal of (most) “non-embedded” plan designs − In 2016, individual out-of-pocket maximums in place under the Affordable Care Act will need to apply to individuals within family tier of coverage. This effectively removes the ability for many plans to offer a non-embedded plan design. − Example to be discussed: If a plan design has a non-embedded feature meaning the employee must meet the entire family deductible, and that family deductible exceeds the individual out-of-pocket maximum, it is non-compliant. 11

12. 12 Important for 2015 Tracking and Reporting Eligibility – Employee Hours − If you haven’t yet started tracking and reporting hours for full-time equivalency status, you are likely already behind. Don’t worry, there are alternative solutions available. − Extremely important for budgeting and planning over the next several years Employer Mandate (Groups over 100 employees for 2015, over 50 employees for 2016) − As of your 2015 renewal, the Employer Mandate is officially in effect. Have you done affordability tests based on employee salaries? (no modifications after 12/27/2012 for renewal dates) − Understand your potential exposure to penalties and know how to decipher between them − Groups must offer affordable and compliant coverage to 70% of their workforce – Up to 95% in 2016 Taxes and Fees (Specifics to follow) − Be aware of the taxes and fees your group will face in 2015 and deadlines to remit payment − Have you determined how to address cost-sharing with your employees regarding ACA costs? Grandfathered Status − If your plan is currently grandfathered, will it continue to be for the 2015 plan year? − Yes: Submit Notice of GF Status. No: Ensure plan design meets all requirements under ACA 12

13. 13 2015 Continued Out-of-pocket maximum requirements (all plans, all sizes) − 2015: OPX for EHB may not exceed $6,600 for self-only coverage and $13,200 for family coverage − If you offer a High Deductible Health Plan (HDHP) with HSA compatibility, your OPX limits for 2015 are $6,450 for self-only coverage and $12,900 for family coverage − If your plan uses multiple service providers for administration, Rx and Medical claims may not exceed total OPX limits when combined. Ex: Rx has to count toward medical “buckets” HSA & FSA Limits (Updated October 30 th, 2014) − Limits for pre-tax FSA contributions have been increased from $2,500 to $2,550 for 2015 − Limits for HSA contributions have been increased to $3,350 (single) and $6,650 (family) HIPAA Certifications (prove compliance with HIPAA electronic transaction rules) − Deadline to file certifications is extended until December 31, 2015 − Self-insured groups need to work with TPA to file. Fully insured groups confirm carrier is submitting Changes in enrollment − Many employers expect an increase in enrollment on their group plan in 2015 due to individual tax 13

14. 14 2016 -2018 (as far as we know) Pay or play (2016 and on) − Pay or play provisions will continue and will expand to include groups with 50+ full-time or full-time equivalent employees Cadillac Tax (2018) − In 2018, the Cadillac Tax will officially go into effect − The Cadillac Tax is a 40% tax levied on health coverage with an annual premium exceeding $10,200 for individuals and $27,500 for families − Different limits will apply to retirees and “high-risk” professions − Excise tax will be indexed to coincide with inflation More on Cadillac Tax − It is extremely important that you work with your consultant as early as possible (2015) to determine if your plans will be subject to the Cadillac Tax in 2018. Use forecasting for premiums − If there are adjustments necessary, it is recommended to make these benefit changes over the next couple of years to minimize disruption and turmoil among covered employees 14

15. 15 Should I Pay or Play?

16. 16 Employer Shared Responsibility Rules (Pay or Play) No requirement to offer coverage Can get tax credits for providing coverage Small Employers (fewer than 50 FT/FTE employees) Must offer coverage to FT employees and dependents to avoid penalties Coverage must be affordable and provide minimum value Penalties delayed until 2015; additional one-year delay may apply for ERs with 50-99 full-time EEs Large Employers (50+ FT/FTE employees) Employer penalties triggered if any full-time employee receives subsidized coverage in an Exchange 16

17. 17 Potential Penalties Employer did not offer coverage to substantially all FT employees and dependents (children) $2,000 x (all FT employees – 30) For 2015, Applicable Large Employers (ALE) with 100+ FT employees can reduce their FT employee count by 80 when calculating the penalty Penalty A Employer offered coverage to substantially all FT employees/dependents But not all employees, OR coverage is not affordable or does not provide minimum value $3,000 x each employee who gets subsidized coverage (capped at Penalty A amount) Penalty B 17

18. 18 Avoiding Penalties Offer coverage to FT employees and dependents that: Is affordable Employee’s contribution for self- only coverage does not exceed 9.5% of income Safe harbors for what income and premium amount to use Provides minimum value Plan covers at least 60% of costs on average MV calculator or design-based checklists 18

19. 19 Who is a full-time employee?

20. 20 Full-time vs. Full-time Equivalent Counted for large employer determination Must be offered coverage (along with dependents) to avoid penalties Full-time employees Counted as a fraction for large employer determination Do not have to be offered coverage Full-time equivalent employees Special rules apply for large employer determination Special rules apply for offering coverage (along with variable hour employees) Seasonal employees 20

21. 21 Full-Time Equivalent Employees Add hours of service in a month for PT employees (up to 120 hours/person) Divide total hours by 120 Result: Number of FTEs for the month 21

22. 22 Look-back Measurement Method Stability Period Coverage provided (or not) – length depends on type of employee and whether FT or not Administrative Period Time for enrollment/disenrollment (Up to 90 days) Measurement Period Counting hours of service (3-12 months)

23. 23 What taxes and fees are we subject to under Health Care Reform?

24. 24 2014 and beyond2013 plan year Patient-Centered Outcomes Research Institute (PCORI) Fees Fee to fund research on informed health decisions Paid by issuers and self-funded plan sponsors Paying the fee − Using Form 720 by July 31 each year − Beginning with plan years ending on or after Oct. 1, 2012 − Ending with the 2018 plan year 2012 plan year $1 x average number of covered lives $2 x average number of covered lives Increase based on National Health Expenditures $2.08 for 2015 24

25. 25 Transitional Reinsurance Fees Paid by health insurance issuers and self-funded plan sponsors Fees based on annual national contribution rate − 2015: $3.67/month ($44/year) x average number of covered lives How this actually works… − Employers submit total number of members via pay.gov and are immediately prompted to schedule future payment via electronic banking Dec. 5 th for 2014 Submit enrollment count to HHS Dec. 15 (or 30 days) HHS notifies issuer/sponsor of amount due 30 days Payment due 25

26. 26 Health Insurance Providers Fee Annual fee on health insurance providers − Effective in 2014 − Due Sept. 30 each year − Allocated according to market share: $8B in 2014 - $14.3B in 2018 (based on premium growth in later years) Applies to: Covered Entities Including health insurance issuers and HMOs Does not apply to: Self-insured employers Government and non-profit entities 26

27. Plan Year2014201520162017 Projected Annual Premium $2,750,000$2,942,500$3,148,475$3,368,868 PCORI Fee$1,005 Transitional Reins.$31,658$22,110$13,819$0 Health Insurance Tax$63,250$88,275$110,197$138,460 State Specific Taxes$11,000$11,770$12,594$13,475 Plan YearYear 1Year 2Year 3Year 44 Year Total Fully Insured$106,913$123,160$137,614$152,941$520,628 Self-Funded$32,663$23,115$14,824$1,005$71,606 Self-Funded Savings$74,250$100,045$122,791$151,936$449,021 Sample ACA Tax & Fee Analysis: 350 Enrolled, $2.75m Annual Premium Notes: Figures above are rounded and may not reflect exact figures. Annual 7% increase was assumed. PCORI fees were calculated using $2 annual charge per member (350 employees on plan). Transitional reinsurance fees are calculated as $63/yr, $44/yr, $27.50/yr. Annual Health Insurance Tax is calculated as 2.3% of premium for 2014 up to 4.11% for 2017 27 25

28. 28 Cost Containment Solutions

29. 29 Self-funding Key Terminology Specific Deductible − The amount of claims for which the plan is responsible for on any one individual in a contract period. Ex: 50k Spec means employer funds up to 50k/member Stop-Loss − Excess loss insurance policy or coverage for claims exceeding employer responsibilities. Also known as Reinsurance Aggregate Stop-Loss − The amount of total claims for any one plan year the employer is responsible for. This includes any and all claim payments for all individuals combined Contract Period − The time covered under a contract showing when a claim is incurred and must be paid to qualify 29

30. 30 The problem with being fully insured 30

31. 31 Fully Insured/Traditional Self-Funding 31 Fully-Insured Self-Funded Carrier Profits & Broker Commissions State Mandates Cost to be part of a stop loss pool run by carrier Claims Below Stop Loss Deductible Cost of Administration Potential Claims Above Expected/Below Maximum Stop Loss Premium Claims Below Stop Loss Deductible Cost of Administration Employer pays carrier premium, carrier pays claims Lack of transparency Unfounded renewal increases (risk, trend, demographics) No chance to “win” Subject to all ACA taxes and fees Subject to state mandated benefits Employer pays stop loss premium, admin, and partially funds claims Complete transparency to claims, trends, costs, experience, etc. Recoup any unused dollars Exempt from State tax and Health Insurers fees Typically “win” 4/5 years

32. 32 Fully Insured/Level-Funding 32 Level-Funded (Simplified Self-funding) Carrier Profits & Broker Commissions State Mandates Cost to be part of a stop loss pool run by carrier Claims Below Stop Loss Deductible Cost of Administration Employer pays carrier premium, carrier pays claims Lack of transparency Unfounded renewal increases (risk, trend, demographics) No chance to “win” Subject to all ACA taxes and fees Subject to state mandated benefits Employer pays stop loss premium, admin, and partially funds claims STABLE MONTHLY PREMIUM Complete transparency to claims, trends, costs, experience, etc. Any unused claim dollars are refunded Also exempt from some fees and taxes Typically “win” 4/5 years Fully Insured Potential Claims Above Expected/Below Maximum Stop Loss Premium Potential Refund (Unused Claim Dollars) Claims Fund Cost of Administration

33. 33 Captive Solutions via Self-Funding What is an Employee Benefits Stop-Loss Captive? − A stop-loss captive is essentially a “pooled” system of risk and premium involving multiple employers of different industries and sizes How long have they been around and how many are there? − Stop-loss captives have been in existence for about 70 years primarily on the workers compensation and property/casualty side − These are relatively new in the past 10 years using health insurance and there are about 30 in existence in the United States What are the potential benefits? − Because risk and premium are “pooled” among a larger employee grouping, we’re able to leverage economies of scale and get more favorable quotes − In addition, participating groups are eligible to receive a premium refund equaling up to 50-60% of stop loss premium What are the potential risks? − The only additional risk is collateral to participate in the amount of 10-15% of total stop loss premium. This collateral is typically returned 6 months after close Underwriting − The Everlong Captive Program is underwritten just as any other traditional stop- loss quote meaning each group is individually underwritten 33

34. 34 Fully Insured/Self-Funding/Captive 34

35. 35 Sample Dividend Distribution Total Surplus of $285,000 Client #ABCDEFGHI Surplus-$50k-$25k+$70k+$100k+$65k+$50k+$60k+$50k-$35k Dividend Structure pro-rated as follows Client #ABCDEFGHI Surplus0% 70/395 17.7% 100/395 25.3% 65/395 16.5% 50/395 12.7% 100/395 25.3% 50/395 12.7% 0% Dividend$0 $51k$72k$47k$36k$43k$36k$0 35

36. 36 Minimum Essential Coverage Plans What is a minimum essential coverage plan (MEC)? − Limited offering that meets minimum essential coverage requirements under ACA − Not considered full major medical coverage Is this a replacement for major medical coverage? − No. MEC plans should not be looked at as an alternative to major medical coverage When should I used this option? − Ideal for part-time employees and/or variable hour employees currently not enrolled in major medical coverage What are the potential benefits? − Very low cost plans. Cover preventive services and can be paired with Limited Benefit Medical plans to become valuable offering to employees otherwise without coverage. With proper contributions, eliminates $2,000 employer penalty AND Individual Mandate What are the potential risks? − Because these plans do not meet Minimum Value (60%), employees may still choose to get a subsidy from the exchange. If employees choose not to enroll in the MEC plan and get a subsidy, Employers may still face $3,000 penalty 36

37. 37 Who is Veritas Risk Services?

38. 38 Your Veritas Team 38 Doug Truax President & Managing Partner Bob Walsh Executive Vice President/Partner Bill Basnett Senior Vice President, Sales Zach Gay Senior Associate, Partnership Development Sharon Schlenker Senior Vice President, Partnership Management Sherry Gaskill Senior Vice President, Finance & Administration Jackie Ciancio Account Executive, Partnership Management Greg Hopkins Account Executive, Partnership Management

39. 39 Veritas Founding and Growth 39 Founded by Doug Truax and Bob Walsh in January 2008 – Combined 40 years of benefits experience Rapid growth in the middle market in a variety of industries, group sizes, and locations As of 2015, over 25,000 employees covered and almost 1,000 in our captive alone High focus on self-funding medical, plan design analysis, wellness program design, voluntary/ancillary offerings, and value added services/resources for HR departments Proactive thought leadership delivered via a disciplined service model Our account managers have been on the other side of the desk – we truly understand We hold ourselves accountable through annual planning and monthly reporting

40. 40 Key Differentiators 40 Unparalleled customer service and dedicated account management team to handle everything from simple administrative tasks to complex strategy and ACA compliance We look at every client objectively and understand each has its own goals, motivators, and needs regardless of industry or size. No cookie cutter approach. High-touch client relationships with monthly reports and quarterly meetings. If you’re looking for the broker who only visits at renewal, you’ve come to the wrong place. Although we have many fully insured clients, we are truly self-funded experts and are constantly looking for ways to decrease your medical spend and put more money back in your pocket We take a consultative approach with our clients. No idea or potential solution is off the table or out of the question. We will help you strategize and choose an arrangement that you are most comfortable with and will act as an extension of your business. No vendor bias. We will help you partner with the carrier or vendor that is in the best interest of your business. Complete transparency from pricing to carrier relationships and on.

41. 41 Monthly Activity Reporting 41 Each of our clients will receive a detailed monthly analysis and report of their current plan performance, goals and strategies for the plan year, as well as updates on outstanding projects and requests This report acts as a checklist to ensure we are always on the same page with our clients and nothing can slip through the cracks. Each monthly report will be customized to your needs and will include a list of future goals/objectives for the following month to encourage and promote continuous progress. This further reinforces our promise of constant communication and a high touch relationship with our clients. VRS Monthly Activity Report

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44. 44 Our National Reach 44

45. 45 Web Benefits Design & HRIS Portals 45

46. 46 What our clients say about Veritas 46 “We have been extremely pleased with their consultative abilities, commitment to on time delivery of promised services, negotiating techniques, and overall execution of brokerage services. Veritas has exceeded our expectations and the services of other brokerage/consultant firms with have worked with in the past. I recommend their services to any organization looking for a new approach to employee benefit brokerage and consulting.” Director, Global Benefits at a technical services company - 3,500 employees “We never knew our prior broker was lacking anything, in fact, we may have recommended him. We were then introduced to Veritas Risk Services but told them we were happy with our current broker; a multiple year relationship. After learning about their firm, strategies and deliverables, we decided mid-term to make Veritas our broker of record. Even though we made the decision only weeks before our renewal, they successfully negotiated with our carriers and saved us significantly. The transition was incredibly smooth and we’ve been very impressed with their technology, communication and execution, in fact, we’ve never had this kind of control over our group benefits.” Senior Vice President, Human Resources at a financial services firm - 200 employees “Veritas is able to do things other brokers can’t. Other brokers can do things when you ask, but it is for a price. Veritas does more, but the services are value adds. Highly competent people. Extremely knowledgeable. They go above and beyond.” Human Resource Manager at a precision manufacturing firm - 150 employees

47. 47 More comments from our clients 47 “Our account manager is a ROCK STAR!” and “They’ve really added value to what I bring to the table and to the information I bring to upper management. We definitely feel a good partnership with Veritas and they have been an asset to my (very small) team.” Director, Compensation and Benefits and Manager, Employee Benefits at a manufacturing company - 2,800 employees “Thanks to their leadership, communication and strategies, we’ve successfully navigated through rapid organic growth, a new multi-state acquisition and healthcare reform legislation. Veritas is more than a broker; they are a valued partner that we and our employees count on throughout the year. Thanks to their proactive approach, we feel we have the benefits platform in place that will help us retain our valued employees and attract new talent. Veritas has continuously gone above and beyond to assist us with everything we need. We appreciate their efforts, and we could not be more please with Veritas’ commitment, expertise and service.” Director of Administration at a financial trading firm - 90 employees “They are great at making my job easy. The most hands-on broker with the most dimension. They handle everything for us, I can’t think of anything else they could do.” Human Resource Manager at a technology company -110 employees

48. 48 MyWave Connect Demo

49. 49 Questions? Zach Gay Senior Associate, Partnership Development P: 630.601.1494 C: 630.272.3272 E: zach_gay@veritasrs.com