Health Care Reform . . . Denial Is No Longer an Option!

1. Health Care Reform . . .Denial Is No Longer an Option! J Pegues CEO Coventry Health Care Abita Springs, January 2013 Public Domain

2. Reform implementation is moving ahead aggressively. 3

3. Recently Proposed Rules Shaping the 2014 Marketplace Today 11/20 11/20 11/20 11/20 11/20 11/30 11/30 12/28

4. More Rules to Come

5. Latest Exchange Timelines Federal Activities Still Waiting on: Final Exchange Rules, including federal exchanges (MAR / APR 2013) Partnership Exchange Deadline FEB 15, 2013 Plan Preview Period in Federal Exchange AUG 2013 JAN 1 Coverage begins Ongoing Regulations and Guidance 2013 2014 OCT 1 Enrollment Opens Ongoing Grants to States Choose EHB Benchmark DEC 26, 2012 Start QHP Certification APR 2013 Outreach and Education Plan MAR 29, 2013 HHS Consultation MAY-AUG 2013 Finalize Media Plan JUN 15, 2013 Complete QHP Certification JUL 31, 2013 State Activities • EHB = Essential Health Benefits • HHS = Health and Human Services • QHP = Qualified Health Plan

6. Imminent Reforms 2014 2013 • Employer coverage mandate (over 50 employees) with penalties for non-coverage • Individual coverage mandate • Waiting periods limited to 90 days • Annual dollar limits prohibited • Coverage for pre-existing conditions for all ages • Dependent coverage to age 26 even if child eligible for employer coverage • Small group plan deductibles limited to $2K / $4K • Rating based on health status prohibited • Annual FSA contributions limited to $2,500 • 3.8% Medicare tax on net investment income for individuals with income >$200 / $250K • Added 0.9% Part A tax on individuals with income >$200K / $250K • Eliminate employer deduction for Part D drug subsidy

7. Essential Health Benefits (EHBs) 10 Mandated Benefit Categories

8. How Will the Value of EHBs in Exchanges Be Determined? Coverage of EHBs can be offered at four “metallic” levels: • Actuarial Value (AV) • HHS plans to allow insurers flexibility to determine specific cost sharing as long as overall AV level is met (+/-2%). • HHS would develop standard AV calculator states could use or choose to modify. • Calculator will potentially allow adjustments for innovative plan designs. Platinum – 90% of health care expenses are paid by the plan Gold – 80% of health care expenses are paid by the plan Silver – 70% of health care expenses are paid by the plan Bronze – 60% of health care expenses are paid by the plan

9. Components of 2014+ Market

10. Employer and Individual Requirements Concerning Coverage • Employer Requirements • As of January 2014, employers >50 FTEs must offer minimum essential coverage (60% AV) that is “affordable.” • Premiums cannot exceed 9.5% income or penalties apply in LG. • Small employers are exempt whether self- or fully-insured. • Self-insured / LG do not have essential health benefits requirement but SG does. • Individual Requirements • As of January 2014, individuals must obtain and maintain minimum essential coverage or pay a penalty. • Exceptions to the mandate for certain individuals. • For example, if cost of available coverage >8% of income • 3-month grace period during the year, but then penalties are cumulative.

11. Taxes / Fees Impacting Premium in 2014 11

12. Major Reform Impacts for Groups

13. How Do the Employer Mandate and Individual Mandate Fit Together?

14. Family Purchase DecisionSilver Plan “Benchmark” Premiums and Out-of-Pocket *Subject to change in annual HHS AV notice Source: Coventry calculations based on Kaiser Family Foundation estimates

15. Small Business Coverage Decisions in 2014 Exchange World

16. Reform and Small Group Employers What Will They Do? 1. Income calculated based on 2009 FPL for a family of four (HHS), indexed to CPI projections (CBO) 2. Tax bracket based on 2010 tax brackets, indexed to CPI projections (CBO) 3. Computed as CBO estimate of Silver Plan in 2016, indexed to 2014 ($11,941) and divided by (1 – Tax Rate) 4. Estimated federal insurance subsidy 5. Wage equivalent minus subsidies 6. Value of insurance plan 7. Drop if required pay raise is greater than free cash flow Source: “Labor Markets and Health Care Reform: New Results,” American Action Forum. Douglas Holtz-Eakin (May 2010)

17. Small Group Decisions in 2014Implications for Employees Small group employers (<50 FTE employees) do not face employer penalties even if an employee receives a premium tax credit or cost sharing subsidy in an Exchange. Yes Yes Yes Yes No No No Yes Yes No No Yes No No *Employee may elect to go to exchange for insurance but will not be penalized if they do not.

18. 2014 Market Rules 18

19. HHS Proposed Standard Age Curve 19

20. Health Care Reform . . .Denial Is No Longer an Option! J Pegues CEO Coventry Health Care Abita Springs, January 2013 Public Domain