Valerie Snyder Rivera, Director of Marketing

1. Valerie Snyder Rivera, Director of Marketing Amanda Baker, Senior Account Manager Thursday, March 14th 2013 Health Care Reform: Making Sense of It • For large groups

2. Making Sense of It. • TO SIMPLIFY THINGS: • This is not legal advice • Regulations and guidance is provided by HHS and is incomplete • Anything can change without notice • Consult your tax advisor for compliance with the IRS code • Wellmark is not responsible for penalties or losses due to employer coverage violations • Seek legal advice to determine changes that may impact grandfathered status • Any questions, talk to your Wellmark representative Wellmark is not providing any legal or professional advice with regard to compliance with any federal or state law, regulations, or guidance. Law, regulations and guidance on specific provisions  has been and will continue to be provided by the appropriate federal and state agencies and regulators. The information provided reflects Wellmark's understanding of the most current information and is subject to change without further notice. Please note that plan benefits, rates, renewal rate adjustments, and rating impact calculations are subject to change and may be revised during a plan’s rating period based on guidance and regulations issued by the appropriate federal and state agencies and regulators. Wellmark makes no representation as to the impact of plan changes on a plan's grandfathered status or interpretation or implementation of any other provisions of law or regulation. Wellmark will not determine whether coverage is discriminatory or otherwise in violation of Internal Revenue Code Section 105(h). Wellmark also will not provide any testing for compliance with Internal Revenue Code Section 105(h). Wellmark will not be held liable for any penalties or other losses resulting from any employer offering coverage in violation of section 105(h). Wellmark will not determine whether any change in an Employer Administered Funding Arrangement affects a health plan’s grandfathered health plan status under ACA or otherwise complies with ACA. Wellmark will not be held liable for any penalties or other losses resulting from any Employer Administered Funding Arrangement. For purposes of this paragraph, an “Employer Administered Funding Arrangement” is an arrangement administered by an employer in which the employer contributes toward the member’s share of benefit costs (such as the member’s deductible, coinsurance, or copayments) in the absence of which the member would be financially responsible. An Employer Administered Funding Arrangement does not include the employer’s contribution to health insurance premiums or rates. • The Lawyers made me say it. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

3. We’re in it together. Everybody needs it. Where they can get it. What it looks like. How it affects you. Decisions about it. How much it costs. How we can help with it. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

4. Making Sense of It. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

5. Making Sense of It. • Health Care Reform (HCR) Expertise + = National expertise from 37 other Blues Plans and the BCBS Association Your Single Solution:Wellmark Local experts in South Dakota and Iowa Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

6. Making Sense of It. We are here to inform, lead, assist andsupport you through all the ACA changes as you make your decisions about your group health plan. Pledge to Employer Groups Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

7. We’re in it together. Everybody needs it . Where they can get it. What it looks like. How it affects you. Decisions about it. How much it costs. How we can help with it. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

8. Making Sense of It. Individual Shared Responsibility (Individual Mandate) Guaranteed Issue No Pre-existing Condition Exclusions Three Primary Elements of the Affordable Care Act (ACA) TERMS TO KNOW Individual Shared Responsibility: Provision in the law that requires all Americans to have health coverage or pay a tax. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

9. Making Sense of It. • Minimum Essential Coverage Requirements • EXCEPTIONS TO MANDATE REQUIREMENT • Financial Hardships • American Indians • Undocumented Immigrants • Incarcerated Individuals • Religious Objections • Three Months or Less • Individual Grandfathered & Non-Grandfathered Plans • State & Federal Government Plans • Employer Group Plans EXCEPTED BENEFITS: Plans that are not within scope of most provisions of the ACA, like dental or vision, long-term care and other supplemental coverage offered as a separate insurance policy and do not qualify as minimum essential coverage. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

10. Making Sense of It. Individuals must decide: Get minimum essential coverage Pay a tax • 2014 – Pay $95 or 1% household income* • 2015 – Pay $325 or 2% household income* • 2016 – Pay $695 or 2.5% household income* Individual Shared Responsibility Consult your tax advisor. * The amount due is determined by the amount which is greater, the flat fee or the percent of household income. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

11. We’re in it together. Everybody needs it. Where they can get it . What it looks like. How it affects you. Decisions about it. How much it costs. How we can help with it. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

12. Making Sense of It. • Online market place • Easy to compare • Two types of exchanges • American Health Benefit Exchange • Small Business Health Options Program (SHOP) • Initial Open Enrollment Oct 1 – Mar 31for individuals • Optional Large Group Exchange 2017 Something New: The Public Exchange Onlineshopping sites Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

13. Making Sense of It. Iowa’s Decision Types of Public Exchanges South Dakota’s Decision State-basedexchanges Partnership betweenstate and federal Federally facilitatedexchange • State provides plan shopping & comparison • State provides core plan management exchange functions • States can use Federal services for premium tax credit and cost-sharing reduction determination • Federal exchange provides shopping & comparison • Federal exchange provides core exchange functions • State makes final Medicaid determination • States can choose to oversee plan management and/or consumer assistance • Federal exchange provides plan shopping & comparison • Federal exchange provides core exchange functions • Federal exchange handles eligibility functions Proprietary – Wellmark Blue Cross and Blue Shield

14. We’re in it together. Everybody needs it. Where they can get it. What it looks like. How it affects you. Decisions about it. How much it costs. How we can help with it. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

15. Making Sense of It. More Choice + More Regulations = More Confusion Health Plans Made Simple Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

16. Making Sense of It. 10% member • Standardized Plans: Metallic Tiers 20% member 30% member 40% member 90% plan 80% plan 70% plan 60% plan Bronze Silver Gold Platinum • TERMS TO KNOW • Actuarial Value: The portion of the covered or allowable claims paid by the insurer. • Catastrophic Plan: A health plan that does not provide a bronze, silver gold or platinum level of coverage for individuals under the age of 30 or who qualify for hardship. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

17. Making Sense of It. • BENEFIT CATEGORIES • Ambulatory Patient Services • Lab Services • Prescriptions • Chronic Disease Management • Maternity and Newborn Care • Preventive Care • Emergency Services • Mental Health and Substance Abuse Treatment • Rehabilitative and Habilitative Services/Devices • Hospitalization • Pediatric Services , including oral and vision care • Essential Health Benefits (EHB) • A bundle of basic medical services • Cost-sharing out-of-pocket (OPM) maximum limits apply • Applies to Non-Grandfathered Plans • Individual Plans, Small Group Plans • Large groups may not impose annual dollar limits on EHBs in 2014 Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

18. Making Sense of It. • New rules for premium calculations • (Individuals and Small Employers) 2014 Premiumcalculations Premiums willfluctuate widely Health and genderno longer a factor TERMS TO KNOW Community Rating: A method of setting health insurance premiums that spreads costs evenly across the entire community. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

19. We’re in it together. Everybody needs it. Where they can get it. What it looks like. How it affects you. Decisions about it. How much it costs. How we can help with it. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

20. Making Sense of It. ACA signed 85% MLR (Health Plans) Summary of Benefits and Coverage (SBC) Exchange Open Enrollment Insurance Exchanges Auto-Enrollment 200+ employees Timing TBD Large Group Exchange Open Enrollment Large Group Insurance Exchange Excise “Cadillac” Tax Annual limits on EHB $750K Dependent Age 26 - All Dependent Age 26 (if not eligible for coverage through employer) Notice of Exchange to group employees Timing TBD, most likely late summer or fall Women’s Preventive ERRP OPM limits Employer Reporting Requirements Annual Health Insurer Fee PCORI Fee 100% Preventive Annual limits on EHB $2 million Transitional Reinsurance Program No lifetime limits on EHB W-2 Reporting for 250+ Quality of Care Reporting Timing TBD Mandatory coverage for clinical trials No Pre-Ex < Age 19 $2,500 FSA Cap Employer Shared Responsibility HSA Non-Qualified Distributions No Tax Deduction for RDS No Annual Limits on EHB Non-discrimination testing for fully-insured groups Timing TBD No FSA/HSA /HRA/MSA for OTC PCORI Fee Increase 90-Day Max Waiting Period Internal Appeals/ External Review No Pre-Ex Conditions 2010 2011 2012 2013 2014 2015 2016 2017 2018 Applies to Non-grandfathered plans only Annual limits on EHB $1.25 million Wellness Programs Applies to Non-grandfathered and Grandfathered plans Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

21. Making Sense of It. Summary of Benefits & Coverage Women’s Preventive Patient Centered Outcomes Research Institute (PCORI) Fee Restricted annual limits on Essential Health Benefits Large Group Provisions 2012 Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

22. Making Sense of It. • Summary of Benefits and Coverage (SBC) • Standardized in plain-English • Explain coverage and gives definitions • Groups will play a role in distributionor may pay a penalty SBC RULES When new employee enrolls During open enrollment Upon group renewal Within 7 days of request Within 60 days of any material benefit change Wellmark is prepared. Our groups will receive their SBCs before their deadline. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

23. Making Sense of It. SBC Non-compliance • Applies to all markets and plans • $1000 per occurrence • Penalties are not tax deductible Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

24. Making Sense of It. • Women’s Preventive • SERVICES COVERED • Well-woman visits • Gestational diabetes screening • Domestic and interpersonal violence screening/counseling • FDA approved contraceptive methods, education and counseling • Breastfeeding support, supplies and counseling • HPV DNA testing • Sexually transmitted infection (STI) counseling • HIV screening and counseling • Effective for plan/policy years on or after Aug. 1, 2012 • No cost-sharing applies in-network • Applies to non-grandfathered plans • Limitations and exceptions exist Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

25. Making Sense of It. Research to find better medical treatments Financed with Comparative Effectiveness Research fee $1 per member in 2012 – 2013 $2 per member in 2014 Patient-Centered Outcomes Research Trust Fund Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

26. Making Sense of It. Flexible Spending Account (FSA) Cap Exchange notification to employees W2 reporting Elimination of retiree drug subsidy tax deduction Patient Centered Outcomes Research Institute (PCORI) Fee Increase Small group enrollment for exchanges (marketplaces) in October Large Group Provisions 2013 Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

27. Making Sense of It. • Flexible Spending Accounts (FSA) Caps Changing • EXCEPTIONS TO THE RULE • Premium Only Plans (POPs) • Cafeteria plans such as dependent care and adoption assistance • Non-Elective contributions or Reimbursement Programs • Flex Credits • Salary reduction contributions • An employees share of health coverage • Dependent care • Adoption assistance • Effective in 2013 • $2,500 limit on salary reductions • Spouses can have separate FSAs Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

28. Making Sense of It. • Exchange Notification Regulations • NOTICE CHECKLIST • Include Exchange contact information • Exchange services • Actuarial Value Status • Subsidy options • Employer contribution guidelines • Employer groups required to notify employees of their rights • Written notice • Implementation has been delayed until late summer/early fall of 2013 Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

29. Making Sense of It. Employer shared responsibility Pre-existing conditions prohibited No waiting periods > 90 days Dependents covered to age 26 No Annual limits on Essential Health Benefits Mandatory coverage for clinical trials Annual health insurer fee Transitional Reinsurance Program Out-of-pocket maximums Wellness programs Health insurance marketplace (exchanges) Large Group Provisions 2014 YEAR OF THE MARKETPLACE (EXCHANGE) Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

30. Making Sense of It. To avoid penalties, employers with 50 or more full-time equivalent (FTE) employees must: • Offer affordable coverage (9.5%of employees annual household income) • Safe harbors issued by IRS • Offer to employees who work 30 or more hours (per DOL definition) • Maintain a minimum value of 60% Employer Shared Responsibility • TERMS TO KNOW • Affordable Coverage: An employee’s cost of coverage cannot exceed 9.5 percent of their annual household income, for their lowest cost plan. • Minimum Actuarial Value: The portion of the covered or allowable claims paid by the insurer cannot be less than 60 percent. • NOTE: At least 95% of full-time employees and their dependents must be offered coverage to meet employer shared responsibility requirements. Consult your tax advisor. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

31. Making Sense of it. • Employer Shared Responsibility Transition Rule • REQUIREMENTS • Potential penalties will apply in the first plan year beginning on or after January 1, 2014, if • Current plan was in effect December 27, 2012, and • Offered to at least 1/3 or all full-time and non-full-time employees, or • At least 25% of all full-time and non-full-time employees enrolled in plan • Applies to plans that renew on a fiscal calendar year (off-calendar year) Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

32. Making Sense of It. Yes • Employer Shared Responsibility – Decision Tree Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

33. Making Sense of It. Full-Time Equivalent Employees Minimum value and affordability requirements apply to employers with 50 or more FTE employees during the preceding calendar year Full-time employee: work an average of at least 30 hours per week or 130 hours per month Non-full-time hours: total number of hours (no more than 120 hours) worked in a month by all non-full-time employees1 Monthly Calculation: FTE employees = Full-time employees + (Non-full-time hours/120) Total FTE Jan.-Dec. / 12 = FTE employee average for previous year. Seasonal employee exception An employer would not be considered a larger employer if the number of FTE employees goes over 50 for 120 days or fewer, during the calendar year, solely because of seasonal employment. Consult your tax advisor. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

34. Making Sense of It. Example: Calculating FTE Employees Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

35. Making Sense of It. • Counting Full-Time Employees Administrative Period (Optional) Standard Measurement Period Stability Period • Ongoing employees:Standard measurement period is between 3 and 12 months • New employees:Variable hour/seasonal employees the initial measurement period • Between 3 and12 months • Can start on the 1st of the month following hire date • Ongoing employee: No longer than 90 days • New employees:Variable hour/seasonal employees administrative period no longer than 90 days • Ongoing employee: Same as standard measurement period but at least 6 months if employee is full-time during measurement period • New employees:Variable hour/seasonal employees, the stability period is the same as for ongoing employees Consult your tax advisor. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

36. Making Sense of It. W2 Safe Harbor Lowest cost self-only premium can not exceed 9.5% of an employee’s W2 wages • Affordability Safe Harbors Federal Poverty Level W2 Rate of Pay • Rate of Pay Safe Harbor • Lowest cost self-only premium can not exceed 9.5% of the computed monthly rate of pay • Hourly rate X 130 hours per month = monthly rate of pay Federal Poverty Safe Harbor Lowest cost self-only premium can not exceed 9.5% of the federal poverty level of a single individual Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

37. Making Sense of it. • Seasonal Employees • DETERMINING EMPLOYER SHARED RESPONSIBILITY • Determine if seasonal employee meets the definition of a full-time employee. • Utilize a standard measurement period of between 3 and12 months. Seasonal • Full-time Equivalent Employees • Not used to determine large group employer status, if: • Number of seasonal workers brings full-time employee count to 50 or more for 120 days or less Terms to know Seasonal employee: A worker who performs labor or services on a seasonal basis. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

38. Making Sense of It. Yes • Employer Shared Responsibility – Decision Tree Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

39. Making Sense of It. Financial Help for those between 100% and 400% of the federal poverty level • Premium Tax Credits & Cost-Sharing Subsidies • SUBSIDY QUALIFICATION NOTIFICATION • Exchange must notify employer • Employee Name • Qualification Status • Employer Liability • Employers can appeal to avoid the penalty. Individuals with access to affordable coverage at a minimum value can’t get financial help If group coverage isdeemed unaffordable,the group may be penalized Consult your tax advisor. TERMS TO KNOW Tax Credit: Small groups with 1-25 employees may qualify for a tax credit up to 50 percent in 2014. But will go away in 2016. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

40. Making Sense of It. No Coverage Penalty • PENALTY ASSESSMENT GUIDELINES • Employer denies employee access to minimum essential coverage or does not provide to at least 95% of full-time employees and their dependents. • At least 1 full-time employee receives a premium tax credit through the public exchange • Pro-rated for each month employer doesn’t offer coverage • No access to minimum essential coverage • $2,000 per full time employee* Terms to know Premium Tax-Credit: Reduce premium costs for people below 400% of the federal poverty level in one of two ways: A refundable credit conducted with the annual tax return or an advanceable payment made directly to the insurance carrier. Consult your tax advisor. * The total penalty applies to your total number of full-time employees minus 30, and is accrued on a monthly basis. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

41. Making Sense of It. Yes • Employer Shared Responsibility – Decision Tree Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

42. Making Sense of It. $3,000 per full time employee Group coverage is offered 1 or more full-time employees receive a premium tax credit or cost-sharing subsidy Inadequate Coverage Penalty • PREMIUM TAX CREDIT AND COST-SHARING SUBSIDY QUALIFICATIONS • Employer coverage is not affordable • Employer coverage does not meet minimum actuarial value • Employee must purchase coverage from HIX Employers are responsible for the inadequate coverage penalty only for those employees that receive the premium tax credit or cost sharing subsidy, but the total employer penalty cannot exceed $2000 times (total full-time employees – 30). The penalty is determined on a monthly basis. Consult your tax advisor. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

43. Making Sense of It. • Calculating the Annual Penalties * Minimum Essential Coverage Offered to at least 95% of full-time employees and their dependents. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

44. Making Sense of it. • No pre-existing conditions for all • Dependent coverage to age 26 • No annual or lifetime dollar limits on essential health benefits More… 2014 Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

45. Making Sense of It. Cost-Sharing Limits Cost-sharing Out-of-Pocket (OPM) maximum limits $6,250 for individuals (2013) $12,500 for families (2013) Proprietary – Wellmark Blue Cross and Blue Shield

46. Making Sense of It. • Wellness Incentives • HEALTH CONTINGENT PROGRAM CONSUMER PROTECTIONS • Annual qualification • Opportunity for a reward at least once per year • Total reward limits • Reasonable alternatives • Uniform availability • Reasonable design standards • Program improves health or prevents disease without being overly burdensome to employees • Participatory wellness programs • No incentive limits • Health contingent wellness programs • Incentive limits increased from 20% to 30% total cost of plan • Incentive limits on tobacco programs are 50% total cost of plan Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

47. Making Sense of it. • Plan years beginning on or after Jan. 1, 2014 • Cannot exceed 90 days for full-time employees • Applies to non-grandfathered & grandfathered plans regardless of group size • Meets compliance even if employee takes additional time to elect coverage Waiting Periods TERMS TO KNOW Waiting period: the period of time that must pass before an individual is eligible for plan benefits. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

48. Making Sense of It. 2015 & Beyond 2015: Employer reporting requirements 2017: Large group health insurance exchange (marketplace) participation 2018: Excise “Cadillac” tax TBD: Auto-enrollment TBD: Non-discrimination testing for fully-insured groups Large Group Provisions 2015 & Beyond Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

49. We’re in it together. Everybody needs it. Where they can get it. What it looks like. How it affects you. Decisions about it. How much it costs. How we can help with it Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

50. Making Sense of It. • Another Big Decision: Pay or Play • DECISION CHECKLIST • Analyze costs • Analyze benefits • Review salaries • Calculate hours worked • Evaluate contracts • Call your Wellmark representative • Meet with your tax advisor • Make Your Decision • Comply with coverage requirements or be assesseda penalty • Weigh your options • Decide in 2013 for 2014 What about the penalties? There are several penalties employer groups may be assessed if they choose not to comply with the mandate — the no coverage penalty, the unaffordable coverage penalty, and a penalty for non-compliance with SBC distribution. Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield