Introduction

1. The following presentation is brought to you by the Member Firms of United Benefit Advisors in conjunction with the National Association of Health Underwriters The following presentation is brought to you by the Member Firms of United Benefit Advisors in conjunction with the National Association of Health Underwriters

2. Health System Reform OutlookOctober 28, 2009Janet Trautwein, CEONational Association of Health Underwriters

3. Introduction • Passage of health care reform in 2009 continues to be the most important priority for the Obama administration. • Momentum is gaining in both the House and Senate, but with resistance. • Every employer and potentially every citizen in America could be directly impacted, depending on the breadth of the program.

4. Predicting the future is tough business “I think there is a world market for maybe five computers.” -- THOMAS WATSON, PRESIDENT OF IBM, 1943 “Barack Obama is not going to beat Hillary Clinton in a single democratic primary. I’ll predict that right now.” -- WILLLIAM KRISTOL, DECEMBER, 2006 “Two years from now, spam will be solved.” -- BILL GATES, FOUNDER OF MICROSOFT, 2004 “I predict the internet will soon go spectacularly supernova and in 1996, will catastrophically collapse." -- ROBERT METCALFE, FOUNDER OF 3COM, 1995 “Bear Stearns is fine! Don’t move your money from Bear!!” -- JIM CRAMER, MAD MONEY HOST, MARCH 2008 (6 DAYSLATER, SHARES PLUNGED 90%)

5. Three House committees with responsibility over health care marked up one bill (H.R. 3200) and passed different versions out of each committee in July Senate HELP committee marked up bill and passed it out of committee on July 15 Senate Finance Committee passed it’s mark on October 13 by a vote of 14-9 with Senator Olympia Snowe (R-ME) as the only GOP supporter Finance and HELP bill being merged for floor consideration at the end of the month Potential House floor action on a “manager’s amendment” to H.R. 3200 likely to follow Senate Overview of Congressional Action

6. Key Senate Players

7. Key House Players

8. President Obama “If you like your health plan, you can keep it, the only thing that will change is that you’ll pay less.” - President Barack Obama

9. President Obama’s Position • Key promises: • Undocumented immigrants will not be covered • No public financing of abortions • If you like your plan you can keep it • Existing coverage will not change, just become better and less expensive • Public option, if there is one, will be limited to small employers and uninsured individuals • Bill will not increase federal deficit by one penny • Bill will cost about $900 billion and be financed most through administrative savings and cuts to waste, fraud and abuse in the current system • Still allowing Congressional lead in negotiations but staff is becoming more active behind the scenes • Main activity is public appearances and the press

10. Congressional Budget Office • The CBO is responsible for putting a price tag or “score” on all of the bills • Limited to 10 year budget window • Limited to the law without changes, actions of political appointments • Federal government costs only • Doesn’t include infrastructure costs

11. Key Issues • Government-Run Public Plan (or Co-Operative? Or Trigger?) • Employer Mandate • Will you really be able to keep the coverage you have? • Structure of the “Exchange” or “Gateway” • Is an individual mandate enforceable? • Cost containment • Cost of the Plan

12. Public Plan? Co-Op? Trigger? State Option? • Concerns about effects on private insurance markets • Crowd-out, unlevel playing field • Cost controls likely grounded in Medicare price fixing, which already shifts $1,800 in annual premium surcharges to private insurance (family coverage) • “Trigger” mechanism possible • Non-profit “Cooperatives” considered as alternative • State option alternatives from Senators Cantwell and Carper

13. Will You Really Be Able to Keep Your Current Plan? • Despite the oft-repeated promise that if you like your current health insurance policy you can keep it, the bills under consideration all contain very strict grandfathering provisions • New plan rules include rating restrictions, an essential benefits package that is far “richer” than many current plans, new taxes on insurers and other aspects of the industry that will be passed to consumers, and a weak individual mandate • New AHIP/PWC study concludes that by 2019 the average family will be paying $4,000 a year more in premiums than they would without reform AHIP’s CEO Karen Ignagni

14. Is An Individual Mandate Enforceable? • Bills require all Americans to obtain specific levels of health insurance coverage • Intent is good—many uninsured are young and healthy, and inclusion in the insured risk pool would stabilize costs • Insurance carriers could underwrite policies without taking into account preexisting conditions and basing rates on health conditions if EVERYONE is in the system • Questions: • Costs of subsidies needed to make sure everyone can afford coverage • What counts as qualified health benefits plan? • Is tax system effective enforcement? • If enforcement doesn’t work, what is the impact on costs? • Impact on Employer-Sponsored plans?

15. Employer Mandate • House Bill and Senate HELP Bill include outright mandates for employers to provide employees with coverage • Employers told what kind of coverage to offer, to whom they must offer it (including part time employees), and how much they have to pay • Would affect fully insured and self-insured plans (COBRA equivalence); effectively end ERISA preemption • If employers don’t comply with every specific of the mandate, they are fined, and the fine does not go toward the cost of coverage for employees • Exemptions for small employers (to a certain degree) from the mandate. President Obama promised employers of less than 50 will be exempt • Senate Finance Committee does not impose a direct mandate on employers to provide coverage. It requires employers of more than 50 people to pay a fine for low income employees who aren’t offered “affordable coverage” and instead obtain subsidized coverage through the exchange

16. What’s An Exchange? • Modeled after 2006 reforms enacted in Massachusetts • Aim is competition among plans on price of coverage and minimizing variations of benefits • Intended to provide consumers / employers with transparent information about costs and covered benefits, as well as a plan performance and subsidies • The House bill would establish one big national exchange, while the Senate bills establish separate exchanges at the state level • The House and Senate HELP bills have an underlying purchasing pool component to the structure, but the Finance bill exchanges use a portal structure • Exchange participation is currently limited to individuals and smallgroups, except in the Senate Finance proposal • Could result in higher costs for employers if young, healthy opt out of employer plans for government plan

17. Bending the Cost Curve??? • All of the bills contain efficiency improvements, payment reforms and a greater focus on wellness and prevention • Almost all of the provisions targeted at public programs, not the private market • None include substantive tort reform—would extend jurisdiction over the bills to the Judiciary committees • Senate HELP and Finance bills include improvements to employer wellness programs, rating for wellness factors and tax incentives for employers that provide qualified wellness programs to their employees • Senate Finance mark is the most serious attempt to constrain rising health care costs to date, with provisions on disease prevention and wellness, improving the quality and efficiency of health care and value-based purchasing

18. Cost Factor • CBO cost analysis of H.R. 3200 is $1.3 trillion dollars over 10 years • Not deficit neutral and “relative to current law, the proposal would probably generate substantial increases in federal budget deficits during the decade beyond the current 10-year budget window.” • House bill is financed by $400 billion in Medicare cuts, tax on high-end (expensive) employer sponsored plans and an income-tax surcharge on the wealthiest of Americans. • Senate HELP bill also scores over $1 trillion—no payment mechanism was included since this is not a committee with financial jurisdiction

19. Cost Factor • Senate Finance bill score currently hovers around $840 billion—score is just an estimate because its not in legislative language • The Finance bill is funded with an excise tax on most “expensive” plans, and new taxes on health insurance plans, prescription drugs, and medical device manufacturers • The excise tax is based on an arbitrary number that does not take geography or the higher costs experienced by older or sicker groups into consideration • The excise tax may be calculated based on health, dental, supplemental benefits and FSAs • New taxes on health insurance plans, drugs, and devices will be passed on as increased premiums.

20. So . . Where Are We Now? • Senate Finance and Health, Education, Labor and Pensions (HELP) committees’ bills are being merged for floor debate. House is doing the same • New push for public option in Senate • All bills under consideration in both the House and Senate impose significant government regulation and oversight of employer sponsored plans

21. So . . Where Are We Now? • Public concern about record deficit and added cost of health care reform, hopefully, may shape final legislation • Divisive opinions of liberal vs. centrist Democrats in both the House and Senate on issues such as a public option and financing could pose a roadblock to passage • Republicans are united in opposition to all bills, except Senator Snow’s “qualified” approval to Senate finance bill

22. What Can You Do? • Be informed of issues being debated and positions of your Congressional representatives on these issues. New developments occur daily • Get involved. This legislation will affect not only you, but generations to come • Call and write letters to your Congressional representatives to share your opinions. Email is fine, but letters have more impact • For updates visit the NAHU website at www.nahu.org

23. Questions and Wrap-Up

24. Thank you for your participation in this important presentation. United Benefit Advisors (UBA) and the National Association of Health Underwriters (NAHU) are leaders in ensuring that millions of Americans have the health care coverage they need to access quality health care and are committed to helping shape policies that guide positive health care reform. If you have questions or need additional information regarding your benefits strategy, contact your local UBA Member Firm at www.UBAbenefits.com Thank you for your participation in this important presentation. United Benefit Advisors (UBA) and the National Association of Health Underwriters (NAHU) are leaders in ensuring that millions of Americans have the health care coverage they need to access quality health care and are committed to helping shape policies that guide positive health care reform. If you have questions or need additional information regarding your benefits strategy, contact your local UBA Member Firm at www.UBAbenefits.com