PPACA* Outlook for Oklahoma (* Obamacare , ACA, Healthcare Reform) How did we get here?

1. PPACA* Outlook for Oklahoma (* Obamacare, ACA, Healthcare Reform) • How did we get here? • What is the cost? • Implementation challenges • Oklahoma City Health Underwriters • March 12, 2013

2. OKLAHOMA FAST FACTS • 84% of Oklahomans have health insurance (1) -82% under age 65-private or public -99% over age 65-federal or ESI -600,000 uninsured • $24 billion-Oklahoma Healthcare Expenditures-2009 (1) -5% annual average increase • $15,745/year- U.S. Average for Family Coverage- 2010 (1) -Premiums up 97%;2002-2012 Source-(1) Kaiser Family Foundation; Health Research & Educational Trust

3. Oklahoma has “opted out” of the ACA • In 2012, State Question 756- 65% yes; 35% no • No legislative actions in 2011, 2012 • No selection of EHB- Oct. 30th, 2012 • No ‘Exchange Blueprint’- Nov. 19th, 2012 • Gov Fallin letter to Sec. Sebelius, “Opposed by majority of Oklahomans” “Threatens to erode the quality of American healthcare and the fiscal stability of the nation” • Default to Federally Facilitated Exchange • No Expansion of Medicaid- Nov. 19th, 2012

4. HEALTHCARE INSURANCE IS EVOLVING • Passage of PPACA most significant regulatory overhaul of U.S. healthcare since Medicare/Medicaid in 1965 • Seeks to achieve the “Trifecta of Change” • Control of Costs • Improved Quality • Universal Coverage • Major challenges for each element of change

5. PPACA Chronology • 2009- HR 3590 (9-17-09) S 1790 (12-24-09) PL#111-148 (3-21-10) • 2010- Signed into law: Mar. 23rd, 2010 Immediate Provisions Age 26 dependents No lifetime dollar limits No pre-ex for <19 years old Many other mandates • 2011 Medical Loss Ratio Rule- 80%/85% -$22 Mil –OK $1.1 Bil – U.S. Rate Review Rule- reasonable criteria>10% increase Medicare Rx Discounts & Free Preventative Care - $1.86 Bil

6. Chronology Cont’d 2012 New Rules Implemented Tax- W2 Reporting; 1099 Hospital Readmission Penalty Accountable Care Organizations - Medicare 2013 Final rules for Health Plans: EHBs http://cciio.cms.gov/resources/data/ehb.html Market Reforms Benefit and Payment Parameters MEWA Multistate Plan Proposed rules on Eligibility (“Application Counselors”), SHOP

7. Chronology Cont’d • 2013- Taxes and Mandates coming Self employed tax increase- 0.9% Medicare tax- 3.8%- Hi-Incomes: 250K/200K DME tax- 2.3% excise tax FSA capped @ $2500/year Contraceptive exemption ends Exchange Open-Enrollment 10/1/13 • 2014- Exchanges begin operation on 1/1/14 No pre-ex, health status or gender discrimination • 2015- Physician payment reform measures

8. PPACA Costs Cost- CBO Estimates Overall Coverage Cost- For 10 yr period beginning: 20102012 $938B $1.76T $754 Billion in Subsidies Implementation Cost: Unknown

9. PPACA Coverage Who Is- Is Not Covered Post-Implementation • 2014 - 22 million Americans move to insured status • 2015-2019 - Add’l10 million move to insured status * • 2020 - 23 million remain uninsured

10. Exchange Business Functions Communication- Outreach, notification, education Oversight- Goverance & management support, resource management Eligibility & Enrollment- Individual + SHOP exchange eligibility determination and enrollment Customer service- Consumer support, broker/navigator relationship mgmt Financial Mgmt- Transaction processing, risk mgmt & reporting, payment stream monitoring, rules mgmt, anti-fraud programs Plan Mgmt- QHP certification, rate/form review, licensing/ solvency, A/V reviews

11. Exchange Implementation Challenges • Funding- $1 billion in funding grants available to SBE states • Ohio- $63 million to establish; est. $43 million to operate • Minn.- $110 million to establish; $54-$60 million to operate • Timely Delivery- By Oct. 1st, 2013, no later than Jan. 1st, 2014 (Statutory deadline) • Bandwidth @HHS will be seriously challenged • Only one-third of regs have been issued • Central hub specs not issued

12. Technology Build – Central Hub “Miracle of Central Planning?”

13. Legal Challenges Religious Liberty & Contraceptive Mandate • 40 Cases-11- Plaintiffs representing hospitals, universities, businesses and some schools • Proposed rules issued February 1, 2013, open for public comment through April 8, 2013 • Implementation Challenges • State of Oklahoma v. Kathleen Sebelius & Timothy Geithner • Seeks to uphold Section 1311 of PPACA- Restricts “Premium assistance tax credits” to [only] exchanges established by states.” • IRS has no authority to offer those entitlements to states that opt-out

14. VI. Marketplace Sticker Shock • CBO 2009 Report on premium increases in the individual and small group markets: -2% to +2% • Milliman Actuaries now estimate increases in the 30-40% range for CY 2014. • Example: Ohio’s individual market will increase 55-85% by 2017; 10-20% in small group. (Exclusive of medical inflation) • Drivers of Increase: • Benefit expansion • Risk pool composition change • Adverse selection • Carrier fee pass-through • Provider cost shifting

15. VII. Exchange Regulatory Environment • Federally Facilitated Exchange run and operated by HHS • QHP Management (Regulatory Functions) will be HHS responsibility. • Licensing 5. SERFF • Solvency 6. Rate Review • Mkt. oversight 7. A/V Review • Consumer Protection 8. Network Adequacy • Dual Regulatory Environment? • Exchange business- HHS • Non-exchange business- OID

16. General ACA Requirements • Two Exchanges • American Health Benefit Exchange • SHOP (Sm. Bus. Health option) Small group • Exchange/Non-exchange Requirements • Guaranteed Issue & Renewability • Modified Community Rating ( age, smoker, etc.) • Risk Sharing Among Carriers • Large Groups Input • 50 FTE’s ( FTE+PTE hours > 50 FTE) • Play or Pay • > 200 FTE’s = auto enrollment • Not subject to EHB, rating rules, limits on deductibles • Small Group/Individual Impact • Increased offerings • Employers have no requirement to offer or contribute to cost of their workers coverage • Tax Credits to employer • Premium subsidies to low-income EE’s

17. ACA Impact on ESI

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