Patient Protection and Affordable Care Act Healthcare and Education Reconciliation Act

1. Patient Protection and Affordable Care ActHealthcare and Education Reconciliation Act Together known as HealthCare reform of 2010 Thomas N. Dondore, SPHR HRS/TND Associates, Inc

2. Thank you for attending • This program provides basic educational information regarding the Health Reform legislation of 2010. • We do not provide legal advice and you should consult others for same. (But we do know our BENEFITS!) • This subject is in flux as enforcement agencies have not set operational regulations. • This is our best interpretation of the subject at this point in time. • Our only consulting obligation is to engaged clients, not the general public. hrstndassociates.com

3. Today’s approach • Focus on soonest elements of the timeline, which extends to 2018 • Focus on smaller business requirements • Answering what questions we can and researching those we can’t • We will barely touch the surface! hrstndassociates.com

4. Implementation Be forewarned, NAIC, CMS, DOL , Dept Treasury and DHHS will need to issue guidance after enactment on many issues which will impact our understanding of these measures. There are some questions you may have today that cannot be answered. hrstndassociates.com

5. Confused – Implementation overload!! • DON’T PANIC YET!! • Don’t memorize this! • We are at the End of the beginning • 7 to 10 years of rule making and changes yet to occur. hrstndassociates.com

6. Grandfathering • Means the existing plan doesn’t have to change immediately, but certain triggers of change in future • For now, insured or self-insured, you are AOK • Grandfathering ends with plan years beginning on or after 10/1/10; 1/1/11 for calendar plans • With your renewal, life begins under Reform hrstndassociates.com

7. Grandfathering 1st • No annual/lifetime limits Mx and Rx • Dependent kids covered ‘til 26 – until 1/1/14 only applies to ones not eligible for other coverage • Pre X – banned for children under 19 • Rescission – plan can’t rescind except for fraud or lies • New rules on plan disclosure – not yet clarified hrstndassociates.com

8. Small Employer Tax Credit • Less than 25 FT ees • Avg. wages <$50K • Providing coverage now • Indexed scale • Full credit if <11 ees, wage <$25K • If buys from Exchange, employer credit could be 50% of employer’s contrib – credit 35% for NFP’s hrstndassociates.com

9. Small Employer Tax Credit • Max credit is up to 50% of premium • Up to two years • Only if employer pays at least 50% of premium • Excludes seasonal workers, S corp shareholders, 5% other business owners, dependents and household members • Covers leased ees • No deduction if getting credits hrstndassociates.com

10. HSA and FSA • No OTC under HRA, HSA or FSA after 12/31/10 except with a provider Rx • HSA withdraw penalty goes to 20% in 2011 • Caps • FSA contribution caps at $2500 in 2013 (expect indexing) hrstndassociates.com

11. Other Early Items • Feds begin review of premium rates • Creation of High risk pool for those with no coverage due to Pre x • Temp reinsurance for employer plans covering non-Medicare eligible retirees and fams • Mandates all Emergency services are ‘in network’ • Bans discrimination in coverage based on salary hrstndassociates.com

12. Other Early Items • Mandates any PCP in network is valid, including OB/GYN/Peds • Requires all plans have an appeal process • Employers must provide a summary of coverages to applicants and enrollees • Mandates no co pay on specific preventive services • Carriers must report medical loss ratios; 80% S and M market and 85% Large market – if not met must provide rebates hrstndassociates.com

13. Other Early Items • Creates risk pool for individual markets for those who have Pre x - $5 billion • Excise tax of 10% on indoor tanning facilities • Wipes out the Part D ‘donut hole’ • DHHS gets authority to monitor carrier premium increases. Penalty for ‘unreasonable’ is exclusion from Exchanges • $200MM in Wellness grants for Small employers hrstndassociates.com

14. By next year… • Cost of healthcare will have to appear on w-2’s (excludes HSA, FSA and Archer MSA contribs) • Under 100 employees may adopt “Simple Cafeteria Plans” • Employers must enroll ees in national Long Term Care plan – CLASS Act • DOL to scrutinize all self insured plans hrstndassociates.com

15. Premium and other tax • Private insurers on net premiums– also TPA fees • Starts in 2014 • Complex factors determining rate • Some exclusions • Fees to generate up to $14.3MMM annually by 2018 • Phased in starting now hrstndassociates.com

16. Premium and other tax • Excise tax of 2.3% of selling price on Medical Device Makers • Starts 2013 • Not eyeglasses, hearing aids and contact lenses hrstndassociates.com

17. Premium and other tax • Medicare Payroll tax for high earners – start 2013 • FICA from1.45 to 2.35 and 3.8% tax on passive investment income hrstndassociates.com

18. Premium and other tax • The Cadillac Tax • On high coverage plans • Set at 40% • On hold per Sidecar act and implementation delayed until 2018 • A win for the unions • Loss for taxpayers as public ee plans fall into this category hrstndassociates.com

19. Mandates or not • For small employers (under 50) no requirement to insure • FT is 30 and more hrs/wk • Over 50, no mandate, but fines of up to $750/ee if ee uses tax credit to buy Exchange insurance • Some statute inconsistency on this hrstndassociates.com

20. Mandates or not • If Insurance offered but ees still getting credits, employer pays lesser of $3000/ee getting credit or $750/ee for total number of ees hrstndassociates.com

21. The Individual MandateStarts 1/1/14 • All citizens and legals must have coverage or penalty • 2014-Greater of $95 or 1% income • 2015-Greater of $325 or 2% income • 2016-Greater of $695 or 2.5% income • After 2016 penalty indexed to inflation • Some exceptions allowed hrstndassociates.com

22. Free Choice Vouchers • Certain ees may get voucher in lieu of employer coverage to buy in to the Exchanges • Qualification have to do with income, cost of employer contribution hrstndassociates.com

23. Exchanges- 2014 • State-based • Available to individuals and small employers initially gps. 1 to 100 • Private carriers and co-ops allowed to sell through Exchange • Statute determined plan design • In 2017 exchanges may open to groups over 100 hrstndassociates.com

24. Exchanges- Underwriting • Modified community rating – strict standards • Variations for age (3:1) • Variations for tobacco use (1.5:1) • Family composition • Geography • Wellness discounts allowed • Count on changes hrstndassociates.com

25. Exchanges- Benefit Levels • DHHS ordered to survey and create a standard of coverage • Offered will be variations on the standard • Minimum coverages will be set • Exchanges must abide by standards hrstndassociates.com

26. Exchanges- Benefit LevelsBased on actuarial of benefits • Bronze plan covers 60% • Silver plan covers 70% • Gold plan covers 80% • Platinum plan covers 90% • Catastrophic available to those under 30 or exempt from mandate • All Exchange matters will be subject to future rule making hrstndassociates.com

27. Essential Reform Rules • No Lifetime limitations • Restricted annual limitations • Dependent child to 26-27 (some statute confusion) • No Pre x • Max waiting period is 90 days • OOP limits on HSA at $5950/11,900 in 2010 hrstndassociates.com

28. Essential Reform Rules • In small group market deductibles cannot exceed $2,000/$4,000 • No co pays on preventive care • No discrimination in favor of highly paid hrstndassociates.com

29. SummaryEssence of Reform • Creates Exchanges • Mandate for all to obtain coverage • $$ disincentives for large eers not providing basic coverage • Expands Medicaid at state level • Imposes underwriting requirements aimed at cost effectiveness hrstndassociates.com

30. SummaryEssence of Reform • Promotes and encourages Wellness programs • Many insurance practice reforms • Phased in closing of the Medicare D donut hole with immediate $250 rebate hrstndassociates.com

31. Questions? • A complete copy of this presentation will be available on our website tomorrow at www.hrstndassociates.com hrstndassociates.com