Overview of Healthcare Reform

1. Overview of Healthcare Reform October 14, 2010 Lewis County Economic Development Council Sheela Tallman Manager, Legislative Policy

2. Agenda • Premera’s Focus • Implementation • State’s role • Impact of midterm elections

3. Premera’s Healthcare Reform Focus • Bring peace of mind to our members and the members of our affiliate companies – nearly 1.6 million members • Helping our members, employers and producers navigate the path forward • One thing is clear – This is a long journey – with some complexity

4. Highlights of Reform Law The reform law builds on the existing employer-based system and improves access to coverage • Individual mandate to maintain coverage • Subsidies for low income individuals • Benefits – no lifetime maximum and dependent age extension • Focus on wellness programs • Comparative effectiveness research

5. Estimated Coverage Impacts of Reform Millions of nonelderly people, by calendar year Source: CBO, Estimated effects of the Insurance Coverage Provisions of Reconciliation Proposal combined with H.R. 3590

6. Timeline of Healthcare Reform January 1, 2010 (Retroactive Date) March 23, 2010 (Enactment Date) September 23, 2010 2011 - 2013 January 1, 2014 2015 - 2020 • Phase I • Dependent coverage to age 26 • Restrictions on rescissions • No pre-existing condition exclusions for those less than age 19 • Preventive services with no cost-sharing • No lifetime limits; restricted annual limits • Patient protections • Rate review for all insured products • 2016 • Healthcare Choice Compacts • 2018 • 40% excise tax on “Cadillac Plans” • 2020 • Completely close Medicare Part D “donut hole” • Minimum Medical Loss Ratio Requirements • Wellness program grants for small employers • Pharma Tax • Summary of benefit requirements • Reporting of quality of care activities • Comparative effectiveness research fee • Medicare payroll tax increase • Medical device manufacturer tax • Small business tax credits • Medicare Part D “donut hole” rebates • Grandfathered plan status if in effect on date of enactment • Phase II • Guaranteed issue, no pre-existing condition exclusions, modified community rating rules • Mandated benefit designs • Individual mandate and employer responsibility • State-based Insurance Exchanges • Subsidies • Medicaid expansion • Phase II small employer tax credits • Insurer fee • 90 Days Out • National high risk pool • Early retiree reinsurance program • July 1, 2010 • HHS internet portal for individuals and small groups 12

7. Grandfathered Plans – Plans in effect 3/23/2010 • “If you like your current plan, you can keep it” • Rules address: • What does not cause the loss of grandfathering • What you need to do to maintain grandfathering status • What causes the loss of grandfathering after March 23, 2010 • Good faith compliance • Are there advantages derived from grandfathering?

8. Interim Final Rules - 2010

9. Major Reforms – Effective 2014 • Guaranteed issue, no pre-existing condition exclusions, new rating rules, small group size • Mandated benefit designs • State-based Exchange • Subsidies for individuals up to 400% FPL • Individual mandate and employer responsibility • Medicaid expansion

10. Individual Mandate – 2014 • Requires legal residents to maintain “minimum essential coverage” • Imposes annual penalty for not having insurance at the greater of flat dollar amount or percent of taxable income: • $95 or 1% of income (2014) • $325 or 2% of income (2015) • $695 or 2.5% of income (2016) • Penalty is capped at national average premium for Bronze plan in Exchange • Exemptions for affordability, gap of less than 3 months, hardship, religious exemption, unauthorized immigrants, incomes below tax filing threshold

11. Employer Responsibility – 2014 • Applies to employers with average of at least 50 full-time employees • Fee must be paid if coverage is NOT offered to full-time employees and one obtains a subsidy in the Exchange • $2,000 per full-time employee per year (subtract first 30 employees) • Fee must be paid if coverage IS offered to full-time employees and one obtains a subsidy • Lesser of: $3,000 for each employee getting a subsidy per year OR $2,000 per full–time employee (subtract first 30 employees) • An employee may be eligible for a subsidy in the Exchange if the employer coverage is below 60% actuarial value or if the employee’s premium exceeds 9.5% of income • Free Choice Vouchers

12. Insurance Exchanges Key intent of Exchanges is to improve access to health insurance for individuals and small employers • Expanded coverage - mandated benefits • Employee choice of carrier • Incentives for eligible individuals and small employers – subsidies and tax credits • Private plans may voluntarily participate

13. Insurance Exchanges 2019 Projected Exchange Enrollment: 29 million 17% 17% 63% 3% Source: CBO letter to Speaker Pelosi, March 20, 2010 CBO projection for individuals eligible for premium credits because their employer plan covers less than 60% of costs is under 1 million

14. Estimated Impact of Taxes and Fees on Premera ($ in millions) Aggregate Aggregate estimated impact to Premera and affiliates Assumes pass through from providers

15. State Activities Underway • Pre-Existing Condition Insurance Plan (temporary high risk pool) • Washington receives $101 million • Premium Review Grants: to expand scope of premium reviews, make information publicly available, and upgrade technology • Washington receives $1 million • Exchange Planning Grant: to research and plan for marketplace and determine operations • Washington receives $996,285

16. Midterm Elections and Health Policy Outcome of elections will influence the future of healthcare reform in terms of implementation and appropriations • All 435 U.S. House of Representatives seats up • Current: 255 Democrats 178 Republicans 2 vacancies • 37 of 100 U.S. Senate seats up • Current: 57 Democrats 41 Republicans 2 Independents

17. Questions