John Penko,

Vice President, Kemper Benefi ts

WHAT NOW?WHAT NEXT?

“I don’t make jokes. I just watch the government and report the facts”

- Will Rogers

“If you don’t read the newspaper you are uninformed, if you read the newspaper you are misinformed”

- Mark Twain

Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.

- Ronald Reagan (1986)

• Unpredictable• Unsustainable• Unfair

ACA Law

What Now?

Changes and Delays to the Health Law

FEB. 7, 2013 Announces a one-year delay in issuing rules to states for putting in place a “Basic Health Program,”

SPRING 2013 Delays for one year the option to provide workers with a choice of health plans on the small business marketplace, limiting them to a single plan.

JULY 2 Announces a one-year delay in the requirement that larger businesses offer health coverage to their employees or face a penalty

SEPT. 26 Announces a one-month delay in the opening of the small-business marketplace, setting the new start date at Nov. 1

OCT. 23 Announces an adjustment of the individual mandate deadline, saying people must now sign up for a plan by March 31, instead of Feb. 15, to avoid tax penalties.

NOV. 14 Allows insurers to reinstate for one year plans being canceled because they do not comply with minimum coverage requirements of the law.

NOV. 22 Extends the deadline to sign up for health coverage that takes effect on Jan. 1 by eight days (to Dec. 23) and delaysthe 2015 insurance enrollment period by a month, to Nov. 15, 2014

NOV. 27 Delays for one year online enrollment in the small-business marketplace (until November 2014)

Over the past year, the Obama administration has made a series of major changes to the health care law, many in response to the troubled rollout of Healthcare.gov.

Changes and Delays to the Health LawOver the past year, the Obama administration has made a series of major changes to the health care law, many in response to the troubled rollout of Healthcare.gov.

DEC. 12 Urges insurers to give consumers more time to make their first premium payments for coverage beginning Jan. 1.

DEC. 19 Announces that people whose policies have been canceled will be allowed to buy catastrophic coverage and will be exempt from tax penalties for not having insurance in 2014.

DEC. 23 Establishes a 24-hour grace period for people trying to sign up for health coverage that takes effect on Jan. 1

DEC. 24 Announces that people might qualify for “a special enrollment period” because of problems with Healthcare.gov

FEB. 10, 2014 For employers with between 50 and 99 employees, delays for another year (until 2016) the requirement that they offer health coverage to their employees or face a penalty

FEB. 28 Allows people to get federal subsidies “on a retroactive basis” if they now sign up for coverage in an exchange

MARCH 5 Extends for two more years the renewal period for plans not compliant with the new health care law, allowing noncompliant coverage well into 2017

• Section 2701 (relating to fair health insurance premiums)

• Section 2702 (relating to guaranteed availability of coverage)

• Section 2703 (relating to guaranteed renewability of coverage)

• Section 2704 (relating to the prohibition of pre-existing condition exclusions or other discrimination based on health

• Section 2705 (relating to the prohibition of discrimination against individual participants and beneficiaries based on health status

• Section 2706 (relating to non-discrimination in health care)

• Section 2707 (relating to comprehensive health insurance coverage)

• Section 2709, as codified at 42 U.S.C.∳300gg-8 (relating to coverage for individuals participating in approved clinical trials)

Affordable Care Act – Compliant PoliciesHealth plans are not considered to be out of compliance with the following provision of the Public Health Services Act (PHS):

CMS indicated in its November 14, 2013 letter that it would consider the impact of this transitional policy in assessing whether to extend it beyond the specified timeframe. We have considered the impact of the transitional policy, and will extend the transitional policy for two years-to policy years beginning on or before October 1, 2016 in the small group and individual markets. We will consider the impact of the two-year extension of the transitional policy in assessing whether an additional one-year extension is appropriate.

The policy also applies to large businesses that currently purchase insurance in the large group market but that, as of January 1, 2016, will be redefined by section 1304(b) of the Affordable Care Act as small businesses purchasing insurance in the small group market. At the option of the States and health insurance issuers, they, too, will have the option of reviewing their current policies through policy years beginning on or before October 1, 2016, without their policies being considered to be out of compliance with the provisions specified above that apply to the small group market but not to the large group market.

Affordable Care Act – Compliant Policies

What Now?

Patient Protection?

**Cover Oregon

Affordable Care Single – Silver Plan?

**Kaiser Family Foundation - Calculator

“If you think health care is expensive now, wait until you see what it costs when it is free!”

- P.J. O’Rourke Civil Libertarian

• For the 2015 plan year, employers will not be subject to a penalty for failure to offer coverage under 4980H(a) if the employer offers coverage to at least 70% of its full-time employees, and to the extent not subject to the dependent coverage transition relief above, to the employees’ dependents. In addition, for purposes of calculating the failure to offer coverage penalty for the 2015 plan year, the 30-full-time-employee reduction set forth in the proposed regulations is increased to 80, and this same amount is used when taking into account the maximum penalty amount in 4980H(b)

• The final regulations clarify the definition of “dependent” to exclude foster children and stepchildren. Therefore, employers will not be required to offer coverage to spouses, foster children and stepchildren in order to comply with the play-or-pay mandate.

Play or Pay RegulationsKey Implications for employers

Multi-employer arrangements- The final regulations continue the transition guidance issued in the proposed regulations with respect to multiemployer arrangements, which provides that an employer will not be subject to the play-or-pay penalty if the employer is required by a collective-bargaining agreement to make contributions to a multiemployer plan that offers affordable coverage to eligible individuals and their dependents that meets minimum value.

Play or Pay RegulationsKey Implications for employers

What’s Next?

• Uncertainty

• Creativity

• Opportunity

What’s Next?

The Three “R’s”- Risk Corridors- Reinsurance- Risk Adjustment

What’s Next?

Employer Mandates- $2000- $3000

Cadillac in 2018- 40% excise

Individual Mandates- 1% in 2014- 2% in 2015- 2.5% in 2016

The Taxman Looms

Under ACA public exchange participants are given a 90 day grace on unpaid premium. In the first 30 days the insurance company will have to cover the unpaid expenses. In the 31-90 day the doctor or provider has to eat the costs of service.

Tax Implications – Doctor/Provider Tax

What’s Next?

Dependent Eligibility Verification (DEV)For the first time ever, employers are being told who they must provide benefits for if they do not want to face penalties. Verifying that dependents meet eligibility requirements should now be a critical step in every firm’s health care reform strategy.

Without active verification, on average, 5-12% of enrolled dependents are ineligible for coverage.

Dependent Eligibility Verification (DEV)Case Study 1- a Public University

• 5.5% Identified Ineligible Dependents• $1,191,996 Health Care Budget Reduction• 33% of enrolled spouses (891) have access to other coverage

Case Study 2- a Municipality• 12.7% Identified Ineligible Dependents• $335,040 Health Care Budget Reduction

Case Study 3- a School District• 23.6% Identified Ineligible Dependents• $4,434,500 Health Care Budget Reduction

Strategic Solutions that meet the needs of multiple employers and their economically diverse workforces – Compliant and Affordable today –Comprehensive and Cost Effective for tomorrow.

• Minimum Essential Coverage (MEC) should be self-funded with an Aggregate only policy with an Accommodation provision.

• Minimum Essential Coverage will cover 100% of the 63 CMS listed preventative services

• All employees can prevent being taxed the Individual Mandate.

• Putting in place now gives both the employer and the employee the edge in compliance and the foundation for the future implementation of PPACA

• This can be strictly voluntary and the employer can charge a reasonable amount for the MEC

• Plan B is a combination of the MEC plus an optionalFully-Insured Limited Medical Plan

• The Limited Medical Plan offering must be fully insured to remain exempt from PPACA

• The Limited Medical Plan pays for other meaningful benefits…such as emergency room visits, doctor office visits, and RX

• Limited medical can be designed to meet a range of price points and coverage features

• Combination of the Minimum Essential Coverage (MEC), a Minimum Value Plan (MVP) and an integrated fully insured Limited Medical Benefit Plan.

• May have a maximum deductible of $6,350 for single and a $12,700 for family. The Limited Medical Plan can supplement the MVP and help offset some of the out-of-pocket exposure.

• Under CMS Safe Harbor rule the employer can’t charge more than 9.5% of employee W2 if employee is eligible for subsidy on the exchange. No restrictions on amount charged for dependent coverage

• If employees waive off dependent coverage under MVP they can purchase a Fully-Insured Dependent Only Limited Medical Plan

• Voluntary coverages further round out benefit offering and offset out of pocket exposure

• Plan D is a combination of preferably a Self-Funded High

Deductible Major Medical Plan at an 85% actuarial value,

incorporating first dollar benefits with a true GAP plan

along with a MEC.

• Employers can charge any amount for this Plan D

Benefit Option

• Voluntary coverages round out the portfolio and further

offset out of pocket exposure for employee and family

Chronic Disease Management• 28.7% of population has at least one chronic illness

• Chronic illness result in 80% of healthcare claims today

• Data suggests that within a managed block only 27.5% of services for regimented care are received. (21.4% less than 2 yrs in managed environment 42% for those 3 yrs plus)

• Estimated that for every 1000 maintenance services completed $1,000,000 annually would be saved in the future.

• Today in a managed environment only 32% of those identified as chronically ill complete their Minimum Annual Care Requirements

• Estimated only 8% of chronically ill outside of a managed environment complete their Minimum Annual Care Requirements

• Identification of the chronically ill in the covered population

• Measure how many of them are meeting the Minimum Annual Care Requirementfor their condition.

• Employers amend their benefit plans to encourage the chronically ill to complete their Minimum Annual Care Requirements

• Open lines of communication with a Healthcare Consumer coach to educate and motivate the chronically ill to:

• Inform them of their services

• Educate the patient on the self-care they should be performing

• Determine appropriate measures of success for the condition

Chronic Disease Management27 Chronic Illnesses

Opportunities in the FutureThe doors of opportunity are

opened on the hinges of opposition

What’s Next?

Private Exchange Benefits• Reducing Trend for healthcare costs

• Reducing administrative burdens in a complex

regulatory environment

• Expanding the number of benefit choices for employees

• “Right sizing benefits” for each employer

• Helping employers management of vendors

Private Exchange Potential• 45% of employers have or are considering utilizing a private health

insurance exchange for their full-time employees before 20181

• 40% of employers plan to consider encouraging part-time employees to

the public exchange by 20181

• 40 Million people projected to participate in private exchanges by 20182

• 73% of participants chose one of the two lowest priced options3

1 Source: Northeast Business Group on Health at www.NEBGH.org2 Accenture3 Aon Hewitt plan selection

What’s Next?

Integrated BenefitsPayroll

Deduction (80’s)

Worksite Marketing

(90’s)

Voluntaryemployee-

paid (early

2000’s)

Integrated Benefits(Today)

Value in Voluntary• $6 billion in sales (6.6%

increase in 2012)

• 45% of all employers agree that voluntary benefits are an essential part of an integrated benefit strategy

• 60% of employees indicate they are likely to purchase voluntary if offered

• 94% responding to Eastbridge voluntary industry confidence index expect sales to increase

**Eastbridge US Worksite Voluntary Sales Report 2012, Met Life 12th Annual Study of Employee Benefits, 2013 Aflac Workforce report

The Stage is Set for Integrated Benefits

• Up to 46 million employees

may have new access to

voluntary products

• If 20% of them participate,

that’s 9 million new

policy holders

• At an average of $500

per plan, that works out to

$4.5 billion in new sales

? Source

You cannot bring about prosperity by discouraging thrift. You cannot strengthen the weak by weakening the strong. You cannot help the wage earner by pulling down the wage payer. You cannot further the brotherhood of man by encouraging class hatred. You cannot help the poor by destroying the rich. You cannot keep out of trouble by spending more than you earn. You cannot build character and courage by taking away man’s initiative and independence. You cannot help people permanently by doing for them what they could and should do for themselves.

- Abraham Lincoln

The End