Healthcare Reform UpdateHAMA Fall MeetingOctober 6, 2010

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Purpose of today’s session

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Discuss background of US Healthcare reform

Review current provisions of new law

Consider key questions for our industry

Share Hilton’s current process

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Situation Summary

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2,650 page legislation was enacted in March 2010 – contains employer mandates including the requirement that large employers offer coverage or pay a penalty

New state exchanges will be established – they must meet federal guidelines and are to be operated by non-profit entities

Individuals will be required to maintain coverage or pay a penalty (penalty may not exceed cost of coverage)

Subsidies will be provided to low and middle income participants to buy exchange coverage

The new law will be financed through taxes on employers, insurers, drug and device makers, high income earners, and cuts to Medicare

Employer-sponsored systems will need to adjust to accommodate the new law

This is just the beginning – regulatory guidance and additional legislation will be forthcoming

Without aggressive action, employer healthcare costs could double in the next five years

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PPACA Overview – Timing of Key Reform ProvisionsEarly Retiree Reinsurance Employer Distribution of Uniform

Summary of Benefits to ParticipantsLimit of Health Care FSA Contributions

Employer Responsibility to Provide Minimum Health coverage

Lifetime Limits Prohibited Quality of Care Report Notice to Inform Employees of Coverage Options in Exchange

Free Choice Vouchers

Preexisting Conditions Exclusions Prohibited for Children

Automatic Enrollment for 2014** Individual Responsibility to Purchase Insurance or Pay Penalty

Only Reasonable Annual Limits Permitted

Medicare Tax on High-Income Individuals

State Insurance Exchanges

Effective Appeals Process* Medicare Part D Subsidy No Longer Tax-Free

Preexisting Condition Exclusions Prohibited

Over-the-Counter Medicines Not Reimbursable Under FSA

Annual Limits Prohibited

HSA Excise Tax Increase Automatic Enrollment**

Employer Reporting of Health Coverage on Form W-2

Limit of 90-Day Waiting Period for Coverage in Plan

Phase-out of Part D Donut Hole Increased Rewards Cap for in Wellness Participation

Medicare Advantage Payments Lower

Employer Reporting of Health Insurance Information to Participants and the Government

Coverage for Preventive Health Services*

Excise Tax on High-Cost Coverage (2018)

105(h) Non-Discrimination Rules Apply to Insured Plans*

2011 2012 2013 2014 and beyond

* Grandfathered

** Effective date unclear

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Key Questions for Our Industry

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What are the biggest issues for Hospitality?

– Expanded Eligibility

– More Benefits Mandates

– Additional Administrative Requirements

– Increased Cost Exposure

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The Road Ahead—A Major Decision Point for Employers

Managed Defined Contribution

Subsidy fixed with company-driven increase

Coverage via individual market (private or public Exchanges)

Worksite health shifts to focus on return to work, absence reduction, productivity gains

Aggressive Health Management

Heavy emphasis on health risk improvement and cost management

Sophisticated use of data analytics to drive design, program management, vendor accountability

Migration from incentives to penalties and “requirement gates” to access better benefits

House money, house rules

“

“When you

get to the

fork in

the road,

take it.”

—Yogi Berra

2014+

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Hilton’s Current Process

Integrating Impacts Working through the design, administration and communication implications

Thinking Ahead Using this opportunity to establish sustainable approach that will work now and in the future (vs. build on approaches that are not working now)

Engaging LeadersPresenting high-level cost analysis and plan to senior leaders

Connecting with Our Team Members Educating team members and their families in context of what they can control – their health and how to use the healthcare system

Acting Now Creating a detailed 3 to 5 year plan and working it immediately (vs. waiting for all the answers)

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End OfHealthcare Reform Update