The Affordable Care Act (ACA) A Healthcare Benefit Consultant s View

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1 The Affordable Care Act (ACA) A Healthcare Benefit Consultant s View Alex Rule, Employee Benefits Consultant, Partner and Shareholder Nancy Frost, Employee Benefits Consultant and Department Manager

2 Presenters Alex Rule, CLU, CHFC, CEBS has been in the employee benefit industry for over 25 years. He has been with Propel since 2004 and is one of 34 primary shareholders. Alex speaks regularly to both local and national groups in all areas related to Employee Benefits with a special interest in Healthcare Reform and the impact it will have to our clients and community. Nancy Frost, appointed as one of 6 members to Washington State s Exchange serving on the Technical Advisory Committee (TAC) Role of the Agent and Broker. Nancy has been with Propel as their Employee Benefits Department Practice Leader and Manager since She has been in the employee benefit industry for over 20 years and relocated back into the Seattle area after spending 14 years in the California market. She also serves as a Board Member to the IIBAW and several carrier Advisory Councils.

3 Agenda I. Affordable Care Act (ACA) - Impact to Healthcare Delivery System II. Impact to Employers Public and Private Exchanges Defined Contribution Strategy III. Big Shift: Customer Behavior and Technology - Changing the Future of Healthcare This Propel Insurance presentation is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal council for legal advice.

4 I. ACA - Impact to Healthcare Delivery

5 ACA Impact to Healthcare Delivery Delivery System Consolidation of Medical Groups and Hospital Networks Increase in Medicaid Eligible Change in Reimbursement Narrow Networks Access to Cost and Quality Transparency

6 ACA Impact to Healthcare Delivery Insurance Carriers Support Accountable Care Organizations (ACO) Establish Criteria for Narrow Networks Avoid Adverse Selection Participation in Exchanges Strong Message on Wellness Support Adapting to the New Norm

7 ACA Impact to Healthcare Delivery Providers and Insurers BlueCross BlueShield Consortium

8 ACA Impact to Healthcare Delivery Next Generation in Value Management BlueCross BlueShield Consortium

9 ACA Impact to Healthcare Delivery Economic Impact Model What Employers can do to Reduce the Cost of Their Benefit Program? Projected average savings. BlueCross BlueShield Consortium

10 ACA Impact to Healthcare Delivery Care Delivery Innovations Today BlueCross BlueShield Consortium

11 II. Impact to Employers Public and Private Exchanges Defined Contribution Strategy

12 Impact to Employers Public Exchanges Washington s Exchange washington healthplanfinder Individual Market Small Group Market Number of Employees up to 50 Shop Ready or Not it will be Open 10/1/2013 Focus on Individual Market Providing Uninsured Insurance Coverage

13 Impact to Employers - Private Exchanges Who is in the game and who is sitting on the sidelines Insurance Carriers Statewide, Regional and/or National coverage National Consulting Firms Others TPA, Business Process Outsources and Start-ups Insurers cautious entering into Private Exchange

14 Impact to Employers - Defined Contribution Strategy BlueCross BlueShield Consortium

15 III. Big Shift Changing the Future of Healthcare Healthcare How Customer Behavior and Technology will Change the Future of Healthcare

16 Big Shift Changing the Future of Healthcare How will Technology change how our customers receive information, make decisions and purchase Educate/Inform Self Online and Immediate Access search engines and resources such as YouTube Make Decisions Input/Feedback from their Communities Yelp, LivingSocial, Amazon, Facebook Purchase Healthcare Online Marketplace Still Need for Trusted Advisor

17 Big Shift Changing the Future of Healthcare Challenge Healthcare Consumer needs to catch up with Technology Capabilities The New Norm Adapting to Change

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19 Healthcare Compass TM Affordability Safe Harbor The affordability safe harbor is the measure of whether the employee's share of premium cost is deemed affordable. There are three safe harbor measures to choose from: Option 1: Option 2: Annual cost of employee only premium does not exceed 9.5% of Box 1, W-2 earnings Monthly cost of employee only premium does not exceed 9.5% of the pay rate of the lowest paid employee x 130 hours (may only be used if pay rates do not decrease during the year) Option 3: Annual cost of employee only premium does not exceed 9.5% of the single Federal Poverty Level Based on 2013 Federal Poverty Level this threshold equates to: $90.96 per month These premium measures are to be based on the lowest cost plan option that meets a 60% actuarial value of benefits. A good way to get a feel for your plan is to look at premiums against minimum wage. The reason this makes sense in lieu of Option 2 is that it does not limit your ability to hire someone at a lower pay rate later in the year. The charts below illustrate 9.5% of earnings relative to various pay rates, beginning with Federal Minimum Wage. The charts on the right are informational, illustrating where the Federal Poverty Level is currently and also what percent of premium responsibility individuals will have in the exchange based on their age and percent of Federal Poverty Level. 9.5% of Hourly Earnings At Different Rates For Maximum Employee Contribution Federal Poverty Level (2013 Amounts) Percent of Federal Poverty Level Hourly Wage Hourly Wage * 130 Hours Per Month 9.5% of Monthly Earnings Household Size 100% 200% 300% 400% $7.25 $943 $ $11,490 $22,980 $34,470 $45,960 $7.50 $975 $ $15,510 $31,020 $46,530 $62,040 $8.00 $1,040 $ $19,530 $39,060 $58,590 $78,120 $8.50 $1,105 $ $23,550 $47,100 $70,650 $94,200 $9.00 $1,170 $ $27,570 $55,140 $82,710 $110,280 $9.50 $1,235 $ $31,590 $63,180 $94,770 $126,360 $10.00 $1,300 $ $35,610 $71,220 $106,830 $142,440 $10.50 $1,365 $ $39,630 $79,260 $118,890 $158,520 $11.00 $1,430 $ $43,650 $87,300 $130,950 $174,600 $11.50 $1,495 $ $47,670 $95,340 $143,010 $190,680 $12.00 $1,560 $ $12.50 $1,625 $ $13.00 $1,690 $ $13.50 $1,755 $ For each additional person, add $4,020 Estimated Percent of Premium Paid By Person/Family Based on Percent of Federal Poverty Level and Age $14.00 $1,820 $ FPL / Age $14.50 $1,885 $ % 0% 0% 0% 0% 0% $15.00 $1,950 $ % 0% 0% 0% 0% 0% $15.50 $2,015 $ % 20% 20% 15% 10% 7% $16.00 $2,080 $ % 31% 30% 23% 15% 10% $16.50 $2,145 $ % 43% 42% 32% 21% 14% $17.00 $2,210 $ % 55% 54% 41% 27% 18% $17.50 $2,275 $ % 68% 67% 51% 33% 23% $18.00 $2,340 $ % 82% 81% 62% 40% 27% $18.50 $2,405 $ % 97% 95% 73% 47% 32% $19.00 $2,470 $ % 100% 100% 79% 51% 35% $19.50 $2,535 $ % 100% 100% 85% 55% 38% $20.00 $2,600 $ % 100% 100% 91% 59% 40% $20.50 $2,665 $ % 100% 100% 97% 63% 43% 425% 100% 100% 100% 100% 100% 130 hours per month is benchmark for full-time status based on IRS proposed regulations. Orange = Medicaid (expansion states); White = Subsidy Range (expansion states); Orange & White = Subsidy Range (non-expansion states); Grey = No Subsidy Source Kaiser Family Foundation: