THE HEALTH CARE REFORM SURVEY

THE HEALTH CARE REFORM SURVEY 2012-2013

THE HEALTH CARE REFORM SURVEY 2012-2013 3 OVERVIEW 7 EFFECT OF HEALTH CARE REFORM 16 EMPLOYER RESPONSE TO HEALTH CARE REFORM 23 EMPLOYER PREPARATION FOR FSA CHANGES AND PAY OR PLAY 27 EMPLOYER BENEFIT STRATEGY 35 REFERENCE MATERIAL 39 APPENDIX

THE HEALTH CARE REFORM SURVEY 2012-2013 OVERVIEW 3 THE HEALTH CARE REFORM SURVEY 2012-2013

OVER HALF OF EMPLOYERS STILL HAVE NOT IDENTIFIED THE COST OF HEALTH CARE REFORM COMPLIANCE The eection is over and the Supreme Court s verdict is in: Heath Care Reform is here to stay. Whatever empoyers thoughts and actions (or ack thereof ) have been over the past three years with regard to this andscape-changing egisation, the time for definitive action has arrived. Heath Care Reform (the Patient Protection and Affordabe Care Act) has captured the attention of empoyers ever since its enactment on March 23, 2010. In its wake, governmenta agencies have reeased a continua wave of proposed reguations, fina reguations, questions and answers, deayed effective dates, and notices of non-enforcement (pending reguatory guidance). In response to the fuidity of the reguatory guidance and its attendant obigations, empoyers have strugged to compy. When the reform aw was newy passed, empoyers generay scrambed to impement steps that woud ensure compiance; however, the increasing reguatory fow and its compexity has hampered these attempts, and outside observers noted their decine as empoyers waited to see the impact of the 2012 Supreme Court case, which considered the egaity of the Heath Care Reform aw. No discernibe rush to impement the requirements of Heath Care Reform foowed the Court s decision, as many empoyers appeared to wait for the resuts of the presidentia eection. OBJECTIVES Wiis has conducted Heath Care Reform Surveys over the ast three years, finding, among other things, that empoyers have worked to compy as they needed to, rather than ooking ahead and taioring benefits in anticipation of a pan s increased costs. In ight of the monumenta 2012 Supreme Court decision and the presidentia eection, Wiis sought updated input from empoyers regarding the costs of compiance with Heath Care Reform as we as the strategies they are impementing to compy and manage costs. The goas of this year s survey were to identify: n n n n What eements of Heath Care Reform have affected empoyer cost (positivey or negativey) The strategies empoyers are using in offering/designing benefits The extent to which empoyers are retaining grandfathered status The expectations of empoyers regarding: What they beieve simiar companies wi do in reaction to Heath Care Reform What pan design changes survey respondents expect to make as a resut of Heath Care Reform As an adviser to empoyers offering group heath benefits, Wiis wi use the survey findings to hep us anticipate empoyer needs and address compiance issues at the same time that cost containment strategies are empoyed. 4 THE HEALTH CARE REFORM SURVEY 2012-2013

EXECUTIVE SUMMARY The survey respondents refect a wide spectrum of empoyers from various industries, differing sizes and across diverse geographic regions. More than 1,200 empoyers* participated in this year s survey with varying benefit pans (PPO, HMO, HDHP, etc.). Over a third of the responding empoyers have between 100 and 499 empoyees, and simiar to ast year s response, a itte over 11% represent empoyers with more than 2,500 empoyees; roughy a third of the respondents were arge empoyers (with more than 500 empoyees), and of that percentage, a third comprised empoyers with more than 2,500 empoyees. Because this year s survey aimed to refresh ast year s data and observe trend changes between ast year s responses and those from this year, most of the recent survey questions were repeated from our prior survey. In many respects, this year s survey findings cosey resembe ast year s. Last year s survey indicated that whie most empoyers are reuctant to be the first to drop coverage, re-design eigibiity, or reduce company financia support for certain benefits for the first time, empoyers noted that they beieved that other empoyers woud, in fact, take these actions. This year s survey asked that same perception question about what pan design/cost containment changes other empoyers were ikey to impement, and the responses argey feature cost shifting toward empoyees. This year s survey aso asked respondents about the ikeihood of acceerating pan design changes in order to compy with Heath Care Reform eary. Predictaby, over haf of the respondents did not pan to be eary adopters. The atest survey incudes the foowing key discoveries: n n n n EMPLOYERS ARE CONCERNED WITH COSTS, BUT MANY UNDERESTIMATE THE TRUE COST OF COMPLIANCE Though cost is sated as the biggest compiance concern (60% of empoyers say that avoiding cost increases is the most important consideration for their businesses), over haf of surveyed empoyers have not determined the cost of Heath Care Reform compiance, and the majority of empoyers beieve that Heath Care Reform has not impacted the cost of their pans. However, among the empoyers who have cacuated (or are in the process of cacuating) the cost, 61% indicate that the tota impact of a Heath Care Reform changes has increased costs (with 17% of responding empoyers noting that costs have increased by over 5%). Furthermore, survey responses do not show that Heath Care Reform has decreased any empoyer costs. MOST EMPLOYERS INTEND TO PLAY UNDER THE PAY OR PLAY MANDATE Survey responses indicate that empoyers continue in the compiance-as-we-go approach and are ess incined to manage heath benefits as part of tota rewards (i.e., saary, vacation, bonuses, retirement). Their preference is to pay under the mandate. However, there are many variations of paying, and empoyers have much room for strategy within the various pay options. EMPLOYERS EXPECT THAT SIMILAR EMPLOYERS WILL COST-SHIFT TO EMPLOYEES This year s findings are simiar to ast year s. Topping the ist of expected empoyer actions are cost shifting, expanding weness programs, and re-designing both eigibiity and benefit package options. EMPLOYERS ARE MUCH MORE LIKELY TO VOLUNTARILY RELINQUISH GRANDFATHERED STATUS There is a sizeabe increase in the number of empoyers vountariy choosing to forego grandfathered status (39%) as opposed to the number of empoyers who chose to vountariy reinquish that status ast year (13%). This increase is due to the desire to contro more aspects of pan design/co-pays/coinsurance/premiums. The pace at which empoyers have vountariy or invountariy ost grandfathered status far surpasses the Department of Heath & Human Services expectations. This continues the trend that was highighted in ast year s survey. The Preambe to June 2010 Reguations specuated that by the end of 2011, 78% of empoyers woud retain grandfathered status; by 5 THE HEALTH CARE REFORM SURVEY 2012-2013

the end of 2012, 62% woud retain grandfathered status; and by the end of 2013, 49% woud retain grandfathered status. Last year s survey responses indicated that, despite empoyer desire to remain grandfathered, many empoyers had ost grandfathered status. However, this year s survey responses point to a shift in empoyer priorities. Aso simiar to ast year, many of this year s survey responses indicate empoyer confusion about cost, and though the 2014 Exchange Enroment period is approaching, 2/3 of empoyers doubt that the exchanges wi be ready for enroment. In response to that uncertainty, 20% of empoyers expect that other empoyers wi terminate group heath pans in order to trigger a migration to exchanges, and 30% of empoyers expect empoyees of other companies to be encouraged to join the state-based exchanges. This paints a rather disma picture of empoyer sponsorship of group heath benefits. However, this concusion is ikey tempered by empoyer responses to mutipe survey questions concerning their own provision of benefits and rewards. Primariy, empoyers say they expect to maintain their pans. Moreover, empoyers noted that they are more ikey to expand heath coverage as needed (in order to compy with Heath Care Reform) and that they wi expand coverage without reducing empoyee saaries, vacations, and bonuses. Taken as a whoe, it appears that empoyers expect that simiar empoyers may take more radica action than they themseves anticipate taking. Whie many empoyers are unsure of the cost of Heath Care Reform, they appear to take sma compiance steps rather than making strategic pans for broad pan changes. NOTES REGARDING THE PRESENTATION OF THE SURVEY RESULTS To aow a more seamess presentation of survey findings within the critica areas we studied, the order of the information presented in this report differs from the order of the survey questions. Resuts have been rounded to simpify the presentation of data. *Because the survey was a directed survey (i.e., certain questions were automaticay added or deeted based upon responses to other questions), the number of survey respondents varied from question to question. 6 THE HEALTH CARE REFORM SURVEY 2012-2013

THE HEALTH CARE REFORM SURVEY 2012-2013 EFFECT OF HEALTH CARE REFORM 7 THE HEALTH CARE REFORM SURVEY 2012-2013

OVER BASED HALF UPON OF THEIR EMPLOYERS PERCEPTIONS, STILL HAVE 50% NOT OF EMPLOYERS IDENTIFIED THE BELIEVE COST THAT OF HEALTH THE COST CARE OF ACTIVE REFORM EMPLOYEE COMPLIANCE HEALTH COVERAGE HAS INCREASED. HOWEVER, THE MAJORITY OF EMPLOYERS BELIEVE THAT HEALTH CARE REFORM HAS OTHERWISE NOT IMPACTED THEIR PLANS. IMPACT ON EMPLOYER S PLAN [N=881] Percentage of workers enroed in heath coverage Vountary benefits options for empoyees Impementation of smaer hospita/physician network Empoyee contributions toward the cost of singe coverage Company contributions toward the cost of dependent coverage Company contributions toward the cost of singe coverage Empoyee contributions toward the cost of dependent coverage Consideration for using a sef-insured mode Weness program empoyee participation Weness program financia incentives Consideration for moving to owest cost pan options Use/addition of consumerdirected heath pans Retiree heath coverage costs Active empoyee heath coverage costs 76% 14% 5% 5% 65% 12% 2% 21% 59% 4% 1% 36% 59% 33% 4% 4% 57% 27% 8% 8% 57% 31% 7% 5% 55% 37% 3% 5% 54% 11% 2% 33% 50% 18% 3% 29% 50% 17% 4% 29% 48% 28% 3% 21% 46% 15% 1% 38% 43% 5% 2% 50% 43% 50% 3% 4% 0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% nno change nincreased ndecreased nnot Appicabe 8 THE HEALTH CARE REFORM SURVEY 2012-2013

The resuts on this graph are interesting in that, whie haf of surveyed empoyers beieve that the cost of empoyee heath coverage costs wi increase, in separate survey questions, much arger percentages of empoyers beieve that neither their empoyer contributions nor empoyee contributions toward coverage wi change. This conficting survey resut seems to underscore empoyer uncertainty about the costs associated with Heath Care Reform; the survey resut coud aso refect the fact that some of the responding empoyers had cacuated the cost of Heath Care Reform compiance under their pans, whie the majority of responding empoyers were speaking from their perceptions. As compared to ast year, a ower percentage of empoyers in this year s survey said they beieve that active empoyee heath coverage costs have increased. Additionay, there is an increase (7% as opposed to 0% ast year) in the number of empoyers saying that company contributions toward the cost of empoyee-ony coverage have decreased. Additiona information, by industry and empoyer size, can be found in Tabe 3 and Tabe 4 of the Appendix. 9 THE HEALTH CARE REFORM SURVEY 2012-2013

OVER HALF OF EMPLOYERS STILL HAVE NOT IDENTIFIED THE COST OF HEALTH CARE REFORM COMPLIANCE. IDENTIFICATION OF COST TO COMPLY WITH HEALTH CARE REFORM N=881 500 400 300 200 100 0 28% Yes, specific costs to compy with heath care reform have been identified 21% In the process of identifying specific costs to compy 51% No, not yet identified Additiona information, by industry and empoyer size, can be found in Tabe 5 and Tabe 6 of the Appendix. 10 THE HEALTH CARE REFORM SURVEY 2012-2013

MORE THAN HALF OF THE EMPLOYERS WHO HAVE IDENTIFIED THE COST OF COMPLYING WITH HEALTH CARE REFORM NOTE THAT COSTS HAVE INCREASED; EMPLOYERS DID NOT SEE A DECREASE IN COST. STUDIED IMPACT ON EMPLOYER COSTS N=369 Tota impact of a changes to compy with Heath Care Reform 24% 20% 17% 18% 21% Provision of adut chid coverage up to age 26 34% 14% 7% 24% 20% Remova of cost-sharing component for preventive services 18% 11% 5% 38% 27% Remova of the annua/ifetime imit for essentia heath benefits 17% 9% 8% 43% 22% Remova of pre-existing condition excusion for chidren under age 19 16% 8% 4% 46% 25% Remova of restrictions on care for non-grandfathered pans 12% 6% 4% 47% 31% 0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% nup to 2% increase in cost n2-5% increase in cost nmore than 5% Increase in cost ndecrease in cost nno change nunknown When comparing this year s survey responses to responses from ast year s survey, generay, there was an increase in the number of empoyers who saw costs rise in the 2-5% bracket, whie at the same time, generay the number of empoyers caiming cost increases in the more than 5% bracket, dropped. However, when asked about the tota impact of changes required by Heath Care Reform, empoyers said that costs had increased within both the 2-5% and the more than 5% categories (though notaby in the 2-5% bracket). Additiona information, by industry, can be found in Tabe 7 of the Appendix. Additiona information regarding the percentage of empoyees enroing adut chidren in the group heath pan can be found in Tabe 13 of the Appendix. 11 THE HEALTH CARE REFORM SURVEY 2012-2013

EMPLOYERS ANTICIPATE THAT EXPANDED COVERAGE MANDATES AND TAXES IMPOSED ON OTHER ENTITIES WILL INCREASE EMPLOYER COSTS. POTENTIAL COST INCREASES TO EMPLOYER PLANS N=715 New taxes on insurance companies, drug manufacturers, and medica device manufacturers 55% 6% 5% 35% Expanded coverage and eigibiity under Heath Care Reform (adut chidren, remova of annua/ifetime imits, eimination of pre-existing condition excusion imits, etc.) 53% 18% 4% 26% Automatic enroment of empoyees in terms of the impact on dependent coverage costs 38% 21% 2% 7% 32% Automatic enroment of empoyees in terms of the impact on singe empoyee coverage costs 38% 23% 1% 7% 33% Coverage for empoyees coud exceed the Pay or Pay threshod 31% 15% 1% 7% 47% Creation and enroment of individuas in state-based exchanges 19% 14% 8% 11% 49% 0 20% 40% 60% 80% 100% nwi increase our costs nwi not increase our costs nwi decrease our costs nis not appicabe to my company ndon t know/unsure Without compete information about state exchanges, empoyers are conficted about the impact of state exchanges on their pans. However, more than haf of empoyers now fee that taxes on insurance companies and drug/medica device manufacturers wi utimatey increase empoyer costs. This year s survey resuts represent a marked increase over ast year s responses. Last year, 43% of empoyers fet that externa taxes/fees woud negativey impact their group heath pans. With regard to automatic enroment, the responses between ast year s survey and this year s survey in the category of wi not change our costs more than doubed. 12 THE HEALTH CARE REFORM SURVEY 2012-2013

MOST EMPLOYERS HAVE ISSUED COMMUNICATIONS ABOUT HEALTH CARE REFORM; HOWEVER, A SIZEABLE MINORITY STILL HAVE NOT. EFFORT MADE TO COMMUNICATE IMPLICATIONS OF HEALTH CARE REFORM TO EMPLOYEES N=1022 Communicated benefits changes as a resut of Heath Care Reform separatey from other empoyee updates Other 1% Unsure / Don't Know 2% 21% Not much communication has been done to date 30% 14% Provided additiona separate communication of a Heath Care Reform requirements 32% Communicated changes reated to heath reform as part of other empoyee updates As compared to ast year, more empoyers have provided empoyees with separate communication materias deaing ony with Heath Care Reform. Last year, 7% of responding empoyers had distributed dedicated materias reated to Heath Care Reform whie this year, 14% of surveyed empoyers distributed separate Heath Care Reform materias to their empoyees. 13 THE HEALTH CARE REFORM SURVEY 2012-2013

FEWER THAN HALF OF PLANS WERE EVER GRANDFATHERED, AND ONLY A THIRD RETAIN GRANDFATHERED STATUS. EXTENT TO WHICH HEALTH PLAN OPTIONS WERE GRANDFATHERED FOR THE PLAN YEAR STARTING ON OR AFTER SEPTEMBER 23, 2010 N=862 43% A 16% Don t Know/Unsure 33% None 3% Some 5% Most EXPECTED GRANDFATHERED STATUS FOR THE PLAN YEAR STARTING ON OR AFTER SEPTEMBER 23, 2012 N=724 33% A 23% Don t Know/Unsure 37% None 4% Most 3% Some 14 THE HEALTH CARE REFORM SURVEY 2012-2013

The resuts from this year s survey indicate a very cose correation to ast year s response regarding the grandfathered nature of pans for pan years starting on or after September 23, 2010. 44% of ast year s survey respondents indicated that a of their pans had been grandfathered for pan years starting on or after September 23, 2010. Whie this year s survey did not po the same pan sponsors, the responses are very simiar. This year s survey indicates the same genera trend for empoyers continuing to maintain their grandfathered status. Last year 29% of responding empoyers were abe to retain grandfathered status, and this year s responses from a different group of empoyers shows a simiar figure. Responses to another question posed within the survey indicate a rather sizeabe increase in the number of empoyers vountariy choosing to forego grandfathered status this year (39%) as opposed to the number of empoyers who chose to vountariy reinquish that status ast year (13%). Responding empoyers indicated that cost considerations infuenced their decision; 37% of empoyers indicated that they woud have preferred to maintain grandfathered status; however, deductibes, co-payments, and other cost-sharing mechanisms were more important to pan sponsors and forced the decision to vountariy reinquish grandfathered status. Additiona information, by industry, can be found in Tabe 8 and Tabe 9 of the Appendix. 15 THE HEALTH CARE REFORM SURVEY 2012-2013

THE HEALTH CARE REFORM SURVEY 2012-2013 EMPLOYER RESPONSE TO HEALTH CARE REFORM 16 THE HEALTH CARE REFORM SURVEY 2012-2013

EMPLOYER PRIORITIES IN THE FACE OF HEALTH CARE REFORM: COST CONTAINMENT IS JOB #1. EMPLOYER PRIORITIES WHEN IMPLEMENTING HEALTH CARE REFORM CHANGES N=723 Ensuring compiance needs are met 3% Other Troube-free transition to new group pan 7% 30% Avoiding cost increases or reducing costs 60% Whie ast year, responding empoyers equay wanted to ensure compiance and avoid cost increases, this year, empoyers appear to have shifted their priorities. Currenty, their focus is on cost containment, with a significant shift from 42% ast year to 60% this year. Thus, predictabe empoyer responses to Heath Care Reform woud incude passing costs on to empoyees, redefining eigibiity, and taking steps to imit expensive heath pan options. This assumption was reinforced by the survey resuts. 17 THE HEALTH CARE REFORM SURVEY 2012-2013

EMPLOYERS EXPECT THAT OTHER SIMILAR EMPLOYERS WILL INCREASE COST SHARING AND EXPAND WELLNESS. POTENTIAL COST IMPACT OF HEALTH CARE REFORM ON EMPLOYER N=712 Increase empoyee contributions toward coverage costs 15% 11% 29% 3% 42% Increase percentage of dependent coverage costs paid by empoyees 14% 11% 28% 4% 43% Expand the scope of weness programs 13% 8% 24% 5% 50% Increase deductibes or copayments to keep the pan s costs beow the Cadiac tax threshod 11% 12% 29% 4% 44% Re-design eigibiity to imit number of benefit-eigibe empoyees (e.g., restrict work hours, etc.) 10% 5% 16% 19% 50% Reduce coverage to owest-cost package that wi avoid the pay or pay penaty 8% 11% 23% 9% 49% 0 20% 40% 60% 80% 100% nwi impement prior to 2014 nwi impement after 2014 nwi ikey impement, but timing is uncertain nwi definitey not impement ndon t know/unsure The responses to this question are consistent with ast year s Wiis Heath Care Reform Survey as we as other survey data. Empoyers are overwhemingy predicting that simiar empoyers wi raise empoyee contributions, and this year s survey responses indicate that empoyers are more ikey to pass on costs for not ony empoyee coverage, but aso empoyee-paid dependent coverage. By a margin greater than 18 to 1, empoyers think that their peer companies wi raise empoyee contributions, and this year the option of re-designing eigibiity to imit the number of benefit-eigibe empoyees grew significanty in its popuarity. Last year, 27% of the surveyed empoyers thought that their peer companies woud definitey not re-design eigibiity. However, this year s survey resuts found that ony 19% of empoyers thought their peer companies woud not make eigibiity changes in order to cut costs. Empoyers in the manufacturing industry were much more ikey to predict eigibiity changes as a costsavings method. Additiona information, by industry and empoyer size, can be found in Tabe 10 and Tabe 11 of the Appendix. 18 THE HEALTH CARE REFORM SURVEY 2012-2013

FEW EMPLOYERS EXPECT TO REDUCE EMPLOYEE HEADCOUNT. POTENTIAL COST IMPACT OF HEALTH CARE REFORM ON EMPLOYER N=712 Raise the new hire coverage eimination period/waiting period to 90 days 8% 5% 16% 17% 54% Drop coverage for part-timers 7% 6% 16% 13% 58% Terminate coverage for retirees 7% 4% 14% 13% 62% Reduce empoyee headcount 6% 3% 14% 22% 55% 0 20% 40% 60% 80% 100% nwi impement prior to 2014 nwi impement after 2014 nwi ikey impement, but timing is uncertain nwi definitey not impement ndon t know/unsure Survey responses show that 31% of respondents in the heath care industry and 21% of respondents in the construction/rea estate industry woud consider reducing empoyee headcount as a resut of Heath Care Reform. Additiona information, by industry and empoyer size, can be found in Tabe 10 and Tabe 11 of the Appendix. 19 THE HEALTH CARE REFORM SURVEY 2012-2013

SOME EMPLOYERS EXPECT TO REDUCE OTHER (NON-MEDICAL) BENEFITS. POTENTIAL COST IMPACT OF HEALTH CARE REFORM ON EMPLOYER N=712 Stop company spending on other wefare benefit pans (i.e., denta, vision, etc.) 5% 5% 16% 16% 58% Repace non-heath wefare benefits (i.e., denta, vision, etc.) with empoyee-pay-a vountary benefits 5% 5% 15% 15% 60% Reduce company spending on tax-quaified benefits (i.e., pension, 401(k), etc.) 5% 4% 14% 18% 59% Reduce compensation (i.e., saary, bonuses, etc.) 5% 4% 17% 14% 60% Encourage vountary migration of empoyees to the state-based exchanges 4% 7% 19% 11% 59% Drop coverage to trigger migration of empoyees to state-based exchanges 3%5% 12% 24% 56% 0 20% 40% 60% 80% 100% nwi impement prior to 2014 nwi impement after 2014 nwi ikey impement, but timing is uncertain nwi definitey not impement ndon t know/unsure As in ast year s survey, empoyers east favored the option of dropping group heath pan coverage in order to trigger migration of empoyees to state-based exchanges. However, empoyers are considering the impact of state exchanges on their pans. 16% of empoyers with fewer than 100 empoyees said they woud ikey consider encouraging vountary migration of empoyees to state-based exchanges, but the timing is uncertain. 16% of empoyers with more than 100 empoyees say this is a ikey option, but the timing is uncertain. Conversey, 17% of empoyers with more than 100 empoyees say they wi definitey not drop empoyer coverage in order to trigger empoyee migration, and 10% of the empoyers with fewer than 100 empoyees say that they wi definitey not attempt to trigger empoyee migration. Additiona information, by industry and empoyer size, can be found in Tabe 10 and Tabe 11 of the Appendix. 20 THE HEALTH CARE REFORM SURVEY 2012-2013

HALF OF EMPLOYERS EXTENDED BENEFITS TO ADULT CHILDREN EVEN WHERE NOT MANDATED; HOWEVER, THE TREND IS SWINGING AWAY FROM VOLUNTARILY EXTENDING THIS COVERAGE. VOLUNTARY EXTENSION OF ADULT CHILD ELIGIBILITY TO OTHER HEALTH-RELATED BENEFITS N=789 Extended the adut chid eigibiity to a other suppementa heath-reated wefare benefits (denta, vision, heath fexibe savings account, etc. ) 46% 5% 39% 10% Extended the adut chid eigibiity to a few suppementa heath-reated wefare benefits 17% 7% 60% 15% Offered empoyees the option for obtaining their own suppementa coverage, at group pan prices 6% 2% 76% 16% 0 20% 40% 60% 80% 100% nyes nconsidering impementing nwi decrease our costs ndid not consider impementing ndon t know/unsure Empoyers are increasingy unwiing to vountariy extend suppementa coverage (either vountary or group coverage) to adut chidren. Between ast year and this year, there was a noticeabe shift, with 60% of empoyers not considering vountary expansion of some suppementa benefits to adut chidren; however, ast year, ony 28% of empoyers did not consider this type of pan design. Simiary, ast year, 34% of empoyers did not consider aowing empoyees to purchase their own suppementa coverage at group pan prices, but this year, 76% of the responding empoyers said they did not consider this option. Last year s Heath Care Reform survey noted that in future years, other surveys woud ikey track the number of empoyers that change their cost sharing tiers to refect the arger popuation of oder chidren eigibe for coverage. Future surveys wi aso ikey consider how many empoyers wi change cost sharing on January 1, 2014 in order to coincide with the apse of the adut chid grandfathered imitation (grandfathered pans can currenty excude adut chidren where they have access to coverage under another empoyer s pan). Once grandfathered status is ost and the affordabiity requirement for Pay or Pay appies to pans, industry experts are ikey to see a scaing back of empoyer financia support for dependent coverage. The survey responses from this year are ikey the beginning of that trend to scae back support for dependent coverage. 21 THE HEALTH CARE REFORM SURVEY 2012-2013

EMPLOYERS ARE NOT PLANNING TO ACCELERATE PLAN CHANGES AHEAD OF EFFECTIVE DATES. EMPLOYERS NOT PLANNING TO REPOSITION THEIR PLANS PRIOR TO REQUIRED COMPLIANCE DATE N=806 Unsure/Don t Know Yes 14% 28% 58% No We over haf of empoyers do not expect to acceerate pan changes required by Heath Care Reform, and among that group, neary 60% of empoyers with between 100 and 499 empoyees said they woud not be acceerating pan changes. Additiona information, by empoyer size, can be found in Tabe 12 of the Appendix. 22 THE HEALTH CARE REFORM SURVEY 2012-2013

THE HEALTH CARE REFORM SURVEY 2012-2013 EMPLOYER PREPARATION FOR FSA CHANGES AND PAY OR PLAY 23 THE HEALTH CARE REFORM SURVEY 2012-2013

80% OF EMPLOYERS CHANGED THEIR FSA DEFERRAL AMOUNTS ON JANUARY 1, 2013, REGARDLESS OF THE PLAN YEAR. WHEN WILL CHANGES TO YOUR HEALTH FSA MAXIMUM DEFERRAL TAKE EFFECT? 70% 60% 50% 40% 30% 20% 10% 0 70% 1st of the caendar year pan year 10% January 1, 2013, even though the pan year is not a caendar year 20% 1st of the non-caendar year pan year Of the surveyed empoyers, 61% offer heath FSAs, and neary 1/3 offer FSA deferras in excess of $2,500. FSA pans were required to compy with the $2,500 imit on January 1, 2013. This means that sponsors of non-caendar year pans needed to decide whether the $2,500 FSA imit woud appy on the first day of the 2012 non-caendar year pan year or whether the mandated FSA imit woud appy on January 1, 2013, regardess of the non-caendar year pan year. Ony 20% of empoyers opted to appy the 2013 FSA imits to their pans which began at some point in 2012. 24 THE HEALTH CARE REFORM SURVEY 2012-2013

OVER 80% OF EMPLOYER PLANS PROVIDE BENEFITS THAT ARE EXPECTED TO COMPLY WITH THE MINIMUM VALUE COVERAGE STANDARD UNDER HEALTH CARE REFORM. PERCENTAGE OF EMPLOYERS PROVIDING COVERAGE IN EXCESS OF MINIMUM VALUE COVERAGE N=937 >80% of a covered services Don t know/unsure 10% <60% of a covered services 6% 33% 60-80% of a covered services 51% In order to offer minimum vaue coverage (which is one component of avoiding the Pay or Pay penaty tax), the pan's share of the tota cost of benefits must be at east 60%. This year s survey resuts are very simiar to ast year s survey resuts; over 80% of empoyer pans aready offer heath coverage that surpasses the minimum vaue coverage requirement under Heath Care Reform. Therefore, for most empoyers, no significant change in coverage wi be required in order to compy with the minimum vaue coverage requirement. Such a situation coud u empoyers into a reactive mode, in which they treat each year s Heath Care Reform changes as a separate activity versus strategicay repositioning heath coverage so that the empoyer considers the minimum vaue of its coverage, the minimum essentia coverage that its pans offer, and the affordabiity of that coverage in order to avoid the Pay or Pay penaty. This year s survey aso shows a sight increase in the percentage of empoyers providing coverage at 60%-80% of a covered services. Additiona information, by industry, can be found in Tabe 14 of the Appendix. 25 THE HEALTH CARE REFORM SURVEY 2012-2013

MORE THAN HALF OF EMPLOYERS PLAN TO PLAY (AND AVOID THE STEEP $2000 TAX PER FULL-TIME EMPLOYEE) BY OFFERING MINIMUM ESSENTIAL COVERAGE AND ADJUSTING CONTRIBUTIONS. PLAY STRATEGIES N=703 Pay Option #1 Offer coverage exceeding minimum essentia coverage and adjust coverage and contributions to manage expenses 55% 45% We are sti waiting to determine a course of action 27% 73% Pay Option #2 Offer coverage exceeding minimum essentia coverage pus new, ower coverage option that meets minimum essentia coverage requirements and is affordabe 23% 77% Pay Option #5 Offer minimum essentia coverage AND reduce hours for part-time empoyees to ess then 30 or excude seasona empoyees or use the ook-back 23% 77% Pay Option #4 Wi Pay by offering an option that is affordabe and of minimum vaue and meets the minimum essentia coverage requirement 16% 84% Pay Option #3 Offer minimum essentia coverage ; however, wi incur $250/month ($3000 annuay) because the pan does not offer affordabe coverage 14% 86% Not Pay Discontinue coverage and pay $2000 annua penaty for fu-time empoyees 13% 87% 0 20% 40% 60% 80% 100% nwi take this course of action nconsidering this course of action Empoyers have many options when considering the Pay or Pay mandate. Empoyers may choose to forego group heath insurance and pay a $2,000 annua penaty tax for each fu-time empoyee (minus the first 30) if at east one empoyee obtains coverage through the exchange and quaifies for a subsidy. On the other hand, empoyers may Pay in a variety of methods and thus avoid the $2,000 penaty, and perhaps pay a $3,000 penaty for a smaer number of fu-time empoyees. In many cases, an empoyer can avoid a penaties by choosing to fuy Pay under the Heath Care Reform Shared Responsibiity rues. Empoyers often have the impression that they must do a or nothing with regard to the Pay or Pay rues. However, this survey indicates that empoyers are reaizing that they have various options avaiabe to them, and it can be reativey simpe for an empoyer to avoid the onerous $2,000 per-fu-time-empoyee penaty. Additiona information, avaiabe by various regions of the country, can be found in Tabe 15 of the Appendix. 26 THE HEALTH CARE REFORM SURVEY 2012-2013

THE HEALTH CARE REFORM SURVEY 2012-2013 EMPLOYER BENEFIT STRATEGY 27 THE HEALTH CARE REFORM SURVEY 2012-2013

EMPLOYERS TEND TO MANAGE HEALTH BENEFITS SEPARATELY FROM OTHER BENEFITS AND REWARDS. MANAGEMENT OF HEALTH BENEFITS IN RELATION TO OTHER EMPLOYEE BENEFITS N=1030 Heath benefits are managed independenty of a other benefits and rewards (exampe: saary, vacation, bonuses, retirement, denta) 42% Heath benefits are managed as part of the tota empoyee benefits package (exampe: vision, denta, retirement) 35% Heath benefits are managed as part of the tota rewards strategy (exampe: saary, vacation, bonuses, retirement, denta) 20% Don't know/unsure 3% Other 0% 0 10% 20% 30% 40% 50% Whie the argest portion of empoyer responses (42%) indicates that empoyers are managing their heath benefits independenty of a other benefits and rewards, when comparing this year s survey resuts to ast year s resuts, there is a sight increase in the percentage of pans being managed as part of a tota rewards strategy. Empoyers empoying a tota rewards strategy have put into pace a mechanism that aows the empoyer to adjust other, non-benefits rewards (saary, vacation, bonuses) in order to hep contro the costs associated with Heath Care Reform. Though the percentage of empoyers empoying a tota rewards strategy constitutes ony 20% of the tota responses from this year s survey, the findings indicate that pan sponsors may be shifting their focus to a more strategic pan design, and if this is the case, an observabe shift in strategy is in the eary stages. 28 THE HEALTH CARE REFORM SURVEY 2012-2013

FEWER THAN HALF OF EMPLOYERS THINK OF BENEFITS STRATEGICALLY AND HAVE WRITTEN STRATEGIES TO BACK THEM UP. PREVALENCE AND DEVELOPMENT OF VARIOUS COVERAGE STRATEGIES N=1030 Heath coverage strategy 27% 11% 11% 36% 10% 5% Tota empoyee benefits strategy (exampe: vision, retirement) 27% 11% 10% 37% 11% 4% Tota empoyee rewards strategy (exampe: saary, vacation, bonuses) 26% 14% 12% 33% 10% 5% Interna communication on the vaue of rewards provided to empoyees 16% 21% 17% 32% 9% 5% Empoyee weness strategy 16% 19% 18% 34% 10% 3% 0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% nwe deveoped nbeing deveoped nbeing considered nno nno and not being considered ndon t know/unsure The survey responses to this question between ast year and this year are virtuay identica and again underscore the fact that there is room to grow in both tota rewards strategy and in incorporating weness programs as part of an empoyer s response to continued heath cost infation. Interestingy, in this year s survey, 34% of respondents said they did not have a weness strategy as opposed to 30% who, ast year, indicated that they did not have a weness strategy. One might query why, in comparison to ast year s survey responses, a greater number of surveyed empoyers on the prior page of this report indicated that this year they manage heath benefits as part of the tota rewards; however, in answering the question refected on this page of the report, the responses regarding written strategies do not indicate an increase in the number of empoyers that have written strategies for a tota rewards approach. In fact, survey respondents indicated that this year there are fewer empoyers with written strategies incorporating tota rewards. The disparity coud be the resut of confusion or it coud indicate an increasing intention to administer benefits in a tota rewards manner, whether or not the empoyer possesses written strategies to accompish this goa. Additiona information, by empoyer size, can be found in Tabe 1 of the Appendix. 29 THE HEALTH CARE REFORM SURVEY 2012-2013

MOST EMPLOYERS EXPECT TO ADOPT OR UPDATE COVERAGE STRATEGIES SOON. TIMEFRAME FOR REVIEW AND/OR CREATION OF BENEFITS AND REWARDS STRATEGIES N=864 Heath coverage strategy 31% 28% 10% 27% 4% Empoyee weness strategy 28% 20% 12% 34% 6% Interna communication on the vaue of rewards provided to empoyees 25% 24% 10% 36% 5% Tota empoyee benefits strategy (exampe: vision, retirement) 24% 25% 13% 33% 5% Tota empoyee rewards strategy (exampe: saary, vacation, bonuses) 23% 23% 12% 38% 4% 0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% nwithin next 6 months nnext 6-12 moths nnext 1-2 years ndon t know/unsure nnever Heath coverage continues to be a driving force in a company s strategic approach, since neary 2/3 of empoyers pan to review their heath coverage strategy within the next 12 months. Though a significant percentage of respondents indicated that they didn t have strategies and were not considering them, the figures indicate a very simiar response when compared to ast year s survey. The findings may refect an underying recognition that empoyers shoud have a strategy, even if empoyers have not yet started to create a strategy. 30 THE HEALTH CARE REFORM SURVEY 2012-2013

FINANCIAL FACTORS WILL BE THE MOST LIKELY TRIGGER TO REVIEW COVERAGE STRATEGY. FACTORS LIKELY TO TRIGGER REVIEW OF EMPLOYER S BENEFITS AND REWARDS STRATEGIES N=929 Increases in heath costs above your company s expectations 64% 32% 3% 1% Growth in number of empoyees 49% 39% 10% 2% Company s financia and market performance 47% 37% 9% 7% Introduction of state-based insurance exchanges 33% 42% 17% 8% Competitors actions reated to benefits/rewards 13% 38% 31% 18% Heath care reform mandates or other reated factors 12% 31% 6% 51% Opportunity to differentiate your benefits from competitors 11% 40% 34% 15% Corporate pressure to reduce costs 11% 39% 36% 14% Increase in vountary empoyee turnover 7% 37% 38% 18% 0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% nextremey ikey nsomewhat ikey nsomewhat unikey nnot at a ikey Finances are at the heart of benefits strategy. Interestingy, this year s survey found that corporate pressure to reduce costs is not expected to be neary as strong this year as was expected ast year. However, as empoyers hire more empoyees (and consequenty the cost to the empoyer increases), the increase in empoyee numbers is expected to trigger the pan s review of its reward strategies. For exampe, ast year, 10.7% of survey respondents noted that increased numbers of empoyees woud trigger additiona benefits strategy review; however, this year, 49% of respondents expected increased empoyee numbers to trigger re-evauation. Additiona information, by empoyer size, can be found in Tabe 2 of the Appendix. 31 THE HEALTH CARE REFORM SURVEY 2012-2013

MOST EMPLOYERS EXPECT TO EXPAND HEALTH COVERAGE AS NEEDED TO COMPLY WITH HEALTH CARE REFORM WITHOUT ADJUSTING OTHER REWARDS. LIKELY PROSPECTIVE CHANGES IN EMPLOYEE BENEFITS AND REWARDS STRATEGIES N=721 Wi expand heath coverage as needed to compy with the Heath Care Reform requirements, eaving a other rewards unchanged 12% 42% 21% 13% 12% Wi change/rebaance the mix of tota rewards to offset increased heath coverage costs Wi reduce company financia support for some or a of the wefare benefits other than heath coverage (exampe: denta, vision, ife, disabiity, etc.) Wi review our retiree medica benefit strategy 11% 31% 30% 22% 6% 6% 28% 36% 22% 8% 6% 13% 8% 9% 64% Wi repace denta and/or wefare benefits with empoyee-pay-a vountary benefits 4% 13% 32% 34% 17% Wi repace ife and/or disabiity wefare benefits with empoyee-pay-a vountary benefits 3% 11% 33% 38% 15% 0 20% 40% 60% 80% 100% nextremey ikey nsomewhat ikey nsomewhat unikey nnot at a ikey nnot appicabe Last year, 43.4% of surveyed empoyers said that rebaancing tota rewards (exampe: perhaps adjusting saary, vacation or bonuses) was somewhat ikey, in contrast to this year, when that percentage dropped to 31%, and at the same time there was a significant increase in the number of empoyers in this year s survey indicating that it was somewhat unikey that they woud rebaance tota rewards. 32 THE HEALTH CARE REFORM SURVEY 2012-2013

MOST EMPLOYERS BELIEVE THAT EXCHANGES WILL NOT BE READY FOR THE 2014 ENROLLMENT. EXCHANGE READINESS N=732 Don t know/unsure Yes 10% 27% No 63% In this year s Heath Care Reform Survey, amost 3/4 of surveyed empoyers fet informed (from being informed at a rudimentary eve to being very we informed) about exchanges. Yet, many questions exist about exchanges; accordingy, neary 2/3 of empoyers doubt that the exchanges wi be functioning and ready for enroment in October 2013. 33 THE HEALTH CARE REFORM SURVEY 2012-2013

NEARLY HALF OF EMPLOYERS ARE WILLING TO CONSIDER A PRIVATE EXCHANGE BASED UPON THE EMPLOYER S DEFINED CONTRIBUTION. LIKELIHOOD OF EMPLOYERS ADOPTING A PRIVATE EXCHANGE N=738 Yes 8% Don t know/unsure 36% Maybe, once empoyees of my size join such private exchanges 44% 12% No Additiona information, by various regions of the country, can be found in Tabe 16 of the Appendix. 34 THE HEALTH CARE REFORM SURVEY 2012-2013

THE HEALTH CARE REFORM SURVEY 2012-2013 REFERENCE MATERIAL 35 THE HEALTH CARE REFORM SURVEY 2012-2013

EMPLOYERS CONTINUE TO LOOK TO INSURANCE BROKERS AND INSURANCE CARRIERS FOR INFORMATION ABOUT HEALTH CARE REFORM. RELIANCE ON EXTERNAL SOURCES N=989 Insurance broker 27% Insurance carrier Free resources and toos as pubished by gov't agencies 17% 16% Trade association In-house personne Law firm Speciaty consuting organization 10% 10% 9% 8% Other 3% 0 10% 20% 30% 36 THE HEALTH CARE REFORM SURVEY 2012-2013

SURVEY RESPONSES FROM A BROAD CROSS SECTION OF AMERICAN INDUSTRY PRIMARY INDUSTRY N=1221 Other Manufacturing 228 224 Heath Care 140 Non-Profit Construction/Rea Estate 118 103 Consuting/Education Financia Technoogy Governmenta Entity Speciaty Services/Lega Distribution Hospitaity Energy/O&G/Utiities Life/Property & Casuaty Engineering/Automotive Heath Insurance Marketing & Communications 65 57 48 47 42 41 27 24 21 15 13 8 0 50 100 150 200 250 NUMBER OF FULL-TIME EMPLOYEES N=1221 1-49 20.56% 50-99 14.91% 100-499 33.74% 500-999 1,000-2,500 2,501-9,999 with operations within a singe state 2,501-9,999 with operations across mutipe states Greater than 10,000 with operations across mutipe states Other 11.06% 8.27% 2.70% 6.31% 2.29% 0.16% 0 10% 20% 30% 40% 37 THE HEALTH CARE REFORM SURVEY 2012-2013

MOST EMPLOYERS ARE FULLY-INSURED, BUT A SIGNIFICANT PERCENTAGE HAVE SELF-FUNDED PLANS OR HAVE MOVED TO CONSUMER-DRIVEN HEALTH PLANS. CURRENT PRIMARY EMPLOYEE GROUP HEALTH PLAN N=1221 Indemnity Sef-insured consumer-driven coverage heath pan, with either a heath reimbursement arrangement or 0% heath savings account Fuy-insured consumer-driven heath pan, with either a heath reimbursement arrangement or heath savings account 13% 8% Other 3% Traditiona fuy-insured pan (e.g. HMO, PPO, etc.) 49% 27% Traditiona sef-insured pan (e.g. HMO, PPO, etc.) Survey resuts indicate a very sight decrease in the number of traditiona sef-funded benefit options sponsored by empoyers. 38 THE HEALTH CARE REFORM SURVEY 2012-2013

THE HEALTH CARE REFORM SURVEY 2012-2013 APPENDIX 39 THE HEALTH CARE REFORM SURVEY 2012-2013

TABLE 1. Does your company have specific strategies for the foowing? HEALTH BENEFITS STRATEGY 1-49 50-99 100-499 500-999 1,000-2,500 2,501-9,999 2,501-9,999 GREATER THAN OTHER TOTAL W/ OPERATIONS W/ OPERATIONS 10,000 W/ IN A SINGLE ACROSS OPERATIONS STATE MULTIPLE STATES ACROSS MULTIPLE STATES Yes, We Deveoped 52 30 92 31 37 13 22 12 0 290 Being Deveoped 10 12 47 16 15 6 9 2 1 118 Being Considered 16 19 47 16 7 3 11 1 1 121 No 91 70 137 30 25 7 19 1 0 380 No and Not Being Considered 33 19 37 13 2 0 4 0 0 108 Unsure / Don t know 16 6 15 3 4 0 2 0 0 46 Tota 219 156 375 109 90 29 67 16 2 1063 BENEFITS STRATEGY (exampe: vision, retirement) Yes, We Deveoped 48 32 97 31 31 14 22 12 0 287 Being Deveoped 9 14 47 14 15 6 9 2 0 116 Being Considered 20 15 40 12 10 3 8 1 2 111 No 87 68 143 35 27 6 22 1 0 389 No and Not Being Considered 39 21 31 14 3 0 4 0 0 112 Unsure / Don t know 16 6 17 3 4 0 2 0 0 48 Tota 219 156 375 109 90 29 67 16 2 1063 TOTAL REWARDS STRATEGY (exampe: saary, vacation, bonuses) Yes, We Deveoped 55 41 86 31 27 12 20 6 0 278 Being Deveoped 12 13 69 13 17 4 11 5 1 145 Being Considered 23 22 43 11 17 4 8 0 1 129 No 78 57 127 38 21 7 18 2 0 348 No and Not Being Considered 38 17 30 10 2 0 4 2 0 103 Unsure / Don t know 13 6 20 6 6 2 6 1 0 60 Tota 219 156 375 109 90 29 67 16 2 1063 WELLNESS STRATEGY Yes, We Deveoped 12 12 48 22 27 14 22 9 1 167 Being Deveoped 12 21 78 37 30 7 17 5 0 207 Being Considered 22 29 84 20 16 5 10 1 1 188 No 113 71 125 19 13 3 16 1 0 361 No and Not Being Considered 49 19 30 10 3 0 1 0 0 112 Unsure / Don t know 11 4 10 1 1 0 1 0 0 28 Tota 219 156 375 109 90 29 67 16 2 1063 40 THE HEALTH CARE REFORM SURVEY 2012-2013

TABLE 1. (continued) Does your company have specific strategies for the foowing? COMMUNICATIONS/MARKETING ON THE VALUE OF REWARDS PROVIDED TO EMPLOYEES 1-49 50-99 100-499 500-999 1,000-2,500 2,501-9,999 2,501-9,999 GREATER THAN OTHER TOTAL W/ OPERATIONS W/ OPERATIONS 10,000 W/ IN A SINGLE ACROSS OPERATIONS STATE MULTIPLE STATES ACROSS MULTIPLE STATES Yes, We Deveoped 28 17 58 17 22 10 13 8 0 173 Being Deveoped 21 35 81 31 21 8 22 4 0 223 Being Considered 23 24 77 23 20 4 14 1 2 188 No 91 60 119 25 21 7 13 2 0 338 No and Not Being Considered 39 13 27 8 3 0 1 1 0 92 Unsure / Don t know 17 7 13 5 3 0 4 0 0 49 Tota 219 156 375 109 90 29 67 16 2 1063 41 THE HEALTH CARE REFORM SURVEY 2012-2013

TABLE 2. Which of the foowing deveopments are ikey to trigger a review of your company's benefits or rewards strategies? By Empoyer Size 1-49 50-99 100-499 500-999 1,000-2,500 2,501-9,999 2,501-9,999 GREATER THAN OTHER TOTAL W/ OPERATIONS W/ OPERATIONS 10,000 W/ IN A SINGLE ACROSS OPERATIONS STATE MULTIPLE STATES ACROSS MULTIPLE STATES Company s financia and market performance Extremey Likey 98 66 146 51 32 14 28 5 1 441 Somewhat Likey 70 55 137 27 34 8 15 7 0 353 Somewhat Unikey 11 11 32 6 9 3 12 3 1 88 Not At A Likey 14 8 21 12 5 1 4 1 0 66 Tota 193 140 336 96 80 26 59 16 2 948 Introduction of state-based insurance exchanges Extremey Likey 58 50 121 33 23 6 14 2 1 308 Somewhat Likey 82 59 137 38 37 10 28 10 0 401 Somewhat Unikey 33 19 60 16 12 10 11 4 1 166 Not At A Likey 20 12 20 9 7 1 6 0 0 75 Tota 193 140 338 96 79 27 59 16 2 950 Increases in heath costs above your company s expectations Extremey Likey 131 92 220 63 47 13 34 6 1 607 Somewhat Likey 54 46 105 30 24 13 23 10 1 306 Somewhat Unikey 5 1 12 2 7 1 1 0 0 29 Not At A Likey 3 3 0 2 2 0 1 0 0 11 Tota 193 142 337 97 80 27 59 16 2 953 Competitors actions reated to benefits / rewards Extremey Likey 21 20 45 9 12 4 12 0 1 124 Somewhat Likey 54 42 149 34 30 11 33 9 0 362 Somewhat Unikey 59 44 98 44 25 9 10 6 1 296 Not At A Likey 57 35 45 9 13 3 4 1 0 167 Tota 191 141 337 96 80 27 59 16 2 949 Opportunity to differentiate your benefits from competitors Extremey Likey 18 15 45 4 8 3 9 1 1 104 Somewhat Likey 57 45 148 40 38 15 27 6 0 376 Somewhat Unikey 64 47 105 44 22 6 19 8 1 316 Not At A Likey 52 33 39 8 12 3 4 1 0 152 Tota 191 140 337 96 80 27 59 16 2 948 42 THE HEALTH CARE REFORM SURVEY 2012-2013

TABLE 2. (continued) Which of the foowing deveopments are ikey to trigger a review of your company's benefits or rewards strategies? By Empoyer Size 1-49 50-99 100-499 500-999 1,000-2,500 2,501-9,999 2,501-9,999 GREATER THAN OTHER TOTAL W/ OPERATIONS W/ OPERATIONS 10,000 W/ IN A SINGLE ACROSS OPERATIONS STATE MULTIPLE STATES ACROSS MULTIPLE STATES Increase in vountary empoyee turnover Extremey Likey 13 13 26 9 6 0 1 1 1 70 Somewhat Likey 55 45 143 33 34 11 24 2 0 347 Somewhat Unikey 65 53 117 41 28 13 25 11 1 354 Not At A Likey 56 28 52 14 12 2 8 2 0 174 Tota 189 139 338 97 80 26 58 16 2 945 Corporate pressure to reduce costs Extremey Likey 47 36 87 36 27 6 25 3 1 268 Somewhat Likey 72 55 153 38 33 16 27 9 0 403 Somewhat Unikey 36 28 70 19 10 3 6 4 1 177 Not At A Likey 35 21 27 4 7 2 1 0 0 97 Tota 190 140 337 97 77 27 59 16 2 945 Growth in number of empoyees Extremey Likey 18 19 36 13 5 0 9 1 1 102 Somewhat Likey 74 48 139 37 37 12 23 6 0 376 Somewhat Unikey 57 48 129 34 31 12 16 9 1 337 Not At A Likey 43 24 34 13 7 2 11 0 0 134 Tota 192 139 338 97 80 26 59 16 2 949 Heath care reform mandates or other reated factors Extremey Likey 85 78 155 48 46 12 26 8 1 459 Somewhat Likey 68 44 147 42 26 11 27 7 1 373 Somewhat Unikey 29 10 29 5 6 4 6 1 0 90 Not At A Likey 11 8 6 2 2 0 0 0 0 29 Tota 193 140 337 97 80 27 59 16 2 951 43 THE HEALTH CARE REFORM SURVEY 2012-2013

TABLE 3. Since its inception, how has the heath care reform aw affected your company's group heath pan in the foowing areas? MULTIPLE STATES By Primary Industry 1-49 50-99 100-499 500-999 1,000-2,500 2,501-9,999 2,501-9,999 GREATER THAN OTHER TOTAL W/ OPERATIONS W/ OPERATIONS 10,000 W/ WITHIN A ACROSS OPERATIONS CONSTRUCTION/ REAL ESTATE CONSULTING/ EDUCATION SINGLE STATEMULTIPLE STATESACROSS DISTRIBUTION ENERGY/O&G/ UTILITIES ENGINEERING/ AUTOMOTIVE FINANCIAL ENTITY GOVERNMENTAL HEALTH CARE HEALTH INSURANCE HOSPITALITY LIFE/PROPERTY & CASUALTY W/ OPERATIONS WITHIN A SINGLE STATE INSURANCE 2,501-9,999 W/ OPERATIONS ACROSS MULTIPLE STATES MANUFACTURING MARKETING & COMMUNICATIONS GREATER THAN 10,000 W/ OPERATIONS ACROSS MULTIPLE STATES NON-PROFIT SPECIALTY SERVICES/LEGAL TECHNOLOGY OTHER TOTAL Active empoyees heath coverage costs Significant Decrease 0 0 1 0 0 1 1 0 0 0 0 2 0 1 0 0 0 6 Moderate Decrease 0 1 1 0 0 1 2 4 0 0 0 2 1 1 2 0 8 23 No Change 35 17 11 8 3 21 16 41 2 9 7 72 2 45 10 18 72 389 Moderate Increase 20 17 11 6 9 18 8 25 4 9 6 82 3 27 13 16 56 330 Significant Increase 13 8 7 3 1 0 4 18 0 2 1 19 0 10 3 3 26 118 Not Appicabe 4 1 2 0 0 1 1 2 0 2 0 2 0 2 0 4 12 33 Grand Tota 72 44 33 17 13 42 32 90 6 22 14 179 6 86 28 41 174 899 Percentage of empoyees enroed heath coverage Significant Decrease 1 0 0 0 0 0 0 2 0 0 0 0 0 0 1 0 2 6 Moderate Decrease 3 0 0 0 1 1 3 3 0 1 0 8 0 4 1 4 8 37 No Change 56 33 24 14 10 35 23 63 5 15 13 145 5 70 22 30 124 687 Moderate Increase 8 7 5 1 2 6 3 17 1 3 1 22 1 8 3 4 26 118 Significant Increase 0 0 1 0 0 0 0 2 0 0 0 2 0 2 1 0 1 9 Not Appicabe 4 4 3 2 0 0 3 3 0 3 0 2 0 2 0 3 13 42 Grand Tota 72 44 33 17 13 42 32 90 6 22 14 179 6 86 28 41 174 899 Empoyee contributions toward the cost of singe coverage Significant Decrease 0 0 1 0 0 1 0 0 0 0 0 0 0 0 0 0 1 3 Moderate Decrease 0 1 2 0 0 0 1 3 1 2 0 6 0 1 2 2 8 29 No Change 50 28 16 12 5 30 18 56 4 11 9 105 3 55 16 23 85 526 Moderate Increase 15 11 10 4 6 11 8 22 1 6 5 57 2 23 7 12 58 258 Significant Increase 1 2 2 1 0 0 3 5 0 0 0 10 0 3 3 0 10 40 Not Appicabe 6 2 2 0 2 0 2 4 0 3 0 1 1 4 0 4 12 43 Grand Tota 72 44 33 17 13 42 32 90 6 22 14 179 6 86 28 41 174 899 Company contributions toward the cost of singe coverage Significant Decrease 0 0 1 0 0 0 1 0 0 0 0 1 0 0 0 0 1 4 Moderate Decrease 2 5 2 2 0 2 2 6 0 1 1 8 0 2 3 5 21 62 No Change 44 23 13 11 8 31 20 53 5 11 11 97 3 60 14 20 91 515 Moderate Increase 18 12 10 3 4 9 6 21 1 8 2 57 2 17 8 12 40 230 Significant Increase 4 3 5 0 1 0 1 7 0 0 0 14 0 5 3 0 11 54 Not Appicabe 4 1 2 1 0 0 2 3 0 2 0 2 1 2 0 4 10 34 Grand Tota 72 44 33 17 13 42 32 90 6 22 14 179 6 86 28 41 174 899 44 THE HEALTH CARE REFORM SURVEY 2012-2013