Are You Ready?

1. 2014: Health Care Reform Requirements and Opportunities Are You Ready? Presented by: Carl Pilger & David Martin

2. Session Overview David Martin Managing Principal Credit Union Services Digital Benefit Advisors Carl Pilger Vice President Legal Counsel Digital Insurance Today, we’ll cover: • Background • Individual Requirements • Employer Requirements • Market Changes • The Marketplace • Potential Opportunities • Question & Answer

3. How Did We Get Here & Where Do We Go Now?

4. Where Do We Stand? • SCOTUS Ruling • 5-4 vote finding ACA Constitutional (almost across the board) • Chief Justice Roberts wrote majority opinion • Dissent- Would have overturned entire law • Election • Who was waiting? • Businesses • Government – now seeing a flurry of proposed rules and clarifications • Delays? • Attempts to Repeal • Defunding • Government Shutdown – little impact on ACA

5. What Does All This Mean to Credit Unions? Time to Act Broker/consultant and/or carrier must confirm you are in compliance • ACA changes already in effect will remain in effect • ACA’s provisions that are not currently in effect will continue to be implemented Continue to prepare and take stock of steps already taken

6. How Are Credit Unions Doing?

7. Sharing Responsibilities – INDIVIDUALS

8. Individual Responsibility (Mandate)ACA, HHS Proposed Rule (CMS-9958-P) 2/1/13 • Who does this apply to? • Individuals of all ages, including children • Those claiming dependents are responsible for dependents What is it? Requires one of the following for each individual: Minimum essential coverage Qualify for an exemption Make a payment when filing federal income tax return When is it effective? January 1, 2014

9. Minimum Essential CoverageACA, HHS Proposed Rule (CMS-9958-P) 2/1/13 What counts? Employer-sponsored coverage, including COBRA and retiree coverage Coverage purchased in individual market Grandfathered plans Medicare and Medicare Advantage Medicaid Children’s Health Insurance Program (CHIP) Certain types of Veterans health coverage State risk pool TRICARE • Specialized coverage excluded: • Vision • Dental • Workers’ Compensation • Disability • Specified disease or condition

10. Tax Penalty Failure to carry health coverage or qualify for an exemptions will result in a payment or tax penalty How much? The lesser of the monthly penalties or the average premium for a bronze plan ACA, HHS Proposed Rule (CMS-9958-P) 2/1/13, IRC 5000A

11. Sharing Responsibilities – EMPLOYERS

12. Employer Responsibilities Delayed Information Update: (Administration announcement 7/2/13; rules to follow)

13. Am I an Applicable Large Employer? Type +

14. Minimum Value of Employer Plans ACA, IRS Proposed Rule - 5/3/13; Commentary due by July 2, 2013 • What is affordable? • Employee’s contribution, toward the employee-only premium, does not exceed 9.5% of the employee’s W2 income. • Example • Employee earns $24,000; spouse earns $7,500 • Employee-only coverage = $400/month ($4,800/yr.) • Employee + Spouse = $750/month ($9,000/yr.) • Employer contributes 50% of employee-only amount and 0% of spouse’s amount • 50% * ($4,800)/$24,000 = 10.0% = UNAFFORDABLE

15. Minimum Value of Employer Plans ACA, IRS Proposed Rule - 5/3/13; Commentary due by July 2, 2013 • Background • Individuals may not receive a premium tax credit (subsidy) if offered an eligible employer-sponsored plan providing affordable, minimum value coverage, i.e. minimum essential coverage (MEC) • Applicability • All employer-sponsored plans • Traditional small group plans offered in the public Marketplace, private exchanges and private market (bronze, silver, gold, platinum) will meet minimum value • Plans offered in the large group market will need to be tested to determine minimum value

16. Sharing Responsibilities – MARKET CHANGES

17. Requirements and Obligations • Market rules • Essential health benefits • Community-rating • Limited rating rules • Minimum actuarial value of 60%, i.e. metal tier plans, i.e. bronze, silver, gold, platinum • Limit on annual deductible: • $2,000 individual • $4,000 family • (small group plans only) – under review

18. Rating Rules & Methodologies • Issuers = individual member ratings Employers = individual or composite rating • Age rating – limited to 3:1 • Tobacco rating – limited to 1.5:1 • Family size – individual v family • Maximum of 3 oldest family members under age 21 • No cap for family members over age 21 • Geographic region • States or CMS can establish one or more rating areas • Maximum rating areas cannot exceed the number of MSAs plus one • One rating area for state, county-based or 3-digit zip codes, or metropolitan statistical areas (MSAs) and non-MSAs • Re-underwriting is prohibited Applies to non-grandfathered health insurers (not self-funded) Apportioned to each family member Will apply to non-grandfathered large group if state permits coverage to be offered through an Exchange in 2017 11/26/12 HHS proposed rule; Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation

19. The Basics Employer Notice RequirementACA – Section 1512

20. Notice Considerations 1 Subsidies are available to those with household incomes between133% and 400% FPL who do not have access to affordable, minimum essential coverage.

21. Preparing for 2014…. Initial Measurement Period Nondiscrimination Stability Period Safe Harbor Actuarial Values Reporting Risk Retention Fees Full-time Employee Medical Loss Ratios Cadillac Plans Wellness Premium Subsidies Annual Limits Auto Enrollment PCORI Fees Minimum Essential Coverage Essential Benefits Employer Mandate Exchange Operation

22. Sharing Responsibilities – THE MARKETPLACE

23. State Exchanges Exchange An organized marketplace to help qualifying individuals and employer groups (initially small employers) buy health insurance in a way that permits easy comparison of available plan options based on price, benefits and quality. Must be established by January 1, 2014 Purpose To facilitate the purchase of qualified health plans (QHPs) To provide small employers a Small Business Health OptionsProgram (SHOP Exchange)

24. Public Marketplace A web portal “marketplace” for health insurance Small Businesses If up to 100 employees, can buy thru Exchange Individuals (no subsidies for ones offered employer-based coverage, unless that coverage is “unaffordable”) Self-insured plans not eligible to Participate States • each sets up own Exchange • will be involved in premium reasonableness reviews; can approve/reject as provided under state law Federal Government • sets criteria for plan participation • and purchaser eligibility • provides subsidies for small businesses and individuals • sets up Exchange if a state fails to

25. Individual Marketplace/Exchange WA NH VT ME MT ND OR MN MA ID NY WI SD MI WY PA RI IA CT NE NV OH NJ IN IL UT WV CO CA DE VA MO KS KY MD NC DC TN AZ OK AR SC NM Operational State Exchanges (1) GA AL MS LA State Exchange Established (15+DC) TX AK FL Federally -Facilitated Exchange (27) HI State Partnership Exchange (7) Information from: CIAB - June 28, 2013

26. SHOP Marketplace/Exchange WA NH VT ME MT ND OR MN MA ID NY WI SD MI WY PA RI IA CT NE NV OH NJ IN IL UT WV CO CA DE VA MO KS KY MD NC DC TN AZ OK AR SC NM Operational State Exchanges (2) GA AL MS LA State Exchange Established (15+DC) TX AK FL Federally -Facilitated Exchange (26) HI State Partnership Exchange (7) Information from: CIAB - June 28, 2013

27. Qualified Health Plans Four Coverage Level Requirements for Essential Benefits Package Bronze:designed to provide benefits actuarially equivalent to 60%of full value; Silver:designed to provide benefits actuarially equivalent to 70%of full value; Gold:designed to provide benefits actuarially equivalent to 80%of full value; and Platinum:designed to provide benefits actuarially equivalent to 90%of full value.

28. Public and Private Marketplaces

29. Marketplace Employer Menus • Health options: • Employers may select from approved QHPs: • One carrier plan (only option for FFEs in 2014) • Multiples plans and carriers • Metal tier with multiple carriers • One carrier with multiple plans • Other insurance options: • Dental and vision offerings will vary by state • Only available from health carriers • Life and disability will be rare • Additional offerings: • Whatever is offered by health carrier selected • Health options: • Employers may select from all plan options: • One carrier plan • One carrier with multiple plans • Metal tier with one carrier • Other insurance options: • Multiple options from medical or ancillary- only carriers • Products include: dental, vision, disability, life, voluntary, pet, accident, cancer, etc. • Additional offerings: • Wellness programs • Administration and payroll • Compliance, education and other resources Public Marketplace Private Marketplace

30. Private Marketplace • The 3 C’s of Benefit Marketplace: • The employer has an expectation of being removed from the day-to-day management of a benefit plan such an enrollment, changes, terminations, managing eligibility, reconciling multiple carrier bills, making premium payments, etc. • 1. Consolidated benefits administration • An online employee enrollment system – that integrates into the carriers & payroll service provider • An online employer administrative system – that easily provides the important data to manage the program • Benefit administration service team to manage the day-to-day activities of the benefit program. • 2. Complete array of benefit choices • Health Plans: 8-15 health plan choice to meet the many demographics within the workforce • Ancillary Benefits: build your own dental, vision, life, disability, accident, critical illness, and more • New Benefits: such as telemedicine & concierge medicine • Customer service – including decision support before, during, & after enrollment • Educational tools including videos • Decision support for medical, dental, vision, life insurance, & disability insurance • Plan recommendations based on an individual’s personal situation • Benefit counselors – available telephonically and via chat

31. Defined Contribution Health Plans Theory of gradual shift to defined contribution health plans • Shifting risk of incurring high health-care costs from employers to workers • Similar to previous shift for retirement plans Today, market is predominately “defined-benefit” plans • Employers determine a set of health-insurance benefits Move to “defined-contribution” where • Employers pay a fixed amount • Employees use money to buy or help pay for insurance they choose themselves

32. Overview of Defined Contribution Approach

33. Shift in Funding Strategies…. Aon Hewitt, Corporate Health Care Exchange Survey, The Time is Now, Rethinking Health Care Coverage, 2012.

34. A Balancing Act

35. Do you have the answer? Should my Credit Union offer Coverage in light of Health Care Reform? • Have to consider “Play or Pay” • What will be offered through each state’s “Exchange”? • What will I need to do to remain competitive?

36. Strategic Inventory Why do you offer health insurance as part of your current benefits package? Protection for employee and family Attract and retain talent Obligation Personal need Tax advantages Employee expectation Why do your employees participate in your health insurance program? Lower cost Tax advantages Protection for family Transfer of responsibility

37. What if? If you eliminate health insurance as part of your benefits package, would you replace it? With other benefits? With salary? What would employee reaction be if you eliminated this benefit? How might productivity be affected? Will all your employees obtain health insurance coverage on their own? What would you do personally for your own benefits? BENEFITS COSTS

38. Summary • HCR not likely to change substantially in the near future in wake ofSCOTUS ruling and Presidential election • Danger in waiting too long to ensure compliance • DOL Audits • Lack of time to create strategy • Potential “opportunities” for credit unions thru HCR • Private Exchanges making shift to defined contribution funding easier • Public Exchanges • Possibility of dropping coverage if needed • “Employer of Choice” strategies

39. League Opportunity

44. For More Information Contact: Lynn Athens VP Human Resources & Collaborative Office Solutions California and Nevada Credit Union Leagues 2855 E. Guasti Rd. #600, Ontario, CA 91761 Phone: 909-212-6038 lynna@ccul.org www.ccul.org

45. Questions

46. References and Resources

47. Plan Fees • IRS Final regulation 12/10/12, FR 2012-29184

48. PCORI Fees General Information: ACA, IRS Final Regulation- 12/18/12; FR 2012-29184

49. Counting Number of Lives • STANDARD METHODS: • Actual count method – • count each covered life for each day of the plan year • divide by number of days • Snapshot method – • choose one or more corresponding days each calendar quarter • add covered lives on those dates • divide by number of days chosen • 5500 method – (if filed by 7/31) • Offering employee coverage only - add number of participants reported at beginning of year to the number reported at end of year and divide by 2 • Offering employee and any other family coverage - add the total participants covered at the beginning of the plan year to the total participants covered at the end of the plan year (IRS Final Regulations 12.10.12; Dept. of Treasury 2013-04836)

50. Multiple plans FEE REQUIREMENTS: (IRS Final Regulations 12.10.12; Dept. of Treasury 2013-04836)