Aon: A Health Care Reform Update

Health Care Reform Update: The Road Ahead
AlphaStaff
August 29, 2013

Consulting | Health and Benefits
Proprietary & Confidential | 07/10/2013 2
2
Today’s Speaker
Richard Kaufman – Vice President, Aon Hewitt
Richard serves as a vice president of Aon Hewitt in the Miami office. In addition to his
account management responsibilities, he also serves as a Compliance Officer for the local
practice. Mr. Kaufman has 25 years of experience in employee benefits.
Aon Hewitt is a global leader in health and benefits consulting. Aon helps its clients act on
three fronts: manage their health care spend, maintain the integrity of their core
offerings, and meet the needs of their varied employee population. Aon’s services include
group life and health plan design, data driven health strategies, audits, absence
management and productivity, consumer-driven health care, health care management,
individual life and health, benefits administration, and executive benefits. Through its
37,000 professionals worldwide, Aon readily delivers distinctive client value via innovative
and effective risk management and workforce productivity solutions.
.

Consulting | U.S. Health & Benefits
Proprietary & Confidential | 12/2012 3
Two Rules of Health Care Reform
 Rule #1: Deal With What You Know
 Rule #2: Apply the Jello Theory

2011 Plan Year 2011 2012 2013 2014 2018
• Small Business Health
Insurance Tax Credit
(effective in 2010)
• Lifetime dollar limits on
Essential Health Benefits
(EHB) prohibited*
• Preexisting Condition
Exclusions Prohibited for
Individuals under 19*
• Overly restrictive annual
dollar limits on EHB
prohibited*
• Extension of Adult Child
Coverage to Age 26*
• Prohibition on
Rescissions*
• No Cost Sharing for
Preventive Health
Services**
• Effective Appeals
Process**
• Patient protections**
• Nondiscrimination
requirements for insured
plans** (DELAYED)
• Expanded MEWA Oversight
(DELAYED)
• Automatic Enrollment
(DELAYED)
• Over-the-Counter
Medicines Not
Reimbursable Under
Health FSA, HRA, or
from HSA Absent a
Prescription, Except
Insulin
• HSA Non-Medical
Expense Tax Increase
• Employer Distribution
of Summary of
Benefits and
Coverage*
• Comparative
Effectiveness Fee
• Employer Quality of
Care Report**
(DELAYED)
• Medical Loss Ratio
rebates (insured plans
only)*
• Employer Reporting of
Health Coverage on
Form W-2 (due
January 31, 2013)
• Insurer Rate Review
and Disclosure
• Notice to Inform
Employees of
Coverage Options in
Exchange
• Limit on Health Care
FSA Contributions to
$2,500 (Indexed)
• Elimination of
Deduction for
Expenses Allocable to
Retiree Drug Subsidy
• Medicare Tax Increase
on High Income
Earners
• Addition of Women’s
Preventive Health
Requirements to No
Cost Sharing for
Preventive Health
Services **
• Individual Mandate to
Purchase Insurance or
Pay Penalty
• State Insurance
Exchanges
• Employer Responsibility
to Provide Affordable
Minimum Essential Health
Coverage*** (delayed)
• Preexisting Conditions
Exclusions Prohibited*
• Annual Dollar Limits on
EHB Prohibited*
• Limit of 90-Day Waiting
Period for Coverage*
• Employer Reporting of
Health Insurance
Information to
Government /Participants
(delayed)
• Increased Cap on
Rewards for Wellness
Program**
• Cost-sharing Limits for All
Group Health Plans
(deductibles and OOP
maximum)**
• Transitional Reinsurance
Contributions
• Coverage of Clinical
Trials**
• Excise Tax on
High-Cost
Coverage
*Denotes group/insurance market reforms applicable to all group health plans.
**Denotes group/insurance market reforms not applicable to grandfathered health
plans.
*** This requirement applies to full time employees (e.g., 30 hours per week) and will
require coverage that is affordable and satisfies a certain actuarial value to avoid the
penalty. Guidance forthcoming.
**** Where effective date determined by plan year, assumes plan year is calendar
year.
Affordable Care Act – Your Compliance Timeline****

Employer Checklist—Act on 2013 Provisions Now
2013 Provisions
Administrative & Communication
Actions
Medicare taxes for high-income  Do calculations
 Coordinate with payroll
 Tell affected employees (optional)
$2,500 FSA Limit  Communicate in off-cycle enrollments
 Provide decision support
 Update SPDs
Women’s preventive health coverage  Communicate in off-cycle enrollments
 Update SPDs
Notifying employees about state
exchanges
 Communicate to all employees about
exchanges (eligibility, services and contact
information)
Patient-Centered Outcomes Research
Institute (PCORI) Trust Fund Fee
 Based on average covered lives
 $1 for 2013; $2 for 2014
 Reporting and payment of fees on IRS
Form 720

Start Preparing for 2014 Provisions
2014 Provisions Administrative & Communication
Actions
Employer mandate (Postponed until
2015)
Free-rider penalties
Premium tax credits
Automatic enrollment (Delayed)
Minimum essential benefits
Fully-effective group market and
insurance reforms
Educating employees on how state
exchanges will work
Transitional Reinsurance Fee
Health Insurance Industry Fee
Increased wellness rewards cap 30% of
cost of health coverage
 Incorporate provisions into enrollment
 Develop a communication strategy and
tactics
 Provide decision support
 Create or update SBCs/ SPDs/ SMMs
Guiding Principles
 Focus on participant actions
 Stay objective
 Simplify messages
 Provide guidance
 Capitalize on the opportunity

Recent Delays
 The Employer Mandate and associated reporting has been delayed until 2015. All other
market reforms are still expected to be implemented on time.
– What was postponed?
• Employers required to offer a reasonable and affordable plan to full-time employees
• Full-time employee definition of 30 hours a week
• Need to establish measurement, administrative, and stability periods
• Employer reporting
– What has not been postponed?
• All fees and taxes
• Market reforms
• Individual mandate
• Public exchanges
• Federal subsidies for public exchanges
 Health Care Reform will require copayments and deductibles to be applied to out of pocket
maximums
– What was delayed?
• If an employer uses a separate pharmacy administrator from the medical administrator, then this has
been postponed until 2015. Otherwise, it takes effect in 2014.

2014—Employer Mandate (Postponed until 2015)
– The Employer Mandate is also referred to as
• The free rider penalty (historical terminology), shared responsibility payment,
the assessable payment, and the employer responsibility payment
– A Large Employer is one that employs 50 or more full-time employees (FTEs)
• FTE generally means an individual, with respect to any month, who is employed
on average at least 30 hours of service per week
– The Employer Mandate requires a Large Employer to offer:
• Minimum Essential Coverage that meets Minimum Actuarial Value requirements
• Coverage that is “affordable”
• Available to “substantially all” (i.e., 95% or more) FTEs
 Employers must also offer coverage to dependent children up to age 26,
however this coverage does not need to be affordable
 The dependent definition does not include spouses

2014—Employer Mandate (Postponed until 2015)
 $2,000 Tax Penalty
– Applies when an employer fails to offer its FTEs the opportunity to enroll in
Minimum Essential (health) Coverage (MEC)
• If one full-time employee goes to an Exchange and qualifies for a subsidy, then the employer would be
subject to a $2,000 penalty for each individual that was not offered coverage that met MEC guidelines
• There is a waiver for the first 30 full-time employees.
• The penalty is calculated on a monthly basis.
 $3,000 Tax Penalty
– Applies when an employer offers its FTEs the opportunity to enroll in MEC and the
employee contribution for single coverage exceeds 9.5% of their income, thus
being considered unaffordable
• The penalty generally is $3,000 per year for each full-time individual who enrolls in an Exchange and
qualifies for a subsidy
• There is no 30 life waiver
• Example of 9.5%: Employee earning $35,000/year; 9.5% of salary = $3,325 annually or $277 per month.
This is the most that an employee can be asked to contribute for single coverage.

What Keeps Employers Up At Night
 Measurement period
– Period of time over which employer tracks employee’s hours of service
• Cannot be less than three months or more than twelve months in duration
– Initial measurement period for new employees will be based on each employee’s start date
– Standard measurement period for ongoing employees will be uniform period of time set by
employer
 Administrative period—optional (up to 90 days in duration)
– Employer looks back at employee’s hours of service in measurement period
• May be utilized for conducting calculation and open enrollment
 Stability period
– Period of time employer must offer coverage to FTE to avoid ACA penalties
• Stability period can be between six months and one year but not less than Measurement
Period
– If employee is considered full-time in measurement period but falls to part-time in stability
period, benefits must be offered through the end of the stability period

Defining Full-Time Employees—Ongoing
2013 Measurement Period
(MP)
2013 Administrative Period
(AP)
2014 Stability Period
(SP)
3 – 12 months Up to 90 days
At least 6 months but no
shorter than MP
 Determines coverage in
stability period
 Average hours worked
 Buffer between MP and SP
 Allows for measuring and
enrolling full-timers
 Eligibility period for employees
averaging 30 hours or more
during MP
MP Considerations
 Longer period reduces number
of full-timers given high
turnover
 Shorter period provides more
time to make workforce
adjustments to mitigate cost
SP Considerations
 Shorter period reduces
coverage commitment but
creates administrative
complexity
 Longer period that aligns with
calendar years is most
practical administratively

Exchange Update
 Coverage through the exchanges will begin in every state on January 1, 2014, with
enrollment beginning October 1, 2013.
 States can elect to:
– build a fully state-based exchange,
– enter into a state-federal partnership exchange, or
– default into a federally-facilitated exchange.
 The Affordable Care Act (ACA) directs the Secretary of Health and Human Services
(HHS) to establish and operate a federally-facilitated exchange in any state that is not
able or willing to establish a state-based exchange.
 In a federally-facilitated exchange, HHS will perform all exchange functions. States
entering into a state-federal partnership exchange may administer plan management
functions, in-person consumer assistance functions, or both, and HHS will perform
the remaining exchange functions. Federal exchanges may have more carriers than
state exchanges.

Exchange Update (cont’d)
• Exchange health plans options will vary from state to state and carriers will
selectively participate state by state.
• Aetna – 14 exchanges
• CIGNA – 5 exchanges
• Humana – 14 exchanges
• United Healthcare – 10 – 25 exchanges
• There will be four types of medical plans offered through an Exchange:
• Bronze (60% actuarial value)
• Silver (70% actuarial value)
• Gold (80% actuarial value)
• Platinum (90% actuarial value)
• Catastrophic plan for those under 30
• Exchanges will first be made available to individuals and small employers of <50
employees. States will retain option to include large employers in 2017.

Public Exchange Status by State
CA
ORE
WA
NEV
UTAH
CO
IDAHO
WYO
NM
ARIZ
ND
SD
NEB
KS
OK
TX
MINN
IOWA
MO
Ark
LA
MS
FLORIDA
GA
SC
KY
WIS
MN
IL IND
OHIO
PA
W VA
VA
NCTN
NY
NJ
MD
DE
CT
VT
NH
MAINE
MASSACHUSETTS
MT
ALASKA
ALA
HA
Won’t Create Exchange
Creating Exchange
Partnership Exchange with Feds
Democrat Governor
Republican Governor
WA
NY
VT
MASSACHUSETTS
15

State Medicaid Expansion Possibilities
 States can expand Medicaid entitlement to individuals with incomes up to 133% of
Federal Poverty Level (FPL), covering up to 17 to 22 million new Medicaid
beneficiaries
 Less than half of states are expanding Medicaid in 2014
 If a state sets up an exchange but does not expand Medicaid, individuals with
incomes between 100% and 133% of FPL would be eligible for federal subsidies to
purchase insurance in the exchange
– Without Medicaid expansion, individuals below 100% of FPL but not currently
eligible for Medicaid (approximately 11.5 million individuals*) would remain
uninsured
 Impact to employers would result from
– Cost-shifting due to uninsured
– Potentially higher Shared Responsibility Payments if do not offer minimum
essential benefits or minimum affordable coverage to full-time employees
between 100% and 133% of the FPL
*Source: The Urban Institute

Half of States Are Expanding Medicaid in 2014
CA
OR
WA
NV
UT
CO
ID
WY
NM
AZ
ND
SD
NB
KS
OK
TX
MN
IA
MO
AR
LA
MS
FL
GA
SC
KY
WI
MI
IL IN
OH
PA
WV
VA
NCTN
NY
NJ
MD
CT
VT
NH
ME
MA
MO
AK
AL
HI
8 States Won’t Expand Medicaid
14 States Will Expand Medicaid
16 States Undecided on Medicaid Expansion
Democrat Governor
Republican Governor
6 States Leaning toward expanding Medicaid
6 States Leaning toward Not Expanding Medicaid
DE
17

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