This webinar provided an overview of healthcare reform and upcoming changes. It discussed the individual mandate beginning in 2014, penalties for non-compliance, and healthcare exchanges. The webinar covered medical loss ratio requirements for insurers to spend minimum amounts on clinical services, flexible spending account limits of $2,500, and how insurers must distribute rebates to employers and employees if the MLR thresholds are not met. Looking ahead, it noted more regulations and guidance are needed to implement key parts of the Affordable Care Act as various deadlines approach.

1. Healthcare Reform Webinar
Discussion for BenefitMall Key Accounts
Monday, August 13, 2012
2:00 p.m. EST

2. Meet The Panel
Meet the Panel
Mike Brachlow
BenefitMall Executive Sales
Director, Large Group
Moderator Randy Madry
BenefitMall Consultant
Speaker
Garry Carneal, JD, MA
BenefitMall Consultant
Speaker

3. Webinar Overview
Healthcare Reform Update
Medical
Loss
Future
Ratio
(MLR)
Flexible
New carrier
Individual Healthcare Spending W-2
benefit
Mandate exchanges Account reporting
summaries
changes
Source: www.besthealthcarerates.com

4. Individual Mandate
 Effective January 1, 2014
 Who does the individual mandate apply?
 Applies to everyone except the following:
 Who already have minimum essential coverage through an employer-sponsored plan
 Who have individual qualified coverage
 Who are enrolled in a Medicaid or Medicare program
 Who are covered by a military plan
 Who are dependents of active military enrolled in a TriCare plan
 Who are permanently incarcerated
• Other exceptions include persons who:
 Who are members of Indian tribes
 Who express religious objection
 Are without coverage for less than three months
 Would be contributing more than eight percent of their household income as a “required
contribution,”
 The Secretary of HHS determines that obtaining coverage would constitute an extreme
hardship

5. Individual Mandate:
What are the tax penalties for non-compliance?
The annual tax (formerly known as a penalty) for not obtaining minimum essential
coverage will be the greater of a flat dollar tax amount per individual or a percentage
of the individual’s taxable income.
The applicable flat dollar amount for 2014 for a tax filer with no dependents will be
$95 and the amount for 2015 will increase to $325. This amount will increase over
the years, rising to $695 in 2016, and will be further revised in 2017 according to
the changes in cost-of-living.
Each adult will pay the rate of an individual, and then you need to add the
dependent at the 50% rate. For example, in 2016 a couple with one child under 18
would be assessed a flat dollar penalty of $1,737.50 (two adults x $695 plus one
child at $347.50 -- one half of adult penalty).
A family of four (one couple with two children over 18) would only be required to
pay the 300% cap in 2016. Three hundred percent of the $695 flat amount for 2016
is equal to $2,085. This amount is less than the flat amount that could be charged if
the cap were not in place (two adults + two children over 18 = $695 x 4 = $2,780).

6. Healthcare Exchanges
Exchange types States have three options
Must be
PPACA: certified
State-based and
versus operational
Federal by Oct
Exchange 1, 2013
State & Default to
State
Federal Federally-
Individual SHOP standalone
Partnership run
Exchange
Exchange Exchange

7. Exchange Primary Functions
Purchasing cooperative that promotes transparency
Qualified health plan certification
Standardizing benefit offerings (including essential health benefit requirements and
gold/silver/bronze levels)
Creation and maintenance of Website for consumers
Resource on Medicaid, Medicare and CHIP eligibility
(with goal of automated enrollment)
Operate or supervise electronic enrollment process
Implement an electronic calculator to determine the actual cost of coverage taking into
account eligibility for premium tax credits and cost sharing reductions
Vehicle for premium subsidies-- Who is eligible and how much is it worth?

8. State Exchange Updates
 10 states and D.C. have adopted
legislation
 4 states through executive order
 20 states have enacted laws or are
leaning toward opting out of broad
healthcare reform
 What is going to happen next?
Source: www.NCSL.org

9. Summary of Plan
Benefits and Coverage
 Effective September 23, 2012, insures and group benefit plans must issue a standardized
Summary of Benefits and Coverage (SBC)
 SBC should detail “in plain language, simple and consistent information about health plan
benefits and coverage that…will help consumers better understand the coverage they
have, and, for the first time, allow them to easily compare different coverage options.”
 NAIC provided recommendations that were adopted by the federal government
 Should include coverage examples that illustrate benefits provided under the plan or
coverage, detail out-of-pocket costs, and explain any coverage exclusions for common
benefit
 Person requesting an SBC must be provided with the document within seven (7) business
days
 Upon renewal, must be provided to both participants and beneficiaries as part of any
written enrollment application materials
 Experts differ as to when updated SBCs need to be issued – after Sept 23 or after new
policy year (?)
 Obligations of employers versus the insurance carriers

10. W-2 Reporting Requirements
 PPACA requires employers to report the cost of health benefits
coverage under an employer-sponsored group health plan on an
employee’s Form W-2, in Box 12, using Code DD
 Reporting for the 2011 calendar year (meaning the Form W-2 generally
required to be furnished to employees in January 2012) was optional.
 For years after 2011, employers generally are required to report the cost
of health benefits provided on the Form W-2
 Reported amount is not taxable because employers excludable
contribution is being reported
 Limitations to W-2 filing requirements such as an employers filing
fewer than 250 Forms W-2 for the previous calendar year
 Many employers are eligible for W-2 reporting transition relief for
tax-year 2012 and beyond, until the IRS issues final guidance for
this reporting requirement

11. Flexible Saving Accounts
 Beginning in 2013, flexible spending accounts are limited to an annual
contribution of $2,500
 The $2,500 limit will be indexed for inflation after 2013
 Married couples may each contribute $2,500 to their employer FSA plan
to total $5,000
 One spouse may not contribute $4,000 to theirs and the other spouse
$1,000 to total the $5,000
 The limit is $2,500 each
 Can wait until renewal date in 2013
 Why the Change? It was implemented to:
 Move individuals into the Exchange insured pools
 Decrease the amount of income that was tax exempt and to generate
more federal income tax revenue to pay for the PPACA

12. MLR in a Nutshell
Large Group Small Group
(defined as (defined as 2
Beginning in 100 or more to 100 FTEs) Calculations
and nongroup Rebates
2011, insure FTEs) are based
• 80% clinical
checks for
rs had to • 85% clinical by legal
services and 2011 will be
spend and services and
qualified quality entity, state
qualified quality issued in
track MLR programs and line of
programs
• 20% 2012
ratios • 15% business
administrative administrative

13. MLR in a Nutshell
If a health plan
If 80/85%
or insurer
percentage not HHS says that
meets or Three month
achieved, notic it will start
MLR reports exceeds the requirement
es and rebate publishing
filed to HHS MLR, notices from August 1
checks must MLR reports
June 1st each will be issued to take action
be distributed during the
year with the first on the MLR
by August 1st summer of
plan document rebate options
the following 2012
after July
year
1, 2012

14. Plan Types and Plan Asset Overview
 Variations in the MRL Rebate Process
 ERISA versus non-ERISA plans
 Does not apply to self-funded plans
 Who is the policyholder?
 Could be the employer, trust, or an individual
 The role of a plan fiduciary
 Determining when the MLR proceeds is a “plan asset “under ERISA?
 Plan document description governs (within ERISA guidelines)
 When plan documents silent, look to source of premium payment:
 Paid completely be employer (no)
 Paid by employee (yes)
 By both? (yes, employee portion)
 Paid through trust assets?(yes)
 See DOL Technical Guidance 2011-04

15. Plan Asset Determination Examples
The portion of the rebate requiring treatment as plan assets
depends on how the premiums for the coverage were initially paid:
• If all premiums are paid by the employees, the entire rebate constitutes plan
assets;
• If the premiums are shared by a fixed percentage (e.g., employer pays 75% of the
premium cost and employees pay 25% of the premium cost), that ratio
determines the amount of the rebate that constitutes plan assets (25%);
• If an employer pays a fixed amount and the employees pay the remaining amount
(the employer pays $350 per month, the employees pay the balance), the rebate
constitutes plan assets up to the amount paid by employees; and
• If the employees pay a fixed amount and the employer pays the remaining
premium (the employees pay $350 per month, the employer pays the
balance), the rebate constitutes plan assets only to the extent it exceeds the
amount paid by the employer.

16. Employer MLR Distribution Rebate Options
DOL Technical 2011-04 Release
Based upon already established
ERISA principles, the DOL
guidance provides employers with
four options. An employer may:
• Distribute rebates to current (and, if
desired, former) participants
• Enhance benefits provided to plan
participants by additional benefits or
wellness programs
• Pay reasonable plan expenses (?)
• Reduce future premiums for current plan
participants (?)
• Note: For the purposes of MLR rebate
checks, COBRA plan participants are
considered plan participants.

17. BenefitMall Recommendations
Three Simple Ways to Go
• Checks to employees
• Premium holiday
• Enhanced benefits

18. Example Calculation: Document
Rebate Check = $5,000 Process!
Step 1: Calculate total premium employer paid to carrier in the 2011 plan year = $100,000
Step 2: Calculate total contribution paid by employees and COBRA participants for the same year = $25,000
Step 3: Divide Step 2 by Step 1 = the total percentage of the premium paid by employees and COBRA
participants ($25,000/$100,000 = 25%)
Step 4: The percentage calculated in Step 3 is multiplied by the total rebate check which equals the amount
due the employee/COBRA participants ($5,000 x 25% = $1,250)
Step 5: Calculate the total amount of 2011 plan year contribution paid by employees and COBRA
participants currently insured using payroll records = $20,000
Step 6: Take the amount paid by each employee or COBRA participant in the 2011 plan year and convert it
to a percentage of the total in Step 4. Employee A contributed $200/ $20,000 = 1%
Step 7: The percentage calculated in Step 6 would then be applied to the net plan participant portion of the
rebate check (Step 4) and the resultant sum is what that plan participant should receive (Employee A 1% x
$1,250 = $12.50)

19. Processing the MLR Rebate Checks
What happens
Does the MLR
if an employer
How does an Who do the How much rebate have to
offered both an
employer rebate checks effort must What happens match the
HMO policy
calculate the go to? employer make if refund payments by
and PPO policy
refunds when (e.g., current to track down amount is very participants for
in 2011, and
there are vs. former former small? the plan year
the HMO hit
multiple plans? participants) employees? that the rebate
78% and the
is based on?
PPO hit 87%?

20. MLR Rebate Reminders
• From the perspective of administrative simplicity and
cost, nothing prevents an employer from treating the entire
Employers rebate as plan assets and not receiving any of the rebate
proceeds for its own benefit.
• The use of a rebate generated by one plan to benefit the
& Plan participants of another plan would be a violation of the fiduciary
responsibility to the plan participants.
Assets • If employer is using a cafeteria plan, Technical Guidance 92-01
offers further information on the requirements to assist in the
treatment of plan assets.
• Distribute rebates within 3 months
Insured • Set up a trust which allows more time to distribute rebates
• DOL notes that employer could direct insurer to apply the
rebate toward future participant premium payments or toward
Plans benefit enhancements adopted by the plan sponsor would
avoid the need for a trust, and may, in some circumstances, be
(i.e., an unfunded trust)
consistent with fiduciary responsibilities.

21. MLR Rebate Reminders
• Decisions on how to apply the plan's portion
of a rebate are subject to ERISA's general
standards of fiduciary conduct. This includes
a duty of impartiality to the plan's
participants.
Guidance • In deciding on an allocation method, the plan
fiduciary may properly weigh the costs to the
on rebate plan and the ultimate plan benefit as well as
the competing interests of participants or
distribution classes of participants provided such method
is reasonable, fair and objective.
• Under no circumstances should the employer
ever receive for its own benefit more than it
originally paid in premiums and plan
expenses in the MLR year.

22. Additional MLR Rebate Observations
• The distribution of the rebates to plan participants
raises significant tax issues that should be considered
When Rebate before choosing that option.
• The IRS has issued FAQ page with examples that
becomes a address the tax implications of direct distribution of
rebate funds to plan participants. See IRS “Medical
taxable event Loss Ratio (MLR) FAQs”
• Taxable if cash is paid through a pre-tax cafeteria plan
– must be tracked on W-2
• Not defined in regulations
Benefit • Plans can defined through good faith effort
• Examples that would probably qualify:
Enhancements Wellness, Dental and Vision

23. MLR Impact: Kaiser Foundation Study
 Refund: MLR rebate checks this year estimated $1.3 billion
 Non-Group Market: Rebates are expected to go to almost
one-third (31%) of consumers in the individual market.
 The share of consumers in the individual insurance market
expected to receive rebates ranges from near zero in several
states to as high as 86% in Oklahoma and 92% in Texas
 Group Market: About one-quarter (28%) of the small group
market and 19% of the large group market is projected to receive
rebates.
 Amount: Checks could range from an average of $72 for those
with insurance through a large employer to an average of $127
for those who bought individual policies

24. Reflection Points
Administrative burden of tracking employee contributions
Process for calculating eligibility for employers
Quick pace of adoption with some regulatory ambiguity
More regulations to come
DOL will be auditing all plans and assessing penalties
(Note: IRS is hiring 16,000 FTEs)
Some insurers concerned about market disruptions especially in
the large group market

25. Healthcare Reform: Looking Ahead
More regulations and guidance on key PPACA deliverables
Federal versus State rights
More insurance coverage;: Who is eligible for the subsidies?
Expect more lawsuits
Need funding for federally run state exchanges
The Elections
Budget concerns including Congress’s sequestration rule

26. Disclaimer
Disclaimer: This webinar is for
informational purposes only. Please seek
legal and tax expert advice before
implementing your MLR rebate program.

27. Questions & Answers
After today’s webinar, please contact:
Mike Brachlow
Executive Sales Director, Large Group
1133 Westchester Avenue
Suite S229
White Plains, NY 10604
Email: mike.brachlow@benefitmall.com
Mike will route follow-up questions to the speakers
and/or BenefitMall contact
For additional Healthcare Reform updates, please monitor:
 www.benefitmall.com
 www.healthcareexchange.com