This document provides an overview of health care reform provisions that will impact employers in 2013 and beyond. Key points include: - Large employers with over 50 full-time employees will face penalties if they do not provide affordable and adequate health insurance to full-time staff beginning in 2014. - Small employers with under 50 employees are exempt from these penalties but will see modified community rating rules applied to their small group plans in 2014. - Individuals must have qualifying health insurance or pay a penalty through their taxes beginning in 2014. Subsidies will be available for individuals earning up to 400% of the federal poverty level who obtain coverage through public exchanges. - States must decide whether to expand Medicaid eligibility to 133

1. Health Care Reform
Employer Impact: 2013 and Beyond
April 2013 Revision
Presented by:
Karan Scigouski
Old National Insurance
Old National Insurance –
3820 Edison Lakes Parkway, Mishawaka, IN 46545 / 574-247-5271

2. Disclaimer
This presentation is not:
• Legal advice
• The final word on Healthcare Reform
• A political opinion
2

3.  Top 100 U.S. insurance broker – 63th largest *
 10th largest bank-affiliated insurance brokerage in the U.S.*
 One of Indiana’s largest independent retail insurance agency
300 insurance associates with over 70 sales professionals *
 Full range of professional services offered:
 Retail property and casualty – commercial and personal
insurance
 Employee benefits – healthcare solutions for business
owners
 Insurance services – benefit and property casualty third
party administration; risk management and alternative risk
solutions
 www.oldnationalins.com consumer website
* Business Insurance Top 100 Brokers Survey
ONI Profile
3

4. ONI Footprint
*Danville, IL
 4 producers
*Evansville
 15 producers
*Ft. Wayne
 17 producers
*Indianapolis
ONI Headquarters
17 producers
Indiana
Jasper
 1 producer
Princeton
 1 producer
Muncie
 1 producer
Mishawaka
 4 producers
Owensboro, KY
 1 producer
*Terre Haute
 15 producers
Bloomington
 2 producers
Lafayette
 1 producer
4

5. -The individual mandate was deemed constitutional by
imposing a tax.
-Since the individual mandate was upheld, then the
second question on the severability of the law did not
have to be addressed.
-The Expansion of Medicaid - Congress may not threaten
to take away existing Medicaid funding if a State chooses
not to expand Medicaid income limits.
Supreme Court Decision
5

6. Current Provisions
• Coverage for dependent children up to age 26
• Elimination of pre-existing condition exclusion for minors
• Elimination of lifetime coverage limits
• Elimination of coverage rescissions
• Expansion of preventive health coverage (non-grandfathered)
• W-2 Reporting for employers (over 250 W-2’s previous year)
• Summary of Benefits and Coverage for all employers
• Non-Discrimination rules (suspended at this time)
• OTC drugs need prescription for HSA/FSA reimbursement
• Medical Loss Ratio (80% and 85%) fully-insured large group
6

7. Provisions Effective in 2013
• Health FSA limit set at $2,500
• New employee education mandates (Delayed from March 1)
– Existence of exchanges
– Potential eligibility for subsidies
– Risk of losing employer contribution if employee buys coverage in an
exchange
• W-2 reporting for employers under 250 W-2’s (Transition Relief –
Delayed for under 250 W-2’s previous year)
• New Taxes & Fees
• Open Enrollment begins on October 1st for Public Exchange
for individuals and small employers
7

8. Future Provisions 2014
• Individual Mandate & Penalty takes effect
• Employer Mandate takes effect & shared responsibility
• Pre-Existing condition limits prohibited for all
• Modified community rating for small fully insured groups.
– 2-50 in years 2014 and 2015, 2-100 in 2016 and beyond (Indiana)
• Public Exchanges open for individuals and small employers
• Small group and individual (non-grandfathered) plans must comply
with maximum deductibles of $2k single/ $4k family
• Must cover clinical trials (non-grandfathered)
• Maximum 90 day waiting period
• Automatic enrollment for 200+ groups
• New Appeals Process
• More fees & taxes
8

9. A Closer Look:
Individual Mandate
9

10. What is Required - Individual Mandate
• To avoid paying a tax penalty, every American citizen must
have “minimum essential coverage.”
• Coverage may be obtained in multiple ways, including
through an employer (on or off the exchange), individual
policy, or though the “public exchange”.
• States to determine what constitutes minimum essential
coverage
10

11. Penalties—Individual Mandate
• January 1, 2014: Individuals must enroll in medical coverage or
pay a penalty
• Penalty Amount: The GREATER of a dollar amount or percentage
of income
 2014 = $95 or 1% with $285 household max
 2015 = $325 or 2% with $975 household max
 2016 = $695 or 2.5% with $2,085 household max
-Penalty for an individual under 18 is one half of the adult penalty, household max
assumes two children
11

12. Who is Exempt from the Individual Penalty?
• Financial hardship
• Religious objections
• Native Americans
• Without coverage for less than 3 months
• Undocumented immigrants
• Incarcerated individuals
• An individual/family that has to pay more than 8% of their
income for health insurance, after taking into account any
employer contributions or tax subsidy/credits
12

13. Individual Mandate – 2014
What if Individual Can’t Afford Health Coverage?
• Premium tax credits available throughout the year IF
– Coverage is obtained through a public “exchange”, AND
– Income is between 100% and 400% of federal poverty level
• Amount of credit is graduated. Person at 100% of poverty level would pay 2% of
their income for health insurance. A person at 400% would pay 9.5% of their
income.
– Individuals below 133% of federal poverty level will be eligible for
coverage through an expanded Medicaid program, unless their State
of residency opts out. (Indiana has opted out at this time)
– Individuals between 100% and 250% of federal poverty level will be
eligible for graduated lower cost deductibles and copayments if they
obtain coverage through an exchange.
– Employees can receive subsidy in public exchange if employer
sponsored health plan does not meet certain requirements 13

14. First Question:
Large or Small Employer?
14

15. What is a “Small Employer”
• Employers with under 50 Full Time Equivalents are considered
a “Small Employer”
• Full-Time Employees = 30+ hours per week
• Part time workers are calculated with 120 hours per month
on a pro-rated basis
• “Small Employers” with less than 50 FTE’s will be exempt
from the employer coverage mandate
• “Small Employers” are exempt from employer penalties
15

16. What is a “Large Employer”
• Employers with over 50 Full Time Equivalents are considered
a “Large Employer”
• Full-Time employees = 30+ hours per week
• Part-Time workers are calculated with 120 hours per month
on a pro-rated basis
• “Large Employers” with more than 50 FTE’s are subject to the
employer mandate to offer coverage to full-time employees
or pay a penalty
• Employment records starting January 1, 2013 will be counted
16

17. What is a Full Time Employee? – Common Law
Employee Category Used to determine “large employer”
status?
Employer subject penalty if a
premium credit received?
Full-time Counted as one employee, based on a
30 hour or more work week
Yes
Part-time Prorated (calculated by taking the hours
worked by part-time employees in a
month divided by 120)
No
Seasonal Not counted, for those working less
than 120 days in a year
Yes, for the month in which a
seasonal worker is full-time
Leased IRS code 414(n) declares leased
employees to be exempt from
calculation
414(n) – Expectation is for
staffing company to be
“applicable large employer”
17

18. What is a Full Time Employee? – Common Law
Employee Category Used to determine “small employer”
status?
Employer subject penalty if a
premium credit received?
Full-time Counted as one employee, based on a
30 hour or more work week
No, if you are a small
employer with fewer than 50
FTEs
Part-time Prorated (calculated by taking the hours
worked by part-time employees in a
month divided by 120)
No
Seasonal Not counted, for those working less
than 120 days in a year
No
Leased IRS code 414(n) declares leased
employees to be exempt from
calculation
No
18
*Partners, 2% Shareholders in S Corp, not considered employees

19. How to Calculate # of Employees
• Part time workers are calculated on 120 hours per month on a
pro-rated basis to come up with FTEs
19
Example: ABC Company has 10 salaried administrative staff, 15
employees that average 40 hours/week and 38 employees averaging
20 hours/week in January, 2013. They also employ 25 seasonal
employees in the summer. How many FTEs?
10 salaried
15 full time employees above 30 hours/week
38 part time 20 hrs x 4.2 weeks/month = 3,192 hours
3,192 / 120 = 27 FTEs
25 seasonal employee hours do not count
• This employer has 52 FTs and FTE’s – PLAY OR PAY

20. Hourly Look Back Periods to Determine Full-Time
For employees with fluctuating hours
• Measurement period – between 3-12 months
– Chosen by the employer in a uniform consistent basis
– This has to be determined in 2013
• Stability Period– At least 6 calendar months and no shorter than
measurement period
– The employee is treated as a full-time employee during the stability period
REGARDLESS of the amount of hours worked during that period
– If the employee does not work full-time during the stability period, the
employer may treat the employee as not a full-time employee during the
stability period that follows
• Employers with stable salaried workforce can virtually ignore this issue
• For employers with seasonal and variable hourly workforce this will
generate real problems. This employer has to begin tracking hours and
potentially revising staffing models.
20

21. Look-Back
Measurement Period Stability Coverage Period
3 Months
6 Months
9 Months
12 Months
6 Months
6 Months
9 Months
12 Months
2012 2013 2014
O N D J F M A M J J A S O N D J F M A M J J A S O N D
2012 2013 2014
O N D J F M A M J J A S O N D J F M A M J J A S O N D
2012 2013 2014
O N D J F M A M J J A S O N D J F M A M J J A S O N D
2012 2013 2014
O N D J F M A M J J A S O N D J F M A M J J A S O N D
Ongoing Employees
21

22. Employer Mandate: Large Employers
22

23. Employer Mandate & Shared Responsibility
January 1, 2014: “Large” employers must offer to their full-
time employees (working at least 30 hours on average per
week during a month):
– Affordable Coverage – Employee cost must be less than 9.5% of
household income for single coverage*
• Safe Harbor allows an employer to use Box 1 from employee’s W-2
• Employer plan does not have to be affordable for spouse and children
– Minimum Value – Plan must meet minimum value requirements.
States and HHS have just recently released what plans will need to
comply. The IRS has released a calculator.
– The minimum value must cover at least 60% of expected claims costs
– HHS provided guidance that large employers have to offer coverage to
full-time employees and their dependents. HHS defined dependents
as children under 26 years old. 23

24. Is Your Plan “Affordable” to Your Employee for
Single Coverage?
Hourly Rate
Maximum monthly EE single cost based on hours worked
32 hours 35 hours 40 hours
$8.75
($14,500 - $18,200)
$115 $126 $144
$12.00
($19,900 - $24,900)
$158 $173 $198
$15.00
($24,900 - $31,200)
$197 $216 $247
24

25. What Penalties May Apply to Large Employers?
The “Shared Responsibility Fee”
• $2,000 penalty per employee per year if employer doesn’t
offer coverage (minus first 30 employees)
(only assessed a penalty if one employee buys an exchange plan and qualifies for a subsidy)
• $3,000 penalty per employee per year if employer plan
doesn’t meet affordability or minimum value AND an
employee receives a subsidy in the exchange
• Penalties are not tax deductible
• Small employers are exempt from these penalties
25

26. Employer Scenario Example - 1
ABC Company offers a medical plan that meets Minimum Value
Employee Only Premium: $500.00 mo.
Employer Pays 66% : $330.00 mo.
Employee Pays 34%: $170.00 mo.
Bob Jones works 35 hours per week at $9.00 per hr. ($16,380)
9.5% of $16,380 = Max “affordable” contribution = $129.68 mo.
Employer Penalized $3,000 for offering “unaffordable” coverage
to Bob, if he buys more affordable subsidized insurance in the
“exchange”
26

27. Employer Scenario Example - 2
ABC Company offers a medical plan that meets Minimum Value
Employee Only Premium: $500.00 mo.
Employer Pays 66% : $330.00 mo.
Employee Pays 34%: $170.00 mo.
Bob Jones works 38 hours per week at $11.00 per hr. ($21,736)
9.5% of $21,736 = Max “affordable” contribution = $172.08
Employer offering “affordable” coverage. Employer can NOT get
penalized, and Bob can’t get a government subsidy for the
“exchange”.
27

28. 2014 New Small Group
Modified Community Rating
What Is It?
28

29. Community Rating
29
WHAT IS IT?
A NEW way of rating your company’s health plan by insurance companies,
based on factors EXCLUDING health condition, industry, health status, gender,
or claims history.
WHO DOES IT AFFECT?
Groups with 2-50 Employees in 2014 and 2015
Groups with 2-100 Employees in 2016 and Beyond
WHAT ARE THE FACTORS?
1.Age (3:1 Ratio)
2.Geographic Area
3.Tobacco Use (1.5:1 Ratio)
4.Family status (EE, F)

30. Community Rating
30
VERY Basic Example:
•Employer A has 10 Employees, all age 40. They are all in perfect health.
Currently the insurance rate for a single is $200 per month
•Employer B has 10 Employees, all age 40. They all have multiple chronic
conditions. Currently the insurance rate for a single is $800 per month.
• In 2014, both groups would pay the same amount, $500 per month.
Insurance companies are estimating that 45% of employers will see an
increase to premiums of 14%-35% simply from the removal of the risk
adjustment factors in underwriting. Some employers will see rates increase by
more than 50% due to this new rating.

31. Questions You Will Need to Have Answers To
Regarding Community Rating
2 – 50 Today, 2 – 100 in 2016
• Will community rating have a positive or negative impact to
my rates?
• What is my current risk factor rating with my current health
carrier?
• If I have a 4 tier composite rate today, how will the age rated
bands impact my employee contribution?
• What strategies can I have to avoid/delay community rating?
• If community rating has a positive impact to my rates, how
soon can I move to this platform?
31

32. A Closer Look at Incomes
Between 100% and 400% of FPL
and the Income Threshold if
Indiana Expands Medicaid in
2014
32

33. Income Levels for 400% of FPL
No. Persons in
Family
Federal Poverty
Level 2013
400% of FPL
1 $11,490 $45,960
2 $15,510 $62,040
3 $19,530 $78,120
4 $23,550 $94,200
5 $27,570 $110,280
A Look at the FPL and 400%
33

34. No. Persons in Family Estimated 133% FPL
1 $15,282
2 $20,628
3 $25,975
4 $31,322
5 $36,668
If Indiana expands Medicaid to 133% of Federal
Poverty Level in 2014
34

35. Exchanges
“Public Marketplace”
35

36. State and Federal Exchanges
• State Based – Funded and run by the State
• Federally Facilitated – Funded and run by the Fed
• Hybrid Exchange – Shared responsibilities
36

37. Public Exchanges/Marketplace –
What Is A Public Exchange?
• It’s a place where individuals are able to “easily” compare
available health insurance options
• It’s where individuals earning 400% of Federal Poverty Level
can receive a premium subsidy/credit
• It’s NOT an entity that actually provides the insurance –
merely oversees the options that are available
• Similar to Travelocity® or Expedia® for travel tickets, but
recent guidance shows it will be closer to TurboTax®
• HHS recently renamed “Exchange” to “Marketplace”
37

38. Public Exchanges –
What is the Impact to the Employer?
• IF an employer doesn’t provide affordable minimum value
coverage, the employee can go into the exchange:
– Affordability is defined as Employee Cost for Single coverage less than
9.5% of household income. – Safe harbor now allows an employer to use Box 1
from employees W-2
– If “unaffordable” the employee may receive a tax subsidy if they’re
between 100%-400% FPL (see chart)
– The employee can qualify for reduced cost-sharing benefits
– The employee is no longer tied to the employer for benefits
– Small group health plans are not penalized by not offering affordable
coverage
– Large group health plans are penalized either $2,000 or $3,000
– Low wage earners will be comparing the cost of employer sponsored
health insurance and public exchange subsidized coverage
38

39. The Impact to the Hourly Working That Has
“Affordable Coverage” at Work
Example 1
$10.00 an hour worker
40 hours a week
Spouse and 2 children
Household income is $20,800 + $16,000 = $36,800 or 160% of FPL
• Your employer plan is deemed affordable with single coverage cost of
$100 per month
• To cover employee, spouse and children your plan costs $450 per month
Your hourly employee, spouse and children are prevented from going into
exchange to purchase subsidized coverage for $115 - $150 per month for
silver level plan
39

40. The Impact to the Hourly Working That Has
“Affordable Coverage” at Work
Example 2
$14.00 an hour worker
38 hours a week
Single parent with 3 children
Household income is $27,664 or 120% of FPL
• Your employer plan is deemed affordable with single coverage cost of
$100 per month
• To cover employee and children your plan costs $250 per month
Your hourly employee and children are prevented from going into
exchange to purchase subsidized coverage for $40 - $50 per month for
silver level plan
40

41. Federal Poverty Level –> 400%
The chart below shows the maximum employee premium payment in the
Federal exchange under ACA if household income is at or below 400% of FPL
– Silver Medal Platform Plan
* Average subsidy of $5,000-$6,000 per subsidized enrollee
* An estimated 87% of Americans qualify for some level of subsidy
41
Percent of FPL Max Premium as %
of Income (2014)
Maximum Amount of Monthly Premium By Family Size
1 2 3 4
FPL in 2013 $11,490 $15,510 $19,530 $23,550
100% 2.00% $19 $26 $33 $39
133% 2.00% $25 $34 $43 $52
133.01% 3.00% $38 $52 $65 $78
150% 4.00% $57 $78 $98 $118
200% 6.30% $121 $163 $205 $247
250% 8.05% $193 $260 $328 $395
300% 9.50% $273 $368 $464 $559
350% 9.50% $318 $430 $541 $653
400% 9.50% $364 $491 $618 $749

42. Exchanges – Small Group and Individual
What Coverage's Must Include?
• To be determined by each State, reflective of a “typical
employer plan” that covers “essential health benefits” in the
following ten categories:
Small Group & Individual Platform Only
– Ambulatory patient services
– Emergency services
– Hospitalization
– Maternity and newborn care
– Mental health and substance use disorder services, including behavioral health
treatment
– Prescription drugs
– Rehabilitative and habilitative services and devices
– Laboratory services
– Preventive and wellness services and chronic disease management
– Pediatric services, including oral and vision care .
42

43. Questions & Concerns Around
Public Exchanges and Affordability
1. How much of your workforce would be impacted?
2. Does the hourly employee today purchase your employer
sponsored health coverage for themselves and/or spouse
and children?
3. By raising the cost for single coverage to above 9.5%for
lower hourly workers, how does this impact everyone else’s
premium?
4. Long-term concern is lower earners will find jobs that do
not offer employer sponsored health insurance or
affordable coverage.
43

44. Public Exchanges – Individuals and Small Groups
Particulars of Plans
• Individual deductibles can not be more than $2,000, and a family deductible can
not be more than $4,000 (indexed against increases in average premiums).
• HHS just ruled deductibles might be higher to meet 60% AV
• Annual out of pocket maximums can not exceed the limits for health savings
account high deductible plans. For 2013, $6,250 individual/$12,500 family.
• Will offer Platinum/Gold/Silver/Bronze coverage levels
• Catastrophic Plans for the under 30 year old
• Carriers might have “narrow” networks
• The Federal government will have a health plan in the public exchange
• Anthem is the only carrier in Indiana (so far) that has announced their intention to
participate in the public exchange
• HHS has released guidance that if employer’s plan meets affordability and 60% AV
then not only is the employee prevented but also the spouse and children are
prevented from receiving subsidized coverage in the exchange
44

45. SHOP Exchanges (for Small Groups)
• SHOP Exchange
– Small business Health Options Program
– Employers 2-50 in 2014 and 2015 / 2-100 in 2016 can shop for
coverage in the exchange environment
– Employer may be eligible for a temporary two year tax credit
– Beginning in 2017, States will have the option to make SHOP
exchanges available to large employers (more than 100 employees).
– Individual government subsidies not available
– Very few plan options will be available
– HHS just announced on 4/1/2013 the Federally Facilitated SHOP
Exchange will be delayed until 2015
45

46. Timeline for Indiana’s Federal
Facilitated Public Exchange
46
March 31, 2013 May 1, 2013 July 31, 2013 October 1, 2013
Plans & Rates
have to be built
Plans & Rates
have to be filed
with the State
Plans & Rates
have to be
approved by the
State
Open
enrollment
begins for
1/1/2014
effective date

47. Taxes and Fees
47

48. Taxes and Fees
• Tax on high earners (0.9% Medicare surtax on $200k
single/$250k family)
• 3.8% tax on unearned income for taxpayers with MAGI in
excess of $200k single/$250k family
• Comparative Effectiveness Research Fees
− This fee funds research on the effectiveness, risks and
benefits of medical treatments
− 2012-2018 plan years
− Fully-insured and self-funded plans sponsors
− September 30, 2012: $1 per covered life per year; October 1,
2013: $2 per covered life per year; After September 30, 2014
the rate increases each year by the medical inflation rate of
CPI
48

49. Taxes and fees…
• ACA Transitional Reinsurance Program Fees
− To support the transitional reinsurance program that aims to stabilize
premiums for coverage in the individual market
− Effective 2014-2016
− Fully-insured and self-funded plan sponsors
− Estimated cost of $63 per member per year in 2014, declining in 2015
and 2016
• ACA Insurer Fee
− Annual excise tax on health insurance to fund premium subsidies and
Medicaid expansion
− Effective in 2014 on all fully-insured plans
− Estimated 2.46% of premium
− Estimated to collect $8 billion in 2014 and increasing to $14 billion by
2018 49

50. Taxes and Fees
• 10% sales tax on indoor tanning (2010)
• Pharmaceutical industry fee – an annual fee on branded
prescription drug manufacturers (2011)
• Medical device manufacturer fee – an annual fee
50

51. How Do These Fees Impact
My Plan’s Costs in 2014?
Fully Insured Employer
51
100 Covered
Members
500 Covered
Members
1,000 Covered
Members
Comparative
Effective
Research Fee
$200 $1,000 $2,000
Transitional
Reinsurance Fee
$6,300 $31,500 $63,000
Insurer Fee $8,600 $43,000 $86,000
Total Annual
Estimate
$15,100 $75,500 $151,000

52. How Do These Fees Impact
My Plan’s Costs in 2014?
Self Funded Employer
52
500 Covered
Members
1,500 Covered
Members
2,500 Covered
Members
Comparative
Effective
Research Fee
$1,000 $3,000 $5,000
Transitional
Reinsurance Fee
$31,500 $94,500 $157,500
Total Annual
Estimate
$32,500 $97,500 $162,500

53. How do we prepare?
53

54. How do we prepare?
54

55. Old National Insurance’s Pay or Play Calculator
How much will you pay in
penalties for your plan?
Using our Health Care
Reform Pay or Play
Calculator, we can determine
how much you could be
required to pay in penalty
taxes with your current health
plan, as well as model
changes that may protect you
from being assessed fines.
55

56. HHS Actuarial Value Calculator
Actuarial Value (AV) is calculated
as the percentage of total average
costs for covered benefits that a
plan will cover. For example, if a
plan has an AV of 70 percent, on
average, a consumer would be
responsible for 30% of the costs of
all covered benefits.
56

57. How do we prepare?
• Determine if you are considered a “Large Employer” or a
“Small Employer” and subject to the employer mandate.
• Determine if your current plan meets minimum benefits
and affordability standards by running your census and plan
design through a Pay or Play calculator and an AV calculator
• Calculate cost of employer mandate penalty scenarios
(dropping coverage, continue as-is, hybrid scenarios)
• Review strategies around your low hourly workforce
• Make strategic staffing decisions
• Communicate with your workforce
• Determine your Measurement Period in 2013
57

58. How do we prepare?
• Examine how the exchanges and subsidies affect your overall benefits
strategy
• Focus your corporate wellness program on a healthier workforce and
more productive population if over 100 employees
• Focus your corporate wellness program on smoking cessation, as insurers
can rate a tobacco user 50% higher if you’re under 100 employees
• Provider access will be a huge problem when 20,000,000 more Americans
have coverage by 2016. Educate your workforce on the importance of
getting a Primary Care Physician now.
• Develop your Compliance Strategy and understand what you have to
report and when it has to be completed.
• Wait on further guidance from HHS, Treasury, DOL and CMS
• Work with a benefit consultant to determine and evaluate your best
options (Private Exchange, Self-Funding, PEOs, Temp Services, etc)
58

59. Questions
59
Karan Scigouski
Pat Carney
Karan.scigouski@oldnationalins.com
Pat.Carney@oldnationalins.com
574-247-5271
812-478-6007