A full-servicevoluntary and health benefits company

Introduction

Visor was incorporated in 2009 after a successful 2007 acquisition and subsequent merger of the largest worksite benefits agency in Washington by Gateway Benefits, established in 1995 by Bill Hill. The purpose of the merger was designed to add core competencies to both agencies so as to adequately address the coming changes imposed by healthcare reform.

Visor now has decades of experience in the employee benefits industry working with clients nationally from its Midwest and West Coast offices.

Group Insurance Design Flaws

• Can only accommodate the mean of the largest population• Assume all employees have the same need for benefits or desire

for good health • Plan options encourage utilization

• Employees are shielded from accountability as low out of pocket plan designs remove cost of care decisions

• There are no penalties for poor health decisions

• Insurance companies have become finance based profit models and have no incentive to lower cost

• One year rate guarantees limit budget management• Demographic shift eventually destroys health insurance model

ACA Premium Drivers

• Growing regulatory compliance cost to administer• Higher than expected claims will create an initial rate

shock• Community Rating will drive average rate up• Limits on premium profit incentivizes premium growth• Plan design restrictions-”The Bronze Trap”• Industry fees passed on to consumers• Addition of mandated benefits• Cadillac tax imposed on every plan• Regional rate adjustments• Audits and Litigation• Underfunded Exchange participation is incentivized

*Excise taxes and fees are non-deductible

Penalties The current health insurance proposition is commonly referred to as Pay or Play.

< 50 No Penalty> 50 Penalty applies

ACA budget includes $13 Billion in fines per year.

-Congressional Research Service Report-May 6,2013

Form 8928 Confessional submitted to the IRS when you fail to submit proper notification to the employees.

Form 8928 Compliance Failures

The compliance failures triggering penalties include the following: COBRA violations. HIPAA portability. Comparable contribution requirements for health savings accounts (HSAs) and Archer Medical

Savings Accounts (MSAs).

Health care reform mandates:• discrimination rules (temporary penalty non-enforcement)• coverage of adult children to age 26 and initial notice• elimination of lifetime and annual dollar limits on coverage and initial notice (phase-in

complete in 2014)• prohibition of coverage rescissions• remove pre-existing condition limits for participants younger than 19 (applies to all

participants beginning in 2014)• new claim and appeal rules, including external review requirement• requirement of the “4-page” summary of benefits and coverage (SBC) (effective with open

enrollment for 2013)• preventative care with no co-payments or other charges• rules on access to primary care providers and emergency room (patient protections)• maximum waiting period of 90 days for eligibility (plan years beginning January 1, 2014 and

later)• Shared responsibility (pay-or-play) mandate (plan years beginning January 1, 2014 and

later).

Visor still recommends Pay or Play…

but a different game!

INTRODUCING

BetterFits

TM

History of BetterFitsThe design of the BetterFits program began as a response to a failing group health plan.

The Employer was paying $841/month for a $5,000 deductible group health plan and facing another 24% increase. Participation had dropped below 50% and the plan was now in jeopardy of cancellation . This event is commonly known in the industry as a “death spiral”.

With knowledge of a regulation change in 2007, Visor suggested the Employer offer a credit for employees to use toward the purchase of a benefit program. The credit was determined by the Employer and based on the average premium needed to purchase coverage. The total employee credit was 75% less than the annual group policy premium and allowed the Employer to offer every employee the same level of benefits. Individual medical policies were offered in a cafeteria style which allowed employees to personally design “their program”.

In 2008, the BetterFits program was brought to full fruition when Visor developed a system to easily process payments of individual medical policies to multiple carriers. Since then, the program has been expanded to include a flex plan to allow employees to fully develop a comprehensive personalized plan.

Small Regulation Change

• Secretary of Treasury published a small regulation change in August 2007 which made individual medical plans eligible for Section 125 reimbursement

(m) Payment or reimbursement of employees’ individual accident and health insurance premiums—(1) In general. The payment or reimbursement of employees’ substantiated individual health insurance premiums isexcludible from employees’ grossincome under section 106 and is aqualified benefit for purposes of section125.(2) Example. The following exampleillustrates the rule of this paragraph (m):Example. Payment or reimbursement ofpremiums. (i) Employer P’s cafeteria planoffers the following benefits for employeeswho are covered by an individual healthinsurance policy. The employee substantiatesthe expenses for the premiums for the policy(as required in paragraph (b)(2) in § 1.125–6)before any payments or reimbursements tothe employee for premiums are made. Thepayments or reimbursements are made in thefollowing ways:(ii) The cafeteria plan reimburses eachemployee directly for the amount of theemployee’s substantiated health insurancepremium;(iii) The cafeteria plan issues the employeea check payable to the health insurancecompany for the amount of the employee’shealth insurance premium, which theemployee is obligated to tender to theinsurance company;(iv) The cafeteria plan issues a check in thesame manner as (iii), except that the checkis payable jointly to the employee and theinsurance company; or(v) Under these circumstances, theindividual health insurance policies areaccident and health plans as defined in§ 1.106–1. This benefit is a qualified benefitunder section 125.- Federal Register/ Vol. 72., No. 150

This one change opened up Defined Contribution plans to smaller companies since it eliminated the actuarial need for thousands of employees.

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How BetterFits Works

• Visor provides direct support and helps educate employees to become skilled risk managers. The benefit options can include any qualified insurance products.

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Enrollment Process

1. Education through Awareness Campaign• Multi-stage information campaign to

include email, payroll stuffers, and website

2. Group Meetings• Power Point presentation explaining the

process and answering questions

3. Individual Enrollments & Education• Consultative meetings to explain

strategies for utilizing financial resources

Alternative Strategies

Employees are fully aware of their individual risk and claim potential. As Risk Managers, employees can purchase insurance policies accordingly to concentrate resources on their particular needs.

Visor’s Benefit Specialists educate employees with strategies to utilize price stable products that complement major medical plans to protect against perceived risk.

$2,000 Coventry Family Plan- $928 43 yr old male/ 45 spouse/ 2 children

Anthem Premier Plus 100%Upgrade Rx $5,000

Anthem Premier Plus 100%Upgrade Rx $3,500

Anthem Premier Plus 100%Upgrade Rx $2,500

$447X12$5,364

$544X 12$6,528

$617x 12$7,404

Difference from $2,500

$2,040 (risk $460)

$876 (risk $124) 0

Difference from $3,500

$1,164 (risk $346)

Plan Design Model

$2,000 Coventry Family Plan- $928 43 yr old male/ 45 spouse/ 2 childrenAnthem Premier Plus 100%Upgrade Rx $3500 -$35 OV, $15 or 40% Rx

$544

Shop plan $54.05

Accident $59.90

Dental $85

Monthly Premium $742.95

Flexible Spending Account $100 ($1,200 Ann)

Total Monthly Expense $842.95

Plan Design Model

$2,000 Coventry Plan- $319 32 yr old male

Anthem Smart Sense plus 70%Upgrade Rx $2500 -$35 OV, $15 or 40% Rx

$80.04

Shop plan $18.34

Accident $15

Dental $29

Monthly Premium $142.38

Flexible Spending Account $100 ($1,200 Ann)

Total Monthly Expense $242.38

Plan Design Model

$2,000 Coventry Plan- $319 58 yr old female

Anthem Smart Sense Plus 70%Standard Rx $2500 -$30/40 OV, $15 or 40% Rx

$200.27

Shop plan $24.93

Accident $15

Critical Illness-$10,800 $13

Dental $29

Monthly Premium $282.20

Flexible Spending Account $38 ($456 Ann)

Total Monthly Expense $320.20

Plan Design Model

Funding Design

Examples of credit offering:• Flat Amount per month• Low flat amount + age actuarial table• Flat amount for employee + flat amount

for childrenThis design is not restricted but some standardized classification is recommended.

The Bronze TrapEvery employer will be required to provide a baseline benefit

equivalent to the Bronze plan design in the Exchange. The minimum Bronze plan design must maintain a 60% Actuarial Value(AV) and can have a deductible no greater than $2000. Any lesser benefit offering by an employer shall make the employees eligible for the Exchange. Employees receiving a credit for the coverage in the Exchange shall subject the employer to a $3,000 tax(fine).

As rates explode in 2014, employers will be left with no benefit adjustments to ameliorate increases. At that time, the only choice will be to pay the increase, pay the fine or both.• PPACA created a new distribution channel known as Navigators.

Navigators are non-profit, unlicensed, non-professional advisors whose single purpose is helping the insurance buying public apply for credits to join an Exchange.

Plan Design

Every group plan offered must meet the 60% Actuarial Value or Minimum Value plan design. In many cases, employers will be forced to purchase more expensive plan designs and left with few choices to reduce future increases as premiums rise.

Limits on Premium Profit

Insurance Companies profit margins have been limited to 15% for group medical and 20% for individual medical.

Only question to ask is:Will the insurance company make more money on a $500 monthly premium or $1,000?

Cadillac Tax

This 40% Excise Tax on amounts over $10,200 will eventually be paid by everyone if their plans just receive “normal” rate increases.

Community Rating

• Rates can only be differentiated by:• Geographic area• Age with 3:1 limit• Smoking Status with 1.5:1 limit• Family status

Younger employees will elect not to participate, pay the tax and only elect coverage on their way to the hospital.

There is no way to police smoking status. The regulations allow up to 4 occasions to use tobacco and still be declared a non-smoker. How does the insurance company enforce premium compliance?

Industry Fees passed on to Consumers

Insurance, Pharmacy and Durable Medical Equipment companies all have to pay a progressive, non-deductible fee to the Federal Government every year.

The insurance fee in 2014 by itself will add $50 to the annual cost of every policy. This fee is scheduled to increase every year.

Audits & Litigation

• DOL is staffing up and performing document audits- very easy audit as the DOL simply sends a letter requesting plan documents. If you do not have them available, DOL sends you a bill.

• IRS has staffed 700 positions and is planning to hire another 300 to audit.

• Part of the planned funding for ACA is an estimated $10 billion in fines the Government will collect though audits.

Tax lawsuits are pending. Any S-Corp or LLC will be forced to pay a tax on a tax if penalized for a non-compliant health plan.

Regional Renewal Adjustment

The annual allowed increases will be based onnational averages set by HHS. The annual

increases will fall disproportionately on low cost States

like Missouri.

Plan Administration

Management of group health plans will become increasingly more complicated and time consuming.

• Summary of Benefits & Coverage

• W2 Reporting• MLR Rebates• Health Exchanges• COBRA• HIPPA• HIPPA Special Enrollment Rights

• Pre-Existing Notice

• Newborn & Mothers Protection

• Summary Annual Report• Wellness Requirement Notice

• Women’s Health & Cancer

• Medicare Part D• CHIP Premium Assistance

• 5500 Filing• Notice of Grandfather Status

• SPD updates

Rate Shock

• The new law and regulations will act as an inflationary catalyst. Premium growth rate will be exponential as the majority of States will experience a significant rate increase next year(80-100%) with “normal” renewal increases thereafter.• Law never addresses the cost of coverage• Aetna’s CEO , Mark Bertolini, has publically stated

that rates in some markets will go up by 100%• Anthem’s CEO, Steve Martenet, stated in a local

meeting that he expects a 80% rate adjustment

ContactInformation

• Toll Free 866.989.9790

• advisor@visorbenefits.com

• www.visorbenefits.com

• Articles can be found at: www.visorbenefits.com/news-notes

• http://www.facebook.com/pages/Visor-Benefits/244505892273414