©2013 Key Benefit Administrators,Inc.

Helping Employers Meet the Challenges of

HealthCare Reform and Delays:

Tax-Planning Sensitive Benefit Portfolio

Executive OverviewKey Benefit Administrators (KBA) was founded in 1979 as a full-service group benefits administration firm specializing in self-funded medical plans. Since that time KBA has grown to become one of the country’s largest independently owned third party administrators, supporting a wide variety of group benefit plans. KBA is a member of the Key Family of Companies which has two major locations in Indianapolis, Indiana and Ft. Mill, South Carolina. The Key Family is a commonly held group of benefits-related organizations with over 400 employees, over 3,000 corporate customers, and over 1.5 million members under management. We are committed to upholding four key principles:

Fundamentals, Extraordinarily Well — While our other principles add great value to doing business with us, our first priority is to deliver the fundamentals at world-class service levels.

Reports — Healthcare Risk Management Reports (HRM) for comprehensive employer-level data & American Health Data Institute (AHDI) reports for meaningful provider and peer analysis. EZ View - Our very own data drill down tool to allow for ad-hoc data analysis and FAST.

Innovative Healthcare Risk Management Techniques — The Key Family works with every client to favorably impact the total cost of the benefit delivery, maximizing the plan’s efficiency and reducing the cost to do business with us.

Online Health Risk Assessment Personalized Multi-Media Healthcare Curriculum Monitor and Manage 27 Chronic Diseases and Capture Co-Morbidities Utilization of Advanced Predictive Modeling Risk Stratification Identification of high quality, cost effective providers Steerage to high quality, cost effective providers

High-Tech, High-Touch Service — Technology is not an end, but an important tool the Key Family utilizes to enable effective, compassionate service to our covered participants.

Healthcare Navigator Nurses — Experienced healthcare coaches for the chronically ill

Shared Strategic Leadership Role with Each Client — Through active relationship management with human resources, finance, and senior management, the Key Family is dedicated to the success of each client’s benefits program.

Ongoing Benefit Program Analysis and Review

2

3

Full Time General Counsel Wallace Gray, JD, MBA◦ 8-Hour Response Time

Nationally Recognized Employee Benefits Expert◦ Plan Documents◦ ERISA, COBRA, FMLA, ADA, ADEA, Medicare, Medicaid, Etc.◦ Flexible Spending Accounts◦ Health Reimbursement Accounts◦ Wellness Programs

Plan Administration◦ Compliant Terms & Conditions◦ Interpretive Guidance◦ Appeal Processing◦ Coordination With Other Benefit Programs

Compliant Notices◦ HIPAA Privacy◦ COBRA◦ WCHRA

Legal Updates

Legal/Compliance

Key Points of Differentiation Core competency in complex healthcare administration –33 years of self-funded medical

experience

On Staff Legal counsel specializing in ERISA law and Employer Law to assist employers with

Compliance and Understanding of the ever changing Healthcare Reform laws

Focus on flexible and creative solutions including Strategic Tax Planning Strategies for employers

to deal with the new Healthcare Reform laws in 2014.

Integrated Healthcare Risk Management Solutions with the focus on turning data into intelligence

and making it “Actionable”

National administrator for multiple supplemental insurance product carriers – multi-dimension

experience in plan designs, processes and procedures

Products and Services

KBA

AHDI/Risk Management

HRA/Flex

Limited Medical

Compliance Services

Gap Administration

Cobra Administration

Dental &Vision

5

Minimum Essential Coverage (MEC)

MEC must cover 100% of the CMS listed Preventive Services

An employer that employs 100 or more full time employees in 2014 can prevent being taxed the $2,000 per full time employee (less 80) in plan year 2015 by offering Minimum Essential Coverage. For 2016 and after, the employer that employs 50 or more full time employees can prevent being taxed the $2,000 per full time employee (less 30) by offering Minimum Essential Coverage.

All employees can prevent being taxed the greater of 1% of adjusted household income or the $95 plus penalty by being covered by the Minimal Essential Coverage, the 60% Minimum Value Plan, or other qualified buy-up plan if offered.

Employers can charge employees any reasonable amount for this benefit option.

Definitions

Minimum Value Plan (MVP)

A 60% Minimum Value Plan which meets the government’s 60% average of “allowed costs” in order to avoid the $3,000 penalty per employee who is eligible for subsidies on the Exchange, who waives off the employer plan, and who purchases coverage on the Exchange.

The employer can’t charge an employee who would otherwise be eligible for a subsidy on the Exchange more than 9.5% of that employee’s W2, Box 1 income for single coverage under the Minimum Value Plan. (Safe Harbor)

Definitions

In general all industries will benefit from this program.

In particular, the ones listed below could benefit the most: Restaurants

Staffing Companies

Nursing Homes

Home Health Care

Hotels and Resorts/Casinos

Security Companies

Convenient Stores

Oil and Gas

What Industry does this plan target?

Minimum Essential Coverage would be self funded with an Aggregate only policy with a monthly Aggregate Accommodation provision.

Minimum Essential Coverage will cover 100% of the CMS listed Preventive Services.

An employer that employs 100 or more full time employees in 2014 can prevent being taxed the $2,000 per full time employee (less 80) in plan year 2015 by offering Minimum Essential Coverage. For 2016 and after, the employer that employs 50 or more full time employees can prevent being taxed the $2,000 per full time employee (less 30) by offering Minimum Essential Coverage.

All employees can prevent being taxed the $95 penalty by being covered by the Minimal Essential Coverage, the 60% Minimum Value Plan, or other qualified buy-up plan if offered.

Health Plan Designs of the FuturePlan A:Minimum Essential Coverage Plan

Preventive Services under the Affordable Care Act

15 Covered Preventive Services for Adults1. Abdominal Aortic Aneurysm one-time screening for men of specified ages who have ever smoked

2. Alcohol Misuse screening and counseling

3. Aspirin use for men and women of certain ages

4. Blood Pressure screening for all adults

5. Cholesterol screening for adults of certain ages or at higher risk

6. Colorectal Cancer screening for adults over 50

7. Depression screening for adults

8. Type 2 Diabetes screening for adults with high blood pressure

9. Diet counseling for adults at higher risk for chronic disease

10. HIV screening for all adults at higher risk

11. Immunization vaccines for adults--doses, recommended ages, and recommended populations vary: • Hepatitis A• Hepatitis B• Herpes Zoster• Human Papillomavirus• Influenza (Flu Shot)• Measles, Mumps, Rubella• Meningococcal• Pneumococcal• Tetanus, Diphtheria, Pertussis• Varicella

12. Obesity screening and counseling for all adults

13. Sexually Transmitted Infection (STI) prevention counseling for adults at higher risk

14. Tobacco Use screening for all adults and cessation interventions for tobacco users

15. Syphilis screening for all adults at higher risk

The eight new prevention-related health services marked with an asterisk ( * ) must be covered with no cost-sharing in plan years starting on or after August 1, 2012.

1. Anemia screening on a routine basis for pregnant women

2. Bacteriuria urinary tract or other infection screening for pregnant women

3. BRCA counseling about genetic testing for women at higher risk

4. Breast Cancer Mammography screenings every 1 to 2 years for women over 40

5. Breast Cancer Chemoprevention counseling for women at higher risk

6. Breastfeeding comprehensive support and counseling from trained providers, as well as access to breastfeeding supplies, for pregnant and nursing women*

7. Cervical Cancer screening for sexually active women

8. Chlamydia Infection screening for younger women and other women at higher risk

9. Contraception: Food and Drug Administration-approved contraceptive methods, sterilization procedures, and patient education and counseling, not including abortifacient drugs*

10. Domestic and interpersonal violence screening and counseling for all women*

11. Folic Acid supplements for women who may become pregnant

12. Gestational diabetes screening for women 24 to 28 weeks pregnant and those at high risk of developing gestational diabetes*

13. Gonorrhea screening for all women at higher risk

14. Hepatitis B screening for pregnant women at their first prenatal visit

22 Covered Preventive Services for Women, Including Pregnant Women

15. Human Immunodeficiency Virus (HIV) screening and counseling for sexually active women*

16. Human Papillomavirus (HPV) DNA Test: high risk HPV DNA testing every three years for women with normal cytology results who are 30 or older*

17. Osteoporosis screening for women over age 60 depending on risk factors

18. Rh Incompatibility screening for all pregnant women and follow-up testing for women at higher risk

19. Tobacco Use screening and interventions for all women, and expanded counseling for pregnant tobacco users

20. Sexually Transmitted Infections (STI) counseling for sexually active women*

21. Syphilis screening for all pregnant women or other women at increased risk

22. Well-woman visits to obtain recommended preventive services*

22 Covered Preventive Services for Women, Including Pregnant Women (continued)

1. Alcohol and Drug Use assessments for adolescents

2. Autism screening for children at 18 and 24 months

3. Behavioral assessments for children of all ages Ages: 0 to 11 months, 1 to 4 years, 5 to 10 years, 11 to 14 years, 15 to 17 years.

4. Blood Pressure screening for children Ages: 0 to 11 months, 1 to 4 years, 5 to 10 years, 11 to 14 years, 15 to 17 years.

5. Cervical Dysplasia screening for sexually active females

6. Congenital Hypothyroidism screening for newborns

7. Depression screening for adolescents

8. Developmental screening for children under age 3, and surveillance throughout childhood

9. Dyslipidemia screening for children at higher risk of lipid disordersAges: 1 to 4 years, 5 to 10 years, 11 to 14 years, 15 to 17 years.

10. Fluoride Chemoprevention supplements for children without fluoride in their water source

11. Gonorrhea preventive medication for the eyes of all newborns

12. Hearing screening for all newborns

13. Height, Weight and Body Mass Index measurements for childrenAges: 0 to 11 months, 1 to 4 years, 5 to 10 years, 11 to 14 years, 15 to 17 years.

14. Hematocrit or Hemoglobin screening for children

15. Hemoglobinopathies or sickle cell screening for newborns

16. HIV screening for adolescents at higher risk

17. Immunization vaccines for children from birth to age 18 —doses, recommended ages, and recommended populations vary: Diphtheria, Tetanus, Pertussis Haemophilus influenzae type b Hepatitis A

26 Covered Preventive Services for Children

Hepatitis B Human Papillomavirus Inactivated Poliovirus Influenza (Flu Shot) Measles, Mumps, Rubella Meningococcal Pneumococcal Rotavirus Varicella

18. Iron supplements for children ages 6 to 12 months at risk for anemia

19. Lead screening for children at risk of exposure

20. Medical History for all children throughout developmentAges: 0 to 11 months, 1 to 4 years, 5 to 10 years, 11 to 14 years, 15 to 17 years.

21. Obesity screening and counseling

22. Oral Health risk assessment for young childrenAges: 0 to 11 months, 1 to 4 years, 5 to 10 years.

23. Phenylketonuria (PKU) screening for this genetic disorder in newborns

24. Sexually Transmitted Infection (STI) prevention counseling and screening for adolescents at higher risk

25. Tuberculin testing for children at higher risk of tuberculosisAges: 0 to 11 months, 1 to 4 years, 5 to 10 years, 11 to 14 years, 15 to 17 years.

26. Vision screening for all children

26 Covered Preventive Services for Children (continued)

Plan A Minimum Essential Coverage Plan

Plus a fully insured Limited Medical Benefit plan for additional coverage.

Health Plan Designs of the Future

Plan B:Minimum Essential Coverage Plan Plus Limited Medical Plan

Plan A Self Funded Minimum Essential Coverage Plan

Plus an improved fully insured limited Medical Benefit plan

Health Plan Designs of the Future

Plan C:Minimum Essential Coverage PlanPlus Improved Limited Medical Plan

Plan A Self Funded Minimum Essential Coverage Plan

Plus 60% Minimum Value Plan, with Specific and Aggregate Coverage, that meets the government’s 60% average of “allowed costs” in order to avoid the $3,000 penalty per employee who is eligible for subsidies on the Exchange, who waives off the employer plan, and who purchases coverage on the Exchange.

The employer can’t charge an employee who would otherwise be eligible for a subsidy on the Exchange more than 9.5% of that employee’s W2, Box 1 income for single coverage under the Minimum Value Plan. (Safe Harbor)

12/18 contract, Aggregate Accommodation to give monthly and annual caps, No New Laser contracts.

Health Plan Designs of the Future

Plan D:Minimum Essential CoveragePlus Minimum Value PlanPlus Optional Limited Medical Plan

Plan A Self Funded Minimum Essential Coverage Plan Plus Traditional Self Funded Major Medical with specific and aggregate stop

loss. 12/18 contract, Aggregate Accommodation to give monthly and annual caps,

No New Laser contracts. Employers can charge employees any amount for this benefit option.

Health Plan Designs of the FuturePlan E:Minimum Essential CoveragePlus Traditional High Deductible Major Medical Plan

DO I PROCEED OR…

DO I WAIT….

DELAY…Now What?

Employers will not be in compliance with the federal guidelines in offering a Minimum Value Plan in 2014/15.

Employers will still be in the dark with unknown risk.

Many of the employees that will be considered eligible in 2014/2015 could possibly apply for the exchange where they will be given a subsidy because of NO Minimum Value Plan being offered.

Many of these employees who have never had insurance before will get a taste of Major Medical Insurance for the first time on the exchanges.

If employers do nothing and wait….

A bigger potential for adverse selection in the MVP due to the young and healthy population enrolling in exchanges in 2014.

In 2015, when MEC and MVP’s are offered, employees and their families will NO LONGER be eligible for the subsidy they are receiving in 2014. The employer could possibly be looking at employees that are very upset because they will no longer be eligible for a subsidy for themselves or their family which could possibly hurt retention.

The employer could be looking at employees that will be buying their MVP plan at no more than 9.5% of their W2 Box 1 income, which could increase budgets dramatically in 2015 verses what they had been advised and budgeted in 2014 .

Many of the employees without insurance that will be eligible would not have considered the MVP if a possible MEC option or Limited Medical Plan was offered to them in 2014.

If employers do nothing and wait continued….

Example: Potential Cost to Employer in 2015 for MVP plan Assume average cost of MVP plan in 2015 is approximately $650/month for single

coverage Assume use of Safe Harbor model for employee contribution at 9.5% of W2 box 1

income-employee cost share would be approximately $110/month

-------------------------------------------------------------------------------------------------------------

Employers cost share would be approximately $540/month or $6,480/year. Employers costs of adding additional employees on a MVP plan:

20 additional employees ≈ $130,000/yr 50 additional employees ≈ $324,000/yr 100 additional employees ≈ $648,000/yr

Potential Costs for employers doing nothing and wait….

As an employer, how do I determine my benefits budget with all these unknowns facing us today?

Should I proceed with implementing a MEC Plan in 2014?

Should I consider offering a MEC only plan and a MEC with a limited medical benefit and a MEC with an enhanced limited medical benefit plan in 2014?

Are there any concerns I should be aware of if I delay the implementation of an MVP until 2015?

Should I consider offering both a MEC and limited medical benefits options along with an affordable MVP in 2014?

Should I be concerned that during 2014 the young and healthy population will decide to enroll in the Exchanges creating adverse selection for my MVP if I delay the MVP implementation until 2015?

New Considerations and concerns….

©2013 Key Benefit Administrators,Inc.

Don’t Delay…Do Something

Implement a MEC plan and Limited Medical plan. This offering will do the following for the employee and employer:

Employee:

It will allow them to avoid their individual tax penalty which starts in 2014.

Some employees will find that coverage from the Exchanges in 2014 is too expensive for them with or without subsidies.

In 2015 when employers make MVP’s available, employees will experience “sticker shock” when they see the premiums and out of pocket expenses attendant to the MVP coverage and elect to stay with the MEC and Limited Medical plan selected in 2014.

YEAR 1- 2014

Employer:

Creates an employer strategy which enables employees who do not have coverage today to purchase a low cost plan with meaningful benefits. Some employees will realize that they cannot afford the Exchange coverage premiums and out of pocket exposure.

Participation in the low cost plan in 2014 could have the effect of these employees not joining the MVP plan in 2015 which is the largest cost to an employer with ACA.

Affords an employer a year to build a MEC SURPLUS which will help offset costs associated with the MVP offered in 2015.

Allows an employer to begin gathering data on this previously uninsured population in order to better analyze this population which may join the MVP in 2015. This will give employers a better way to estimate the cost of the 2015 MVP.

2014

Understand the data for the past year with the MEC and Limited Medical plan and not be in the “dark”

Complete the financial forecast with the data from the current plans, the Surplus that was achieved in Year 1 with the MEC and determine possible expense of offering the Minimum Value Plan.

Introduce low cost plans to employees a year in advance to get them comfortable and avoid “sticker shock” in 2015.

Ability to have the first phase of ACA implemented and avoid potential chaos from employees losing subsidies in 2015 when MVP plan is implemented.

Consider options for your current plan being offered today to your employees (PLAN E) and what is the most advantageous route for you and your employees including potential surveys to see who would purchase the MVP plan.

2014 Employer Achievements…

Avg Cost $50.00 Fixed Costs $21.00 Total Claims Cost Forecast $29.00 Unearned Claims ($12.00)

________ Actual Employer Cost $38.00

35% Tax Savings ($13.00) FICA Reduction ($1.50)

True Employer Expense per Employee $23.50

Actual Employer Cost of the MEC

Continue the MEC and Limited Medical offered in 2014 and add the Minimum Value Plan offering.

Continue looking at best practices in communications and enrollment strategies with surveys throughout year.

Begin to analyze your data from KBA to understand how to stabilize your medical costs with all of the changes taken place.

Begin to look at Population and Risk Management within your benefit plan design to turn data into intelligence and make it actionable.

Begin to establish benchmarks within your plans that can be understood by all within the company and make adjustments with the data to stabilize costs within the health plan.

2015

Analyze the MEC, Limited Medical and MVP for adjustments.

Continue to work the population management programs to improve the overall health of the covered population.

Adjust where necessary to be sure the MEC and MVP plans are coming in on budget.

2015

The ability to be in compliance with the new ACA Regulations while avoiding any penalties in 2014/2015.

The ability for an employee to avoid being taxed the greater of 1% of adjusted household income or the $95 plus penalty by electing the “Minimum Essential Coverage” plan.

The ability to bring an affordable low cost plan with meaningful benefits to employees that will still not be able to afford the Minimum Value Plan.

The ability to have a 3 year strategy implemented as discussed and have “real” data and anticipated implication to best position yourself for 2015 and beyond.

Allow employees to feel that they have been given the best opportunity that is most affordable to them and their families.

What do we accomplish for the employee and employer?

THANK YOU!!!