This presentation by Brent Heurter, president of Healthy Halo Insurance Services, explains healthcare reform strategies for employers.

2. Your Presenter
Brent Heurter, CBWA
President,
Healthy Halo Insurance Services
brent@healthyhalo.com
323.319.6626
2

3. Agenda
• History of Health Insurance and Costs
• Individual Mandated Health Insurance
• Tax Credits and Subsidy Programs
• The Exchange: Covered California
• Pay or Play for Large Employers
• ACA Compliance Checklist
• Strategies for Containing Costs
• Resources & Tools Available
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5. A Brief History of Health Insurance
• Employer-sponsored health insurance was born during World War II
• Medicare and Medicaid passed in 1965
• ACA signed into law on March 23, 2010
• Supreme Court upheld the ACA on June 28, 2012
World
War II
1965 2010 2012
5

6. Cumulative Premium Increases Compared to Inflation
Family Coverage, California, 2002 to 2012
• California Employer Hearth
Benefits Cost of Health
Insurance
• Since 2002, health insurance
premiums in California have
increased by 169%, more than
five times the 31.5% increase in
the state's overall inflation rate.
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7. How Much Will Premiums Increase?
• One state report shows that premiums will go up
30% in 2014
• Age-banded rates cannot vary more than 3:1 for
adults for individual and small group
• Eliminates “Risk Adjustment Factor” for small
groups (2-50 ees)
• Essential Benefits
• New health insurance taxes
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8. Essential Benefits8

9. Taxes and Fees9

11. Other Employer Cost Considerations
• Must offer benefits to those working 30 hours or more per week
• Maximum waiting period 60 days in CA
• Adjusting contributions to avoid penalties
• Individual mandate may cause employees to join the plan
• Automatic enrollment for companies with 200 plus employees
• More administration for reporting and eligibility mandates
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12. Individual Mandate
• Jan. 1, 2014 all individuals are required to have health insurance
• Exceptions:
o Family income is below threshold of having to file a tax return
o Currently enrolled in Medicare or Medicaid
o Enrolled in a plan offered by an employer
12

13. Individual/Family Penalties for Not Having
Health Insurance13
Year Percentage of
Income
Set Dollar Amount per
Adult
Set Dollar Amount per
Child
Year
2014 1% $95 $47.50 2014
2015 2% $325 $162.50 2015
2016 2.5% $695 $347.50 2016
Health Insurance Penalty Phase-In Schedule
Pay the greater of the two amounts

14. Covered California
• Public, state-run Exchange
• Guaranteed Issue for ALL Individuals/Families
• Provides online “apples to apples” comparison
• Begins open enrollment 10/1/13 for coverage effective 1/1/14
• Must have coverage before 3/1/14 or wait until next open enrollment
• 13 carriers state-wide with 7 carriers in LA County
• Rates based on age and 19 territories
14

15. Levels of Coverage15
Category
Percentage of expenses
paid by health plan
Percentage of expenses paid
by individual
Platinum 90% 10%
Gold 80% 20%
Silver 70% 30%
Bronze 60% 40%
Higher
percentage of
expenses paid
by plan
Lower monthly
premium
payment

16. Individual Plan Rates16
Plan Bronze Silver Gold Platinum
Health Net
HMO
__ $242 $276 $311
Anthem
HMO
__ $259 $327 $374
Molina Healthcare
HMO
$204 $259 $285 $342
L.A. Care
HMO
$196 $265 $301 $332
Blue Shield
PPO
$240 $287 $342 $392
Anthem
EPO
$225 $299 $363 $420
Kaiser
HMO
$245 $325 $399 $429
Health Net
PPO
$301 __ __ __
South Los Angeles County – 40 Year Old

17. 2014 Individual Plan Rates to Comparable Small Group
Rates
17
Area Avg. Cost of Silver Plan
Average cost of 2013 Comparable Small
Group Plans
Difference
Los Angeles (North)
$242 $311 -22%
Los Angeles (South) $253 $362 -29%

18. FINANCIAL ASSISTANCE PROGRAMS
AVAILABLE ONLY IN
COVERED CALIFORNIA EXCHANGE
18

19. Federal Poverty Level (FPL)19
Persons in Household FPL 138% FPL 200% FPL 250% FPL 400% FPL
1 $11,490 $15,856 $22,980 $28,725 $45,960
2 $15,510 $21,404 $31,020 $38,774 $62,400
3 $19,530 $26,951 $39,060 $48,825 $78,120
4 $23,550 $32,499 $47,100 $58,875 $94,200
Medi-Cal
Cost-Sharing Subsidies
Premium Subsidies

20. Medi-Cal
• Free coverage for qualified individuals and children
• In 2014, Medi-Cal eligibility increases from 100% FPL to 138% FPL for
adults and includes adults without children
• Eligibility for children is up to 250% FPL, however differs in other states
• Estimates range from 1.7 million to more than 3 million Californians will
become eligible
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21. 1) Cost-Sharing Subsidies
• Eligibility: 138% to 250% FPL
• Sliding scale based on FPL
• 138% - 150% FPL covers 94% of costs
• 150% -200% FPL covers 87% of costs
• 200-250% of FPL covers 73% of costs
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What is the benefit?
Allows the purchase of a Silver Plan (which covers the cost of medical
services at 70%) to a HIGHER percentage of coverage (which means lower
deductibles and copayments)

22. 1) Cost-Sharing Subsidies22
Coverage Category
94% Silver
Covers 94% avg.
annual cost
87% Silver
Covers 87% avg. annual cost
73% Silver
Covers 73% avg. annual cost
70% Silver
Covers 70% avg.
annual cost
Income Ranges 138% - 150% FPL 150% - 200% FPL 200% - 250% FPL 250% - 400% FPL
Office Visit $3 $15 $40 $45
Lab
Diagnostics
$3
$5
$15
$20
$40
$50
$45
$65
Generic Drugs $3 $5 $20 $25
Annual Out of Pocket
Max. Individual/
Family
$2,250
$4,500
$2,500
$4,500
$5,200
$4,500
$6,350
$12,700
Examples based on FPL

23. 2) Premium Subsidies (aka Tax Credits)
• Eligibility 138% to 400% FPL
• Amount of subsidy is based on a sliding scale
• Applied to the monthly premium
• Individual can earn up to $45,960
• Family of four can earn up to $94,200
• Available only in the Exchange
• Must be Silver plan or higher
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24. 2) Premium Subsidy Examples24
Plan 150 FPL 200 FPL 250 FPL 400 FPL
Health Net
HMO
$40 $103 $175 $242
$202 $138 $66 $0
Anthem
HMO
$57 $121 $193 $259
$202 $138 $66 $0
Molina Healthcare
HMO
$58 $121 $193 $259
$202 $138 $66 $0
L.A. Care
HMO
$64 $127 $199 $265
$202 $138 $66 $0
Blue Shield
PPO
$86 $149 $221 $287
$202 $138 $66 $0
Anthem
EPO
$97 $160 $232 $299
$202 $138 $66 $0
Kaiser Permanente
HMO
$123 $186 $258 $325
$202 $138 $66 $0
40 Year Old Single/ South LA County/Silver Plan
Subsidies shown in
green premium after
subsidy and
monthly premium
after subsidy is
shown in black

25. Covered California : Cost-Estimate Calculator25

26. Groups of Employees26
Medi-Cal Eligible
Individual with income lower
than $15,856
Or
Family of 2 with income lower
than $21,404
Or
Family of 3 with income lower
than $26,951
Or
Family of 4 with income lower
than $32,499
Group 1
Less than 138% FPL
Group 2
138 to 250% FPL
Cost-Sharing & Premium
Subsidy Eligible
Individual with income
between $15,856 - $28,725
Or
Family of 2 with income
between $21,404 - $38,774
Or
Family of 3 with income
between $26,951 - $48,825
Or
Family of 4 with income
between $32,499 - $58,876
Must purchase on
the Exchange to
receive subsidies

27. Groups of Employees27
Premium Subsidy Eligible
Individual with income of
$22,980 - $45,960
Or
Family of 2 with income of
$31,020 - $62,400
Or
Family of 3 with income of
$39,060 - $78,120
Or
Family of 4 with income of
$47,100 - $94,200
Group 3
138% to 400% FPL
Group 4
Higher than 400% FPL
No Subsidies
Individual with income higher
than $45,960
Or
Family of 2 with income higher
than $62,400
Or
Family of 3 with income higher
than $78,120
Or
Family of 4 with income higher
than $94,200
Must purchase on
the Exchange to
receive subsidies

28. Groups of Employees28
Group 5
Waives Coverage and Opts to Pay Penalty
Year % of Income Adult Child
2014 1% $95 $47.50
2015 2% $325 $162.50
2016 2.5% $695 $347.50

29. Group Health Benefit Changes
Effective Already:
1. Dependents covered until age 26
2. No cost for preventative care
3. No cost for contraceptives
4. No lifetime or annual benefit limits
Effective Jan. 1, 2014:
1. No pre-existing exclusions
2. Maximum OOP $6,350 / $12,700
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30. Small Employers
• No mandate to provide group health insurance
• Defined as 1 – 50 full-time employees
• Small employer expands to 100 employees in 2017 but penalty still
applies over 50 FTEs
• Community rating
• Max. plan deductible of $2,000/$4,000
• In the Exchange: min. participation and contribution requirements
may no longer apply (must enroll during special open enrollment
period Nov. 15 – December 15)
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31. Small Business Health Options Program (SHOP)
• Public Exchange run by Covered California
• Side-by-side comparison of plans
• Choice of health plans, dental and carriers
• Can provide defined contribution amount towards Bronze, Silver,
Gold or Platinum plans
• One consolidated bill for all plans
• Tax credits are available for 2 years from 2014 to 2020
• On a sliding scale up to a maximum of 50%:
o 25 or fewer FTEs with average payroll less than $50,000 per year and contribute 50%
are eligible for minimal tax credit
o 10 or fewer FTEs with average payroll less than $25,000 are eligible for maximum tax
credit
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32. Large Employers
• Pay or Play!
• 50 or more full-time equivalent (FTE) employees in the prior year.
• Employees working 30 hours per week are deemed full-time.
• Part-time employees: add up hours worked for the month and divide
by 120
• 10 employees @ 15 hours per week = 600 hours divided by
120 = 5 FTEs
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33. Large Employer Penalties
• No health insurance = $2,000 per year/per employee
o The first 30 employees are not counted:
o Example: 60 employees – 30 = 30 x $2,000 = $60,000 annual penalty
• Unaffordable Coverage = $3,000 per year/per employee that purchases health
insurance through the Exchange and receives a subsidy.
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34. Minimum Value and Affordability Test
1) Minimum Value Test: health plan must pay a minimum of 60% of expenses
2) Affordability Test: employees’ contribution cannot exceed 9.5% of their W-
2 wages
• Penalty does not apply:
• If employee has coverage through spouse
• Employee buys health insurance through the Exchange but does not qualify for a
subsidy
• Employee is enrolled in Medicaid/Medicare
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35. Penalties for Employers Not Offering Affordable Coverage
Under the Affordable Care Act Beginning in 2014
35

36. Penalties for Employers Not Offering Affordable Coverage
Under the Affordable Care Act Beginning in 2014
36

37. Employer Survey on Health Reform
McKinsey & Company, a leading global management consulting firm, conducted
a survey of 1,329 employers to measure their attitudes about healthcare reform:
• 30% of employers will “definitely or probably” stop providing employer sponsored
insurance in the years following 2014
• Among employers with a “high awareness of reform, this proportion increases to more
than 50%”
• 45 to 50% of employers will “pursue some alternative to traditional” group health
coverage
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38. Research and Consumer Surveys
• At least 30% of employers would gain economically from dropping
coverage even if they make employees 100% whole
• Contrary to what other employers assume, more than 85% of employees
would remain at their jobs even if their employer stopped offering employer
sponsored insurance
“Most employers, however will find value-creating options between the
extremes of completely dropping coverage and making no changes to
the current offering”
Source: McKinsey & Company
38

39. Key Concepts and Plan Design Strategies
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40. Defined Contribution
Employer provides fixed dollar amount and the
employee can choose how to allocate it among a
variety of benefit options.
40

41. Defined Contribution & Private Exchanges
A benefits exchange is an online store where employees purchase benefit
to suit their individual and family needs.
41
What is a private exchange?
A benefits model that:
• Allows employees to select health plans
and other benefits from a menu of
products and services
• Employees shop for the products that
best fit them personally using defined
contribution dollars from their employer,
and their own money if they choose

42. Health Reimbursement Arrangements (HRAs)42
What is an HRA?
• Created under Section 105 of the IRS Code and further
clarified by the IRS in 2002
• HRAs are an employer-funded plan to reimburse
employees for medical expenses including individual and
family premiums
• HRAs are notional arrangements; no funds are expensed
until reimbursements are paid
• HRAs are tax-deductible for the employer and tax-free
to the employee
• HRAs can be restricted for the purchase of individual and
family health and other specified benefit plans and medical
expenses

43. Healthcare Reform & Defined Contribution HRA43
• Medical Underwriting
• No Federal Subsidies for
Individual Policies
• No Standardized System for
Comparing Plans
• Employer- Driven
• No Medical Underwriting
• Federal Subsidies for
Individual Policies
• Easy comparison of plans
• Individual/Family DrivenVs.
After 2014Before 2014

44. Advantages to HRAs & Defined Contribution44
• Control & predict costs
• No min. contribution or
participation
• Establish own rules
• No admin. hassle
• Allows you to focus on your
business
• Portable & permanent
• Total choice & flexibility
• Up to 29% less cost
• Allows for premium &
cost-sharing subsidies
• Better educated consumers
EmployeeEmployer

45. Pay or Play Spectrum of Strategies45
Continue as plan
sponsor for all
employees
(plan provides
minimum value is
affordable)
Restructure
contributions
to qualify
lower-paid
employees and their
dependents for
federal
subsidies in
the Exchange
Limit eligibility to plan
and direct ineligibles
to the Exchange
Exclude classes
of full-time employees
Reduce weekly hours to
29 or less
Discontinue plan and
provide tax-free
defined contribution for
employees to
purchase individual
plans in the Exchange
Discontinue plan with
no employee
contributions

46. Play and Redirect
• Calculate potential penalties
• Establish defined contribution plan and HRA
• Restructure contributions so that employee contributions are greater
than 9.5% of income for employees earning less than 400% FPL
• Redirect eligible employees to receive cost-sharing and premium
subsidies through the Exchange
• Allow non-eligible employees to continue group health insurance or
receive tax-free defined contribution allowance to purchase policies
through the Exchange
• Provide eligible employees with a tax-free defined contribution HRA
allowance to purchase policies through the Exchange
46

47. Pay and Redeploy Strategies
• Employer discontinues group coverage and completely subsidizes employee participation in the
Exchange (make employees whole)
• Employer discontinues group coverage and keep employee contributions in the exchange at the
same level of what continued group coverage would have cost (employer cost-neutral Defined
Contribution HRA)
• Employer discontinues group coverage and provides contributions for individual exchange at a level
to achieve a savings target i.e. 20% (employer cost-savings defined contribution HRA)
• Employer discontinues coverage and eliminates entire cost of coverage by not subsidizing any
employee exchange participation and pays penalties (pay and exit )
By implementing an HRA, employers avoid using pay increases and paying increased payroll taxes to
compensate employees. Employees still maintain tax-free benefits and avoid paying increased income
taxes.
47

48. ACA Compliance Checklist
2013:
 Summary of Benefits Coverage (SBC)
 Include in Open Enrollment Packets
 Include in New Hire Packets
 W-2 Reporting Requirements (over 250 ees)
 Employee Notice of Exchange Distributed by 10/1
 Include in New Hire Packets
2014:
 Maximum Waiting Period of 60 days in CA
 Automatic Enrollment (200 or more ees)
Pending:
 Eligibility and Benefits Non-Discrimination Testing
48

49. What Are You Doing with Your Plan?
• 90% of employers have moved beyond a “wait and see” approach
• Only 10% of companies are still in the “wait and see” mode
• More than 50% of companies are developing tactics to deal with
the implications of health reform
• About one-third of companies have modeled the financial impact of
reform on their organization
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Which category do you fall into today?
Source: International Foundation of Employee Benefit Plans Survey Results: “2013 Employer Sponsored
Health Care: ACA’s Impact”

50. Action Steps
 Talk to other companies in your industry. What are they doing?
 Take advantage of our free whitepapers, reports, tools and resources
 Register for our next monthly webinar: “Beyond the Basics: Advanced Healthcare
Reform Strategies” on Thursday, July 18
 Evaluate your broker: How well informed are you on the ACA? What strategies have
been discussed and developed specifically for your company?
 Take advantage of your complimentary one-hour, no-obligation consultation and
we’ll develop specific strategies for your company (or to discuss any topic you
desire)
 Expect my call tomorrow to answer any questions you might have
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51. Employer Tools and Resources
Free White Papers and EBooks
51

52. End.
Thank you !