L O C K T O N D U N N I N G B E N E F I T S

University of Alaska Healthcare Reform

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Healthcare Reform

Regulation

Limit Health FSAs to $2,500 (current is $5,000, will change at 7/1/2013)

.9% additional Medicare tax and 3.8% passive income tax on individuals earning +$200,000 ($250,000 for families)

Health Insurance Taxes and Fees-Annual Excise Tax Pharmaceutical tax - $2.8B annually- Comparative Effective Research assessment increases to $2 per enrolled employee

2013Regulation

Plans required to produce 4 page plan summaries starting with 9/23/2012 – Open Enrollment April 2013

W – 2 reporting of health plan values(Requires 2012 reporting received Jan 2013)

New appeals process with external review (most claim payers are in compliant with rule)

Health Insurance Taxes and Fees- Annual Excise Tax Pharmaceutical tax -$2.8B annually-Comparative Effective Research assessment of $1 per enrolled employee (What healthcare treatments are appropriate in given circumstances)

2012

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Regulation

Free Rider Surcharge – Must offer qualifying coverage (60%) at an affordable cost (no more than 9.5% of household income) - $2,000 non-deductible penalty per FTE for not offering a plan ($3,000 for offering non-qualifying/non-affordable coverage)

Automatic enrollment (deferred until regulations issued)

Cover Clinical Trials - Insurers will be prohibited from dropping or limiting coverage because an individual chooses to participate in a clinical trial. This applies to all clinical trials that treat cancer or other life-threatening diseases

All employees working more than 30hrs per week are eligible for coverage

Transitional Reinsurance Program Fees – Estimated at $150 PEPY

2014Regulation

Cadillac Tax – 40% excise tax on health benefits for “high value” plans.

2018

Healthcare Reform

THE “EFFICIENT FRONTIER”

Optimizing Plan Design and Contribution Strategies by

modeling over 800 alternative plan design and contribution

strategies to assist in finding an optimal strategy that minimizes cost to the employer – mostly

by taking advantage of Exchange subsidies - and

maximizes value for employees.

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Pay or Play – Average Additional Costs (Losers) or Savings (Winners) under the Pay option

-

100

200

300

400

500

600

700

800

$(10,000)

$(5,000)

$-

$5,000

$10,000

$15,000

$20,000

< $10,000 $10,000 -$20,000

$20,000 -$30,000

$30,000 -$40,000

$40,000 -$50,000

$50,000 -$60,000

$60,000 -$70,000

$70,000 -$80,000

$80,000 -$90,000

$90,000 -$100,000

$100,000 +

Empl

oyee

Cou

nt

$ Co

sts

/ Sa

ving

s

Income Band

PAY or PLAY - Average Additional Costs (Losers) or Savings (Winners) under the PAY option

Winners Losers Winner Count Loser Count

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University of Alaska Health Reform Projections 2014

No Reform PLAY PAY – Public Exchanges

PAY – Public Exchanges

Play – Efficient Frontier

Current UNDER Reform

Winners - 60%

Value – 76% Value – 80%

Employees covered in Plan 3,942 4,155 0 0 4,083Employees covered in Exchanges 0 0 4,794 4,794 119Employees covered in Plan or Exchange 3,942 4,155 4,794 4,794 4,202

Expected Net Employer Plan Cost $60,557,000 $65,214,000 ------ ------ $63,720,000Employer additional taxes paid ------ $1,343,000 $1,343,000 ($282,000)Surcharge ------ $9,528,000 $9,528,000 $357,000

Total Expected Net University Cost (Plan Cost, Taxes, & Surcharge)

$60,557,000 $65,214,000 $10,871,000 $10,871,000 $63,795,000

$ Change $4,657,000 ($54,343,000) ($54,343,000) ($1,419,000)

Total Expected Employee Cost (EE Contributions, OOP & Taxes

$37,930,000 $40,902,000 $68,784,000 $94,471,000 $39,112,000

$ Change $2,972,000 $27,882,000 $53,569,000 ($1,790,000)

University plus Employee Total Costs $98,487,000 $106,116,000 $79,655,000 $105,342,000 $102,907,000

Current BEFORE Reform - 2014

Terminate Plan (Salary)

Terminate Plan (Household Income)

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Actuarial Value 90% 85% 80% 75% 70% 65% 60%

Exchange Metal Platinum High Gold Low Gold High Silver Low Silver High Bronze Low Bronze

Deductible $250 $500 $750 $1,000 $1,250 $1,700 $2,500

Family Deductible $500 $1,000 $1,500 $2,000 $2,500 $3,400 $5,000

Family Deductible Type Embedded Embedded Embedded Embedded Aggregated Aggregated Aggregated

OOP Max (Includes Deductible) $1,250 $2,000 $2,500 $4,000 $3,500 $6,000 $6,000

Family OOP $2,500 $4,000 $5,000 $8,000 $7,000 $12,000 $12,000

Employee Coinsurance $0 $0 $0 $0 $0 $0 $0

PCP Copay $15 $15 $25 $25 20% After Ded. 20% After Ded. 20% After Ded.

Specialist Copay $15 $25 $45 $50 20% After Ded. 20% After Ded. 20% After Ded.

ER Copay $50 $100 $100 $200 20% After Ded. 20% After Ded. 20% After Ded.

Rx Deductible N/A N/A N/A $50/$100 20% After Ded. 20% After Ded. 20% After Ded.

Generic Copay $5 $5 $10 $10 20% After Ded. 20% After Ded. 20% After Ded.

Preferred Brand Copay $20 $25 $3530%, min $35,

max $7520% After Ded. 20% After Ded. 20% After Ded.

Non-Preferred Copay $35 $40 $5040%, min $50,

max $10020% After Ded. 20% After Ded. 20% After Ded.

Illustrated 2014 Exchange Plan Design

UA Plans – 76%

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Healthcare Reform Options

Cost Before Reform - 2014 Estimated Employees in Plan of 3,942 Estimated University cost of $60,557,000 Estimated Employee cost of $37,930,000

Option 1 – Play and offer qualifying coverage Estimated Employees in Plan of 4,155 Estimated University Cost of $65,214,000 Estimated Employee Cost of $40,902,000

Option 2 – Pay $2,000 per employee (+30 hours) Penalty Estimated Employees in Exchange 4,794 Estimated University Cost of $10,871,000 Estimated Employee Cost of $68,784,000

Option 3 – Non-Qualifying Plan Estimated Employees in Exchange of 119 and 4,083 in the plan (4,202) Estimated University Cost of $63,795,000 Estimated Employee Cost of $39,112,000

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