2014 and Beyond – What’s Next in Employer Sponsored Healthcare Plans Next year will be a significant year for employer sponsored health care. With the onset of numerous benefit and eligibility mandates as well as the introduction of public medical exchanges, employers are taking a closer look of the healthcare benefits they traditionally offer employees in the US. Join us to learn about the changes in the health insurance market. We will discuss how these changes impact employer strategies and how employers will interact with the public exchanges. Beyond the employer impact we will address how the changing market will impact employees who are subject to the individual mandate beginning in 2014. By the end of this webcast participants will be able to: • Identify key changes HR and Benefits functions to know and do as a result of these changes • Identify key changes required for 2014 • Discuss emerging healthcare cost trends • Understand how employers will interact with the public exchanges • Review emerging employer strategies including the interworkings of private exchanges ABOUT THE PRESENTER: Jennifer Calhoun Mohl is a Partner and senior consultant in Mercer’s Philadelphia health and benefits practice. She assists clients with various consulting assignments, including the design, administration, financing, and regulatory compliance of health and welfare benefit plans for both active and retiree populations. In addition, Jennifer serves as a relationship manager on client assignments that involve multiple Mercer offices and multiple lines of business. In addition, Jennifer has assisted with the implementation and operations of benefit programs, including communications, outsourcing and call center support. Recently, she has served as the lead health and benefit strategist on client assignments involving multiple lines of business – with a particular focus on mergers and acquisitions. Jennifer serves as one of Mercer’s National Health and Benefits spokeswomen. She has been quoted in various periodicals including, Managed Care Report, O&P Business News, The Philadelphia Inquirer, Philadelphia Business Journal, Money Magazine and has been featured on Money Matters Today on CN8. Prior to joining Mercer in 1999, Jennifer began her consulting career with Towers Perrin in 1994. She was also a legislative intern in Washington for the New York State legislature with a particular focus on employment issues including the 1993 National Healthcare Initiative spearheaded by (at time first-lady), Hillary Clinton. Jennifer received a BS in Industrial and Labor Relations at the New York State School of Industrial and Labor Relations at Cornell University.

1. Healthcare Reform Briefing: What HR Should Know
Sponsored by

2. Discussion Topics
• What is happening in 2014?
• Employer interaction with public exchange
• Employer strategies for 2014 and beyond
• Emerging healthcare costs
• Closing thoughts
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.

3. Who is here today? My main focus within HR is…
Choose all that apply.
 Benefits and/or compensation strategy and planning
 Recruiting and/or outplacement, I never touch the benefits
 HRIS and administration, I have to make sure benefits run
smoothly
 All of the above
 None of the above, I came for the free shirt
Please Respond
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
December 8, 2013
December 8, 2013
2

4. What is happening in 2014
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.

5. 2014 is a significant year …
Consequences of Affordable Care Act (ACA)
Design &
Marketplace
Changes
No lifetime
dollar limits/ pre-exiting
condition limits
Higher plan
enrollment
Dependents to
age 26
30-hour eligibility
Restricted annual
dollar limits
Individual Mandate
No waiting period
over 90 days
Auto enrollment
(delayed)
Medicaid Expansion
Out of Pocket Maximum
Wellness Incentives
Exchanges
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
Fees
Comparative
effectiveness
research (PCORI)
Fees on
insurers
Manufacturer’s
fees
Temporary
reinsurance
programs
Employer
mandate
and shared
responsibility
Minimum plan value
and contribution
requirements
(delayed)

6. Employer Mandate and Shared Responsibility
High Level Requirements…
Offer cover to “full-time employees”
– “Minimum essential coverage”
– Coverage offer to 95% of FT employees and dependent children considered
offer to “substantially all”
– FTE is any employee who works on average 30 or more hours per week
– Must offer to FTEs and their dependent children under age 26 (but not
required to offer to spouses or domestic partners)
“affordable” health care coverage
– An employee’s required contribution for self-only coverage cannot exceed
9.5% of the employee’s household income
with a “minimum value”
– The actuarial value of the plan must be at least 60% - The calculation of the
anticipated percentage of the cost of the “essential health benefits” covered by
a plan
or, face potential tax “penalties”
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.

7. New in 2014: Individual Mandate
Pay penalty
All individuals
must have health coverage
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
OR
2014
Greater of $95 (single) | $285 cap (family)
or 1% of household income
By 2016
Greater of $695 (single) | $2,085 cap (family)
or 2.5% of household income
6

8. Public Programs in 2014
Medicaid,
Medicaid Public Exchanges and Subsidies
Medicaid Expansion
Public Exchanges
Expanded to anyone below
138% federal poverty line
Insurance plan options
available on exchanges that
are operated by states or
federal government (or a
state/federal partnership)
Not all states have agreed
to expand coverage
• In these states, federal
subsidies may be
available for certain
people to buy coverage
• Those ineligible for
Medicaid or federal
subsidies may have no
option for subsidized
coverage other than
employer plan (if
available)
• Exchanges will conduct
open enrollment: Oct 1, 2013
to Mar 31, 2014
• If household income is
between 100%/138% and
400% of federal poverty
level (FPL) – and individual
does not have access to
affordable employer
coverage that provides
minimum value– federal
government will provide
subsidies to buy insurance
on exchanges
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
Subsidies
Single
individual
% of
FPL**
Family
of four
Annual household income
Household income >400% of FPL
not eligible for subsidy through
marketplace
400%
$45,960
$94,200
300%
$34,470
$70,650
200%
$22,980
$47,100
150%
$17,235
$35,325
138%
$15,856
$32,499
100%
$11,490
$23,550
* Not all States have agreed to expand Medicaid to 138% of FPL
** Based on 2013 FPL
7

9. © 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
• PCORI.
• Temporary
Reinsurance Fee.
• Health Insurer Fee.
Communications
• Maximum 90 day
waiting period.
• No limits on preexisting conditions
or essential health
benefits.
• Limits on out-ofpocket maximums;
counting
copayments
against OOP max.
• Expansion of
Wellness
incentives.
• Coverage for
clinical trial related
services.
Taxes and Fees
Plan Design Requirements
Employer Requirements in 2014
• SBCs.
• W-2 reporting of
health care costs.
• Exchange Notice.
8

10. Interacting with the public exchange
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.

11. Healthcare.gov
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
10

12. What percent of large employers (with over 500 ees) are going
to terminate medical coverage in the next three years?
 1%
 10%
 20%
 40%
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
December 8, 2013
December 8, 2013
11

13. New in 2014: Public Exchange (aka Public Marketplace)
•
Created by ACA.
•
Structured marketplace to sell and purchase health insurance operated by states or
federal government (or a state/federal partnership).
•
Government subsidized medical coverage for low income individuals and families.
•
Exchanges will conduct open enrollment: Oct 1, 2013 to Mar 31, 2014.
Percent of Population by Current Health Insurance Source*
Medicare/Gov't
Medicaid/CHIP
Will benefit from government programs – Expanded
Medicaid and Public Exchanges in 2014
Uninsured
Individual
Employer
0
5
10
15
20
25
30
35
40
45
50
*Source: U.S. Census, 2011
• Almost all large employers say they will continue to provide health care
benefits in 2014 and beyond.
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
12

14. What do the public exchanges do?
Manage Plan Activities
Determine eligibility, enroll individuals
Assist consumers
Provide financial management
Ensure plan accountability
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
December 8, 2013
13

15. 2014: Products offered in Exchanges
Public Exchange products will differ from group plans
Plan options in public exchange are named after metals
Public exchanges
Features
Plan value
ER | Group
Bronze
Silver
Gold
Platinum
Catastrophic
age <30
Plan
design1
60%
70%
80%
90%
HSA rules
>60%
• Silver – second-lowest cost plan – is baseline for calculating government subsidy
• Government subsidy and member contribution requirement calculated based on
income, vary by level between Medicaid eligibility and 400% FPL
• Once subsidy determined for silver plan, can use for gold plan (pay more) or
bronze plan (pay less)
Public exchange products may differ by State….
1.Some provisions apply differently for grandfathered and non-grandfathered plans
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
14

16. Public Exchanges
Status of State Exchanges (as of March 2013)
Declared state exchange 22
Planning partnership exchange 7
Default to federal exchange 27
Sources: Kaiser Family Foundation (states); HHS, HealthCare.gov (territories)
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
15

17. Employers and Public Exchanges
How Will It Work When Employees Apply For Subsidies?
1
Individual applies
to Exchange
2
Provides & attests to
certain info including:
• income and family size
• lowest cost employer
plan option that meets
minimum value
(employee only cost)
4
Employer Appeal
Exchange
verification
3
• Notice to individual of
eligibility determination
after verification complete
• Notice to employer if
individual determined
eligible for exchange
subsidies after verification
complete
Verifies income and other
info
Verification process for
employer coverage
(statistical sample only)
Individual can enroll during
verification process
5
• Employer requests
appeal within 90 days of
notice described in step 3
• Exchange tells employee
of appeal request
• Written appeal decision
w/in 90 days of receipt of
appeal request
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
IRS reporting &
reconciliation
After close of calendar
year, IRS has at least three
sources of info to confirm
subsidies were provided
correctly:
• Employer reporting
• Exchange reporting
• Individual tax filing
Exchange
Eligibility Notice
6
IRS Employer
Shared Resp process
IRS has said, after
employee tax returns for
coverage year are due:
• IRS will contact employer
about possible liability
• Employer response
• IRS notice & demand for
payment
16

18. What percent of your organization’s employees are going to
be eligible for the subsidy on the public exchange?
Choose all that apply.
 Few will be eligible
 10%
 20%
 40%
 All employees are eligible
Please Respond
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
December 8, 2013
December 8, 2013
17

19. What household income is needed to receive subsidized government
insurance?
Single
individual
Income segments
under health reform
% of
FPL**
No government
subsidy
Family
of four
Annual household income
Household income >400% of FPL
not eligible for subsidy through marketplace
400%
$34,470
$70,650
200%
$22,980
$47,100
150%
$17,235
$35,325
138%
Medicaid
eligible*
$94,200
300%
May be eligible
for subsidy
$45,960
$15,856
$32,499
100%
$11,490
$23,550
* Not all States have agreed to expand Medicaid to 138% of FPL
** Based on 2013 FPL
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
18

20. Employer Strategies – 2014 and Beyond
© 2013 Mercer
This is for informational purposes only and is not intended to be used as legal advice.

21. The Good News: employers expect to hold per-employee health
benefit cost growth to 4.8% in 2014
But the increase in per-employee cost does not reflect rising enrollment
Workers' earnings
Annual change in total health benefit cost per employee
Overall inflation
20.0%
18.0%
17.1%
16.0%
14.7%
14.0%
12.0%
12.1%
11.2%
10.0%
8.0%
10.1%
10.1%
8.1%
8.0%
7.3%
6.1%
6.0%
7.5%
6.9%
6.1% 6.1% 6.1% 6.3%
6.1%
5.5%
4.1%
5.0%*
4.8%*
4.0%
2.0%
2.1%
2.5%
0.2%
0.0%
-1.1%
-2.0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
*Projected
Source: Mercer’s National Survey of Employer-Sponsored Health Plans; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual
Inflation (April to April) 1990-2013; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April)
1990-2013.
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.

22. Issues That Are Top of Mind for Employers as They Look Beyond 2014

Continued cost increase due to Affordable Care Act.

Educating employees about their choices and supporting informed
decisions.

Handling employee questions about the public exchange.

Administrative issues (tracking employee hours, look-back period).

Staying on top of all the Affordable Care Act requirements.

Anticipation of the excise tax in 2018.
Source: Mercer Survey, HCR Road to Implementation, June 2013
© 2013 Mercer
This is for informational purposes only and is not intended to be used as legal advice.
21

23. Employers React to Affordable Care Act in 2014 & Make the News…
UPS drops coverage for working
spouses and estimates covering
children to age 26 will cost $60M
Darden and Sears joined a fully insured
private exchange and Darden stopped
offering full time qualifying hours to many
employees
Starbucks announced that it will not be
cutting benefits for spouses/partners or
reducing hours for workers so that they do
not qualify for benefits
Delta Airlines faces an increase of $100M
in medical costs in 2014 between normal
trend and ACA requirements (appears to
be at least 38% of the increase)
Xerox is increasing their working
spouse surcharge to $1,500 annually in
2014
Walmart has been focusing on hiring
temporary employees to manage
healthcare costs under ACA
The Hamilton School District in
Trenton, NJ will be limiting substitute
teachers to 4 days per week to avoid
30 hour per week threshold
Clothing retailer Forever 21 (27,000
employees total) announced
reclassification of non-management
positions from FT to PT effective Sept. 1,
2013 based on a reduction of hours to a
maximum 29.5 hours per week
© 2013 Mercer
This is for informational purposes only, and is not intended to be used as legal advice.
22

24. Is your organization thinking or considering any of the
following to manage costs?
Choose all that apply.
 Status quo – perhaps tweak the current approach and monitor
 Introducing High Deductible Health Plans (HDHPs)
 Adding a 60% plan or “low” option
 Focusing on health management or wellness incentives
 Other changes such as adjusting eligibility for spouses, etc.
Please Respond
© 2013 Mercer
This is for informational purposes only and is not intended to be used as legal advice.
December 8, 2013
December 8, 2013
23

25. Employers’ responses are all over the board!
51%
24%
Make all
employees
eligible for
the FTE plan
27%
Change workforce
strategy so fewer
Add a
employees work
lower-cost
30+ hours/week
plan for
newly
13%
eligible
Where contributions hourly
are “unaffordable”
employees
add a less
expensive plan
© 2013 Mercer
This is for informational purposes only and is not intended to be used as legal advice.
17%
Offer the FTE plan
to some, but not
all, newly eligible
employees
December 8, 2013
31%
Add a lowcost plan
as the
default for
autoenrollment
24

26. Public Vs. Private Exchanges
What is the Difference?
PUBLIC
PRIVATE
Closed
Open
Standalone
dental
Medical,
prescription
Government
sponsored
Insured only
Dental, vision, life,
voluntary, plus more
Employer, broker,
TPA, association
Single or
multiple carrier
Insured or
self-funded
Actives, retirees
Individuals
© 2013 Mercer
This is for informational purposes only and is not intended to be used as legal advice.
December 8, 2013
Group plans
25

27. Private Exchanges
In a Picture
Benefits
admin
Vendors
& carriers
EXCHANGE
Medical
Dental
Ancillary
$
Eligibility &
enrollment
Consolidated
billing
Additional
features
Consumer
experience
$
Employer
contribution
Consumer
enrollment portal
Decision tools
&/or call center
Multiple payment
models
Full product suite with choice of plans
Health
© 2013 Mercer
This is for informational purposes only and is not intended to be used as legal advice.
Life, accident
& disability
Voluntary
26

28. Growing Interest in Private Health Care Exchanges
Percent of employers that
would consider offering a
private exchange
Advantages for Employers
and Employees
56%
Employer advantages
 Cost control.
 Choice for employees.
 Streamlined management
and administration.
18%
Employee advantages
 Cost-efficient, convenient
buying.
 Comprehensive coverage.
2011
2012
 Personalized portfolios.
December 8, 2013
27

29. Closing thoughts
© 2013 Mercer
This is for informational purposes only and is not intended to be used as legal advice.

30. Closing Thoughts…
• Short term – Employers focused on cost management
and ACA compliance
– Expanded eligibility, minimum plan design, and affordable
contributions in 2015.
– Excise tax in 2018.
• Still some unknowns about the ACA
– Auto-enrollment.
– Reporting and disclosure.
– Could there be more delays?
• Longer term – things will change!
– New products/approaches.
– Funding changes.
– Delivery system transformations.
© 2013 Mercer
This is for informational purposes only and is not intended to be used as legal advice.
29

31. Thank You
Jennifer.Calhoun.Mohl@mercer.com
David.Matey@mercer.com
Services provided by Mercer Health & Benefits LLC.
MERCER

32. Mercer is not engaged in the practice of law and this presentation, which
may include commenting on legal issues or regulations, does not
constitute and is not a substitute for legal advice. Accordingly, Mercer
recommends that employers secure the advice of competent legal
counsel with respect to any legal matters related to this report or
otherwise.
The information contained in this document and in any attachments is
not intended by Mercer to be used, and it cannot be used, for the
purpose of avoiding penalties under the Internal Revenue Code or
imposed by any legislative body on the taxpayer or plan sponsor.
MERCER