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Aon Orientation

February 25, 2014

The Affordable Care ActAn Opportunity for Response

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Agenda

Aon/Aon Hewitt Overview ACA Overview and Heath Care Reform What’s changing and when? What is an Exchange? Aon Hewitt Corporate Exchange overview Q&A

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AON OVERVIEW

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About Aon

Aon Vision: Aon is universally recognized as the premier global professional services firm focused on risk advice and human capital management

Aon plc

Aon Risk Solutions

Aon Benfield Aon Hewitt

Retail Brokerage Captive Management Affinity Programs Select Personal Lines Premium Finance Claims advocacy

& Claims Administration

Risk Assessment & Advisory

Treaty Reinsurance Facultative

Reinsurance Investment Banking Analytics Client Services

Health & Benefits Consulting

Retirement and Actuarial Consulting

Investment Consulting M&A Solutions Talent and Rewards Benefits Administration HR Business Process

Outsourcing Global Benefits

Aon ServiceCorp.

Finance Marketing Human Resources Technology

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Aon plc

Aon plc

The leading global provider of risk management services, insurance and re-insurance brokerage, and human resource solutions

FY12 Revenue $11.5 billion Aon RevenueAon Risk SolutionsAon BenfieldAon Hewitt

Empowering results for clients on two of the most important issuesin today’s global economy; risk and people

65,000 colleagues

120 countries

500 global offices

HR Solutions34%

Greg CasePresident & CEO

Risk Solutions66%

Aon Risk Solutions

Aon Benfield (Reinsurance)

Aon Hewitt

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Aon Overview | History in the Making

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Aon Overview | Serving Many of the World’s Best Organizations

of top Fortune 500 firms

of top P&C insurance firms

of top Technology firms

of top Healthcare firms

of top Consumer firms

of top Financial firms

of top Energy firms

of top Telecom firms

…are Aon Clients

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AON HEWITT OVERVIEW

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The Expansive Reach of Aon Hewitt

30,000

colleagues around the world

330offices in

90 countries

More than

20,000clients globally

Serve

80% of the Fortune 500

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An Established, Industry-Leading Focus on HR Solutions

Most named Top Consultants on Human Resource Executive and Risk and Insurance magazine’s annual list of Top Employee Benefit Consultants for the past five years

Honored with an Outsourcing Excellence Award by the Outsourcing Center in 2012 and 2013

Named one of 20 Institutional Leaders of the Past 20 Years by PLANSPONSOR magazine

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Solutions With Scale, Depth and Breadth

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Retirement HealthTalent

Three Focused Solution Lines

Consulting• Health and Benefits Brokerage

and Consulting

• Absence and Productivity

• Elective Benefits

• Global Benefits

Consulting• Retirement Consulting and

Administration

• Investment Consulting and Delegated Investment Mgmt.

• Executive Benefits

Consulting• Broad-Based Compensation

• Executive Compensation

• Sales Force Effectiveness

• Leadership & Assessment

• Employee Engagement

• HR Effectiveness

Outsourcing• Health and Welfare Administration

• Absence Management

• Dependent Verification

• Advocacy Services

• Reimbursement Account Admin

• Compliance Services

• Active Health Care Exchange

• Retiree Health Care Exchange

Outsourcing• Defined Benefit Administration

• Defined Contribution Administration

• Financial Services

– AH as Advisor

– Self-Directed Brokerage and Personal Financial Center

• Compliance Services

Outsourcing• Talent Acquisition & Recruitment

Outsourcing

• HR BPO

– Global Workforce & Payroll

– Talent Administration Support

• Total Rewards + Online Communications

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Communication, Merger & Acquisition Solutions, Customer Experience

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Macroeconomic Trends

Companies facing huge pension liabilities and need to de-risk

– Move to fixed income– Focus on volatility vs. short

term returns– Settle pension liability

through the insurance markets and lump sums

Pressure on defined contribution systems to do more

– Focus on financial wellness and adequacy

– Fiduciary rigor and governance

– Shift to institutional from retail approaches

The Industry Leadership to Deliver: RetirementNavigate retirement risk while providing new levels of financial security

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Market-leading Capabilities

#1 DB and #2 DC administrator–$2 billion in DC payments monthly; $25 billion in

pension payments for 2.7M retirees monthly; $667 million in lump-sum pension checks monthly

Investment advice for $4.2 trillion in assets globally; delegated investment management for ~$37 billion in assets for >130 clients

Experienced leader in all major de-risking trends and consultant on largest pension de-risking action

Only firm with integrated and comprehensive solutions across actuarial (~$1 trillion in global pension liabilities), plan administration, investments and insurance

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The Industry Leadership to Deliver: TalentCultivate talent to drive organizational and personal performance and growth

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Market-leading Capabilities

12 global HR BPO centers; support in 11 languages

Large scale transaction capability: 15M payroll transactions, assess 8M candidates and hire 59,000 client positions annually

5,000 talent clients with 17M employees in 40 countries

50 unique comp & performance surveys

17M+ responses in our engagement database

Supported ~30% of PE transactions over last 3 years and 25% of corporate M&A deals over $15B in 2011

Macroeconomic Trends

4 out of 10 employees worldwide are not engaged

Focus required on culture and engagement to attract next-gen talent

Emerging economies are growing faster than available leadership talent

Increasing need to build global talent pools

New pay philosophies need to align to long-term results

Growing interest in SaaS

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The Industry Leadership to Deliver: Health

Macroeconomic Trends

Health care costs have risen 52% in past 6 years – similar trend expected to continue

Health Care Reform actions driving major change and new options

Companies searching for global benefit solutions

New strategies needed to improve population health

Redefine health & benefits solutions for greater choice, affordability, and wellness

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Market-leading Capabilities

Largest provider of health & welfare admin– 10k unique health plan designs– Serve more than 9.5 million health and welfare

participants– Direct $8B in health premiums annually

Pioneer in health care exchanges– 100,000 employees and their families in our

corporate exchange– 200,000 retirees in our retiree exchange

Provide Health & Benefits consulting covering the health benefits management spectrum

– 90 locations worldwide– 5,000 large and mid-market clients in both public and

private sectors

Help 108,000 employees return to work annually

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Affordable Care Act

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Health Care $2.5 trillion Food $0.9 trillion National Defense $0.8 trillion Clothing $0.3 trillion Total Pre-tax Corporate Profits $1.3 trillion

Spending by Category (2009)

Sources: CMS, Bureau of Economic Analysis, 2009

Why Are We Talking About This?

Health Care Spending

5.2%

17.6%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2009

(% of Gross Domestic Product)

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About Health Care Reform

On March 23, 2010, the Patient Protection and Affordable Care Act (PPACA) was signed into law. The law puts in place comprehensive health insurance reforms that will roll out over four years and beyond.

On March 30, 2010, the Health Care and Education Reconciliation Act of 2010 (HCERA) was signed into law. This act contains significant modifications to PPACA.

The combined laws are referred to as the “Affordable Care Act” or more commonly as “Health Care Reform”. These two laws together make sweeping changes to existing laws governing employer-sponsored group health plans, individual health coverage, and governmental health programs.

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Health Reform: Keeping it in the Forefront

The Headlines 2012 saw the Supreme Court confirmation

of the Health Care Reform Mandate Congressional repeal remains unlikely Major implications for

– State Governments

– Federal Government

– Employers

– Employees

– Providers

What’s Ahead for Health Reform?

2014 State exchanges open Individual mandate Employer free rider penalty Employer Responsibility to provide Minimum

Essential Coverage Limit of 90 Day Waiting Period for Coverage Wellness incentives move to 30% differential

2018 Excise Tax on High Cost Employer Sponsored Coverage (*health insurance issuers and sponsors of self-funded group health plans will be assessed an excise tax on any benefits provided to employees that exceed a pre-determined threshold. aka – “The Cadillac tax”)

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Health Care Reform Timeline

2010 2011 2012 2013 2014 2018

•Lifetime limits prohibited

•Only restricted annual limits permitted

•Consumer protections>Preexistingcondition exclusionsprohibited for childrenunder 19>Rescission ofCoverage>Other protections

•Coverage for preventive health services

•Extension of dependent coverage up to age 26

•Effective appeals process

•Early Retiree Reimbursement Program

•Expansion of adoption assistance program credit

•Additional reporting to State & Federal governments and Public

•Over-the-counter medication not reimbursable through Flexible Spending Account

•Health Savings Account excise tax increased

•Medicare Part D discounts for certain drugs in the “doughnut hole”

•Medicare Annual Enrollment period changes

•Employer distribution of summary of benefits and coverage to participants

•Employer quality of care report

•Employer reporting of health coverage on W-2

•Comparative effectiveness fee*

•Notice to inform employees of coverage options in exchange

•Limit of Health Care Flexible Spending Account contributions

•Medicare Part D subsidy to employer no longer tax-free

•Tax on high-income individuals

•Comparative effectiveness fee*

•Individual mandate to purchase insurance or pay penalty

•State/Federal insurance exchanges

•Employer to provide minimum health coverage

•Preexisting condition exclusions prohibited

•Annual limits prohibited

•Automatic enrollment (delayed)

•Limit of 90 days on waiting periods for coverage

•Employer reporting of health insurance information to participants & Government

•Increased cap on rewards for wellness programs

•Transition Reinsurance Program

•Excise tax on high-cost coverage

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Business Opportunity & Drivers

Note: Aon Hewitt’s 2013 Health Care Trends survey of more than

800 employers Aon Hewitt’s 2013 Retiree Health Care Trends survey of

more than 500 employers

The Facts: 122 million+ active employees with employer-

sponsored group coverage 94% of employers plan to continue offering

health benefits to active employees Retiree market poised to grow at 4.5 million

per year Around 48 million people qualify for Medicare

today. 26% of those have employer-sponsored coverage

28% of employers plan to move to a corporate exchange model in the future.

66% of employers use or plan to move to an individual market strategy for retiree health care

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Four Paths for Employers

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House Money, House Rules—Rising Cost and Worsening Health Risk

Source: 2010 World Economic Forum

Chronic illness accounts for 60% - 65% of all health care spending

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Changing Health Behavior

Top Challenges Desired Outcomes Top Tactics

Motivating participants to promote behavior change—65%

Increase utilization of wellness and prevention—70%

Offer incentives or disincentives to motivate sustained behavior change—61%

Government compliance and regulations—35%

Increasing participant decision making related to health issues—62%

Promote a culture of health in the workplace—48%

Managing the health of an aging workforce—30%

Lower health risk of population—58%

Move to rewarding improved health results or outcomes—44%

Source: Aon Hewitt 2012 Health Care Survey, available at aon.com/betterhealthresults

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Play on a New Field

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Play on a New Field

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Aon Hewitt Corporate Exchange Survey Results

10%

4%

4%

77%

7%

8%

8%

44%

31%

7%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Other

No Employer Plan, Employees AccessIndividual Market

Joins Corporate Exchange, Provides FixedDollar Subsidy

Provides a Few Options, Employee PaysPercentage

Provides Single Plan; Pays 100%

Current Future (3-5 Years)Source: Aon Hewitt, 2011 (n=562)

44% of companies believe they will adopt a Corporate Exchange form of health benefits delivery over the next 3-5 years

Employer Responsibility for Health Care Coverage

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It Is About Managing Through Reform

The Situation: Employers with modest impact will see costs rise 2%

to 5% in 2014 Employers with low-paid workers, long waiting

periods, 30+ hour employees with no coverage or low value coverage could see costs increase 20% to 60% in 2014

Some employers will continue to make incremental changes to health care programs and will offer more traditional decision-making tools and resources to employees

For other employers, 2014 will mean radically redefining their health care offerings and helping employees optimize their coverage and cost through: Employer plan, Exchanges, Medicaid

These choices will be heavily influenced by federal subsidies and state Medicaid entitlement rules as well as the influx of fully insured lives into state and federal exchanges

Employers need to continue to monitor legislative and regulatory changes

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What is an Exchange?

An exchange is a competitive marketplace that consists of suppliers and buyers

Exchange

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Exchange Benefits to Employers, Enrollees, and CarriersEmployers Trend mitigation through competition, efficiency

and best-in-market contracting Cost predictability Risk transfer Focus on health and productivity

Enrollees Greater choice of plans and carriers Flexibility to tailor benefit/contribution trade-offs Superior customer experience

Carriers Market share opportunity Earnings potential (full premiums vs. administrative fees) Product innovation and control Attractive risk pool

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Corporate/Private Exchange Goals

Create a competitive market in health care benefits at a retail/consumer level

– Will drive efficiency and mitigate trend through competitive forces

Facilitate the movement to a defined contribution model for those employers who are aligned with this philosophy

– Jump off the health care trend curve to a compensation-like rate of increase

– Treat health benefits as an element of total rewards

Expand choice, drive efficiency and simplicity, but allow consumer selections that could not be driven unilaterally at the employer level

– For example, narrow networks, select formularies

Provide an alternative to state exchanges for large employers before 2017, and transition to an individual model when the market is ready

Consolidate purchasing power in the private sector to drive systemic reforms of the health care delivery system

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Aon Hewitt Health Care Exchanges

Now Future Now Now FutureFuture

Private Exchange Public Exchange

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Aon Hewitt Health Care Exchange Initiatives

Individual Exchange

Post-65 RetireesAon Hewitt Navigators

Pre-65 RetireesAon Hewitt Navigators

ActivesAon Hewitt Navigators

Group Exchange

Active + / or Pre-65 RetireesAon Hewitt Corporate Exchange

State/Federal Exchange

Active + / or Pre-65 Retirees

H&B Consulting

Aon Hewitt Health Care Exchange Portfolio

In development

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Navigators – We Make it Easy

EDUCATION

ENROLLMENTCHOICE

ADVOCACY

EMPLOYERS Significant Cost Savings Financial Predictability Turn-key Implementation Proven network, all major

carriers Integrated HRA

RETIREES Free access to personalized

healthcare advisors Medicare expertise 80 Carriers and 3300 products Advocate to navigate issues

Over 240,000 retirees served with over 92% satisfaction

With Aon Hewitt Navigators, employers can realize significant cost savings by seamlessly transitioning retirees to the individual market while still providing

the support they need to navigate the complex Medicare market.

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Corporate Exchange: How It Works

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Value Proposition—Making This Work for All Stakeholders

Employees Greater choice of plans and carriers Superior customer experience Flexibility to tailor benefit/contribution trade-offs

Clients Risk transfer and predictability Trend mitigation through competition, efficiency, and best-in-market contracting Focus on health and productivity

Carriers Market share opportunity Earnings potential Product innovation and control Attractive risk pool

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Corporate Exchange Shopping Experience

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Gain Predictability and Risk Transfer without Cost Increases

Insured Plans

Consumerism

Competition

Choice and Flexibility

Defined ContributionSubsidy

Best-in-MarketEfficiencies

Reduce TrendRemove Volatility

Ensure Employee Sustainability

In every consumer market, competition reduces cost

Regional rating bands allows market-specific insurer strengths to emerge

Consumers will make economic choices if they can reap the full economic benefit

Freedom of movement across insurers will keep costs low and service levels high generating more control and increased satisfaction

Insurers will have accountability for managingcare; price becomes critically important

With competition mitigating trend, plan sponsors can move to a DC approach without long-term cost-shifting to associates

No “Silver Bullet”: Six Key Levers Working in Concert

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Q&A

Aon and ACA: Trivia

1) Who is the CEO of Aon?

2) What does Aon mean?

3) How many people do we administer benefits for?

4) How many colleagues do we have globally?

5) What is an Exchange?

6) Which company did Aon Hewitt contract for the Corporate Exchange for benefits in

2014?