Impact of ACA on the Health Insurance Industry

Agenda

Impact of ACA on the Health Insurance Industry

Planning for 2015 and Beyond

Business Problems and Priorities

Health Insurance Pre-Affordable Care ActPre-dominantly employer based coverage

Individual segments heavily underwritten

Well established national, regional, and niche competitors

Limited federal oversight outside of Medicaid/Medicare

Broad portfolios with variation in benefit, cost share, and network

Three Dates That Changed Everything

Obama signs Health Care Reform into LawInsurance reform that broadens access and establishes consumer protections

Supreme Court Upholds the Individual MandateLast legal hurdle cleared to implement major reforms in 2014

Launch of heath care exchangesNew market, technologies, channels with government oversight

BUT…

Insurance Reform

Added taxes and fees to cover costs

Intended to protect consumers and ensure access to care• Government controlled rate review and modification

• Community rating for individuals and small groups

• Standardized and mandated set of essential health benefits

• Rules to protect consumers

Individual Mandate

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BUT…

Intended to hold down costs and protect the insurance pool from adverse selection

Penalty widely believed too low to have impact

Young and healthy willing to gamble

First payment is not until 2015 tax season

Introduction of Exchanges

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Intended to expand access to coverage and increase choiceState or federally operated market places to purchase

insurance for individuals and small groups

Insurers must meet minimum qualifications to participate

Coverage must fall into one of four metal levels

Essential health benefits must be covered

Risk adjustment programs to control costs

The Last 5 years - Steady State of Change

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Insurers consumed by Health Care Reform implementation

Transformative decisions being made in an uncertain environment

Existing financial and forecasting models no longer valid

Regulations incomplete and continually changing

Unknown competitive landscape

On-goingpolitical churn

Costs will rise, making coverage unaffordable

Chaotic roll out of exchange technology

Extreme dumping of employer based coverage

Consumer confusion over obligations, options, subsidies

Mass movement of small/mid groups to self funding

Significant downward pressure on provider reimbursement

Increase in adverse selection

Non-industry entrants in insurance space

Early Predictions What Happened?Yes, for Federal Exchange

Jury out, premium suppression mitigating

No, virtually none year 1

No, limited to moderate

Yes, significant and on-going

Jury out

Jury out, but age range suggests its likely

New entrants were minimal, evidence of irrational pricing

Price stability will take several years

Emergence of retail market will be slow, but it will come

Consumer understanding and adoption of individual coverage will gradually evolve

Demand for technology will not slow down

Non-insurance sector competitors will continue to emerge

Post-2014 Expectations

Planning for 2015 and Beyond

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Exchanges are here to stay

Employer based system largely maintained….for now

Individual enrollment grew, but young and healthy didn’t buy

Pricing, product, distribution and competitor environment continue to be unpredictable

Reform implementation continues, indefinitely

Health Insurance Landscape Today

Many Unknowns Impacting 2015 PlanningPreparing for first year of re-certification and retention

Stakeholders evaluating results and next moves• Insurers analyzing year 1 impact to medical

and administrative costs

• Employers assessing impacts of benefit mandates, taxes and penalties as they make decisions for 2015

• Providers determining value of participation vs. reimbursement in new segments

• Consumers struggling to understand their benefits, cost share and networks

State controlled premium limits ability to project revenue and margin• Market pricing masking true costs for

consumers

• Premium disconnected from cost of care

• Impact of risk adjustment programs still unknown

Continued political and legislative churn

Evolving and unpredictable competitor strategies

Cost vs. value of new distribution channels

Challenges for 2015 and beyond

Areas of Focus for Health Insurers

Provider paymentinnovation(Medical home, ACOs)

Care management ofindividual segment

Retail distribution(private exchanges, web enrollment, retail partnerships)

Value based/high performance networks

Consumer experience

Web/Mobile technology (self service; wellness, health management)

Future Impacts for Employers

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Regulations Still in Play

Groups >100 Pay or Play Penalty in 2015

Groups 50-100 Pay or Play Penalty in 2016

Groups 50-100 Community Rated in 2016

Cadillac Tax in 2017

Discrimination Rules?

Small Employers (<25) Lose Tax Credit in 2016

Top Questions for Employers

Continue to Offer Coverage Drop Coverage

Recruitment and Retention

Employees

Employer Plans vs. Individual

Employee Satisfaction

Business Impacts

Employees Making Own Decisions

Lose Tax Benefit for both business and

employees

May pay penalty

No administrative oversight

New TrendsPrivate Exchanges

Large National Multi-Carrier Solutions

Local Broker Branded Solutions

Web Based Exchanges

Insurer Based Exchanges

Private Exchange Questions

Defined Contribution? Employer Contribution for Individual Policies

Fees by Private Exchange Vendors

Product Bundles and Choice

Private Exchange Vendors – Who are they?

Group vs. Individual and the ability to take care of all employees

Understand Upcoming Regulations• How do they impact your business

• Do they change your decisions for healthcare

• What is the impact to your employees

New trends will surface and be an option

Technology will continue to evolve and will impact employer sponsored healthcare

The Horizon for Employers

THANK YOU

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