This document summarizes considerations for small employers related to upcoming health care reform provisions. It discusses the health care reform timeline, new taxes and fees, changes to the definition of small group, where small groups can purchase coverage through health insurance exchanges, the small business tax credit, and other plan design changes. The document also provides overviews of upcoming requirements regarding women's preventive services, the summary of benefits and coverage, and taxes and fees associated with the Affordable Care Act.

1. What’s Next for Small Employers?
A Health Care Reform Webinar
September 20, 2012
This material is for general information and educational purposes only. The information is based on our current understanding of the national health reform provisions referenced. However, interpretations of applicable statutes and
regulations vary. The federal government continues to issue guidance on how the provisions of national health reform should be interpreted and applied. While some of the information deals with federal law, it does not constitute
legal or compliance advice. Applicability and interpretation of the law depends on the specific facts and circumstances of each individual’s situation. If you have specific questions about application of the law to your situation, you are
encouraged to consult an attorney for advice. As required by IRS Circular 230, unless expressly stated otherwise, if this message contains any tax information concerning one or more Federal tax issues, it is not a formal legal
opinion and cannot be used by any person to avoid Federal tax penalties, and cannot be quoted or referenced to promote or market to another party any transaction or matter addressed in this communication
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 1

2. Small employer considerations
• Health care reform timeline • Group to individual
• New taxes and fees transition
• Definition of “small group” • Employer penalties*
• Where to SHOP • Individual mandate
• Small business tax credit • Advanced premium tax
• Plan year, benefit year, credits
renewal date • Cost-sharing subsidies
• Rating factor changes
• Plan design changes
*The employer excise tax or penalty does not apply to certain groups who
meet the government’s definition of small group.
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 2

3. 2012
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 3

4. Women’s Preventive Services
– Services for women must be covered with no cost sharing
beginning on plan years on or after August 1, 2012; including:
 Screening for gestational diabetes
 Human papillomavirus, or HPV, testing
 Screening and counseling for interpersonal and domestic violence
 Contraceptive counseling and methods
 Breastfeeding supplies
– Those employers that meet the tax code's narrow definition of
religious employer will be allowed an exemption from the
contraceptive mandate
– Several documents related to drug coverage and religious status
must be maintained on an annual basis to ensure benefits are
applied appropriately for each group type
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 4

5. Women’s Preventive Services
The following employer groups may require special handling
and important documentation:
• Grandfathered groups
• Groups with no prescription drug coverage
• Prescription drug coverage with carve-out arrangement
• Religious groups
• Religious-based employers (temporary safe harbor)
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 5

6. Summary of Benefits and Coverage (SBC) Required
Capabilities
• Effective Sept 23, 2012 group health plans and health insurance issuers
offering group or individual coverage are required to provide an SBC, coverage
examples and a uniform glossary of health insurance terms to enrolled and
prospective members
• Employers offering fully insured coverage are jointly responsible for distribution
• The SBC includes:
– Summary of Benefits and Coverage
– Coverage Examples
– Uniform Glossary
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 6

7. Summary of Benefits and Coverage (SBC) Required
Capabilities
Upon request Application Renewal SBC Changes Special Material
(Automatic)* Between Enrollees Modification***
Application
and
Enrollment**
Issuer to Within 7 7 business days of 30 days before Before 1st day NA 60 calendar
Group business days receipt of plan year of coverage days prior to the
Health of request application (If 30 days is not effective date of
Plan given, 7 days after change
intent to renew)
For each triggering event:
Issuer/ Same Include with written Same Same 90 days Same
Group to app materials or if from
Participant none then1st day enrollment
eligible to enroll
Issuer to Same 7 business days of Same Same NA Same
Individual receipt of
Customer application
*Written Renewals require SBC the date that the application materials are delivered.
**SBC Distribution only required if changes happen between application and enrollment.
***Material modifications denote mid-plan year changes and require either an SBC or a notification of the benefits change.
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 7

8. 2013
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 8

9. Summary of NHR taxes and fees
Initial Focus
Line of sight:
– Medical device tax: Effective for sales made after Dec. 31, 2012, this tax is assessed on the manufacturer, producer or importer of any taxable
medical device. The tax is a 2.3 percent of the value of the sold item.
– Pharmaceutical tax: In 2011, manufacturers of brand-name pharmaceutical drugs were taxed based on the total amount of their drug sales
compared to overall national drug sales.
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 9

10. Timing of ACA taxes and fees
2012 2013 2014 2015 2016 2017 2018 2019
Comparative Effectiveness Research Fee
Market Share Tax
Exchange User Fee
Reinsurance Fee Excise Tax
Initial Payment Dates
• Comparative Effectiveness – July 31, 2013
• Reinsurance – January 15, 2014
• Market Share - September 30, 2014
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 10

11. 2014
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 11

12. Employers have three key decisions:
Employer offers coverage
The employer-sponsored
coverage must have at least a 60
percent actuarial value and
provide essential health benefits
The employee share of premium
cost cannot exceed 9.5 percent of
the employee’s household income
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 12

13. Definition of Small Group
• For many health insurance provisions, the federal small group
definition effective Jan 1, 2014 will be 1- 50 employees.
• This definition will include full-time, part-time and seasonal
employees unlike prior years
• It is important to note variations in the government’s definition of small
group by provision.
• Employer penalties in the form of an excise tax will not be imposed on
employers with fewer than 50 employees who decide not to offer
coverage
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 13

14. Where to “SHOP”
• Small Business Health Options Program (SHOP)
• Purchasing coverage on the Exchange is required to receive the
small business tax credit in 2014
• Open enrollment begins on Oct 1, 2013 for coverage effective on Jan
1, 2014. Rolling enrollment is available through the year to allow an
open enrollment period that coincides with the group’s plan year.
• Medicare Advantage and Medicare complementary plans will not be
available on the Exchange.
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 14

15. The Exchange is a new way to shop
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 15

16. A closer look at the Exchange
• Exchange
• Competitive List of Plans
• Provider Directory
• Individuals
• Ability to compare and select plans
• Can receive Advance Premium Tax Credit
• Can receive subsidies
• Cost Sharing
• 90 day Grace Period
• Individual Enrollment
• Small Group (SHOP)
• No premium/cost share subsidies
• Ability to compare and select plans
• Group Enrollment
• Group Member Enrollment
• Billing Aggregation
— Consolidates into one payment
• Small Business Tax Credit (2 years only)
— Business with approximately 25 or less
FTEs/average wage of 50K
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 16

17. How will the Exchange work?
Insurers cannot medically
1
Insurers must offer Essential
5 underwrite or apply pre-
Benefits
existing condition clauses
Products should conform to Price parity required if same
2 metal tiers (Bronze, Silver, 6 product sold on and off
Gold, Platinum) exchange
Insurers must offer at least
Minimum network adequacy
3 one Silver and one Gold 7 requirements
product
Restricted rating factors to Approval and qualification
4 age, tobacco use, 8 process for plans and
geography and family status prices
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 17

18. What are the metal tiers?
Actuarial value:
Example: a plan with an actuarial value of 70% means that for a standard population, the plan will
pay 70% of their expense for essential health benefits, while the enrollees will pay 30% through
some combination of deductibles, copays, and coinsurance.
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 18

19. Group to Individual Transition
• After careful consideration some groups may determine that they will
no longer offer employer-sponsored coverage to employees
• The Blues have a comprehensive process to assist in transitioning
employees to a BCBSM individual plan. This process is available to
groups, agents and individuals to support them through this transition.
• Scenario-based decision making is recommended. You may seek:
– Tax advisor
– Consultant
– Agent
• Timing is critical because of downstream impacts to your business
model and your employees and their families
• Communication should begin soon
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 19

20. Health care reform will shift definitions and
decision timing
• Plan year vs. renewal year – reform provisions are most often
effective on plan year while business decisions and rate changes
occur at renewal
• Complex and flexible plan designs vs. simplified and standard plan
designs
– All plans must offer essential health benefits
– Actuarial value requirements limit flexibility to “tweak” cost sharing
• Some rating categories may be eliminated based on the new
definition of “small group” in favor of community or experience rating
depending on group size.
• Some migration of small group membership to the individual market
is expected in 2014-2017
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 20

21. Principles of BCBSM’s 2014 small group
product strategy
BCBSM will provide an array of affordable, easy to understand
traditional products and new well-priced innovative options
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 21

22. Better alignment in small group portfolios
New BCBSM SG products New BCN SG products
New Platinum Products New Platinum Products
Community BCN 5
Blue
New Gold Products
New Gold Products New Gold Products
New Gold Products
Price
BCN 10
Simply Blue
& New Silver Products New Silver Products
HSA/HRA
High
Deductibles
New Bronze Products New Bronze Products
& Other
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 22

23. Premium tax credits and cost-sharing
subsidies are available, but there are rules
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 23

24. What is the premium tax credit?
Premium tax credit = Silver plan premium – maximum % of income a consumer must pay
Federal Poverty Level Percentage of income
100-150%* 2.0 - 4.0%
150-200% 4.0 - 6.3%
200-250% 6.3 - 8.05%
250-300% 8.05 - 9.5%
300-400% 9.5%
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 24

25. What employees would qualify for
financial assistance?
Employees qualify if they meet the
However, they will not qualify if:
following criteria:
 Have income 100 to 400 % FPL Employer offers a plan of at least
▪ Single individual income: $11,170 - $44,680 bronze level equivalent (60% actuarial
▪ Family of 4 income: $23,050- $92,200 value), AND
The employee’s contribution to
Purchase coverage through the premium would
Exchange, and not exceed 9.5% of household income,
OR
Other coverage (not including
U.S. citizen or legal immigrant individual market) is available (such as
through Medicaid or Medicare)
FPL: Federal Poverty Level; Medicaid eligibility is generally extended to 133 percent FPL calculated with
a 5 percent income disregard. Thus, Medicaid eligibility is effectively up to 138 percent FPL
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 25

26. How is the penalty for the individual
mandate calculated?
Legal residents who don’t purchase minimum essential coverage
may have to pay a tax. This tax is the greater of two calculations :
$695 per person per year 2.5% of household
up to a maximum of OR income (the $2,085 max
$2,085 per family does not apply)
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 26

27. APPENDIX
• Background on Exchanges
• Overview of Exchanges
• Application of the Excise Tax or “Employer Penalty”
• Eligibility Chart for Individual Premium Tax Credits and Cost-sharing
subsidies
• Illustrative State Implementation Timeline for the Exchanges
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 27

28. Exchanges
Background
• The National Healthcare Reform legislation provides funding for the states to establish Health Benefit
Exchanges that “facilitates the purchase of qualified plans” (Sec. 1311). The scope of the Health
Benefit Exchanges include, combined or separately, an individual Exchange and a SHOP (Small
Business Health Options Program) Exchange.
• The State of Michigan received a planning grant and a “level 1” grant from HHS for Exchange
development, but the state legislature did not authorize the use of the level 1 grant.
• The state has announced that it will not have a state-based Exchange in 2014. Rather, it is preparing
for a federal exchange or a state-federal partnership. In either model, we expect that the state will
manage QHP (product) certification for an exchange that operates on the federal technology solution.
The state could elect to stand up a state-based Exchange in 2015 or a subsequent year.
What the Blues are doing:
• BCBSM is working toward the assumption that the State of Michigan will participate in 2014 on the
State/Federal Partnership model.
• BCBSM will transition to the State exchange once it is established
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 28

29. Overview of the Exchange
• What is an “Exchange”?
• An Exchange is a competitive marketplace for individuals and small employers to directly
compare available private health insurance options on the basis of price, quality, and other
factors.
• Purpose and Function of an Exchange
• Offers consumers a choice of health plans and focuses competition on price.
• Provides information to consumers.
• Creates an administrative mechanism for enrollment.
• Moves towards portability of coverage.
o “Coverage through an exchange can be de-linked from employment, helping make
health insurance more portable for people moving from job to job”
• Reforms the insurance market.
o “Health reform proposals require insures to accept all applications without
consideration of the applicants health and further prohibits or significantly limits
premium variation related to health status”
• http://www.kff.org/healthreform/upload/7908.pdf
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 29

30. How is the excise tax calculated?
• Excise tax applies to “applicable large employers.” An applicable large employer is an employer with
an average of 50 or more full-time equivalent employees in the preceding calendar year
• The excise tax that must be paid depends on whether the employer offers coverage and whether any
employees receive subsidies on the individual market exchange
• While the definition of applicable large employer is determined on an annual basis, the excise tax
penalty is assessed on a monthly basis and there are multiple scenarios to calculate the excise tax:
1
Employers that do not offer coverage, and have at least one full-time employee
that receives a premium tax credit on the exchange:
Excise tax = $2,000 X (# of full-time employees – 30 employees)
2
Employers that offer coverage and have at least one full-time employee that
receives a premium tax credit on the exchange. The excise tax is the lesser of:
$3,000 for each full-time employee receiving a tax credit
OR
$2,000 for each full-time employee – 30 employees
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 30

31. Individuals who purchase on the Exchange may be eligible for
subsidies
▪ Individual market participants:100% and 400% of federal poverty level
Who is (FPL)
eligible for a ▪ Single Individual income: $11,170 - $44,680
subsidy?
▪ Family of 4 income: $23,050- $92,200
▪ Not if group coverage is available
Subsidy = Silver plan premium – Maximum payable
Premium Limit on Premium: Applies to:
Subsidy
“Maximum Premium Payable” (% Sliding scale: 100 - 400% FPL
of income): 2% - 9.5%
Cost Sharing Change: Applies to:
Cost Sharing
Subsidy ▪ Out of Pocket Limit ▪ Sliding Scale: 100-400% FPL
Reduction: 1/3 – 2/3
▪ Sliding Scale: 100-250% FPL
▪ Actuarial Value
Improvement: 3% - 24%
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 31

32. ILLUSTRATIVE State Exchange Implementation Timeline
Oct 2011 Jan 2012 Apr 2012 Jul 2012 Oct 2012 Jan 2013 Apr 2013 Jul 2013 Oct 2013
t s eT m t s yS
Early-Mid 2012 – Final Regulations
e
) 3102/ 40 – 2102/ 01(
06/12 Most Legislative
Sessions End
State Exchange Work Integration with Other Parties
3102/ 21
– 3102/ 01
01/12 Business 04/12 Design 10/12 Payor 04/13 All
A t ne mp rI nE ne p O
Requirements Complete Product Load 03/13 Navigator Systems Go
12/11 Operational
Complete Complete Training Complete
Leads in place
ll om
3102/ 80 3102/ 90
3102/ 90 3102/ 01
t ne m o ev e D
Q
) 2102/ 01 – 2102/ 40(
• Web Portal
pl
• Work with selected Vendor(s) • All QHP Shopping • Hub Eligibility
• Call Centers Test And Enrollment
• QHP Management testing
• Employer Management
• Navigator Management
l a not ar ep O
eg na hcx E et at S
• Outreach & Education
g nt s eT ss en daeR
) 3102/ 80 – 3102/ 40 (
• Notice & Appeals
i
i
• Enrollment (Single Streamline Application)
• Reporting
• Financial Management
i
• Federal Program Eligibility/ Premium Subsidies
• State Program Eligibility Rules
ng s e D eg na hcx E
) 2102/ 40 – W N O(
• Shopping
• QHP Product Comparison
Based on Proposed Federal Regulations
• QHP Cost Calculator Legend
Critical State Milestones
• SHOP Functionality
i
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 32

33. Where does my
Insurance Agent fit in?
Knowledgeable on plan options
AND
Federal and State Legislation that could impact your business
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 33

34. Where does my
Insurance Agent fit in?
 Employer Requirements under PPACA
 Exchanges and Employer Sponsored Plans
 Up-to-date guidance on recent regulations
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 34

35. To find a knowledgeable insurance agent in
your area, go to:
http://www.nahu.org/consumer/findagent.cfm
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 35

36. Further Discussion and Questions
Please go on to B4BConnect.com immediately
following the webinar.
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 36

37. Updates
To receive invitations to future updates and educational
opportunities please register at
MyChamberAdvantage.com
Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. 37