HOW TO SURVIVE AND THRIVE DURING THE ERA OF HEALTH CARE

REFORM

By Jim Wisdom, CFP

James L. Wisdom Insurance Services

August , 2012

OVERVIEW

Health Reform Overview

Where Are You Today?

Where Do you Want To Go?

How Can We Help You Get There?

PATIENT PROTECTION AND AFFORDABLE CARE ACT ( PPACA)-OVERVIEW Tax Credits Employers with 10 or fewer workers Average annual wages of < $25,000 Eligible for credit of up to 35% of premiums costs through 2013 Phases out and disappears if employer has > 25 employees and

average annual income of $50,000 or more

PATIENT PROTECTION AND AFFORDABLE CARE ACT ( PPACA)-OVERVIEW ( CONT’D) 2011- Adult children to 26; No lifetime limits; Restricted

Annual limits; No Pre-Existing Conditions for Children under 19; Preventive Services with no cost sharing required

Employers must satisfy non-discrimination requirements of Section 105(h)- subject to $100/day penalty ( non-compliance)

PPACA- OVERVIEW ( CONT’D)

Form W-2 Reporting

2013- Broaden Medicare HI (+ .9% increase )

Medicare tax on investment income ( +3.8%)

Applies to income levels greater than $200K ( Individuals) and $250K ( Families)

Unearned income = interest, dividends, capital gains, annuities, royalties and rents

PPACA- OVERVIEW ( CONT’D)

2013 ( cont’d)

Tax of 2.3% on Medical Device Manufacturers

Itemized Deductions on Medical Expenses- Expenses must exceed 10% of income ( from 7.5% of income now)

PPACA- OVERVIEW ( CONT’D)

2014- Employer “pay or play” responsibility for 50 FTE’s or more ( includes part-timers)

If employer offers coverage, but has one employee receiving subsidized coverage in exchange: Employer pays lesser of $3,000 X # FTE’s receiving subsidized

coverage in an exchange or $2,000 X # FTE’s

If employer doesn’t offer coverage, employer pays $2,000 X # FTE’s, if at least one FTE obtains subsidized coverage in an exchange

PPACA- OVERVIEW ( CONT’D)

2014 ( cont’d)

Employer Free Choice Vouchers Subsidies available for low income employees

The Employee’s household income can’t exceed 400% of FPL

PPACA- OVERVIEW ( CONT’D)

2014 ( cont’d)

Wellness Incentives Increase from 20% to 30% of plan costs ( Health Care Reform “carrot”) for participation in employer sponsored wellness program

Incentive may increase to 50% of plan costs

PPACA- OVERVIEW ( CONT’D)

2014

Employee Health Coverage Reporting- Employers must report on the following:

If “minimum essential coverage” is offered Waiting period Lowest cost option in each enrollment category Employer share of total allowed costs of benefits Total number and names of FTE’s receiving coverage

PPACA- OVERVIEW ( CONT’D)

2014 ( cont’d)

Insurance market reform ( Exchanges) guaranteed issue; no underwriting, no pre-existing conditions; limits

on rating bands

PPACA- OVERVIEW ( CONT’D)

2018- “Cadillac Tax”

Excise tax on high-cost health plans 40% excise tax Applies to Individual coverage cost > $10,200 Applies to Family coverage cost > $27,500 Costs are aggregated ( i.e. PPO + H.S.A., etc. ) “Cadillac Tax to affect 60% of our clients”- Towers Watson – Benefit

Consultants

HIGH PERFORMING COMPANIES VS. LOW PERFORMING COMPANIES“There is a bigger price difference between High Performing

companies and Low Performing Companies than ever before.”

Towers Watson- 2010 Health Care Survey

KEY CHARACTERISTICS OF HIGH PERFORMING COMPANIESProactive vs. Reactive

Consumer Driven Health Plan Option ( i.e. HSA, HRA)

Company Sponsored Wellness Program

Source: Towers Watson 2010 Health Care Survey

CONSUMER DRIVEN HEALTH PLANS

HRA – Health Reimbursement Arrangement

HSA- Health Savings Account “Health Care IRA” 20% to 30% discount vs. Traditional Plans “Triple Tax Punch”

Tax- Favored at Deposit, Growth and Withdrawal Phase Unused $$ rolls over to the next year- tax-favored Maximum Deposit ( 2012):

Individuals: $3,100 Families: $6,250

WELLNESS PROGRAMS

$2.5 Trillion spent on health care annually

Approx. 50% of all health care costs due to lifestyle “The Big Three”- Diabetes, Obesity, Heart Disease

70% of all health care costs due to: Diabetes Asthma Congestive Heart Failure Coronary Artery Disease Depression

VALUE BASED PLANS: OVERVIEW

What are Value Based Plans?

What makes them unique?

What is the long term outlook for Value Based Plans?

WHAT ARE VALUE BASED PLANS?

Like typical health plans, when a member is injured or sick, Value Based Plans will pay their claims

Unlike typical health plans, Value Based Plans go further by rewarding employees to take action to improve or manage their health.

The difference: Health Insurance vs. Healthy Insurance

POTENTIAL BENEFITS - VALUE BASED HEALTH PLANSProvide financial incentives to employees to complete “Health

Actions” and monitor health and lifestyle

Lower Health Claims Costs, lower health premiums over the short and long-term

Lower, more stable health premiums over the short and long-term

A healthier, more educated workforce

Lower presenteeism

Lower absenteeism

Higher employee morale and productivity

A more profitable employer

POTENTIAL FUTURE BENEFITS – VALUE BASED PLANSValue Based Plans have offered rate increases averaging 1.5%

per year for the last two years ( far below industry norms)

For groups of 51+ employees, some vendors are offering two year rate guarantees

Value Based Plans may be attracting a healthier risk pool

If this happens, Value Based Plans may continue to offer lower annual rate increases

The above phenomenon would adversely affect the annual rate increases with traditional health plans ( HMO, PPO) – adverse risk pool = higher than normal rate increases

WHERE ARE YOU TODAY?Level I I Level III

Multi Plans Yes Yes

Pre-Tax Premiums Yes Yes

Rollover Unused $ No YesPay Claims Pre-Tax Yes YesHC Financial Option No YesPrice/Quality Tools No YesInv. Options ( tax-adv.) No YesHealth Risk Tools Yes YesHealth Risk Prev. Tools No No Wellness Program No No

WHERE ARE YOU TODAY?

Level IV PlanningMulti Plans YesPre-Tax Premiums YesRollover unused $ YesPay Claims Pre-Tax YesHC Financial Option YesPrice/Quality Tools YesInv. Options (tax adv) YesHealth Risk Tools YesH R Prev. Tools YesWellness Program Yes

WHY JAMES L. WISDOM INSURANCE SERVICES24 years of experience in Insurance and

Financial ServicesSpecialize in privately held employer groupsCertified Financial Planner DesignationHealth Care Consulting Comprehensive Fee Based Financial Planning –

Owners and Key ExecsHealth Care Reform SpecialistsProperty & Casualty / Worker’s Comp. Expertise Through Associate Firms

WHY JAMES L. WISDOM INSURANCE SERVICESHow we approach your business:

Each company is unique and different

Fully understand your company, culture, industry and business objectives

Identify your 2-5 year Strategic Business Plan

Help create a 2-5 year Insurance/Risk Management Plan

Consult, counsel and adapt during this time frame

Follow-through ( measuring and reporting)

JAMES L. WISDOM INSURANCE SERVICES- ADD’L SERVICESI. Insurance/Risk Management Planning

II. Retirement Planning

III. Estate Planning

IV. Business Succession Planning

CONTACT INFORMATION

James L. Wisdom Insurance Services

4607 Lakeview Canyon Road- Suite 482

Westlake Village, CA 91361

Work: 805-497-9264

Cell: 818-469-6640

Fax: 805-435-3636

CA License # 0699524

Web Site: www.wisdomhealthplans.com

E-Mail: jim@wisdomhealthplans.com

Health Care Reform Blog: www.jimwisdom.wordpress.com

THANK YOU!