Health Care Reform – Timeline ImplementationImpact to Baker Hughes (Disclaimer: The costs represented below are through 2011)

© 2010 Baker Hughes Incorporated. All Rights Reserved. 1

Year Health Care Reform Provision Impact to Baker Hughes

2010 Accounting recognition of change in taxability of RDS payments

Reinsurance for retiree medical coverage $250 rebate for seniors who hit Medicare Part D

coverage gap Immediate coverage and consumer protection

requirements for non-calendar year plans starting 6 months after effective date

No financial impact to Baker Hughes (BHI)

2011 Immediate coverage reforms (calendar year plans) Extended dependent coverage No lifetime and restricted annual limits No preexisting condition exclusions for

individuals 18 and younger W-2 reporting of aggregate value of employees’

health coverage HSA withdrawal penalty increased No reimbursement of OTC medicines from account-

based health plans CLASS* Act long-term care benefit enrollment Begin phasing out Medicare Part D donut hole

Increased costs of roughly $776,000

Additional administration associated with W-2 reporting

2012 Presidential election No financial impact

2013 Deduction for employer Part D retiree drug subsidy Medicare payroll tax increased for high-wage employees and new tax on unearned income

Cap on salary-reduction contributions to health FSAs

$1.6M Part D retiree drug subsidy eliminated$12,400 cost increase from additional FICA taxes resulting from FSA cap

© 2010 Baker Hughes Incorporated. All Rights Reserved. 2

Year Health Care Reform Provision Impact to Baker Hughes

2014 Employer mandates: play-or-pay, automatic enrollment, free-choice vouchers

Individual health coverage mandate Health Benefit Exchanges operational Premium and cost-sharing subsidies for low- and

middle-income individuals Medicaid eligibility expanded Additional consumer protections and market reforms,

such as guaranteed issue, premium rating restrictions, prohibition on excessive waiting periods, prohibition on annual dollar limits, etc.

BHI health care costs in 2014 are projected to be $256 million before accounting for health care reform

Should BHI continue to offer health coverage:

Additional mandates will increase costs by $2.4 million

These costs could potentially be offset by as much as $52 million through reductions in plan design

Should BHI opt to exit employer sponsored health care coverage:

BHI would owe a federal penalty of $50 million

An additional cost of $316 million would be necessary to make employees whole, but is not required

2016 Cross-border sales of health insurance Presidential election

No financial impact

2018 - 2024 Excise tax on high-cost group health plans BHI is projected to exceed the cost threshold in 2018, resulting in an excise tax of $1.9 million. Aggregate 2018-2024 excise tax total $37 million

Total Total costs assumes no change to Health Care Reform provisions as outlined.

Blue = Health Care Reform costs factored

$41.78M

Health Care Reform – Timeline ImplementationImpact to Baker Hughes (Disclaimer: The costs represented below are through 2011)

U.S. Health Care Reform: High Level Timeline

© 2011 Baker Hughes Incorporated. All Rights Reserved. 3

Adult child coverage to age 26, no lifetime dollar limits/’restricted’ annual dollar limits on essential health benefits, no preexisting condition exclusions for children under age 19, etc. (calendar-year plans)

HSA withdrawal penalty increased to 20% No reimbursement of over-the-counter (OTC) medicines from account-based health plans, unless prescribed

W-2 issued using 2012 health plan data Medicare payroll tax increased for high-wage employees and

separate new tax on unearned income $2,500 cap on salary-reduction contributions to health FSAs Change employer tax treatment for Medicare Part D RDS payments HHS approves/conditionally approves state Exchanges

States may open Exchanges to large

employers

2010 2011 2012 2013 2014 2015 2016 2017 2018 - 2024

Sales of health insurance across state borders permitted

W-2 reporting of aggregate value of employees’ health coverage Comparative effectiveness research tax begins HHS required 4-page health plan summary of benefits disclosure Presidential election Supreme Court ruling on individual mandate (likely)

Evolving interpretations, proposed regulations, (interim) final regulations, technical corrections, legislative amendments, judicial decisions, elections, preparation for major changes, unpredictability

Individual health coverage mandate Employer mandates: play-or-pay, automatic enrollment Health Benefit Exchanges operational Premium and cost-sharing subsidies for low- and middle-income

individuals Medicaid eligibility expanded in all states to 133% of FPL Additional group health plan mandates, such as prohibition on

excessive waiting periods, coverage for clinical trials, and limits on annual OOP maximums and annual deductibles

PPACA signed into law (March 23, 2010) Some immediate health plan mandates and insurance market reforms Reinsurance program for early retiree medical coverage Accounting recognition of change in taxability of Medicare D RDS

payments $250 rebate for seniors who hit Medicare Part D coverage gap

40% nondeductible excise tax on high-cost employer-

sponsored health coverage (“Cadillac” plan tax)