Employment Resources

The landmark Supreme Court decision upholding the federal Affordable Care Act (ACA) will encourage more employers to replace direct payment of their workers’ health care premiums under a company-sponsored plan with a lump sum that employees would use to buy the coverage of their choice.

A growing number of smaller and medium-sized businesses have been offering this “defined-contribution” option – similar to 401(k) programs financed by employers making a single tax-deferred payment into a retirement savings account – for years. An employee health benefit plan financed by a lump sum payment can save employers as much as 15%-25%, compared with the cost of a conventional benefit program; that’s a significant advantage, given that the average health care premium for covering workers and their families has skyrocketed by 113% during the past 10 years.

What’s more, defined-contribution plans shift the responsibility for selecting a plan from the business to individual employees, which frees them up to tailor a program to the providers and benefits they prefer, rather than being stuck with employer-controlled, one-size-fits-all coverage (employees can also retain their plan if they move to a new job).

The ACA will simplify employees’ health care choices by setting benchmarks for coverage and creating insurance exchanges on the state level that offer a variety of programs.

The act gives businesses a powerful incentive to offer workers the “choose-it-yourself” health care option by funding high-risk coverage pools in individual states for workers with previously existing medical conditions. As of January 1, 2014, all Health insurers will be required to guarantee coverage for every private-sector employee.

To learn how you, and your employees, can take advantage of these new programs, please get in touch with our employee benefits professionals.

Business is tough. The financial markets are struggling. Layoffs and cost cutting remains the order of the day. Can employee benefit offerings be far behind? At many businesses, obviously not. But does this have to hold true at yours?

Not according to many benefit managers. They say the key to defending – and even expanding -benefit programs is the ability to make the business case for them. It’s not enough to argue that these programs improve quality of life or boost morale. Management needs to see the effect on the bottom line. In other words, they want benefit programs held to the same standards as the company’s other business processes – what’s the return on investment (ROI)?

Our employee benefits professionals can help by providing the bottom-line costs for your programs and the costs of any options you might wish to consider. With this information, you can present hard data to go with your success stories. For example, if you help a significant number of employees to quit smoking, so what? If you can put the answer to our “quit smoking” question in terms of its impact on health costs per employee, annual absenteeism rates, or meeting corporate mission statements about safety and retaining quality employees, now you’re talking about ROI: The language that drives the budget.

More and more businesses are offering workers, and their dependents, High Deductible Health Plans (HDHPs) as an alternative to traditional programs with low deductibles. Participation in these programs rose by 7% in 2011, and is on track to hit double-digit growth this year. According to the Employee Benefits Research Institute, HDHPs might become the dominant type of employee health care benefit plan as early as 2014.

It’s easy to see why: In return for paying larger annual deductibles (and out-of-pocket medical expenses up to $3,000), participants can slash their premiums dramatically — and invest these dollars in Health Savings Accounts (HSAs), which they can use to accumulate retirement funds exempt from federal taxes. That’s a powerful incentive in today’s uncertain economy.

HDHPs give your employees “skin in the game.” Because they’ll have to pay their medical bills themselves until they meet their deductible, they tend to evaluate health-care providers and services carefully, shopping to meet their needs, rather than being shoehorned into a standardized cookie-cutter plan. What’s more, participants have a financial motivation to reduce health-care expenditures by taking better care of themselves through weight-loss or stop-smoking programs, gym memberships, dietary changes, etc. Some plans offer preventive-care “wellness benefits,” such as health-risk assessments, free of charge.

However, before you offer your employees an HDHP, bear in mind that:

• These plans aren’t cost effective for people with chronic health problems.
• Some participants try to save money by postponing or avoiding the care they need.
• Workers in lower-income brackets might not earn enough to benefit from the HSA tax breaks.

For a complimentary review of how HDH plans can benefit you and your employees, please get in touch with us.

The complex interaction among evolving employee needs for medical services, skyrocketing health provider costs, and lingering uncertainty over health care reform is transforming traditional health benefits programs from top to bottom.

The lingering recession has had a significant impact on these plans. If you’re like most businesses, you’re focused more closely than ever on the bottom line; curbing costs wherever possible. In this challenging environment, it’s all too easy to lose sight of your most valuable asset — your workers — and the need to provide health care benefits that can play a key role in boosting employee retention rates and generating the growth in productivity your business will need when the economy starts to take off again.

Although economic pressures prevent many workers from leaving their jobs, a nationwide survey sponsored by MetLife found that one in three employees expected to change jobs during the next year. According to the study, workers who were happy with their health benefits program were almost three times more likely to remain in their current positions than were respondents who didn’t have a satisfactory plan.

An effective, comprehensive, cost-effective employee health benefits program should include these elements:

• Freedom of choice. The health care needs of your workers can vary widely, depending on their age, gender, life style, medical history, etc. — which means that old-fashioned cookie-cutter plans just won’t cut it. It makes sense to let employees choose from among the “alphabet soup” of benefit options (such as PPOs, POS’s, HRAs, and ACOs), and work with them to tailor a program that fits their situation.
• Cost control/cost sharing. Budgetary constraints make it essential to curb the cost of benefit plans. For example, take a close look at whether the dependents of your employees are eligible for the program. According to some studies, nearly one in seven dependent beneficiaries don’t meet eligibility criteria — and these freeloaders account for 7 cents of every dollar spent on employee health benefits. Employees will need to put “skin in the game” by taking higher deductibles and paying more out-of-pocket costs.
• Proactive employee participation. Encouraging workers to help keep themselves healthy will benefit them — and boost your bottom line — by increasing productivity and reducing the cost of your benefit program. You can offer participating employees a variety of financial incentives, ranging from gift cards for taking a comprehensive physical to premium reductions in return for such lifestyle changes as losing weight and giving up cigarettes.
• Non-traditional benefits. Give employees the opportunity to supplement their health plan with a “Chinese menu” of voluntary benefits, for which they’ll pick up the tab. These products usually include Life and Long-Term Disability insurance, Dental and Vision plans, identity theft, and legal services.

Choosing the best employee benefits programs for you and your workers can be a daunting task. As your insurance professionals, we stand ready to help. Just give us a call.

If sickness or injury kept an employee off the job for weeks — or months — how would he or she be able to pay the bills? The answer: Group Disability insurance provides an invaluable source of income, averaging about 60% of his or her earnings, for up to two years (depending on the policy).

One recent nationwide study found that only one in three workers benefit from the financial security net that this product offers. Yet, according to another survey, although only 13% of employees knew much about Disability insurance, 90% were prepared to pay at least part of the premium once they understood it.

To help sell your workers on this valuable financial “umbrella,” let them know that:

• Although Workers Compensation helps pay for loss of income from job-related illness or mishaps, it does not cover employees who are unable to work due to sickness or injury incurred outside the workplace — which account for up to 90% of Disability claims.
• Social Security Disability Insurance payments max out at only $1,100 a month.
• One in three sick or injured workers stays off the job for at least 90 days — and these workers will probably remain disabled for at least two years.

We’d be happy to help you develop a comprehensive, cost-effective Group Disability program that can help give your employees financial peace of mind.

Healthcare cost increases are expected in the near future. However, many employers are pursuing measures to improve their employees’ health. Recent research shows that employers are also taking steps to manage the rising costs of medical plans. The recent survey found that health care costs are expected to rise by almost 6%. When compared with the average costs recorded five years ago, current numbers reflect an increase of 40% for employees. For employers, the increase was almost 35%. Since they must cover a larger share of costs than active employees, workers who retire early face even more financial challenges. Retirees who are not yet eligible for Medicare might expect to pay more than $4,200 each year for single-only coverage. For family coverage, the amount jumps to $10,500.

Health Benefit Design Options. Expect to see significant changes in employers’ health benefits during the next few years. About 40% of employers feel that employees should be accountable for their individual health. This is one of the top strategies, and it is constantly growing in popularity. The same percentage of employers plan to review their health coverage offerings. They also plan to make sure they are complying with the PPACA. There are many different choices employers face. With new strategies emerging, they are each more likely to find a specific strategy that works best for their unique workforce demographics and company objectives.

Do not expect to see workplaces discontinue coverage plans just yet. Less than 5% of employers are considering discontinuing coverage for active employees. However, 45% of employers are likely to extend coverage to a portion of the workforce and recommend state exchange options for others. However, it seems that changes are likely to continue beyond the next several years. About 25% of employers do not feel confident that they will be offering Health insurance in 10 years. By that time, they expect that state exchanges will greatly impact health plans. They will also impact retiree offerings.

Employer contributions to retiree medical plans will continue to deteriorate in the future. Most employers will introduce account-based alternatives, which are similar to 401(k)s. These plans will allow employees to put away money for their medical costs after retirement. Currently, 10% of employers have retiree medical programs. However, that number is expected to dwindle to less than five percent in the next few years.

Encouraging Employee Accountability. By encouraging employees to be accountable, employers greatly reduce the cost of health benefits. They also notice their employees are more productive. In addition to encouraging accountability for individual health, employers are encouraging accountability for the amount of services employees consume. Companies that do this have seen a small increase of about 2% in costs over the last four years. Expect to see more encouragement toward evidence-based care, decision-making support tools and specialty treatments in the near future. Employers are quickly discovering the advantages of teaching employees to be conscientious about their own health decisions. Financial rewards are also used to encourage healthy lifestyles.

Growing Benefit Trends. Employers are still struggling with the shaky economy. The cost of inflation only makes their problems worse. However, there are several tactics emerging, which they plan to use for cost control. These tactics include the following:

• Changes in pharmacy plans.
• Spousal and dependent coverage surcharges.
• Vendor management and more transparency.
• Growth in account-based health plans.

The future is certainly full of change. Some changes may bring better benefits for employees and employers. However, the changes are designed for individuals to build a better knowledge of personal health. To learn what options are available and what to expect, discuss concerns with an agent.

Health insurance companies offer group participants a limited amount of time each year to make changes to their group health plan. That period of time – typically one to two months per year, is called “open enrollment.”

Why open enrollment? Open enrollment periods are important for helping to control an insurance industry phenomenon called “adverse selection.” This occurs when people wait until they are actually sick to purchase insurance. When this happens, it drives up premium costs for the entire group and makes group insurance plans unworkable. By limiting eligibility for plan changes to certain times during the year, workers have an incentive to enroll in plans right away. This is an important measure to take – especially for group plans with guaranteed underwriting. This keeps costs down for plan participants and sponsors alike.

Employer Responsibilities. As a plan sponsor, you have certain responsibilities prior to and during your open enrollment periods:

• Take reasonable steps to alert your workers to the open enrollment period well in advance. Examples of reasonable steps include emails, employee newsletters, public bulletin boards, and notices included with paychecks.
• Provide plan information. You should ensure that you distribute specific information about your various plans to your employees well in advance of the open enrollment period.
• Maintain minimum enrollment levels. Most plans require a certain percentage of eligible employees to enroll in the plan – typically 50% to 75%. This is not usually a problem, as long as employers educate their workers about their available health plan options and encourage them to enroll.
• Provide necessary enrollment documents. Your insurance carrier can help you with this effort by providing you with the number of enrollment packets you anticipate you might need.
• Safeguard Personally Identifiable Information. Plan sponsors might occasionally have access to sensitive information about workers’ medical information. It is a violation of federal law to compromise this information in any way.

Employee Responsibilities. Your employees also have responsibilities:

• Educate themselves. Your employees should take the time to learn about the various options in the plan, including co-pays, deductibles and exclusions.
• Take advantage of initial or open enrollment eligibility periods.
• Enroll in COBRA, if they are eligible and require continuing coverage after leaving your work force.
• Enroll family members, either during open enrollment period or during their initial eligibility period as new hires. If they fail to enroll during one of these periods, they cannot go back and add family members to the plan, but must wait until the next open enrollment period.

Our responsibilities. Our customer relations staff and agents stand ready to help you meet your responsibilities in preparing for your open enrollment period. Specifically, we can help you with enrollment forms, brochures and fact sheets, and answers to your plan-related questions. For more information, please don’t hesitate to contact our office.

The Corporate Executive Board, an advisory and research company, and HighRoads, a compliance and health care costs services provider, assembled 2011 data from almost 11,000 medical plan designs and the medical plan rates of more than 30 million Americans. The data showed that an average of $187 dollars per year in out-of-pocket expenses was saved when an employee used a high-deductible Consumer-Driven Health Plan, or CDHP. The savings for families averaged $204.

However, when compared with Health Maintenance Organization (HMO) plans and traditional Preferred Provider Organization (PPO) plans, CDHP premium and out-of-pocket savings might be too little, as well as the deductible being too high, to spur employees to make the change. Even with substantial communications related to high-deductible CDHPs, PPOs are still the most widely offered and popular plans, representing 39% of employer plans. HMOs represented 27% of U.S. employer plans and CDHPs linked to Health Savings Accounts (HSAs) represented 17%. Other data included:

• Traditional, non-high-deductible plan premiums averaged $132.11, exclusive provider organization (EPO) plans averaged almost $112, HMO premiums averaged almost $133, and PPO premiums averaged almost $150 (employee-only/per month).
• At an average premium of almost $63 (employee-only/per month), CDHPs were significantly lower than other plans.
• When compared to PPOs, CDHP plans were accompanied by lower yearly out-of-pocket costs. For CDHPs, the average yearly out-of-pocket cost was $2,128 for individuals and $5,656 for families. For PPOs, the average yearly out-of-pocket cost was $2,315 for individuals and $5,860 for families.
• The average in-network co-pays with non-CDHP plans were $103 per emergency room visit, $31 per specialist visit, and $19 per primary care provider visit.

By effectively educating employees about potential cost savings from CDHPs, employers can offer employees more control and flexibility related to health care decisions and help them decrease their out-of-pocket yearly expenses.

Implementation Tips For Shifting to Full-Replacement CDHP. Some businesses are offering one or more CDHPs since just encouraging employee enrollment might not be sufficient to create the enrollment numbers necessary for significant cost reduction. Towers Watson/National Business Group on Health found that 8% of employers are currently offering full-replacement CDHPs to some portion of their workforce.

Most experts recommend employers consider several factors before making such a commitment. For example, employers should consider their low-income workers. Do they have families and will they need an employer contribution to a HRA or HSA to ensure they’re protected from exorbitant out-of-pocket costs? Employers should also assess and weigh the challenges that will come from full-replacement CDHP against the costs of crafting a plan to drive voluntary participation rates. Should a full-replacement CDHP be the best option, here are a few suggestions:

• Use focus groups to test full-replacement CDHP. Listen to the employees. Find out what they might need to utilize the plan. Such feedback can be helpful as communications are drafted.
• Don’t forget the big picture. Employers need to clearly and effectively explain how the change is connected to the business’s overall benefits strategy. For example, is there a wellness factor that could be interlinked to the full-replacement CDHP? Employees also need to see how the change plays into their personal big picture, such as from being shown the strong connection between health care decisions and retirement decisions and the benefit of health care expense saving with a tax-advantaged HSA.
• Address the change head-on and keep stakeholders involved in the process. If rumors get started before an announcement is made to employees, it can create confusion and be detrimental to employee support. A news release, whether it be from a media relations firm or internally through HR, should be sent to explain the what and why of the change. Be sure to keep managers, supervisors, and if applicable, union officials in the loop.
• Make any choice among CDHPs meaningful. Also, be sure that the options are differentiated thoroughly so that employees can clearly determine which option is best for their needs and be confident in their final decision.
• Use a combination of print and news media to reach all the workforce generations. Keep in mind that Twitter, Facebook, blogs, and other online portals are freshly-streamed, inexpensive media portals to engage employees.
• Communicate early and frequently, and don’t forget to actually listen and respond. Don’t be surprised by an array of employee reactions. Some employees might be open to CDHP, while others might be fearful or angry. Anticipate all the reactions. Give employees a portal, such as a call center line, to vent, but also give them sufficient information and time to embrace the change eventually. Communication should begin at least three months before annual enrollment and include CDHP tip sheets and user guides.
• Relating is key. Young, single workers aren’t going to plan the same way a middle-age parent or older individual does. Testimonials within communications can help employers reach their multi-demographic workforce.
• Whether using print or other media to communicate employee benefits, ensure it’s done year-round to keep the stream of information fresh and up-to-date.

If you are a small employer and you sponsor a health plan for your employees, you might be eligible for a lucrative tax credit for tax years 2011, 2012 and 2013. As part of the Patient Protection and Affordable Care Act, Congress authorized this tax credit to help small businesses offset the costs of managing a health care plan for their employees.

How It Works

The IRS will refund up to 35% of premiums you pay toward your employer group Health insurance plan, in the form of a credit against your business income taxes. If your organization is tax-exempt, you may qualify for a credit of up to 25%.

To qualify for the credit, you must meet the following criteria:

• You must have fewer than 25 full-time equivalents.
• Your average worker must earn less than $50,000 per year from his or her employment with you.
• You must pay at least half the premium to cover your employees, although not your employees’ dependents.

If your business has fewer than 10 employees, and you pay them annual wages of $25,000 or less, you may be able to qualify for the full credit. The credit phases out as you add more employees, and pay them more, until it phases out completely at the 25 worker and $50,000 mark.

The IRS does not count leased employees, nor owners of sole proprietorships, partners, or shareholders with more than a 2% ownership interest in an S-corporation or a 5% interest in a C-corporation. The IRS also typically does not count family members against you for the purpose of determining your credit.

Limitations on Annual Premiums

The IRS has placed limits on the amount of annual premium you can apply towards the credit. However, the precise limits vary depending upon your state. For information specific to your state, or for businesses with operations in multiple states, please don’t hesitate to give us a call for a free consultation.

How to Claim the Credit

To claim the credit, fill out IRS Form 8941 – Credit for Small Employer Health Insurance Premiums, and submit it with your tax return for the year. Incidentally, the credit has been in effect since tax year 2010. If you would have qualified and simply weren’t aware of it then, or missed it, you may be able to claim the credit by filing an amended tax return for years 2010 and 2011. Be sure to speak to your a qualified tax advisor.

Since the financial crisis of 2008, America’s economy has continued to struggle. Unemployment rates are still high, and pay rates have been cut. In addition, retirement and health plans seem to have less generous offerings. Unfortunately, they are not as secure or predictable as they once were. Many employees are worried about their long-term retirement options. They are waiting to see if further reductions will be made in their benefits, which would result in higher upfront expenses.

Although the economic downturn brought mostly negative changes, one positive change that took place was the sharper focus on health spending and retirement security. With higher health costs and financial losses, more workers value security and want to pay for guaranteed benefits. A 2011 survey was performed to evaluate workers’ attitudes toward their employers’ benefits, their individual household finances and their retirement issues. This extensive survey also examined the impact of health and retirement benefits on retaining and recruiting employees.

Of all the findings in this survey, one that should be especially important to employers is the percentage of employees who said they were willing to pay more for good benefits and security. The survey showed that more than half of the respondents said they would be willing to trade some form of pay for better benefits. Most of the respondents in this percentage were older employees or younger males. Healthy workers and high earners also comprised a notable portion of that number. It is likely that the concerned older workers are still feeling the negative effects of their home values and individual retirement account balances deteriorating.

In comparison with data from prior years, the percentage of employees willing to pay more for good benefits is a substantial change. In 2009, only 46% were willing to pay more. As people gain experience with financial market volatility, their worries about the economy’s future continue growing. This prompts the rise in interest for solid benefits. Employees have learned from the financial crisis, and they know that future benefit cutbacks are possible.

The number of employees who would be willing sacrifice more take-home pay for solid benefits is expected to rise. Many are willing to sacrifice bonuses and other incentives to enjoy more predictable health costs and better retirement benefits. A significant amount of workers are also willing to give up paid time off for these positive changes. These issues are all important considerations for employers. Offering good benefits is a great way to attract and retain quality employees. To learn more about benefit changes, discuss the options with an agent.