Employment Resources

The recent health care legislation signed into law by President Barack Obama contains a Small Business Health Care Tax Credit that will help small businesses with the cost of providing their employees with health care. The tax credit’s benefits are available immediately for the 2010 tax year.

According to the Congressional Budget Office, small businesses are expected to save an estimated $40 billion by 2019, due to the Small Business Health Care Tax Credit. The tax credit is effective retroactive to January 1st, 2010 and covers up to 35% of a small business’s premiums, with the rate increasing to 50% on January 1st, 2014.

Although non-profit organizations are eligible for the credit, they will receive a lower percentage. Tax exempt organizations will be able to receive up to a 25% tax credit in 2010, which will be raised to 35% in 2014.

The tax credit has broad eligibility, covering 4 million small businesses. Any business that pays at least 50% of employee health care costs, employs the equivalent of 25 or fewer fulltime workers (allowing eligibility for companies with 50 part-time workers), and pays an average employee salary of $50,000 or less (not including owners and their family members) will be eligible for the Small Business Health Care Tax Credit.

The maximum credit of 35% is available for small businesses with 10 or fewer fulltime workers and an average salary of $25,000 or less. For businesses that pay employees between an average of $25,000 and $50,000, the tax credit gradually phases out. The gradual phase out also applies to businesses that employ an equivalent of 10 to 25 full time workers (20 to 50 part time workers).

Businesses are able to claim the credit for a total of six years. They will be eligible to claim the credit for four years, from 2010 to 2013, and then any two years after the 2013 date.

To keep businesses from abusing the system by picking a high-cost plan, the Small Business Health Care Tax Credit will only be eligible for the average health insurance cost of the state where the business is located. This information will be provided by the IRS at a later date.

For more information, refer to the IRS website.

Employers with 20 or more employees and offering group health coverage must offer a continuation of that coverage under COBRA, to covered individuals who lose that coverage upon the occurrence of a qualifying event. Most employers are well aware of the importance of offering COBRA when required to do so, and of the penalties for not complying with the law. However, it is also important to understand the circumstances under which COBRA need not be offered, because offering COBRA when it is not required can result in unnecessary expense. When an individual is covered under an employer’s group health care plan, and then loses that coverage due to the occurrence of a qualifying event specified in the COBRA statute, COBRA coverage must be offered. Qualifying events include:

For covered employees

• Voluntary or involuntary termination of employment, for reasons other than gross misconduct.
• Reduction in the number of hours of employment.

For spouses covered under the group health plan-

• Divorce or legal separation.
• Death of the covered employee.
• The covered employee becoming entitled to Medicare.
• Plus, the voluntary or involuntary termination of the covered employee’s employment, for reasons other than gross misconduct; or a reduction in the number of hours of the covered employee’s employment.

For dependent children covered under the group health plan-

• Loss of dependent child status under the rules of the group health plan.
• Divorce or legal separation of the covered employee.
• Plus, the voluntary or involuntary termination of the covered employee’s employment, for reasons other than gross misconduct; a reduction in the number of hours of the covered employee’s employment; the covered employee becoming entitled to Medicare; and the death of the covered employee.

Review this list of qualifying events and the other conditions for COBRA eligibility (for example, that coverage loss is a result of the qualifying event, and not from some other reason). It’s clear to see that there are numerous situations under which COBRA coverage need not be offered. For example:

• An employee tenders his or her resignation from employment. Because no termination of employment has yet occurred, an offer of COBRA would be premature.
• The employer changes health plans or insurance carriers, and the new coverage is less generous than before. Though the plan coverage may not be as good, coverage has not been lost, which is one of the requirements for COBRA eligibility.
• The employee voluntarily drops coverage, but does not terminate employment or reduce hours. Later, the employee terminates employment. Though the termination of employment is a qualifying event under the COBRA statute, it did not lead to the loss of coverage. Therefore, this is not a situation for which an offer of COBRA coverage need be made.
• The employee and spouse split up, but do not divorce or legally separate. A divorce or legal separation that results in a loss of coverage under the group health plan is a COBRA qualifying event. If spouses only physically separate, it is not a COBRA qualifying event.
• A COBRA-triggering event occurs that requires notification to the administrator by a covered individual (e.g., divorce/legal separation, loss of child dependent status), and no notification is given within 60 days of the qualifying event. The employer is not required to extend an offer of COBRA coverage.

COBRA is a complex law, and compliance is critical. In the quest to be compliant, it is important not to “over offer”� COBRA, because the potential cost is too high. Review COBRA’s requirements periodically with one of our benefits professionals, to ensure your company is complying, while not offering COBRA in unnecessary situations.

When it’s time to welcome an employee back into the office after an unexpected disabling accident, illness, or disease it can be uncomfortable for everyone without the benefit of knowing these basic tips. Preparing your staff and making a few accommodating adjustments to the work environment will go a long way toward maintaining a professional, productive, and positive work environment for everyone.

Initial Steps – The feelings of isolation are high in someone who has been a victim of a disabling experience. You as an employer can aid in the healing process by keeping your office staff connected.

1. Stay in touch with your employee. Encourage co-workers to keep in contact with their fellow employee by designating a member of your staff to coordinate a volunteer team of meal delivery, rides to medical appointments, or whatever support need might arise. E-mails and phone calls should also be encouraged.
2. As their employer, educate yourself on the insurance coverage your business offers. Consult with the representative of your insurance company and with the EAPs (Employee Assistants Programs) to understand the benefits that are currently available. Work as an advocate to ensure your disabled employee is getting their full benefits for as long as they can, especially the Health and Disability insurance. Create a packet of information that addresses expected questions and needs the employee may have during this difficult time. Include Web sites, contact phone numbers for support, and insurance clarification assistance.
3. As they recover at home, before they return to the office, offer some sort of limited responsibility opportunity, providing a light at-home work schedule with flexible hours and low pressure terms. Have another member of your staff, with similar job responsibilities help with their work load, so when they return there is not an overwhelming pile of papers to sift through.

Transitional Steps – Assuming your employee will be returning to the office, there are some preparatory steps that you can take to make the transition easier on everyone that will be affected directly by their return.

1. Based on the injury or disability, evaluate the individuals work station to determine if adjustments need to be made in respect to accommodating a wheel chair or other adaptive furnishings. Address the technology of the job to determine if adjustments need to be made, such as a phone headset or raised or lowered keyboard.
2. If possible, provide a reserved parking space for your returning employee as close to the building as possible. You might need a ramp or some other assistance for ease of entry into the building.
3. Brainstorm with the rest of your staff to determine other ways to help everyone feel more relaxed about the team member’s return. This could include a “Welcome Backâ€� banner, a potluck lunch, and a generous amount of flowers, balloons, or cards collected in the cubicle.

Final Phase Steps – Alleviate unnecessary stress by implementing these final steps when your employee returns to work.

1. Designate an escort to greet the returning employee into the building. Introduce them to the provisionary changes that have been made in the building to accommodate their special needs.
2. Provide a debriefing with all the new business information needed to bring the employee up to date. Things to include could be staff promotions and changes, schedule and responsibility changes, and a benefits update.
3. Allow the employee the “space” they need in the first week to make personal adjustments to their schedule. Part time work might be appropriate or at least some sort of rest period during the day. Check in personally with the returning team member to offer support and evaluate how the transition is working.

Congress has extended for a second time the COBRA subsidy eligibility period under The American Recovery and Reinvestment Act of 2009 (ARRA). Signed March 2, the Temporary Extension Act (TEA) extends ARRA an additional 30 days to March 31, 2010. It also makes the 65% subsidy available to eligible individuals who first experience a reduction in hours followed by an involuntary termination. Previously individuals who had their hours reduced and were later involuntarily terminated were not eligible for the subsidy.

If an individual is involuntarily terminated during March 2010, the employer will now need to determine whether their hours were reduced all the way back to September 2008 and whether they were offered COBRA at that time. If the individual did not elect COBRA after their original reduction in hours, they will be given another option to elect COBRA as of their involuntary termination date, if they are eligible for the subsidy; any gap in coverage would be disregarded for pre-existing conditions and no catch-up premiums would be required.

Summary of new provision:

• If an individual’s COBRA qualifying event is an involuntary termination of employment during March 2010, normal COBRA procedures will apply.
• If an individual had a reduction in hours later followed by an involuntary termination and the individual elected COBRA immediately following the reduction in hours, no additional COBRA election period is required.
• If an individual had a reduction in hours and did not elect COBRA (or elected coverage but later dropped it) and is involuntarily terminated between March 2, 2010 and March 31, 2010, the involuntary termination is considered a new “qualifying event”� and will trigger an additional round of COBRA notices for employers (or their administrators). However, irrespective of the new qualifying event, the maximum period of COBRA coverage (usually 18 months) will be applied from the original reduction of hours date, not upon involuntary termination.

As an example, an individual has a reduction in hours on September 30, 2009, triggering COBRA eligibility on October 1, 2009. She fails to elect COBRA within the required timelines, and is later involuntarily terminated on March 10, 2010. In this example, March 10th is deemed to be a new qualifying event, triggering a new round of COBRA eligibility. However, the employee’s general COBRA eligibility period will have commenced on and date back to October 1, 2009.

Next Steps

1. Employers will need to comply with these changes and notify effected individuals immediately.
2. Employers should keep track of individuals who are eligible for COBRA due to a reduction in hours so that appropriate notices can be delivered if those individuals are later involuntarily terminated during March 2010.
3. Employers should continue to track these employees because it’s highly likely the COBRA subsidy will be extended again.

The Commonwealth Fund’s 2008 International Health Policy Survey reported that in the U.S.:

• 38% of study participants left the doctor’s office without getting important questions answered.
• Only 53% said their doctor involved them in treatment option decisions.
• 41% said their doctor had not reviewed their list of medications in more than two years.

Each of the above problems can bring about serious health consequences. How do your plan members compare with these statistics? Is there a potential drug interaction crisis looming, with the potential to create an outlier cost for your company to bear? Below are a few tips you can share with your plan members to encourage open and detailed communication with their doctors.

1. Write down the names and the dosage of all the medications you take. Although you might feel that you have your medications memorized, it is not uncommon to confuse bits of data when you’re trying to pass the information along to your doctor. It is better to hand the doctor a written list so that he can quickly extract the data he needs.
2. Before you visit the doctor, think about topics you would like to discuss during this visit. For example, if you were diagnosed previously with high blood pressure, your doctor might have asked you to reduce salt intake, exercise more, quit smoking, and take an anti-hypertensive medication. Since he will be curious about your progress, make notes of what you plan to tell him.
3. Make a list of questions you would like to ask the doctor. You will be more able to think clearly about questions in the comfort of your home, than when you are sitting on an exam table and wearing a paper gown.
4. Arrive on time for your appointment. If you are anxious because you’re late, and the doctor is aggravated that he is running behind schedule, the lines of communication might not be open.
5. Be aware that your doctor is neither a miracle worker with a perfect solution to every problem; nor is he an adversary purposely ignoring your needs. He is a highly trained professional using his best judgment to guide you in both treatment options and preventive care. If you feel he is veering off course, speak up and be involved in guiding the conversation.
6. Don’t be discouraged if the doctor refers you to a nurse or physician’s assistant. These professionals are also highly trained and will often spend significant time explaining medical information to you.
7. Jot down new instructions as well as answers to your questions. It can be difficult to remember all that is said during an office visit, especially if you received unexpected news or information.
8. If you get home and realize you are confused about the doctor’s instructions, don’t hesitate to call the office. It is far better to get the information straight in your mind, than to make errors in your care or medication routine.
9. Pay your doctor bills. A medical office is a business, and if you fail to pay your bills, your relationship with your doctor can suffer.

Overall, remind your members to be active partners with their doctors as they pursue both medical treatments and preventive healthcare.

Overall spending on prescription drugs has increased an average of about 10% a year since 2000, with a “small but growing subset”� of drugs having “extraordinary price increases,”� according to a report from the General Accounting Office (GAO). In particular, specialty drugs drive especially high costs. Specialty drugs are generally defined as high-cost drugs that typically target a smaller group of patients with a narrow indication or complex medical condition; they also might have special shipping and/or handling requirements and require close supervision and/or monitoring during drug therapy. Cost data on these types of drugs emphasizes how important it can be for employers to develop specific cost control strategies aimed at specialty drugs. According to the GAO report, between 2000 and 2008, 416 brand-name drugs had price increases that ranged from 100% to 499%, but in a few cases were 1,000% or more. In most cases, the products sustained the new price: 87% of these products remained at the increased price or rose even further, while only 13% had a price decrease.

Specialty drug prices are especially acute. A report from pharmacy benefit manager (PBM) Prime Therapeutics LLC shows, though specialty drugs represented 1.1% of prescriptions filled for its members, they accounted for 15.4% of overall drug costs. An article in the Journal of Managed Care Pharmacy lists 10 specialty drug therapeutic classes, with the average annual cost of therapy ranging from a low of $5,000 to as high as $150,000 or more. Drugs in these classes treat rheumatoid arthritis, HIV/AIDS, multiple sclerosis, cancers, growth disorders, hepatitis, hemophilia, infertility, osteoporosis, and other conditions.

When developing strategies to manage specialty drug costs, it is important to remember that, unlike non-specialty prescription drugs, some specialty drugs require administration by a health care professional in a doctor’s office, infusion center, or outpatient hospital department. When a specialty drug is administered by a health care professional, it might be paid through the medical benefit rather than through the prescription drug benefit. This can have the effect of hiding the actual expense of specialty drugs from the plan sponsor. According to the Prime Therapeutics report, more than half of specialty drug costs may be paid as a medical benefit. Separate payments through the medical benefit also make implementation of cost management strategies more difficult, since different billing codes may be used for drugs under the medical benefit than are used in the prescription drug plan, with the pharmacy benefit coding more specific. More specific coding enables better identification and analysis of prescription drug use.

For specialty drugs covered by the pharmacy benefit, many plan sponsors have adopted a four-tier copayment/coinsurance structure, in which the first, lowest-pay tier is for generics, the second for preferred brand-name drugs, the third for nonpreferred brand-name drugs, and the fourth tier-requiring the highest cost for specialty drugs. Given the potential high annual cost for specialty drug therapies, plans with a fourth tier typically set a maximum out-of-pocket cost per prescription or for the plan year. If cost-sharing results in a financial burden for the patient, noncompliance with the therapeutic regimen is more likely to occur, which can result in a worsening of the medical condition and the need for hospitalization or other treatments that are more costly. Consider whether it is appropriate to include some specialty drugs in the lower-cost tiers, in an effort to drive compliance.

The Prime Therapeutics report notes that growth in the number of specialty drugs presents the opportunity to establish formularies and preferred drug lists that encourage use of those specialty drugs that are identified for their clinical safety, effectiveness, and value. Thus, though costs for all specialty drugs might be high, formularies can be used to optimize use of those medications that best combine therapeutic and cost value. This report also suggests use of efficient drug delivery channels; a pharmacy program that offers streamlined processes, detailed utilization reporting, integrated care management, and the opportunity for aggressive discounts on specialty drugs; and controls on “buy and bill” arrangements by health care providers administering specialty drugs.

The Journal of Managed Care Pharmacy article notes that another possible cost management strategy is to move all specialty drugs into the pharmacy benefit, with the goal of having more uniform application of patient cost sharing and clinical and utilization management. Implementation of this strategy might pose its own challenges, however, due to specific plan provisions, vendor contracts, and contractual arrangements with health care providers.
Though specialty drugs offer innovative therapeutic opportunities for patients, their price tags pose cost management concerns. Consultation with a benefit consultant, PBM or health plan is a good starting point for developing strategies for optimizing the value of specialty drugs for your employees.

In late December 2009, President Obama signed into law changes to the COBRA premium subsidy law that previously was set to expire on December 31, 2009. The extension brings added compliance obligations for employers, as the program has been extended two months through February 28, 2010, the subsidy period is expanded by 6 months to 15 months total and separate notice requirements apply.

The American Recovery and Reinvestment Act of 2009 previously established a law under which “assistance-eligible individuals� (AEIs) could receive a 65% COBRA premium subsidy for up to nine months from their continuation effective date. Under the original legislation, an AEI was defined as any COBRA qualified beneficiary who elected COBRA coverage and: (1) Lost group health coverage as a result of an involuntary employment termination; and (2) had a qualifying event between September 1, 2008, and December 31, 2009. The Act included various new administrative requirements for employers, many of which were required within a short time period after ARRA was enacted.

Here are the key provisions of the new COBRA subsidy extension:

1. The maximum subsidy period increases from nine to15 months.
2. The subsidy eligibility period is extended to February 28, 2010 (previously December 31, 2009).
3. AEIs who previously had reached the end of their original premium reduction period before the extension was passed will have additional time to pay their premiums to continue coverage. They must pay the 35% of total premium costs by the later of February 17, 2010, 30 days after notice is provided by their plan administrator, or the end of the otherwise applicable payment grace period.
4. AEIs who paid the full COBRA premium after their original subsidy period expired are eligible for reimbursement or crediting of excess premiums paid.
5. Plan administrators must provide notice of the subsidy extension by February 17, 2010 to those individuals who were AEIs on or after October 31, 2009.
6. Additional notices must also be provided to AEIs who are eligible to make retroactive premium payments at the subsidized rate and those entitled to premium reimbursement.

Two critical tasks in managing any business are to control costs and maximize productivity. Many business owners feel confident that they’re doing all they can in both of these areas. However, if employers aren’t considering the shape their employees are in, they are missing a huge piece of the puzzle that might be affecting both costs and productivity adversely.

According to a study by the Centers for Disease Control and Prevention, 26.1% of American adults were obese in 2008, compared with 25.6% in 2007. If we count Americans who are either overweight or obese, a staggering two out of three fit the bill. These statistics become of even greater concern for business owners when you add the findings of the Department of Health and Human Services (DHHS) survey entitled “Prevention Makes Common Cents: Estimated Economic Costs of Obesity to U.S. Business.”� DHHS discovered that the total cost of obesity to U.S. companies is estimated at $13 billion per year. Health insurance costs related to obesity comprise the largest percentage of the total coming in, at a whopping $8 billion.

Of course, increased insurance costs isn’t the only story here. The ballooning American waistline is the cause of 39 million lost work days; 239 million restricted activity days; 90 million bed days; and 63 million physician visits; numbers which add up to an immense drain on productivity.

What can employers do to combat this growing problem? Start with some suggestions offered by the American College of Occupational and Environmental Medicine:

1. Offer healthy choices in cafeterias and/or vending machines.
2. Provide nutritional information for cafeteria selections.
3. Provide healthier snacks at meetings and other employee events. For example, serve fruit, popcorn, and low-fat yogurt, rather than doughnuts or pastries.
4. Provide bottled water in the vending areas or cafeteria.
5. Institute a workplace wellness program that provides mechanisms to aid employees in adopting healthy lifestyles.
6. Provide educational material on the health risks of being overweight and how to eat healthier.
7. Encourage the use of stairways instead of elevators by placing signs near the elevator and stairs highlighting the health benefits of stair use. Ensure that stairways are accessible and are lighted properly.
8. Discourage employees from eating at their desks. Even a short walk to the cafeteria/lunch room can be helpful.
9. Support physical activity breaks during the workday.
10. Allow employees enough time for lunch so that they can walk or use the gym.

Although there might be an initial cost associated with implementing these provisions, the ROI will prove that the expense was well worth it when employers begin to see the improvements in productivity and the decline in obesity-related health claims. Even more important than these two benefits are the residual benefits received from implementing these changes. When employees see that their employers care enough to provide not just a safe workplace, but also a healthy workplace, these gestures encourage a real sense of loyalty that will ultimately translate into a healthy boost to everyone’s bottom line.

Employees with substance abuse problems cost businesses billions of dollars each year. According to the 2008 National Survey on Drug Use and Health, among the 17.8 million Americans aged 18 or older who admitted to illicit drug use, nearly 73% were employed. This equates to 12.9 million employees who admit to some form of substance abuse.

For the majority of substance abusers, their problem lies with alcohol. According to information published by Ensuring Solutions to Alcohol Problems, a part of the George Washington University Medical Center, alcohol abuse costs American businesses $134 billion in annual losses. Most of the losses are due to missed work: 65.3% of this cost is caused by alcohol-related illness, 27.2% due to premature death, and 7.5% to crime. People addicted to alcohol also spend more time in the hospital and have higher rates of job turnover than their non- or light-drinking co-workers.

Data such as this shows that alcohol and other substance abuse takes a toll on workplace productivity, and contributes to higher medical costs both for treatment of the addiction and for substance-related medical issues. Employee substance abuse problems also cause an increased occurrence of workplace accidents and higher Disability and Workers Compensation costs. There is no question that it is in an employer’s best interests to find ways to minimize the impact of employees’ substance abuse on the workplace.

Experts in the field stress that it is imperative that employers educate employees about the health hazards of substance addiction and encourage employees to seek early treatment of any problems. While stressing the importance of a drug-free workplace, policies that rely primarily on discipline can result in addicted employees hiding their problems out of fear of losing their jobs, and in co-workers enabling such behavior in a spirit of friendship. In this type of environment, an addicted employee might resist seeking assistance — such as obtaining treatment under the medical plan or taking a leave to enroll in a treatment program — until a crisis occurs.

On the other hand, employees will be more likely to seek the help they need if they believe that by doing so they will receive help, not punishment. The same is true of co-workers, who can be a valuable resource in encouraging addicted employees to ask for help and to stay committed once treatment has begun.

Since substance abuse is truly a medical problem, most medical insurance plans include at least some substance abuse benefits. Workplace communications about a business’s policies on alcohol/drug use should include this information. If employees realize that help is within reach, they are more likely to seek solutions to their problem. Some employees might not realize that this benefit is available to them. Employee Assistance Programs (EAPs) can also offer screenings, counseling, and treatment referrals for employees with substance problems. Depending on the individual EAP design, it also might have worksite awareness and supervisor training programs.

Employers should make employees aware that any communications regarding substance abuse issues are confidential. This, together with a supportive (instead of punitive) environment, increases the likelihood that employees will ask for help.

With so many dollars wasted in lost productivity, the incentives for a business to promote substance abuse awareness are compelling. And, because work is such an important part of most people’s lives, the workplace can be an effective place for substance abuse intervention to begin.

Congress passed the Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefit provisions in 1986. The law was enacted to allow continuity of Health insurance coverage for qualified employees and their dependents if they lost coverage due to such events as termination, resignation, reduction in work hours, divorce, or death. Through COBRA, employees and their dependents have the right to continue coverage under a former employer’s group health plan for up to 18 months (36 months in the case of death, divorce, or Medicare entitlement of the former employee), so long as the employee pays the total cost for the coverage and up to a 2% administrative fee.

Although COBRA has worked well for employees, it has always presented employers with a number of difficulties. Maintaining detailed records, notifying eligible beneficiaries, and collecting premium payments make administration complicated and time-consuming. Employers make mistakes, and this can result in large fines, including:

• IRS excise taxes of $100 – $200 daily for each notice, up to 10% of the cost of the health plan, or $500,000 per year
• Department of Labor fines of $110 daily for each notice

In addition, an employer or plan administrator might have to pay medical expenses and litigation costs if a case goes to court.

The compliance issues and the cost involved in maintaining COBRA plans have led many companies to outsource this function. Some of the benefits of outsourcing include:

• Controlling Costs – HR personnel who are unsure of statutory requirements regarding eligibility will minimize risk exposure by providing COBRA benefits to employees who are not technically eligible. Third party administrators have the legal expertise to know which employees are truly eligible and which are not, which can mean a substantial savings in claim costs.
• Eliminating the need to train staff in plan administration – Not only will your HR staff need initial COBRA administration training, they will require ongoing training to keep up with all statutory, regulatory, and case law developments.
• More efficient use of HR staff’s time – Utilizing HR personnel for COBRA administration lessens their ability to make a more positive impact on the company’s overall operation, like recruiting good employees or arbitrating disputes between line/department managers and their staff.
• Equitable treatment for all qualified beneficiaries – Third party administrators aren’t swayed by emotion, or subject to potential conflicts of interest when they determine eligibility. They base their decisions exclusively on the statutory and regulatory requirements, which ensures fair treatment for all qualified beneficiaries.