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Small Businesses and Self-Funding Medical Benefits

ACA “Pooled” Rates vs. Self-Funded Strategies

There is a lot of talk about self-funded or level-level funded medical plans as a way for companies to save money on health benefits… for good reason.

The Affordable Care Act mandates uniform “pooled” rates for all employers with less than 50 employees.  As such, employers are “stuck” in the rating pool with all other small businesses. Self-funding is a way for companies with healthier than average employees to “break out” of the pooled rates set under the ACA. In self-funded strategies, built-in underlying insurance called “stop-loss” protects even small businesses from the potential catastrophic cost of a large medical claim.

For companies with less than 50 employees to qualify, employees will have to complete health questionnaires or phone interviews.  Some insurance carriers are also using “prescription drug underwriting” to screen businesses for lower rates. This involves scanning prescription databases for what medications employees are taking- this connects to the underlying medical conditions and the cost of the drugs.

Pros and Cons of Self-Funding

It is possible for employers to save 20% or more of health plan costs with self-funding.  But what are some of the advantages and potential pitfalls of self-funding?

  • Self-funded contracts give companies an opportunity to retain funds and enjoy cash-flow advantages.  Any unspent claim dollars are retained by the company, so only funds needed to pay claims for the specific company are ever spent.
  • Although there is stop-loss insurance in place, typically, the total plan cost can be 20% to 25% more than fully-insured if the claims level is significantly higher than projected.
  • Only employers with proof of better than average claims expense should consider self-funding.
  • There can be a higher risk of liability since the employer is technically the insurer of the plan, and not an insurance company.
  • Employers with under about 300 employees should seek out a “level-funded” contract, where monthly claim reimbursement levels from employer funds are capped at the level of a fully-insured plan. This protects the company from claim volatility.
  • Employers need to work with a broker or consultant who has experience with setting up and working with TPAs and stop-loss carriers.  Also, there are compliance and cost issues that require the help of an experienced professional in self-funding.

Self-funding is an attractive alternative to fully-insured health plans for many companies.  Self-funded plans are now available to employers with as few as 10 employees. With proper stop-loss insurance levels, and an experienced professional to guide the way, more companies than ever can save money by considering self-funded medical plans.

 

About the Expert

Gregg Kennerly is a Principal at Advanced Benefit Strategies of Virginia, which designs and implements innovative corporate health care plans. Reach him at [email protected] or 757-961-3319.


Employers and Ex-Military Employees Benefits

The Hampton Roads Metropolitan area probably has the highest percentage of ex-military employees in the nation.  Ex-military employees typically do not elect to enroll in employer-sponsored health plans. This lowers benefits costs for area employers, but TRICARE still has out-of-pocket costs that can sting the pocketbook of these employees.  

Is there a product that can fill the gaps in TRICARE coverage? YES!  Employers can offer an employee-paid TRICARE supplement that can be paid by the employee on a pre-tax basis.  These supplements are very affordable and can make a difference when recruiting employees in Hampton Roads. Here is just a partial list of the advantages to offering a TRICARE supplement now:

  • The Feds have just raised the out-of-pocket costs for TRICARE Prime and TRICARE.
  • Why should employers ignore the needs of ex-military… fills an obvious need!
  • Can be offered on an Employee pay all basis for less than $70 per month typically
  • Distinguishes your company as military friendly in a competitive market
  • Will create employee loyalty and decreased turnover

Bottom line:  Employers with even a few ex-military employees should offer a TRICARE supplement as part of their employee benefits portfolio to help our ex-military lower their out-of-pocket medical expenses.


5 Must-Do’s for Employee Orientation

Employee orientation is an important piece of HR and employee management. A formal orientation is essential to setting a new hire up for success and helping your company maintain the corporate image and values you portrayed during the interview process.

This isn’t just for new employees though. Employee orientation can also be designed for current staffers who are being promoted to a new position within the company and need a similar type of program. If you have questions about how to improve employee retention, we have another video to help walk you through this challenge.

Learn the must-do’s for employee orientation in the video below.

For more on employee orientation, check out our Onboarding section.


DOL Adopts New Test for FLSA Applicability to Interns

The U.S. Department of Labor (DOL) has adopted the primary beneficiary test for determining whether interns of for-profit employers count as employees under the federal Fair Labor Standards Act (FLSA).

The FLSA requires for-profit employers to pay employees for their work. Interns and students, however, may not be “employees” under the FLSA—in which case the FLSA does not require compensation for their work. In ruling on FLSA cases, courts have previously used the primary beneficiary test to examine the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary of the relationship.” On January 5, 2018, the DOL announced its adoption of the primary beneficiary test for purposes of its enforcement of the FLSA.

The primary beneficiary test includes the following seven factors:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

If analysis of these circumstances reveals that an intern is an employee, then he or she is entitled to both minimum wage and overtime pay under the FLSA.

This makes a careful, purposeful on-boarding even more important. For more tips on how to best on-board an intern or new staff, take a look at some of our favorite practices!

To learn more about employee compensation, please visit our section on Employee Pay.


What Employers Need to Know About ACA Reporting in 2018

There’s a lot of buzz surrounding healthcare these days. A lot is changing, and it’s important to not fall behind on reporting.

Under the Affordable Care Act, applicable large employers (ALEs)—generally those with at least 50 full-time employees, including full-time equivalent employees, in the preceding calendar year—must report certain information to their full-time employees and the Internal Revenue Service (IRS) about the health care coverage they have offered (if any).

With deadlines for 2017 reporting just a few weeks away, ALEs should begin thinking about these five information reporting facts:

  1. ALEs are required to furnish a Form 1095-C to each of their full-time employees by March 2, 2018.
  2. ALEs must file Forms 1095-C, accompanied by the transmittal Form 1094-Cwith the IRS no later than February 28, 2018 (or April 2, 2018, if filing electronically).
  3. Self-insured ALEs must also report via Forms 1094-C and 1095-C.
  4. ALEs that file 250 or more Forms 1095-C must file them electronically.
  5. ALEs can find a complete list of information reporting resources at the IRS’s Information Center for Applicable Large Employers.

If the current struggle over healthcare is interesting to you, take a look and read my contrary view to the question of repealing the mandate.

Check out our Information Reporting section for more on the information reporting requirements.


Post OSHA Form 300A Starting Feb. 1

Employers subject to the recordkeeping requirements of the federal Occupational Safety and Health Act (OSH Act) are reminded to post their 2017 OSHA Form 300A, Summary of Work-Related Injuries and Illnesses, from February 1–April 30, 2018.

OSHA Form 300A lists the total number of job-related injuries and illnesses that occurred during the previous year, and must be postedeven if no work-related injuries or illnesses occurred during the year. It should be displayed in a common area where notices to employees are usually posted so that employees are aware of the injuries and illnesses occurring in the workplace. In addition, a company executive must certify that he or she has examined the employer’s OSHA Form 300, Log of Work-Related Injuries and Illnesses, and that he or she reasonably believes—based on his or her knowledge of the process by which the information was recorded—that the OSHA Form 300A is correct and complete.

For more information on the OSHA Form 300A requirement, please click here.

To read more about worker safety and health, please visit our Safety & Wellness section.


IRS Releases New Income Tax Withholding Tables

The Internal Revenue Service (IRS) has released IRS Notice 1036, Early Release Copies of the 2018 Percentage Method Tables for Income Tax Withholding. The notice updates the income tax withholding tables for 2018, reflecting changes made by the Tax Cuts and Jobs Act.

Employers should begin using the 2018 withholding tables as soon as possible, but not later than February 15, 2018. The new withholding tables are designed to work with the Forms W-4 that workers have already filed with their employers.

Click here to read IRS Notice 1036.

For additional tax information, please visit our section on Employer Tax Laws.


Will Lack of Mandate Cause More Americans to go Without Health Insurance? A Contrary View

The tax cut passed by the Republican Administration includes the 2019 rollback of the “Individual Mandate” included in the Affordable Care Act.  Many healthcare policy wonks have predicted that the number of uninsured Americans will balloon by 13 million over the next 10 years due to the lack of penalty for not carrying health insurance.

It’s certainly logical that some people, mostly young folks, will drop health insurance coverage in 2019, as the cost of individual plans is prohibitive in many states. As a healthcare consultant to business, I’ve already heard stories of this phenomenon. While I do expect some people to go without coverage because there is no longer a penalty, I am of the opinion that overall health insurance enrollment will increase, not decrease in the one to five year term. My reasoning is based on a number of market changes I have already observed:

  • In Virginia, individual health plans not subject to ACA subsidies now cost about 50%more than comparable employer-sponsored group healthcare plans. This is sparking a movement back to group benefit plans by small employers.
  • The roaring economy has caused a surge in optimism among business owners and executives of all sized companies.  Improved financial results lead to new job creation and more covered workers.
  • Businesses with existing healthcare benefit plans are hiring new employees at a rapid pace. After a typical 30 or 60 day waiting period, these new workers will come onto company healthcare benefit plans… many for the first time.
  • When the labor market is tight and qualified workers are scarce, businesses have to offer better benefits packages to attract workers.
  • Smaller employers that may have dropped their healthcare plans during the great recession are now competing for employees, and I see them already restarting their health plans.
  • Start-up companies entering a competitive employment market are starting new healthcare plans to attract and keep their good employees.

I realize many will discount my observations as “trickle-down economics” comes to healthcare; or that it will only benefit business owners or already well-off workers.  I disagree and fail to see how these market forces will not benefit all Americans who are willing to work and enroll in health benefits.  I already see it happening.


10 Employee Retention Resolutions for 2018

With a new year upon us, your attention is likely focused on setting financial and productivity goals for your business. As you plan, make sure to look at one area you may have overlooked: employee retention. Employee retention has a huge impact on your bottom line, and now is a great time to make some employee retention resolutions that will pay off all year long. Watch the video below to learn 10 key employee retention resolutions for 2018.

Employee Retention

For more on employee retention, check out our Human Resources section.


IRS Announces 2018 Standard Mileage Rates

The Internal Revenue Service (IRS) has issued the 2018 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, or medical purposes.

2018 Standard Mileage Rates

Beginning on January 1, 2018, the standard mileage rates for the use of a car, van, pickup, or panel truck will be:

  • 54.5 cents per mile for all business miles driven (up 1 cent from 2017)
  • 18 cents per mile driven for medical purposes (up 1 cent from 2017)
  • 14 cents per mile driven in service of charitable organizations (unchanged from 2017)
  • Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

    IRS Notice 2018-03 contains additional information about mileage rates.

    For more on employer-provided transportation benefits, please see our section on Fringe Benefits.


 
 

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