- Announcing VSRA Association Dental Plan
In response to the overwhelming success of the VSRA Association Medical Plan, we are launching an association dental plan for January 1, 2012 start dates. The plan is insured by Assurant Employee Benefits, a national top ten dental insurance company with approximately 1000 network dental providers in Hampton Roads. - Read More
The Five Most Important Health Insurance Moves for 2012
by Gregg Kennerly | Published Friday, November 4, 2011
Businesses across the country are struggling with the new reality of tighter margins on lower revenue brought on by the recession and continuing malaise in the economy. Providing medical benefits to attract and keep employees continues to be important, but continuing medical plan cost increases are putting unprecedented pressure on companies to not only maintain current spending levels, but cut costs. In our practice, we’ve had success with these strategies that can help maintain benefit levels while easing costs and the administrative burden on HR staff:
- Maximize your benefits, by making changes that use every advantage the tax code, state and federal law can give your plan. Section 125 of the Federal Tax Code allows employees to pay for benefits with pre-tax dollars. This seems like a no-brainer, but surprisingly, we find relatively large employers that aren’t taking advantage of this. Another important tool in the battle is the implementation of a Health Reimbursement Arrangement (HRA). These flexible, tax advantaged accounts can be used to lower premium costs, preserve cash flow, and avoid the “use it or lose it” provisions of Flexible Spending Accounts. Although they use strictly employer funds, HRA strategies can be quite useful in lowering total costs to both employers and employees.
- Offer multiple plan designs, and build in heavy disincentives for employees to choose “Cadillac” plans. Almost without exception, plan designs that reimburse virtually all expenses from the first dollar are a waste of money. Insurance companies know these plans appeal to “high utilizers” and they charge more than is actuarially necessary. Consider implementing a plan with at least a $1500 deductible for hospital expenses and then use an HRA to reimburse part of it. If getting rid of a rich plan design isn’t politically feasible for your company, offer it as a buy-up and let them pay the difference through pre-tax payroll deduction.
- Carefully monitor developments in health care reform, but adopting a ‘watch and wait’ position is the best approach for 2012. The legislation, if it remains intact, will have far-reaching effects on every enterprise in the country. There is no need to panic, however. So far, most of the compliance burden has fallen on insurance companies. The major provisions of PPACA (health reform bill) take effect in 2014, and will require close analysis from a benefit professional to determine the specific impact on any particular business. Many provisions are subject to repeal and spending large sums on analysis should be delayed until the picture is clearer.
- Make sure your broker is providing you with the help you need. The economy has squeezed the HR functions in most small businesses, and HR personnel have typically taken on increased responsibilities. Compliance with health reform and increased regulation has multiplied the problem. Your health insurance broker should provide assistance with compliance, enrollment, communication to employees and much more. These functions are the minimum you should expect, and can go a long way toward easing the work load on your HR staff.
- Implement an incentive-based wellness program. Emerging data shows these programs can have a significant impact on costs if implemented correctly. Incentive based plans use a “carrot and stick” approach to encouraging participation in a variety of wellness programs, from biometric screening to weight loss and smoking cessation programs. Typically, the incentive to participate is created in the contribution to the medical plan premium. For instance, if an employer contributes 50% of the premium for employee coverage, the percentage will be moved up to 80% or 90% if the employee agrees to participate in a program that will usually have measurable results. The ROI on incentive-based plans is reported to be between 2.5 and 4 to 1. These are impressive numbers that are finally emerging as confirmation that incentive plans work. A disincentive plan penalizes employees for not participating, although the potential for savings is greater, there is often perceived damage to company culture as a result. Many health insurers offer various programs at a fraction of the actual cost, as they stand to gain on fully insured contracts as well.
Although costs continue to rise and the conversation continues to gain complexity, there are concrete actions you can take to make sure your company has done everything possible to fare better financially than your competition in offering meaningful benefits to your employees.
In his career, Gregg has developed specialized expertise in “consumer-driven” and high deductible health plans with HSA and HRA strategies, and sold the first HSA plans issued in Virginia through Assurant Health. He is an expert in analyzing plan design data and has served as account executive for national accounts such as Coca-Cola Enterprises and Tenet HealthCare. Gregg utilizes a strategic approach to establish goals based on each client’s unique culture and competitive environment, and measuring results against jointly established criteria.
Gregg Kennerly is a Principal at Advanced Benefit Strategies of Virginia, LLC.
