The animal kingdom has long been instrumental in teaching children about appropriate behavior.
A rabbit named Peter educated us on the importance of conflict resolution. For better or worse, Curious George was habitually inquisitive and, in separate incidents, three bears and three pigs taught us the importance of home security.
But despite a literary reputation as “big” and “bad,” according to Jack Hanna, “A wolf will feed the sick, the old and the young first.”
That’s a pretty impressive character trait for a creature so often maligned by the human race. Over the years, however, we’ve learned to expect Hanna to set the record straight on an important part of our world that most of us will never experience firsthand.
Following the footsteps of a legend
Inspired by wildlife pioneer Marlin Perkins, Hanna parlayed a fascination with animals and a position leading the Columbus Zoo into a television empire spanning 30 years. He’s had countless TV appearances on popular shows such as “Good Morning America” and “The Late Show with David Letterman.” In addition, he currently helms two television programs, “Jack Hanna’s Wild Countdown” and “Jack Hanna’s Into the Wild.”
Not surprisingly, Hanna’s high regard for the animal population is also reflected in his view of the public’s acceptance of the animal kingdom: “Most people who say they don’t like animals don’t like people much either.”
Phil Beuth, former president of “Good Morning America,” observes, “With Jack, what you see is what you get — he’s a genuine gentleman.”
Hanna has set a simple benchmark for appropriate professional behavior, “I operate by The Golden Rule — do unto others as you would have them do unto you.”
Of course, humans are animals too — complete with instincts, genetic predispositions, unique skill sets and laws to keep us from acting like predatory animals. Yet, prey we do — leveraged buyouts, hostile takeovers, foreclosures, etc.
Comparing workforces of nature
When asked about lessons human worker bees can glean from the animal kingdom, Hanna enthusiastically says, “Just look at ants and termites. They each have specific jobs to do.” By performing specific tasks every day, these creatures work solely to serve the greater good — ostensibly without complaining.
Animals = 1 Humans = 0
Hanna also points to an innate respect in the wild that does not always translate into the land of the bipeds: “The animal world does not waste food and animals do not abuse their own children. For example, gorillas may fight but they still work together.”
Working through issues to achieve top performance is apparently part of the natural order of things. It’s about survival. As the concept of business survival has never been more prominent, shouldn’t cooperation receive equal billing?
Animals = 2 Humans = 0
Though Hanna also marvels at the mysteries behind the instinctual and highly effective way animals communicate, many in the office marvel at some people’s overwhelming lack of communication skills.
Animals = 3 Humans = 0
Specifically, according to Hanna, “The elephant is one of the most intelligent creatures on the planet.”
So yes, it seems that without the benefit of an iPhone, Twitter or Outlook, an elephant truly never forgets.
Time to hire me an elephant. The Laws of Nature win every time. ●
Speaker, writer and professional storyteller Randall Kenneth Jones is the creator of RediscoverCourtesy.org and the president of MindZoo, a marketing communications firm in Naples, Fla. For more information, visit randallkennethjones.com.
Google Plus: http://bit.ly/15BWZq0
A marketing epidemic, to put it mildly, has been impacting most businesses — and it’s time to think about keeping your message simple if you haven’t already done so.
The roots of this epidemic can be traced back to two events.
First, during the economic fall of 2008, as businesses looked for ways to preserve revenue streams, companies hunkered down and focused on sales to preserve existing customers. Many cutoff or significantly reduced marketing budgets, and others shifted to digital media as a “low-cost alternative.”
The second event was the rapid spread of social media and the skyrocketing use of smartphones and tablets, which provide instant access to relationships, information and communication.
The social media craze and businesses’ desire to market on the cheap led companies to flood the marketing channels with content. Sales sheets, photos, videos, web pages — companies were suddenly all things to all people because they could push content to digital channels for “free.”
The problem — our marketing channels are now very noisy. As consumers of information, we respond to this noise with limited attention spans. The result — companies have sent confusing messages to the marketplace and people aren’t listening.
This current epidemic of marketing noise distributed across all channels leads to a common marketing need for all businesses — simplification.
Keeping it simple
So how do you achieve message simplification? It all ties back to the business. Here are seven steps to help get you started:
1. Identify three to four key business objectives for the next two years. Do you want regional growth or growth in a new industry? Do you want to sell more to existing customers?
2. Prioritize your objectives by placing dollars or number of opportunities next to them. This will help you focus on the most important areas.
3. Brainstorm a list of marketing tactics that can help you achieve each objective. Can you generate more leads from trade shows, your website, your existing customer list? What tactics do you need to adopt?
4. Write a succinct summary, or “elevator pitch.” This should be one to three sentences on how you benefit the people you are targeting in your objectives.
5. Compare your elevator pitch to your marketing tactics and existing materials. Review your website, brochures, email newsletter, social media accounts, videos, trade show collateral, etc. Notice how many “extra” things you say in an effort to cover all your bases.
6. Rework your message. Focus on the audiences for your key objectives. Identify the benefits for these audiences. Your marketing message should speak directly to these audiences so they can understand your value and usefulness to them.
7. Prioritize your marketing tactics. It’s tempting to be trendy and market on social media or through video, just remember to consider which tactics will best reach your audiences. You don’t need to be in every marketing channel, just the ones where your customers and prospects will hear you.
Finally, once you’ve simplified your message, stick to it! It is important so that people understand the benefits and value that you deliver. While it might seem repetitive to you, your audience will appreciate the clarity and with time, will remember what your business does best. ●
Kristy Amy is director of marketing strategy for SBN Interactive. Reach her at mailto:email@example.com or (440) 250-7011.
Life has a way of presenting us with difficult circumstances. Sometimes it’s in our personal lives, and sometimes it’s in our business.
If the circumstance is severe enough, it can create a crisis, which can often cause a feeling of hopelessness. When things outside your control come at you in droves, it becomes difficult to cope with them. Entire organizations can be overwhelmed and pulled down by external circumstances, which if not dealt with promptly and correctly, can destroy the company.
The CEO’s role is to right the ship and rally everyone around a solution — and it most likely won’t be easy. People are always looking for the easy way out, but that path is rarely an option. When facing a difficult situation, you have to play the ball where it lies, which means the resources you have in people, dollars or equipment are all you may have to work with.
But challenges also present opportunities. Faced with a crisis, you and your leadership team will be forced to look at your assets in new ways. You’ll be required to take a careful look at your customer base, your market and your processes. This kind of in-depth evaluation may uncover not only a possible solution to your problem, but it may open your eyes to markets or applications you never considered before.
Take Netflix for example. The company was the king of DVD-by-mail, and had already knocked off the once mighty Blockbuster. With the increase in streaming video content, however, customers began moving away from DVDs, threatening Netflix’s main revenue channel. It reacted by creating not only streaming content, but also by creating its own unique content. Customers can stream video from many outlets, but it’s tough to beat Netflix’s reputation and ease of use.
Often, the resources you need are already at hand; they just need to be used in new ways. Netflix already had the capabilities; it just needed to apply them differently.
You may find that after assessing what you have, you have started to create a new path that leads away from the crisis.
At the beginning of a difficult time, you may not be able to see a way out, which can lead to despair. By starting with an initial step and continuing, however, you’ll soon see the light. Start by calling your bank or suppliers to ask for better terms or whatever it is you need, and then build from there.
No matter what you do, though, don’t compromise your integrity. Always do the right thing in the wrong circumstances, because depending on how severe your crisis is, your reputation might be the only thing you have to negotiate with.
If you work hard, do the right thing and stay positive, a solution will likely present itself. It may not always be in a form that you anticipated — you may need to change your products or your market — but if you keep an open mind and work with what you have, everything will work itself out. ●
Most weeks I get on a plane and attempt to have an out-of-body experience to deal with all the hassles of flying as I travel from point A to point B. When flying, I have a few simple rules. One, I almost never eat the food. Two, I attempt to talk to no one other than obligatory hellos. Three, I never argue with or say a cross word to flight attendants.
One other very important practice I follow on land, sea and especially in the air is that I constantly scan my surroundings for potential troubles and new ideas.
On a recent flight, upon boarding, I quietly and obediently proceeded to my assigned seat.
As I began to sit down, a gentleman asked if I would mind trading seats with him so that he could sit next to his wife. Like most seasoned travelers I try to accommodate reasonable requests. In this case it seemed a no-brainer to agree to move.
Notice the details
As I started to settle in and fasten my seat belt I noted that my new seatmate was very hot. No, it’s not what you’re thinking. I mean she seemed to be flushed and radiating heat, ostensibly from a high fever. I’m thinking, this is not good, plus it proves the age-old adage that no good deed goes unpunished.
In the next minute I had an epiphany, which happens frequently as I believe that many problems come disguised as opportunities.
I rang the call button and, when approached, asked the cabin attendant to please bring me two cloth napkins. I stated that the purpose was to construct a makeshift face mask by tying the two pieces together to prevent possibly contracting some dreaded disease.
I feared that my intentions could be misinterpreted if I were to don a mask without an explanation; this could cause a well-meaning passenger to drag me to the floor thinking I had nefarious motives.
The stewardess smiled, nodding approvingly of my plan. She then summoned all her co-attendants to my seat and proceeded to whisper what I was attempting. Otherwise, she explained, they, too, could misunderstand my appearance and cause me bodily harm.
As founder and CEO of Max-Wellness, a health and wellness retail and marketing chain, I’m always looking for that next special something to share with my team. Therefore, while burying my now masked face in a newspaper so as not to frighten or offend the sick seatmate, I began dictating a memo to my merchandise product group proudly asserting that I just had another “aha!” moment, for which I am well-known, among my colleagues. For full disclosure, however, I am sometimes known for being a bit “out there” on occasion — but no one bats a thousand.
Turn an idea into a product
This particular predicament gave me the idea to develop a product kit that we could sell to weary travelers in our stores and in airports. I suggested a handful of complementary products, including a mask, a disinfectant spray and, if all else fails, relief remedies. I also noted that it probably would be prudent to include a cigarette pack-type “Black Box” warning stating that the mask is not what some suspicious flyers might think, but instead it’s for prevention of disease only. I even proposed we market these kits directly to the airlines to dispense as an emergency prophylactic for passengers exposed to airborne (pun intended) pathogens.
Fleeting thoughts have value
A key role for business leaders is teaching a management team to use fleeting thoughts as a springboard, to pair common problems with sometimes-simple solutions.
Just because it is a simple fix, though, doesn’t mean the idea couldn’t be a lucrative breakthrough.
When something sparks an idea it needs to be taken to the next level before being pooh-poohed. Most likely the vast majority of these inspirations won’t see the light of day, but that’s OK. Just think — what if one transient idea translates into the next Post-it Notes, Kleenex or bottled water?
The next time you sit by a masked man on a plane, it most likely won’t be the Lone Ranger. Instead, you might be witnessing the incubation of the next best thing since sliced bread. ●
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. “The Benevolent Dictator,” a book by Feuer that chronicles his step-by-step strategy to build business and create wealth, published by John Wiley & Sons, is now available. Reach him with comments at firstname.lastname@example.org.
Businesses and individuals managing employee retirement plans need to understand their Employee Retirement Income Security Act of 1974 (ERISA) obligations and the liabilities associated with plan mismanagement.
“Plan fiduciaries must act prudently. They must do things such as diversifying investments to minimize risk, and they must always act in accordance with plan documents, as long as those plan documents comply with ERISA,” says Kerri L. Keller, a partner at Brouse McDowell.
“There are certain actions that plan fiduciaries must never do. These include using plan assets for personal gain or for business purposes,” she says.
Smart Business spoke with Keller about the role of a plan fiduciary and how to comply with ERISA requirements.
Who is a plan fiduciary?
A plan fiduciary can be any business or individual who exercises discretion, control or authority with respect to plan management. It can also be any business or individual who manages plan assets or exercises discretion or control with respect to the disposition of plan assets. An ERISA fiduciary also can be those businesses or individuals who provide investment advice to a plan, or are responsible for plan administration.
Examples of plan fiduciaries are the named fiduciary or plan administrator, such as the employer or plan sponsor. But sometimes third-party service providers, investment managers and advisers, insurance brokers, and officers of the employer or plan sponsor can be deemed plan fiduciaries.
What are the responsibilities of a fiduciary?
Every plan fiduciary has a duty of loyalty, a duty of prudence, a duty to diversify and a duty to act in accordance with the plan documents. Plan fiduciaries should know that they could incur personal liability for breaching any of their ERISA-imposed responsibilities, obligations or duties.
This personal liability can require a plan fiduciary to pay back to the plan any losses that result from a breach of fiduciary duties, and to give back any profits that the fiduciary may have made from using plan assets. Fiduciaries must act solely in the interest of the plan participants, and for the exclusive purpose of providing plan benefits and defraying reasonable plan expenses.
Are all employer actions considered fiduciary actions?
No. Certain business actions are not considered fiduciary actions, such as the employer’s decision to establish a plan, what features to include, and the decision to amend or terminate a plan. In other words, when an employer acts on behalf of its business, it is generally not acting in its capacity as a plan fiduciary.
However, actions taken to implement these decisions can transform a business or individual into a plan fiduciary. Fiduciary actions generally include exercising discretionary functions over the management of a plan and its assets.
What are the obligations and liabilities associated with plan mismanagement?
For starters, ERISA fiduciaries can be liable — even personally — for breaching any of the responsibilities, obligations or duties imposed by ERISA. If a fiduciary breaches a duty to the plan, he or she may be required to personally pay back any losses to the plan and restore any profits made by the use of plan assets. A court also can order any other relief that it deems appropriate.
What would be an example of a breach?
A breach would occur if a business owner used plan assets to finance a purchase of equipment to open a new division. The business — and the owner in his or her personal capacity — would likely be required to pay the plan back and disgorge any profits that were made by the improper use of the plan’s assets. As previously stated, a plan fiduciary must act in the best interest of the plan and its participants — not in the best interest of the employer or owner.
The IRS, the Department of Labor, and the Department of Justice all have a role in ERISA oversight. These are the agencies that will generally perform compliance investigations and enforce penalties against the plan or plan fiduciaries. ●
Insights Legal Affairs is brought to you by Brouse McDowell
Companies that have looked into using the IC-DISC (Interest-Charge Domestic International Sales Corporation) provisions of the tax code, intended to help U.S. companies compete internationally, might remember that the incentive essentially reduces the top federal tax rate on income from certain qualified goods and services from 39.6 to 20 percent.
“Partly because it is thought of as a manufacturing and export incentive, many companies have dismissed the IC-DISC. Many more have misinterpreted the rules, which actually do not require manufacturing or exporting,” says Amit Mathur, CPA, director at WTP Advisors.
Pete Chudyk, head of the tax consulting practice at Maloney + Novotny LLC, says “We have helped many companies realize that the definition of ‘qualified export’ sales for IC-DISC purposes is explicitly based on use outside of the U.S., and does not literally require the exporting of goods.”
Smart Business spoke with Mathur and top accounting firms about five IC-DISC myths that lead to business owners missing or underutilizing the valuable government incentive.
Myth 1: Products must be exported.
Perhaps the most widely held IC-DISC misinterpretation is that a company must export a product and sell to a foreign customer to qualify for benefits.
While the product generally must be ultimately used outside of the U.S. — without being further manufactured by another party inside the U.S. — there is no requirement that the product be exported, or that the customer be foreign. In some cases, the product may even return to the U.S. For example, an Ohio auto parts maker that sells to General Motors Co. can claim benefits if the parts are incorporated into a car GM builds in Mexico. A special component rule allows these parts to qualify after being incorporated into another product abroad that returns to the U.S.
Mike Trabert, a partner at Skoda Minotti, says “Any closely held manufacturer or distributor should examine where the ultimate use of their products occurs. While they may not consider themselves ‘exporters,’ significant and easy to implement tax benefits may be available.”
Myth 2: The taxpayer must manufacture the product.
Closely held distributors and brokers, as well as the final manufacturers, of any U.S.-made product are eligible for IC-DISC benefits for any given qualified sale or lease. Unlike the Domestic Production Activities Deduction often enjoyed in tandem with the IC-DISC — both benefits can be claimed — manufacture by the taxpayer is not required.
Myth 3: Business operations will be disrupted.
A popular misconception is that using an IC-DISC will require a new entity to sell qualified exported goods in order to obtain the tax savings. This fear of having to alter contracts, logistics, payments, etc., is totally unfounded. There is actually no effect on cash flow or any other business operations from using an IC-DISC. Other than receiving a commission from the related operating company and immediately paying a dividend back to the company, or its owners, the IC-DISC typically does not perform any activities whatsoever.
Myth 4: IC-DISC benefits are limited to $10 million of qualified sales.
No limitation exists on the amount of qualified export sales that can generate IC-DISC benefits. Originally, the IC-DISC provided a deferral benefit, and the amount that could be deferred was related to only $10 million of qualified export sales.
Myth 5: IC-DISC commission is 4 percent of export sales or 50 percent of export income.
IC-DISC savings result from allowable commission paid to an IC-DISC, generating an expense at ordinary rates (39.6 percent) with the same amount typically being paid from the IC-DISC to its shareholders as a dividend, taxed at dividend rates (top rate 20 percent). Many believe this commission amount is limited to 4 percent of export sales or 50 percent of export taxable income.
In reality, each qualified export transaction can use either of these basic methods, or a host of other methods explicitly encouraged in the regulations that can be more beneficial. Some methods even allow loss transactions to generate a commission. ●
Insights Tax Incentives is brought to you by WTP Advisors
The Jan. 1, 2014, implementation date of many insurance provisions and mandates under the Affordable Care Act (ACA) is rapidly approaching, leaving employers to wonder just how the ACA is going to impact them and their benefit offering.
“As employers explore their health insurance options for 2014 and receive renewal rates from their carriers, some may see an increase that is higher than what they may have expected,” says Marty Hauser, CEO of SummaCare, Inc. “This increase can be attributed to several factors mandated by the ACA. Employers should familiarize themselves with these changes so they understand the reason for premium costs and can decide what is best for their employees and business.”
Smart Business spoke to Hauser about the changes in rating and underwriting under the ACA that will impact premium costs next year.
What do insurers use to determine rates for employers and how will that change?
Currently, rating is based on a number of factors including age, gender, health status and geographic location. Preexisting medical conditions and prescription use are also used to determine rates.
In 2014, rating is limited to age, smoking status and geographic location. Guaranteed issue also goes into effect, meaning that insurers cannot deny coverage because of a preexisting condition or rate-up for high-risk groups. Simply put, insurers can rate a group based on fewer factors than in previous years.
What else is changing in rating that will impact premiums?
Age bands, which are ranges of ages that determine premium amounts, are used to determine a group’s rates, and today these are set at a 5-to-1 gender-based ratio.
Beginning in 2014, age bands can have a maximum ratio of 3-to-1, and these age bands are separated into three groupings: one single age band for children ages 0 through 20, one year age bands for adults ages 21 through 63, and one single age band for adults ages 64 and older.
It’s important for employers to understand that under the ACA these ratios are uniformly mandated and regulated across the country for each carrier in order to level the playing field when it comes to group insurance premiums.
In addition to the change in rating factors and age bands, the ACA requires certain fees and taxes from health insurance companies based on the insurer’s membership.
The first fee, called the patient centered outcomes research trust fund fee, went into effect last year at a cost of $1 per family member and increased to $2 per family member this year. The fee is collected to help fund the Patient-Centered Outcomes Research Institute, which will assist patients, clinicians, purchasers and policy-makers in making informed health decisions through research.
The second fee, called the transitional reinsurance program fee, is effective from 2014 through 2017 at a cost of $5.25 per family member per month or $63 per family member annually. This fee will be assessed against both insured and self-funded group health plans in order to stabilize premiums in the individual market for the first three years the marketplaces are in effect. These fees will be used to make payments to carriers that cover high-risk individuals in the individual market.
The third fee, called the marketplace user fee, goes into effect next year at a cost of 3.5 percent of policy costs. The marketplace user fee is meant to cover administrative costs of policies on the health insurance marketplace.
Finally, the annual health insurer industry fee begins next year at a cost of 2 to 2.5 percent, increasing to 3 to 4 percent in 2015. This fee is an excise tax to fund some of the provisions of the ACA.
In addition to the new fees, health plans are still subject to the 1.4 percent state premium tax.
How can employers offset some of the expense of their health insurance next year?
While there isn’t much employers can do about the new rating factors or fees imposed by the ACA, they can help offset their premium costs by working with their insurer or independent insurance agent to make sure they are offering the right coverage for their employees and budget. ●
Insights Health Care is brought to you by SummaCare, Inc.
The U.S. is very much a national economy — even small businesses aren’t restricted to their hometown communities. Many companies don’t know that certain activities give rise to filing requirements for income, payroll and/or sales taxes in other states.
At the same time, it’s no secret that states are having trouble making ends meet, so they are using creative ways to find companies doing business from out of state.
“States essentially are looking to find new sources of tax revenue, without increasing taxes on the folks in their own state. It’s really easy to tax the people who don’t vote for you,” says Brad Greenberg, a director of tax in SS&G’s Chicago office.
Smart Business spoke with Greenberg about being proactive with your state tax filing requirements.
How would a business know if it had a filing requirement in another state?
There are more than 11,000 taxing jurisdictions in the U.S., whether states, cities or counties. With state and local tax filing requirements, the keyword is nexus — a minimum physical connection, often through sales or delivery trucks, attending a trade show or having contractors service a machine you sold.
If you make sales to a state, you probably have a responsibility to remit sales tax. However, if your activities are restricted to sales, you may not need to pay income tax. Payroll taxes are more black and white — if you have an employee based out of another state, you’ll have a payroll tax requirement.
If your employees are working on a project in another state, depending on the length of time and that state’s tax requirements, you may need to withhold state income taxes. Rules are so varied that Congress introduced legislation for a 30-day minimum rule. In addition, some states use a concept known as economic nexus to determine filing requirements, such as Ohio’s commercial activities tax, or if you sell $500,000 or more to California, even over the Internet.
What are states doing to find businesses?
States are cross-referencing taxpayer information from various departments to generate lists of companies that are remitting payroll taxes, but aren’t remitting sales or income tax.
Then, states send out letters. One is an audit or assessment that says ‘you’ve been doing business in our state. We think you should be filing sales and/or income tax returns.’ Any business receiving this letter needs a professional to investigate whether or not a filing requirement existed. If one does, you must file returns; if there isn’t, the adviser can help explain why filing requirements don’t exist.
The other kind of letter is a nexus questionnaire, which asks about your business activities. Don’t ever try to fill out one of these yourself. They are written to create more taxpayers for that state. Tax professionals can help ensure you answer the questionnaire completely and accurately, truly reflecting your business activities, without leading the state to believe there is a filing requirement.
Why is it helpful to be proactive?
You want to sit down with your tax adviser and take a close look at your multi-state activities to recognize any issues. If you happen to be doing business in a state where you potentially owe tax, there are mechanisms to minimize your liability, interest and penalties. Your accountant can ask the state for a voluntary disclosure agreement. If you voluntarily come forward, you’ll likely have a shorter look-back period, and in many cases forgiveness of penalty.
What if the business provides services?
A professional services firm can perform work for out-of-state clients on site or virtually. The income tax filing requirements depend on whether the states in which you perform the work, and where your customers are located, apportion income based on where you provide the service (‘cost-of-performance’ method) or where the customer realizes the benefit of the service (‘market’ method). So it’s important to keep good records with respect to where employees are working on each client engagement. The rules are complex and differ from state to state.
You don’t want to be subject to the hassle of audits or filing back tax returns, or to face penalties and interest. An accountant with a strong background in state and local tax can help manage these risks. ●
Insights Accounting & Consulting is brought to you by SS&G
The Kaiser Family Foundation recently released a study that stated premiums available on state-based health insurance exchanges would be lower than expected. In Ohio, rates cited were even lower than the national average, with costs for the second-lowest silver tier plan at $249 compared to $320 nationally.
However, Ohio Lt. Gov. Mary Taylor had earlier announced that individual premiums were expected to increase by 41 percent.
Smart Business spoke with William F. Hutter, CEO of Sequent, about whether the Patient Protection and Affordable Care Act (ACA) will succeed in driving down health insurance costs.
Do the rates cited in the Kaiser study mean costs are going down?
Possibly for a couple of years — we’ve still not seen the community rating prices for small group coverage, and just maybe the lowest prices were illustrated in the Kaiser study. The rates indicate a very low and attractive premium structure. It’s unlikely these rates will be sustainable after 2016 because carriers don’t know the real cost of insuring this group yet.
In addition, the paper didn’t address complex tax implications for both the company and employees that must be considered for total cost. For example, the new taxes on insurance premiums paid by carriers, but collected from employers, are a protection for the carriers. The tax will be set aside to help carriers offset the real cost of coverage for the first two years. After that, the exchange carriers will be on their own, with no government subsidy.
What impact will these rates have on businesses and their health care plans?
One of the leading actuarial firms, Milliman, has an analysis tool to help any company dig through the ‘play or pay’ considerations. Having completed more than 250 separate analyses, Milliman reported it made sense to ‘pay’ for only two of those companies. However, it’s difficult to access the individual total costs relative to plan designs.
What do the delays mean for 2014?
This is a practice year for everyone; 2014 is a penalty-free zone. With the rollback in enforcing penalties and a delay in reporting incomes for the affordability test, people think they are off the hook regarding ACA requirements. But everything else is going forward, including a big increase in taxes.
Unfortunately, the early testing on the exchange, scheduled for early September, was delayed. The Department of Health and Human Services also delayed the deadline to sign final agreements on health plans that will be available to consumers on the exchanges, which might have occurred because some insurers have been hesitant to sign up.
Many people anticipate there may be massive technology glitches relative to the exchanges, including a brewing concern in the technology arena about confidentiality and Health Insurance Portability and Accountability Act (HIPAA) compliance. The system is going to be large and unwieldy.
Who is going to buy insurance from the exchanges?
Even with the individual mandate — which still could be delayed by the government — beginning next year, most people will not be making changes regarding their health care, whether they have insurance or not. If you haven’t purchased coverage because you’re young and invincible, you’re not going to purchase coverage now with minimal individual mandate penalties in the first year.
The people who will be truly interested in participating are the most needy — those who cannot afford other coverage because they are ill and not working.
As for businesses, depending on the average income per worker, some might drop plans and let employees go to the exchanges. Businesses with fewer than 50 full-time equivalent employees will not be penalized when penalties are assessed in 2015. So, they could drop coverage, give everyone a $4,000 raise and let employees buy their own insurance. But companies need to remember that giving a raise to buy exchange coverage causes everyone’s taxable income to increase. Therefore, the employee pays more in taxes, the company pays more in taxes and the increase might bump income over the subsidy limits.
It’s still very difficult to predict what exactly is going to happen because there are so many unknowns. ●
Insights HR Outsourcing is brought to you by Sequent