Most employers know that having healthy employees can help lower health care costs, but a healthy population can have far greater benefits for your company.
Those benefits can be so great that some employers are not only encouraging healthy behaviors, they are demanding them as a condition of employment, says Michael F. Campbell, chief wellness officer at Neace Lukens.
“There is a general consensus that health care costs are driving the wellness movement,” says Campbell. “But a recent study revealed that the benefits in improved productivity and presenteeism from wellness programs were financially a far greater advantage than the decrease in health care costs. Lost productivity due to poor health, chronic conditions and poor lifestyle created a far greater impact.”
Smart Business spoke with Campbell about steps you can take to improve the health — and productivity — of your employees.
If an employer wants its employees to be healthier, where does it start?
You have to start at the top. If the leader of the company is unwilling to lead in this endeavor as they would lead in their business endeavors, it will fail. That’s the only way you are going to have an impact on the culture.
For example, our CEO decided two years ago that something had to change. He began to change his lifestyle, his activities, his eating and drinking habits, and began communicating those changes to the employees.
You may get a lot of negative feedback from the population when you’re requiring people to do certain things, but if the leader is saying, ‘Look, face it, this is here to stay,’ having that repetitious message in place makes a big difference. At companies of all sizes, the ones that succeed with wellness programs are the ones in which the leader steps up to the plate and becomes a living example of what they’re asking people to do.
What kinds of things can employers incorporate into wellness programs?
You can encourage people to get annual physicals, whether they are covered on your health plan or not. If everyone is not on the health plan, don’t attach incentives to the plan because you are after your entire population.
You can also ask employees to participate in a nutrition program. That doesn’t mean telling them how to eat; it simply means that they have to participate in an assessment that will tell them what their nutrition prescription is. You can also persuade everyone to participate in quarterly seminars on nutrition.
For example, we are going to support the program for employees to use pedometers. That doesn’t mean they have to walk a certain number of steps each day, not yet, but they do have to wear them. We suggest a goal and tell them what the recommendations are. It’s very unobtrusive and we simply say to them, we need you to wear this.
This approach is not an outcomes-based program yet; it’s a participation-based approach.
How can employers overcome employee resistance?
Take, for example, a hospital that wanted to implement a tobacco-free workplace policy. It announced it was going to charge those who did not kick the habit, and it did a very poor job of rolling it out, a very poor job of communicating, a very poor job of educating people, and the turnaround time from announcement to quit date was way too short. As a result, it had a rebellion.
Compare that with employers who have done it correctly. They start 18 months in advance, they make a case for the initiative, they explain to employees why they are so interested in making it happen, and the pros and cons of the program. And they say to employees, way in advance, ‘Get ready. The day is coming when we are going to issue a policy that you will not be able to use tobacco on the premises, at any time. We’re not going to do this for a year and a half yet, and in the meantime, for those who do use tobacco, we have this incredible program that we’re going to bring to the table to help you quit.’
Employers who do that have no problems. Nobody quits, there is no rebellion; it just happens. But if you wait until the objections come, and you don’t answer all of their questions ahead of time and explain thoroughly why you’re doing this, you’re going to have problems.
What would you say to employers who say they can’t afford the investment into wellness?
Think of it along the lines of safety. If you ask a factory manager what kind of money that person is investing in safety programs, it’s amazing relative to the amount of money that’s involved in that area. It’s so incredibly disproportionate to health care cost. There are signs all over the place, and everyone knows what they should and shouldn’t be doing when it comes to safety.
But when it comes to health plan costs, which are astronomical when compared to their exposure financially, what are they doing there? There is a huge value to the investment for wellness.
Some employers may also think that the health of their employees is none of their business.
Yes, it is your business. And you’d better make it your business, or you are going to be out of business.
Michael F. Campbell is chief wellness officer at Neace Lukens. Reach him at (317) 595-7349 or email@example.com.
When you sign contracts, how closely do you read them? And how much attention are you paying to the insurance and indemnification clauses that you are agreeing to?
Mike Cremeans, vice president at Neace Lukens, says that too many business leaders don’t take the time to truly understand what comprehensive risks they are committing to when they sign a contract.
“Too often, the details are ignored,” says Cremeans. “C-level people may not have the time or the expertise to look too closely at the insurance and indemnification terms. And, unfortunately, many times, those sections of a contract are viewed as a commodity purchase. However, investing up front to have a contract attorney review the agreement can help you avoid substantial problems on the back end.”
Smart Business spoke with Cremeans about how to make sure you have the insurance required by your licensing agreements and that the agreement adequately constrains your risk to avoid getting burned in a lawsuit.
Before signing a contract, what does a business leader need to consider?
Make sure you understand what the licensor is concerned about. Many times, they include phrases in the agreement that are not defined but that they believe will somehow protect them. So begin by making sure there is a clear understanding among all parties as to what the terms in the indemnity and insurance sections of the contract mean.
Once you have an agreement regarding definitions, you can determine if the licensee has the corresponding insurance coverage and can make an intelligent decision on how to comply with a particular insurance requirement.
How can doing so help in the event of a lawsuit?
Contracts should consider all eventualities. Likewise, insurance and indemnification language should be very clear, in a way that almost settles a claim before it happens. If everyone understands up front the intent and purpose of the indemnity and insurance clauses, that will help prevent a serious error or misunderstanding in the event of a claim.
Too often, leaders don’t have a full, nuanced understanding of their insurance coverages, so when faced with a claim, they say, ‘That’s OK. We have insurance for that.’ Then they realize that the details of their insurance policies don’t align entirely with the language in the license agreement. For example, indemnification sections sometimes do not make an exception for the sole negligence of the licensor. However, many policies provide coverage for contractual liability except for the sole negligence of the other party. It is better to have a clear understanding up front as to what the terms mean and what the policy will cover, resulting in a smoother process.
What language should a licensee watch for in insurance requirements?
Terms such as ‘reasonable and customary,’ ‘adequate,’ ‘sufficient to support the indemnification section,’ etc., are red flags. All they do is open up problems. This is dangerous, especially if you do not purchase high enough insurance limits. In the event of a large claim, if your limits are inadequate, the licensor can accuse you of not having enough insurance and of being in breach of the agreement. You then have the original insurance claim, along with a potential lawsuit from the licensor.
Unreasonably high insurance limits are another requirement to be mindful of. Many times, the licensor does not understand what insurance limits should apply based on exposure. If you are selling wallets, what kind of bodily injury or property damage could a wallet cause? But if you are selling pharmaceuticals, that carries a different set of potential risks. So if a licensor asks for the same limits of liability on each, that doesn’t make sense.
Also, be aware of indemnification sections that require you to indemnify the licensor for any and all claims, liabilities, costs, etc. No insurance policy covers ‘any and all’ claims because of inherent exclusions and conditions. So the licensee will have a higher obligation under the indemnification section than will be covered by its insurance. Work with an insurance professional who understands how to identify these detailed potential risks and then makes recommendations to help you with the best possible portfolio of insurance products to protect both you and the licensor if you are required to indemnify it.
What should a company look for in an insurance broker?
It is vital to work with a broker who specializes in your industry. A true insurance professional will ask questions, listen intently, and understand exactly what your needs and your risk tolerance are. Then he or she will be in the best position to make good, sound recommendations that won’t break the bank.
Trust, but verify. If you ask, ‘Is everything covered?’ and the broker says, ‘Don’t worry, it’s all covered,’ run the other direction to find another broker. You need to have someone who will force you to think about these issues. Dig into the issues that could potentially put you out of business. Engage your insurance professional and address your concerns and what you are going to do about them.
How should the broker work with other professionals to provide the best coverage?
It is very helpful to have a conference call with the licensor and its attorney, the licensee and its attorney, and perhaps both parties’ insurance brokers. That way you can all discuss the contract language and make certain everyone understands and agrees to the intent, terminology and definitions. We find that qualified insurance brokers bridge multiple disciplines and can oftentimes help translate jargon and facilitate understanding among all parties. Both sides can then decide what terms and conditions are acceptable and come up with a compromise.
A satisfying outcome can be achieved for all when all parties communicate effectively and thoroughly understand the other’s perspective and constraints.
Mike Cremeans is vice president at Neace Lukens. Reach him at (216) 446-3354 or firstname.lastname@example.org.
When was the last time you reviewed your business’s insurance coverage?
If you’re not doing an assessment at least annually, you may not be covered as things continue to change at your company. And if you’re just continuing to pay your insurance bill without evaluating what you are paying for, you may find yourself underinsured should a disaster strike your business, says Jeffery Reisner, CPCU, CWCC, who leads the Real Estate Insurance Practice at Neace Lukens.
“Things can change quickly,” says Reisner. “For example, FEMA has been changing the flood plains over the last two years, and a property that wasn’t formerly in a high hazard flood zone may now be. Building codes may have changed forcing you to pay for mandated property upgrades to damaged property. Due to economic conditions, you now have a high vacancy issue. These all have unique challenges and exposures to address. Especially if you have a large mixed use real estate portfolio, you really need to keep in touch with your insurance broker and risk manager to ensure that your coverage is up to date and you can address these exposures in case of a disaster.”
Smart Business spoke with Reisner about doing a coverage analysis of your business and how doing so can help you determine the right amount of insurance for your company.
How do you determine the right coverage and amount of insurance for your business?
Start with a coverage analysis, regardless of whether you are a small business or a large multi-state or multi-location insured. Many times, a small business has a higher risk as it generally will not have an in-house risk manager to review its insurance coverage. This leaves the owner ultimately reliant on his or her broker. A small business also may not have the financial resources to recover from an uncovered loss or disaster.
In an assessment, your insurance broker will identify any changes in exposures in your business -— past, present and future — and then review your current insurance program and go over the policy in detail. He or she will identify current coverages and whether there are any weaknesses or uncovered areas in the policy. Insurance is broken down into multiple segments, including property, general liability, auto, management liability, etc., and each of those has its own exposure and challenges.
Your broker will go over each of those areas and then make recommendations for coverage, possibly with a side by side analysis.
Is doing an assessment a time-consuming process?
It can be, particularly if your business has a real estate footprint across the country. If your locations are primarily in what is considered low hazard areas geographically, it’s a little easier. But if you have property in catastrophe-prone areas, such as the flood-prone banks of the Mississippi, or high wind areas in the Gulf of Mexico or on a major earthquake fault line, it can be a more complex process. With the unusual weather-related events we have had lately it has been difficult to predict.
It also depends of the mix of properties in your portfolio. If you have a blend of multi-family, office space, light industrial and commercial, each one of those presents a different challenge both from a property and general liability standpoint.
How does the assessment or due diligence process work?
As mentioned before, your broker will want to look at your current policy, location schedule and statement of values so that he or she can identify the types of property in your portfolio, profile of the properties and where they are located.
The broker will then start their due diligence by conducting a survey of each property with the on-site property managers or whatever other resource they have access to. This will involve identifying items as simple as construction, square footage, age, and fire and life safety features. With the more challenging or larger properties, utilizing a broker’s loss control department or risk management personnel to visit the site is always an efficient way to evaluate a property’s exposures. An exposure analysis checklist can assist even a smaller business in its coverage review.
Your insurance needs should be assessed yearly, at minimum, but if you have a large portfolio with an extensive footprint across the U.S., you may want to do a quarterly or midterm review. This is something that every business needs to do. Often businesses simply continue to renew and pay their insurance bills without considering what they are paying for and whether their needs have changed.
How can you identify the right broker for your needs?
Choosing a broker is a huge issue, and you should interview several brokers to find the right match for your needs. Too many business owners simply bid out what they believe their insurance needs to be to several brokers in hopes of achieving some cost savings.
While important, price shouldn’t even be part of the initial conversation with the broker. Instead, the broker should ask questions about your business in order to start assessing your needs.
You should be asking questions, as well, to determine what the broker is going to be able to bring to the table, besides a quote.
Any broker can obtain a quote for you. But when a large loss occurs, is it just going to be you and your assigned adjuster mediating a loss? Or is your broker’s team going to be your ongoing advocate to help you begin your road to recovery?
Ask whether your broker is specialized in the market segment in which you do business. You want a broker that is an expert in your field, as you are. Ask about the broker’s relationships with the insurance carriers he or she represents. Also ask for referrals and call several of the broker’s current clients. Lastly, what other services and resources does he or she bring to the table? Price obviously is an important consideration, but after a major loss, the support and services provided by your broker can make a significant difference in how quickly your business can recover.
Jeffery P. Reisner, CPCU, CWCC, leads the Real Estate Insurance Practice at Neace Lukens. Reach him at (216) 446-3336.
When signing a contract with a vendor or supplier, you are most likely agreeing to terms that are either bringing on risk or passing on risk. Almost every company doing business has partaken in this for years, but have you ever examined what is actually written in your contracts and how your company is affected or exposed?
“A product will be handled by multiple parties throughout its life cycle while moving through the entire supply chain, manufacturing chain and distribution chain,” says Dennis J. Vogelsberger, CPCU, CWCC, a partner at Neace Lukens. “Sound business relationships are vital for smooth functioning and for getting the product out to market quickly. So how do you handle mishaps that inevitably occur, while still avoiding potentially contentious situations with suppliers and vendors?”
Smart Business spoke with Vogelsberger about how to make sure your company is protected by its contracts.
How can a company protect against taking on undue risks with suppliers and vendors?
The best way is to clearly spell out each party’s responsibilities in advance through various contractual agreements, which are typically required. Because injury and liability can be created at any point along the product’s path to the end consumer, it is important to create language that shifts the burden of responsibility to the party that has the greatest ability to mitigate the risk.
The portion of the contract that deals with risk transfer is critical. Contractual laws vary from state to state, and your attorney should advise you on those nuances. Also, every contractual agreement should be looked at individually. A generic agreement is not recommended, as relationships with vendors and suppliers can vary.
What are some commonly used provisions to accomplish contractual risk transfer?
Indemnity provisions may include one or more of the following obligations: to indemnify, or to reimburse the other in the event of a loss; to defend by paying for legal defense if a third party brings a claim; and to hold harmless — to exempt a party from responsibilities in the event of damages.
Before agreeing to an indemnification provision in a contract, check the wording against the coverage provided by your insurance policy, as many times the indemnification section in the contract is broader than the coverage in the policy. In that case, you would be responsible for the uninsured liability. This is important, as many policies will not cover the other party’s sole negligence, yet many contracts have this wording in them.
Another common provision is the exculpatory provision, which is a way to eliminate a company’s liability stemming from its own wrongful acts. It may be a simple statement in the contract requiring the other party to waive claims against you that result from the business being transacted. In theory, this shields you from potential lawsuits; however, courts may not enforce it. As a result, be very wary of accepting this type of provision.
What additional provisions should businesses be aware of?
The additional insured provision allows you to transfer risk by requiring the other party to list you on its insurance policy as an additional insured, and vice versa. This obligates its insurance carrier to defend and indemnify you as an additional insured, even though you pay no premium. Within this provision, other insurance requirements may also be stated, such as limits, type of policy form and what type of insurance is required.
It is not enough to get an e-mail stating you were added as an additional insured, or a certificate of insurance. You need to see the actual endorsement, as coverage for an additional insured can be drastically reduced to limit the insurance carrier’s exposure, leading you to be severely underinsured. The endorsement will spell out how you are covered and if there are restrictions or sublimits.
On the other side, if you are adding companies to your insurance policy to gain their business, be careful. Protect yourself by doing an annual aggregate contractual liability exposure analysis with your broker to understand all the liability that you have taken on.
For example, if you add 10 companies as additional insureds throughout the year and you only have $1 million in liability coverage, is that enough in the event of a claim? Or if you have a $900,000 claim, that leaves only $100,000 left for all the other additional insureds to tap in to, which can leave you woefully underinsured.
Finally, waiver of subrogation provisions can be critical. Subrogation is the process of one party’s insurance carrier seeking reimbursement from the other party for money spent if it believes that other party was at fault. If your insurance carrier is seeking reimbursement from your business partner, it has the potential to severely damage that business relationship. To avoid deteriorating partnerships, one or both parties can agree to waive their right of subrogation against the other before a loss occurs. As with the exculpatory provision, the waiver of subrogation may not hold up in court in the case of gross negligence or willful misconduct. Additionally, your insurance company, in some cases, will have the final say because it is paying the claim and/or trying to recover monies.
Just because you sign a contract doesn’t mean your insurance company will agree to the terms and cover a claim. Understanding these terms and provisions, as well as how to properly transfer risk, is a step toward limiting your company’s overall liability landscape.
We are not attorneys and are not recommending any legal advice. All contracts and the information above should be discussed with your counsel before implementing.
Dennis J. Vogelsberger, CPCU, CWCC, is a partner at Neace Lukens. Reach him at (216) 446-3324 or email@example.com.
If you haven’t done a dependent eligibility audit of your health insurance plan recently, you may be paying for benefits for people who don’t belong on the plan.
“A dependent eligibility audit provides an inspection of an employer’s health and wellness plan to ensure that dependents who are enrolled in the plan are actually eligible to be there,” says Jamie Debenham, vice president of Neace Lukens.
While some of those people may be on the plan as an oversight, others may be intentionally enrolled, and that could be costing you money, adds Brett Vogelsberger, senior account executive of Neace Lukens.
“If an ineligible dependent is intentionally enrolled, it is probably because that person needs care, and that could increase your costs,” says Vogelsberger.
Smart Business spoke with Vogelsberger and Debenham about how conducting a dependent eligibility audit can help control wasteful spending and potentially reduce your premiums.
What type of companies can benefit from performing this kind of audit?
Generally, the companies that can benefit most are those that have more than 100 employees. But not all 100-employee-plus companies would benefit if they have mostly single employees with single coverage.
Employers that have a lot of employees with family dependent coverage are most likely to benefit from an audit. In those larger employer groups, it’s a fairly frequent occurrence that there is someone on the policy who isn’t eligible to be there.
How does a company begin the audit process?
The first step is to notify employees 30 to 60 days beforehand that you are going to do a dependent eligibility audit and give them the opportunity to voluntarily terminate ineligible dependents. This provides an amnesty period, without penalty, for employees to come forward and remove that ineligible person.
Next, identify a firm that has experience with audits. The firm will send a notification to your employees who have dependents on their coverage, requesting information. If the dependent is a spouse, the notification will ask for a federal tax form filed within the last year that shows both the employee and the spouse on it.
If there are covered children on the plan, the notification will request a birth certificate and a copy of a federal tax return.
If applicable, the employee will also need to submit a divorce decree stating that he or she is required by the courts to provide coverage to a child who is not residing in the home.
Getting the documents you need can be time-consuming, both because employees are reluctant to provide them and because they forget. You should allow for at least 90 days to complete the process.
How can you overcome employees’ resistance to providing personal information?
You need to assure them that everything is HIPAA compliant and that the information will only be used for audit purposes. You can also provide them with a secure e-mail address and ask them to white out financial information, Social Security numbers and other sensitive information from the documents.
But even if an employee is uncomfortable, he or she cannot refuse to submit the required documents. Because the plan is sponsored by the employer, the employer has the right to legally dismiss the employee if the enrollment application was fraudulent or to remove the dependents from the plan for noncompliance with the documentation requirement.
From an initial enrollment perspective, employers should ask for specific documents up front in order to prevent ineligible employees from being enrolled in the first place, especially when enrolling dependents.
What do you do if you find ineligible dependents on the plan?
The employee would be notified that the dependent will be terminated as of an effective date in the future. Before health care reform, those terminations were backdated. That has become more difficult to do because of the new rescission laws, which do not allow canceling the contract as though it never existed.
How can doing an audit benefit a company?
It will certainly benefit on premiums and also from the performance of the health plan as a whole. You benefit from claims not filed by an ineligible dependent, because generally, someone who is deliberately on the plan is going to be using the plan and creating claims and ultimately spending a lot of money. In addition, over a long period of time, because the claims would be coming down, that may ultimately result in better rates.
Employees may also benefit. Most companies ask employees to pay a portion of their premium, and if getting ineligible dependents off the plan improves premiums, that benefit is going to trickle down to them.
Some employers may be reluctant to pursue an audit because they don’t want conflict, especially if they suspect that a highly paid or key employee may have an ineligible dependent on the plan. But not removing that person could be a costly mistake.
What would you say to business leaders who say the process is expensive and time-consuming?
I would tell them about the potential savings, because that is going to directly hit their pocketbook. The audit may initially seem expensive, but not compared with the savings that you will get from finding ineligible employees. There are quite a lot of dollars involved, and a significant amount can be saved as the result of performing a dependent eligibility audit.
How often should an audit be performed?
For a company with high turnover, it should be done every year, or at least every other year. For a very stable company, once you’ve done it once, you may be able to wait five or six years before doing it again.
Jamie Debenham is a vice president with Neace Lukens. Reach him at Jamie.Debenham@neacelukens.com or (216) 446-3312. Brett Vogelsberger is a senior account executive with Neace Lukens. Reach him at Brett.Vogelsberger@neacelukens.com or (216) 446-3304.