Traditional desktop phones are on the way out, as companies discover that unified communications software now provides additional and more convenient ways to communicate and share messages with employees and clients.
“When Voice over Internal Protocol (VoIP) was introduced, many capabilities were promised. With the recent uptick in real-time communication services — instant messaging (IM), presence information, video conferencing, speech recognition, etc. — being used in conjunction with non-real-time communication — voicemail, email and fax, we’re finally seeing some of those capabilities being implemented and the promises of VoIP finally being delivered,” says Jeff Beller, IT and telecom consultant with Skoda Minotti Technology Partners.
Smart Business spoke with Beller about unified communications and how it enables companies to be more efficient.
What is meant by unified communications?
Unified communications has evolved to now deliver more fully on the promises of VoIP — to streamline communications so as to accelerate it, extend its reach and afford efficient means of collaboration. Recent advances in presence and mobility technologies have made it more useful.
Unified communications is software that brings different communication into a single user interface. The software provides presence, voice, IM, ad hoc collaboration — audio or video, and online meeting capabilities — all viewed, monitored, initiated and controlled via a single unifying application. All communication modes are connected so that workers and clients are able to get help at that moment in time.
As a comparison, only 20 to 30 percent of calls are answered when using more traditional services, with most calls going to voicemail. The phone tag scenario and, ‘I’m not available, please leave a message,’ won’t differentiate you from the competition.
What equipment is needed?
You need a VoIP-enabled phone system. The software application can run on your desktop, smartphone or tablet so it’s not only unifying communications, but also the various devices. Your smartphone turns into an office desk phone, and when you leave the office, a caller automatically reaches you. It’s not call forwarding; it behaves like your office desk phone with the same number and controls like transferring or conferencing.
Manufacturers that offer VoIP also have unified communications applications (chat, presence information, etc.), or you can use a third-party application, like Microsoft Lync, with those VoIP systems. Have a needs and readiness assessment performed to learn what your needs are, understand what is out there and then decide what works best. It’s best to work with a consultant who can demonstrate different manufacturers and technologies, rather than just one offering.
How does ‘presence’ work?
Presence makes communications more efficient by mining data in your Outlook calendar and, when you’re unavailable, switching availability off for your instant messenger or phone system. It can tell how you’d prefer to be reached or who to contact in your absence. Also, if there’s no keyboard activity for 15 minutes, others can see you’re likely not at your desk. This information populates a dashboard in the unified communications interface that also controls calling, instant messaging and conferencing.
The real-time display of intelligent presence information, combined with mobility, really benefits a receptionist, who can direct the caller to the right person almost instantly. Fewer calls go to voicemail, so clients are served better. Similarly, field service staff can communicate with co-workers more efficiently to solve problems faster and provide better customer service.
What’s the future of unified communications?
The need for a desk phone will become less as workers acclimate to using unified communications software on their desktops. Presence technology also will improve with multiple datapoint mining for instant assessment of communication states. As this state becomes more granular and meaningful, it drives ‘smart’ communication routing. And, as ‘always-on-and-always-connected’ mobile devices (smartphones and tablets) are integrated into the corporate network infrastructure, the use and significance of desk phones will dissipate.
Jeff Beller is an IT and telecom consultant with Skoda Minotti Technology Partners. Reach him at (440) 449-6800 or firstname.lastname@example.org.
Business insurance costs and coverage terms have become unstable, but there are steps that businesses can take to minimize risk and keep costs under control.
“Health insurance rates increase almost every year — there’s never good news. With respect to property and casualty insurance, premiums have been decreasing or flat for a number of years. Because rates have been stable, business owners are often unwilling to spend time and resources on loss control and risk management,” says Peter Bern, CEO of Leverity Insurance Group. “This reduction in pricing is deceptive, setting businesses up for a shock when the insurance market takes a turn, so it’s important to proactively address risks and losses now before insurance prices begin to climb. Those that simply ride the market without working to reduce risk will have a harder time placing coverage and won’t be offered rates that are as competitive and coverage that’s as comprehensive as they had seen in the past.”
Smart Business spoke with Bern about the causes of the hardening insurance market and what companies can do to address the situation.
What does a hardening market mean?
It’s not just an increase in premium rates; rather, insurance companies and their underwriters are also taking a closer look at the risks and determining whether they want to change the coverage terms by requiring higher deductibles or are unwilling to provide as much, or any, coverage for specific exposures. Basically, it’s a challenged marketplace and it’s more complicated to get competitive and comprehensive coverage from insurance companies.
Why is this happening?
Over the last several years, insurance companies have been hammered by unprecedented losses from natural disasters, corporate fraud and dealing with continued flat investment returns, which can be attributed to the weak economy. Worldwide, insured catastrophe losses have hit and exceeded historical records, and, as a result, insurance companies are paying out more in claims than they’re taking in through premiums. As 2013 begins, there is no doubt that Hurricane Sandy will have a large impact on the insurance marketplace. The scary part is that the losses are still being added up. Bottom line, for insurance companies to make money and stay financially viable, they need to increase pricing and exercise greater discipline in underwriting risks.
What potential rate increases do companies face if they don’t take action?
As a business owner, a 10 to 15 percent increase in cost will still be unpleasant, but a 40 percent or more increase in addition to a reduction in coverage could affect the viability of your company. Over the past year, premium rate increases of approximately 5 to 7 percent are being seen throughout the insurance marketplace. However, certain segments and businesses have experienced larger increases in premiums because of loss frequency and severity, as well as diminished capacity in the marketplace.
What can businesses do to take charge, control losses and mitigate the effects of the hardening market?
It starts with proper risk management practices to prepare in the event of a loss. By partnering with a trusted adviser, businesses can:
• Pinpoint exposures and cost drivers.
• Identify loss control solutions tailored to unique risks of the business.
• Create a contingency plan to account for disaster and unpredictable risks.
• Build a company focused on safety.
• Manage claims efficiently to control costs.
• Determine the most competitive and comprehensive way to transfer risk.
Even if the insurance marketplace doesn’t harden to a point that it affects your company’s well-being in the short or long term, a business with effective loss control and risk management initiatives will always pay less to secure and protect its assets and exposures in any market conditions.
Peter Bern is CEO at Leverity Insurance Group. Reach him at (216) 861-2727, ext. 512 or email@example.com.
Insights Business Insurance is brought to you by Leverity Insurance Group
Think your company has no confidential information that needs to be protected? Think again.
“All companies have confidential information which, if compromised, could cause immeasurable damage,” says Kate B. Wexler, an attorney in the Business, Corporate & Securities practice group at Brouse McDowell. “Confidential information can be tangible or intangible and of a technical, business or other nature.”
Wexler says there are occasions where such information needs to be shared with employees, contractors, suppliers, customers, vendors, potential partners and others, and a confidentiality agreement should be put in place to protect the company’s interests.
Smart Business spoke with Wexler about confidential information and situations when you might want a confidentiality agreement.
What needs to be kept confidential?
Any information not generally known to the public should be treated as confidential, provided that you take steps to keep your information confidential as well. When you are sharing your company’s confidential information with any third party, you’ll want to press for a definition of confidential information that is as broad as possible to avoid any argument later on that any particular piece of information was not covered by the confidentiality agreement. It can be as general as all information, whether written or oral, delivered by your company in connection with a contemplated transaction. Of course, as the recipient of such information, you’ll want to limit this definition by requiring that all information disclosed be marked ‘confidential.’
Under what circumstances would you enter into a confidentiality agreement?
Contexts in which confidentiality agreements are used include agreements with individual employees to ensure they understand their obligations to the employer; agreements with potential partners in a joint venture; supplier agreements; and agreements between companies wishing to explore a potential acquisition or merger.
Although parties often rush through the step of entering into a confidentiality agreement when their new relationship begins, and sometimes omit it entirely, it’s critical in defining the relationship’s rules.
These rules not only include defining what’s mine and what’s yours, but they also address the level of care a receiving party must take with your confidential information; prohibitions against reverse engineering; disclosure to governmental entities; compliance with laws to which your company and your information is subject — e.g., HIPAA, GLBA, U.S. export laws; injunctive relief should a party breach the confidentiality agreement; and what happens to the information when discussions end.
Other issues often addressed in confidentiality agreements are confidentiality of the fact that the parties are even in discussion, and nonsolicitation, which prevents a potential partner from attempting to poach your employees that they may meet in the course of exploring this potential relationship.
Are there restrictions?
Yes, there are many situations where the disclosure of confidential information is required by law. For example, judicial or governmental order or by deposition, interrogatory, request for documents, subpoena and civil investigative demand. These situations can be addressed in the confidentiality agreement as permitted exceptions. It is also interesting to note that there are certain non-U.S. jurisdictions that will not recognize an agreement that prohibits reverse engineering.
Are there occasions when you might want to terminate a confidentiality agreement?
One such situation would be when the parties enter into a definitive agreement whereby confidentiality obligations between the parties would be addressed. Another might be when one or both parties no longer wish to pursue the objective of the relationship. In that case, a well-drafted confidentiality agreement would anticipate that situation and while the parties may no longer share information, their obligations to maintain confidentiality with respect to the previously disclosed information continues for a certain period of time.
Kate B. Wexler is an attorney with the Business, Corporate & Securities practice group at Brouse McDowell. Reach her at (330) 535-5711, ext 399 or firstname.lastname@example.org.
Insights Legal Affairs is brought to you by Brouse McDowell
You may be paying too much or not offering the right incentives to retain your employees if your company isn’t benchmarking its benefits program annually.
“It’s important to see where you’re stacking up in terms of offering competitive benefits compared to employers that are recruiting and attracting the employment base that you recruit from,” says Daniel Meracle, Employee Benefits Consultant and Wellness Adviser with Benefitdecisions, Inc.
Smart Business spoke with Meracle about the benchmarking process and how it can help in planning business strategy.
What is benchmarking?
It’s comparing the benefits your company offers employees to those of like employers in similar industries, geographic regions and of similar size.
You can compare just about every feature of the benefits, from employee contributions, both as a dollar amount and as a percentage of the overall premium, to total out-of-pocket cost per employee or per family. You can also get into details of the plan regarding deductibles, co-pays, out-of-pocket maximums and so on. Once you have made these comparisons, you can evaluate how your company stacks up relative to your peer companies. Your company may have a specific strategy around benefit levels and can use the benchmarks to determine if you are meeting this strategy. The benchmarks can also tell you where you are out of line with competitors in terms of costs or benefit coverage, or if you’re not offering a benefit that is now common.
Medical cost, coverage and plan design are typically the largest portion of a benchmark analysis because medical insurance is the biggest cost component of an employer’s benefits package. However, you can look at all the ancillary lines, such as dental, life, disability, 401(k), pension plans, wellness programs — even incentives and features within wellness programs.
How are the results used?
The benchmarking analysis helps you strategize about what level of benefits you want to offer. Do you want a richer benefits package to improve retention, or is it time for a change that aligns you with your peers?
It also helps you come up with a plan of action rather than just be satisfied with getting a 4 percent increase in health insurance premiums instead of a 15 percent increase. If you have a much higher cost per employee per year than the benchmarks are showing, that means you either have richer benefits or some higher-utilizing employees in your plan. You can then change the benefit plan to shift more costs to the high utilizers, or justify the cost for investing in and launching a wellness program. It’s a strong encourager of wellness programs when you can show that medical costs are 20 percent higher than the norm, for example.
Where do you get the information?
There are benchmarking reports put out annually by various insurance carriers, industry associations and brokers. These reports compile statistics in numerous categories and drill down into plan design and features. For example, reports will show how many employers cover bariatric surgery and what kind of co-pays they put on emergency room visits.
What information is needed for an analysis?
Usually just a copy of your medical plan summary of benefits, the most recent month’s health insurance bill and the schedule of employee contributions.
Can companies do this by themselves?
Usually a broker or benefits consultant puts together the reports and the analysis of your company’s plan relative to the benchmarks. Often there are recommendations for plan, contribution or benefit changes resulting from the analysis. The analysis may also confirm you are achieving your benefits strategy.
It is important to benchmark using the same data source and around many of the same categories each year so you can evaluate changes and progress.
By monitoring benchmarks annually, you can evaluate your plan design to ensure cost-effectiveness, that your benefits’ objectives are being met and you’re providing competitive benefits for your employees.
Daniel Meracle is a Employee Benefits Consultant and Wellness Adviser at Benefitdecisions, Inc. Reach him at (312) 376-0433 or email@example.com.
Insights Employee Benefits is brought to you by Benefitdecisions, Inc.
“It’s definitely not a program for people who are lazy or are quick to give up,” Magyar says. “It is not easy, but it is so worth it because the rewards are phenomenal.”
After 20 years of working in events and menu planning, Magyar stepped outside her comfort zone and it led to a position as an innovation manager at Mattson, the largest independent developer of new products for the food and business industry in North America.
Smart Business spoke with Magyar about her experiences in the MBA program and working at a job in which she could be “tasting sauces at 7 in the morning and cocktails at 2.”
Why did you choose UCLA’s executive MBA program?
It was convenient for me because I worked for The Walt Disney Company at the time. But it’s also an internationally acclaimed program and it’s very well respected in the entrepreneurial world.
I considered applying for the class of 2008 and audited a class. I listened to how the class interacted and how supportive the students were of each other. There were teaching moments not just from the professor at the front of the room, but also from all 65 students sitting in the chairs. I was impressed with the openness of the classroom environment. There wasn’t the cutthroat competition or one-upmanship that I’ve heard exists in other high-caliber programs.
Why is that the case?
I believe it is systemic in the Anderson culture. I worked in the recruiting and admissions department after I graduated and saw what they look for in incoming students. It’s not just what you’re going to get out of the program, but also what you’re bringing to it as a potential student. The admissions team considers all the pieces and how they will fit when putting together a class.
You’ll learn a lot from an amazing caliber of professor, but you’ll learn just as much in a different way while sitting next to CFOs, CEOs or senior vice presidents in finance or marketing who have had amazing real life experience.
How did the MBA program prepare you for your current job?
The key thing my MBA gave me was a sense of confidence to step out beyond what I had known for so long, which was event management and planning, and food and beverage. I’m still in the food world, which I love and I’m passionate about, but now I approach it from a completely different perspective.
When a client comes to me with a new food or beverage product, I not only can show them the formula they need and how to make it taste good, but I can also get them thinking about what will give this new product a level of competitive advantage and protect it from being immediately knocked off by potential competitors or what kind of marketing strategy to use when presenting the concept to potential buyers.
Did anything about the MBA program surprise you?
I knew I would come out of it a stronger, faster, smarter person, that’s what a good MBA program is all about. But I was really impressed with two things from Anderson. First was UCLA Anderson’s network. I reached out to Anderson alums for my strategic research project and afterward while recruiting and I’ve always gotten a call back. It’s a big school, but it’s a very tight, supportive community.
The second thing that surprised me was how quickly I was able to put the lessons learned into practical application. There were a lot of opportunities for me to go back to the office and be faced with a strategic project or personnel issues that I now had a new way of thinking about. It’s pretty spectacular when you’re in a position to apply what you’ve learned and get a real return on your educational investment quickly.
Janine Magyar is a graduate of the Executive MBA program at UCLA Anderson School of Management. Reach her at (818) 486-6590 or firstname.lastname@example.org.
Insights Executive Education is brought to you by UCLA Anderson School of Management
Microfilm does the job of preserving your company’s documents and publications for up to 500 years. But content digitalization offers an archival-quality storage method that allows convenient, searchable access to these materials.
“Digitalization allows you to unlock the potential of the content,” says Natraj Kumar, general manager of Business Process Outsourcing (BP0) Services at HTC Global. “The Financial Times, for example, already has the content and most is available in physical form. They wanted the content posted on their website so people can access it and they can make revenue from it.”
Smart Business spoke with Kumar about the process of transferring content to digital form, the value it provides and the types of companies that are benefitting from digitalization.
What businesses are utilizing content digitalization?
The companies that are transferring content to digital form are e-research businesses like ProQuest and Gale, which is part of Cengage Learning. They maintain databases of reference content used by libraries, schools and businesses. Their revenue is based on a subscription model, so they want to have their content on the Internet.
Another set of customers is national libraries, like the National Library of Australia or the Library of Congress.
Content digitalization helps anyone with a huge amount of paper or a large library. When the Enron and Arthur Andersen scandal hit, quite a few legal firms had to go through the paperwork and find liability and assets. The contract to convert that into digital form was for $25 million, so you can imagine how many pages were involved.
How is content digitalized?
Normally, material is scanned from books and microfilms. Sometimes it’s also from digital content. We’re working with National Geographic magazine and they send PDFs of issues.
But conversion from scanned to digital form is only part of the story. The indexing and granularity of the content is the engine behind the digital archive. Scanned images are fine, they’re still accessible, but if the indexing is good it helps people locate their content of interest quickly.
Indexing is a painstaking process; when it’s scientific, medical or biology related content it’s important to have people with degrees in those fields read through the material and do the indexing because it’s not just about English, it’s about subject knowledge. You have to know which terms to index.
What are the advantages of going digital?
Looking up all pictures of Mount Everest that appeared in National Geographic magazine would be a tedious task if you have to sift through 50 years of magazines. With the type of metadata utilized and the indexing that is done, a search brings out all of the details. These photos are not available on Google; this is copyrighted material and not available in the public domain.
It makes research materials so much easier to find. For example, Cengage has a platform featuring different content sources. When you search the term ‘Wall Street crash of 1989,’ you’re going to get articles from The Economist, the Financial Times and quite a few newspapers that they are hosting.
What should you consider when choosing a company to transfer content to digital form?
There are a lot of companies that offer this service and throw people into the job. It’s important that the company apply technology wherever possible, because of the cost benefit and speed to market. The typical archiving project runs from 750,000 to 1.5 million pages. If the project takes two years, your product could become irrelevant. You need a company that can get the job done in six months.
The company also needs to know what they’re doing to the extent that they will not be asking a lot of questions and tying up your employees. In short, they need the capability to deliver good quality and a large volume in a short period without engaging most of your resources.
Natraj Kumar is general manager of BPO Services at HTC Global. Reach him at email@example.com.
Insights Technology is brought to you by HTC Global Services
If you’re committing resources to a trade show, don’t expect to spend a lot of time on the golf course, poolside or in a casino.
“Once you’ve chosen a show and established a budget, the most important thing to know is that it’s not a vacation,” says John F. Kallmeyer, director, Visual Marketing, Skoda Minotti Strategic Marketing. “There’s a perception out there that you go to these trade events and it’s a big party. But the reality is that if you’re spending the money to go to a trade show, you better go in with a plan and proper training beforehand.”
Kallmeyer says an EXPO Magazine survey of business-to-business marketers showed average spending on trade shows was about 20 percent of a company’s overall marketing budget.
Smart Business spoke with Kallmeyer about preparing for trade shows, the benefits of being an exhibitor and things you might not know about industry events.
If your industry has a trade show, do you have to participate?
It isn’t mandatory, but one of the top reasons companies do trade show marketing is to increase brand awareness — to be seen by all of the major players in the industry, whether your clients, your prospects or even your competition. So in that sense it’s good to go to shows if you want to be a player in your industry.
From a business development standpoint, it’s important to note the top-cited reason attendees go to trade shows is to see new products and services. They like to stay up on industry trends and issues, so if you have something new to offer to the industry you should be at the trade shows and putting the information out there.
What do you need to know before operating a booth?
Make sure you match your message to the audience, the particular attendees going to the show, and not only know how you’re going to promote that to get people to your booth, but also have a very specific plan to follow up with anyone you talk to and capitalize on that.
Pre-show marketing strategy is very important. Promote that you’re going to be there — for example, include that information on your website, promote your participation on social media sites, send out mailings to invite people to stop by, and send emails and newsletters and include that information. The more people see your name, logo and message, the greater the chance that when they’re wandering around that 80,000-square-foot exhibition hall, they’re going to seek you out or stop if they see you.
Also, create a concise message that matches the audience and then have properly trained booth staff to get everyone on the same page, looking toward the same goal and delivering the same message.
How is the sales environment different?
The trade show environment presents a very rich, yet challenging selling atmosphere. In a very hectic, crowded environment, you have to make eye contact with a potential buyer, engage them long enough to pre-qualify them and convert them to a viable sales lead — all in under just a few minutes.
Attendees generally want to see the entire show, so you have a limited time to make an impression. That is why pre-show planning and staff training are so important.
What are some important strategies for following through on sales leads after the show?
It’s critical to have a post-show marketing strategy in place before the show. As soon as you get back you should begin to follow up on show leads — for example, send a promotional item or an email follow-up or make phone calls. Additionally, it’s imperative to identify and track show leads so you can calculate meaningful ROI from attending the show.
John F. Kallmeyer is director of Visual Marketing with Skoda Minotti Strategic Marketing. Reach him at (440) 449-6800 or firstname.lastname@example.org.
Insights Accounting & Consulting is brought to you by Skoda Minotti
When it comes to insurance, people are accustomed to choosing an insurance program strictly by rate — a point proliferated by many commercials emphasizing premium savings.
“Technology has forced that upon us as consumers. Everyone’s talking about rate and not about relationship,” says Hoch. “Business insurance is a partnership. Your insurance partner should be a trusted adviser who helps you leverage your risk. They should be very involved in your business, like your accountant or lawyer. It’s a long-term relationship rather than a commodity.”
Smart Business spoke with Hoch about business insurance and what people should consider when looking for an agent.
What is business insurance?
‘Business Insurance’ is a broad name for different coverage available to a business owner to protect against losses and to insure the continuing operation of the business. At the very basic level, it can be defined as the management of risk. There are insurance risks that, while they may never occur, can be so catastrophic that it makes sense to plan ahead and manage the risk. Insurance companies take in premium payments from many businesses, invest those payments, and create a ‘pool of money’ to pay out to a business if they suffer a covered loss.
What should be considered when choosing a business insurance agent?
You want to look beyond just price. Independent agents have access to multiple insurance carriers. They represent your best interests by leveraging their resources to find solutions to every type of risk associated with your business. An insurance agent should do his or her homework and get to know the prospective client by meeting with key people in safety, engineering and operations, and asking them open-ended questions to get them to talk about their business in order to identify its exposures. Truly, you want an insurance agent who will provide you with a thorough second opinion, rather than just quoting on an ‘apples-to-apples’ basis.
Are there ways to tell if an agent provides good service?
Good service is about the ease of doing business, like immediate customer service that includes same day turnaround on certificates of insurance, 24-hour claims service, online claim reporting, and account servicing for things as simple as adding an automobile or a driver or getting additional coverage. They should also be able to provide other risk management services like disaster planning and workplace and fleet safety programs, to name a few.
What are commonly purchased types of business insurance?
General Liability, Property, Auto Liability, Workers’ Compensation and Professional Liability are probably the most familiar. However, those that might not come immediately to mind are Cyber and Privacy Liability, Employment Practices Liability, Fiduciary Liability, Directors and Officers Liability and International coverage.
When looking for an agent, you want to look for someone who is knowledgeable beyond the common types of commercial insurance policies that any agent can provide.
How important is it for the insurance agent to have a background in the client’s industry?
It’s vital. When seeking an opinion on your personal health, you want the right doctor who specializes in your specific condition. Similarly, you want an insurance agent who understands how your business works so that the insurance can be applied to your specific needs. You will benefit from working with someone who can make sure you get the right solution to any issues you might have.
A good insurance adviser can audit your business and find deficiencies in terms of insurance, and possibly the business itself. A trusted adviser and a comprehensive insurance program can help protect the longevity and viability of your business.
Derek Hoch is president of Leverity Insurance Group. Reach him at (216) 861-2727, ext. 517, or email@example.com.
Insights Business Insurance is brought to you by Leverity
Health care reform is on the way, with most mandates starting in 2014, but it will be 20 or 30 years before we really know how the Patient Protection and Affordable Care Act (PPACA) will work, says William F. Hutter, president and CEO of Sequent.
“That creates much uncertainty for small and middle-market companies.
They don’t know what to do. And that uncertainty is bad for the economy and it is bad for business. When business owners can’t make decisions, it’s bad for all of us,” says Hutter.
Smart Business spoke with Hutter about some of the lesser-known aspects of the PPACA.
What are the minimum participation standards?
There are two standards for minimum participation:
• 80 percent of all eligible employees must take coverage from the employer.
• 70 percent of net eligible employees must take coverage from the employer.
Net eligible employees won’t include those who decide to get coverage from a spouse’s plan.
A really unique caveat about this is that if a company cannot maintain those participation requirements, technically no carrier has to write it coverage. That would force the company into a state health care exchange because it would be unable to provide a health insurance program for employees.
You could try to increase employee participation by improving the plan, but then the cost goes up and the company can’t afford it. Or the cost goes up and somebody can go to the state health care exchange and get a subsidized plan for less.
A lot of companies with between 75 and 150 employees are really going to be challenged. If they can’t meet minimum participation requirements and can’t afford to design a plan to compete with the exchange, they can give up and let everybody go to the exchange. But then they have to pay a $2,000, per employee, nondeductible penalty. For a company with 100 full-time equivalents (FTEs), that’s a $200,000 tax and they still don’t have a health plan.
How can companies that provide adequate health insurance still wind up paying penalties?
Say I run a company that has more than 50 FTEs and I’m offering a good health care plan. However, because of the subsidies that are offered, an individual opts out of my health care plan and instead seeks out insurance from a state exchange. A family of four can earn up to $80,000 and get a subsidy for buying on the exchange. I could still wind up paying a $3,000 penalty if I have an employee who opts out.
So companies will be weighing whether it costs more to provide health care or simply pay the penalty?
Correct. If that’s the case, how does that impact my company culture and how do I want to take care of my employees and their families? We don’t know how some of those questions are going to manifest. Or the fact that, as an employee, I get my health care out of an exchange, therefore I can go to work anywhere I want to. That begins to break down the loyalty factors between employees and companies.
What impact will the PPACA have on health insurance costs?
Based on the average cost of $440 per month for an individual, 75 percent is used for claims. That means the remaining 25 percent, or $110, goes for administration costs, profits, compensation, rents and other expenses related to the health care plan. The legislation says that 85 percent of every dollar must be used to pay claims. In order to maintain that same $110 a month, the cost for an individual goes up to $730; it’s just a reverse calculation. This can be attributed to the legislation and how it ultimately impacts the medical loss ratios.
William F. Hutter is president and CEO at Sequent. Reach him at (888) 456-3627 or firstname.lastname@example.org.
Insights HR Outsourcing is brought to you by Sequent
President Barack Obama’s re-election means health care reform is certain, and businesses need to plan to meet Patient Protection and Affordable Care Act (PPACA) mandates, most of which will be effective on Jan. 1, 2014.
There are ways companies can structure themselves to avoid any type of penalty and maintain their employees’ benefits, says Stefan Thomas, an associate with Kegler, Brown, Hill & Ritter.
“Because of the ambiguity of the law, it’s a difficult subject matter for companies to understand. Some are opting in or opting out of insurance plans, some are self-insured and some are privately insured. It’s really specific and handled on a case-by-case basis.”
Smart Business spoke with Thomas about steps that companies should take in order to meet PPACA mandates.
What steps do companies need to take in order to be prepared for the PPACA requirements?
First,companies need to determine if the law will affect them. Depending on the size of the company, it might not. They would have to be an applicable large employer, which means having 50 or more employees, including full time, full-time equivalent and seasonal workers.
There are other things to consider, such as whether the seasonal exception is applicable or whether full-time-equivalent workers (2-to-1) or seasonal employees, defined as those who work four or more months, have caused them to become large employers.
If a company is subject to PPACA mandates, what is their logical next step?
The next thing for a company to do is to figure out whether or not they’re providing any insurance and, if they are, whether it’s adequate. If it’s not adequate, it needs to be, meaning that they’re paying a certain percentage of the premium, which should be 60 percent.
If they’re large and have insurance that meets the 60 percent threshold, then they don’t have to worry about anything. But if they fail to provide the adequate amount, they have to pay a tax penalty, which is based on a ratio and can be $2,000 or $3,000 per employee. On top of that, they have to determine whether an employee has opted into an exchange. However, if the employee hasn’t gone through the exchange, the company still might not be penalized.
Some businesses are trying to limit hours employees are working or they’re changing the way they are providing health insurance in order to avoid penalties.
Is there anything smaller companies need to know about the PPACA?
Small employers could be eligible for a tax credit if they have 25 or fewer employees, with salaries averaging $50,000 or less and they provide insurance. They also have to fill out tax form 990T to determine whether they qualify for credits.
Have all the regulations of the PPACA been determined now or are provisions still subject to change?
There is still quite a lot of ambiguity regarding the new law and that is just how it is going to be for the next few years. For example, it has recently been discovered that the Medicaid expansion is mandated.
If states fail to expand coverage to people up to 138 percent of poverty level, those states will not be able to receive full funding from the federal government. That is a big issue because Medicaid is one of the largest items in state budgets.
The health care reform law is evolving every day, so companies are advised to pay close attention to the regulations as they are rolled out. Consider dedicating staff to monitoring the act’s developments, otherwise your company could be missing tax credits or penalties that could be incurred because of lack of knowledge.
Stefan Thomas is an associate at Kegler, Brown, Hill & Ritter. Reach him at (614) 462-5484 or email@example.com.
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