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
Do you hire multiple agents for every renewal and shop for the lowest price? Do you spend countless hours each year reviewing the same business information with several agents? If you answered yes, you may be making simple insurance marketing mistakes.
“Business owners need to have a strategic plan for marketing insurance, part of the plan is a defined marketing and renewal process,” says Ryan Clugston, a client advisor at SeibertKeck.
Smart Business spoke with Clugston about common misperceptions regarding the insurance renewal process and how to make better use of your time and resources.
Why not purchase the policy with the lowest price?
Saving money may seem great, but it also could mean gaps in coverage. Every carrier’s policy differs in language and coverage offerings. The variables in the policy language and how the coverage is structured will greatly influence the cost of the policy. Sometimes the least costly policy has the right coverage, but not always.
Many times the least expensive policy has more constrictive language, including warranties that the insured must adhere to for coverage to respond in the event of a claim, such as having certificates of insurance for all subcontractors or that claims notifications have to be made within a specific time period for coverage to be provided. There are a number of other examples where a policy may restrict coverage. These can be removed or adjusted, for a charge, which would vastly improve the claims experience.
Always review the policy to make sure it is complete before switching based on price.
Should you shop insurance companies every year?
In the long run, businesses that shop their insurance every year looking to beat down their cost of insurance are doing themselves a disservice. When an underwriter sees the same submission to quote a business, year after year, from multiple agents, the underwriter will become less interested in quoting it. They assume that if they do write the insurance, they have a great opportunity to lose it the following year because it will be marketed again. It is beneficial to build a relationship with your agent and carrier; this allows them to get to know your business and business practices and can assist at the time of a claim or renewal.
Should you have multiple agents quote your insurance?
You should not use more than two agents to quote your insurance at any one time. When you have three or more agents involved in the quoting process, the amount of time the business owner and staff has to commit to answering underwriting questions, allowing time for loss control visits, etc., becomes overwhelming. By limiting yourself to two agencies to quote your insurance the process should be more manageable and effective. It is helpful to have a market selection between the agents, this helps streamline the quote process.
How can you find a knowledgeable agent?
Industry associations sometimes endorse an agency because of their familiarity with the industry. Sometimes the agency has a program specific to that industry as well.
Also, reach out to people you trust, such as your industry peers or another service provider like your banker, attorney, accountant or payroll provider.
Can I keep my current carrier, but change agents?
Business owners may wish to do a request for services (RFS) to determine who they want to represent their insurance needs. An RFS does not involve the marketing of your insurance. It is a process where the business owner may learn of the services and capabilities of multiple insurance agencies. Upon completion, the business owner will make their choice of agency and assign the policies to them to review, adjust, market and service.
Avoiding common misconceptions of the insurance renewal process can greatly reduce time, costs, and stress spent and created at your annual insurance renewal. Being strategic about selecting your agent and quoting your insurance can help you build a strong insurance team around your business, ensure the correct coverage is in place and provide competitive marketplace pricing. ●
Ryan Clugston is a client advisor at SeibertKeck, Best Hoovler McTeague. Reach him at (614) 246-7475 or firstname.lastname@example.org.
Insights Business Insurance is brought to you by SeibertKeck
Lean and Six Sigma were developed for manufacturing, but are gaining momentum within service industries.
“Both Lean and Six Sigma have been used almost exclusively in manufacturing. Now you’ll see black belts in all fields, from IT to financial services to health care,” says Chris Liebtag, a Lean Six Sigma Black Belt with Rea & Associates.
Smart Business spoke with Liebtag about Lean Six Sigma, a program that melds the two disciplines for maximum benefit.
What are the origins of Lean and Six Sigma?
Six Sigma originated at Motorola, but its roots can be traced through the Quality Circle Movement of the ’70s to the Total Quality Management teaching of the ’50s. It is a project-based methodology seeking quality and consistency. Lean, on the other hand, has a very complete toolkit and is mostly concerned with identifying and eliminating waste or non-value-added steps.
Lean Six Sigma combines the basic tenants of both to look at ways to remove non-value-added steps in a process and improve quality.
What types of businesses can be improved by implementing Lean Six Sigma?
It’s been very strong in health care and financial services. An emergency room might want to look at the process of admitting patients, or a medical billing organization that sends bills to multiple entities might want to determine how long it takes and ways to accelerate the process.
There must always be a business rationale; clients define the value and you’re looking to satisfy their needs and remove wasteful steps.
Should everyone in the company be trained?
It’s important to at least be exposed to the concepts. It does involve a cultural change within an organization, so implementation will require everyone to adopt the mindset of always looking for ways to continuously improve. Select employees should be trained as facilitators, but everyone should be thinking about how to better serve clients.
The results likely will be increased customer satisfaction, an enhanced business reputation and a competitive advantage. If you can deliver your product or service faster than competitors at a higher quality or even a lower price because of operational efficiency, it provides an enormous advantage.
Does that require Lean Six Sigma?
Efficiency and customer satisfaction initiatives can be tackled without Lean and Six Sigma. However, these techniques have been proven to be very effective when it comes to controlling costs and improving satisfaction among clients and employees. Employees are empowered to better their work environment, which eliminates turnover and produces a happier workforce. In turn, that leads to improved customer satisfaction. Lean Six Sigma provides a framework to generate these gains.
Does Lean Six Sigma need to be adjusted to fit the company?
The most successful projects are tailored specifically to address industry- or business-specific circumstances. The 30,000-foot view concepts and methodologies can be applied almost universally — define a problem, measure the variety of steps within that problem or process, and then analyze and improve it. However, the best results are produced by combining the tools and methods of Lean and Six Sigma with industry expertise. That industry expertise component also helps generate buy-in among employees.
How important is it to set goals for improvement?
You should always start with the end in mind, even if that goal might not be immediately achievable. If you want to reduce costs by 10 percent, process changes are designed to produce that result. You might only get to 8 percent — that doesn’t mean it wasn’t a worthwhile enterprise, it just presents an opportunity to continually improve toward that goal.
The idea behind Lean Six Sigma is continuous improvement. It isn’t designed to be a ‘one-and-done’ initiative. It’s a change in culture whereby employees embrace the mindset that the business needs to get a little better each year and sustain the gains. Lean Six Sigma is more than a technique or a process, it’s a discipline and approach to running your business. ●
Chris Liebtag is a Lean Six Sigma black belt at Rea & Associates. Reach him at (614) 923-6586 or email@example.com.
Insights Accounting is brought to you by Rea & Associates
Technologies such as smartphone apps offer quick access to information, which leads to better decision-making. But technological improvements are only part of a solution to any given problem.
“You don’t start by simply adopting technology. You start by seeking a solution to a problem,” says Keith Stump, vice president of sales at Blue Technologies.
For example, the cost of labor is a business’s most significant expense. The more a company can influence what its employees do, how they do it and the time it takes, the more productive and cost-effective the business becomes, he says. And often technology can help achieve that goal.
Smart Business spoke with Stump about coupling technology and processes to create efficiency.
How do process improvements and technological upgrades intertwine?
Consider the problem you’re trying to fix, and then examine all aspects of the surrounding process to understand it. You should start to see how everything fits together, and if there’s a better solution. For instance, you may have excellent hardware for copying, printing and faxing, but the software managing the information and devices is in need of an upgrade.
Attack the problem piece by piece. Determine your outcome and develop a strategy to work toward that goal. There must be milestones along the way, as well as consistent, structured reviews.
How might technology boost productivity?
It’s common for some technology to be well structured within the business. For example, a company has specific IT help desk procedures, remote monitoring and data backup. However, the print management could be unstructured. Employees may be buying printer supplies from several stores. There’s no typical process for toner delivery. Support comes in a variety of fashions.
Nationally, on average, 19 percent of service calls to internal help desks are related to printers. If your IT department is supporting printers, it means high-paid people are doing a low-paid activity, which isn’t cost-effective. With the right service provider, software can automate your print management with supply alerts and service triggers. Now, toner is automatically shipped. If there’s a problem, the machine notifies the provider to send a repairperson.
How can companies better integrate mobile devices?
Today, there’s a greater proliferation of tablets and other mobile devices in the workplace, especially for employees operating in the field or at multiple locations. However, it’s still necessary to print and scan documents. There are free, downloadable apps that enable mobile devices to automatically sync with the multi-functional scanner/printer as soon as the device is brought into the facility.
What can be done to improve document management?
There are software applications that allow users to search for business documents, similar to how information from the Web can be pulled up through a search engine.
The information is housed within an infrastructure, and a software application allows you to easily access business documents, such as contracts, packing lists, invoices, copies of checks, etc. It’s a huge advantage in terms of speed and efficiency.
Also, when scanning, it’s important that everything ends up in the right place, accessible to the right people. With auto-capture software on multi-functional devices, an employee hits a speed dial button and the machine routes the scan to the appropriate storage place. Documents are more accessible and secure with fewer errors.
What is key to successful change?
Business technology — and the processes it improves — touches many areas. All employees must embrace changes that are implemented to enhance productivity, whether in the IT infrastructure and support, hardware or software applications. Designate champions within your staff to help employees understand why change is necessary. Having C-level support and a well-designed rollout is critical.
Buying hardware, software or managed services is a part of doing business. But the best companies ensure each purchase decision starts with an effort to improve processes and create cost efficiencies. ●
Keith Stump is vice president of sales at Blue Technologies. Reach him at (216) 271-4800 or firstname.lastname@example.org.
Insights Technology is brought to you by Blue Technologies
More companies are using non-competition agreements as a means of protecting business interests when employees leave.
“Historically, the agreements in the employment context were narrowly focused on people exposed to technological secrets, or very high-level executives. It’s become more common to have contracts with employees who aren’t in the control group, such as salespeople,” says Robert Cohen, a director at Kegler, Brown, Hill & Ritter.
However, there are legal problems that arise, and courts have held that non-competition restrictions must be reasonable and exist for the purpose of protecting the business by ensuring fair competition.
Smart Business spoke with Cohen about when non-competition agreements make sense and what to incorporate in the language to avoid legal complications.
When are non-competition agreements being used in the employment context?
One example is an agreement that is used to protect confidential information in the employment context and prevent certain post-employment competition. Such an agreement typically spells-out that the employee will be exposed to confidential, proprietary information, and he or she agrees to only use that information to the benefit of the company. These restrictions are typically accompanied by a more direct restriction in the form of a non-competition covenant stating that the person cannot work in the industry for one year, or within a certain geographic radius of their work location, or that he or she cannot perform certain services for the employer’s clients.
How restrictive can companies be?
The general answer, based on Ohio Supreme Court decisions, is that agreements are enforced only if they are reasonable. Obviously the concept of reasonableness is a very general one. A test of reasonableness takes into consideration several factors, including:
- Temporal and geographic restrictions.
- Whether the employee represents the sole company contact with a customer.
- Whether the employee possesses confidential information or trade secrets.
- Whether the covenant seeks to eliminate unfair or merely ordinary competition.
- Whether the restriction serves to bar the employee’s sole means of support.
- Whether the talent the employer seeks to suppress was actually developed during the period of employment with the former employer.
- Whether the forbidden employment is incidental to the main employment.
These factors don’t serve as a checklist, they don’t apply in all cases and they are not weighted equally. The overriding law is that non-competition restrictions are enforceable so long as they preclude unfair competition, but are not acceptable if they are being used to eliminate ordinary competition.
Court decisions vary regarding what is reasonable. There are decisions upholding competitive employment and customer restrictions for time periods of six months to five years. But there are also court decisions holding that restrictions of this same time range are not reasonable on the facts of particular cases. Ohio law also allows the court to shorten the time period set forth in the non-competition restriction to one the court believes is more reasonable.
What is your advice as to whether companies should have non-competition agreements?
Focus on whether either of the following is occurring in the particular business:
- Is the company investing time and money to train employees or establish relationships between those employees and the company’s customers?
- Is the company exposing its employees to confidential or trade secret information?
In those cases, the company has an interest in protecting its investment from being misappropriated to the competition.
If you’re going to have a non-competition agreement, include a question on the employment application asking if the person is willing to enter into such an agreement. This allows potential employees to consider the restrictions before committing to the employment relationship.
Narrowly tailor the agreement to protect your legitimate business interests. For example, geographic restrictions should be limited to your market area, or in some cases to the particular area where the employee functions. ●
Robert Cohen is a director at Kegler, Brown, Hill & Ritter Co., L.P.A. Reach him at (614) 462-5492 or email@example.com.
Insights Legal Affairs is brought to you by Kegler, Brown, Hill & Ritter
The end of Q3 and the beginning of Q4 is an optimum time to begin the development of a marketing plan to kick-off in 2014.
The following 12 steps to developing an actionable marketing plan are the same ones I have used throughout my 35+ years as a marketing professional. If you want to grow your business and get your company's name established within your market, this is the place to start.
A well thought-out marketing plan will put things in perspective and serve as a guide to achieve your goals.
1. Research to knowas much as you can about your customer, competitors, the industries you serve and trends that may be game changers for your business. It is important that your business remains relevant.
2. Define your goal and what you want to accomplish. Be as specific as you can down to the number of new customer relationships needed, customer retention rates, growth by market segment and so on.
3. Know your company's strengths and weaknesses. Conduct a SWOT (strengths, weaknesses, opportunities and threats) analysis so that you can weigh your strengths against those of your competitors to uncover your competitive advantages. Analyze your weaknesses to determine where you may fall short and vulnerable to your competition.
4. Develop a competitive position that defines your niche and positions you within your marketplace. Know your unique brand and create a competitive advantage that is memorable and has the ability to make you standout.
5. Objectives in a marketing plan identify obstacles you need to overcome in order to achieve success. It might be things expanding market share, greater geographic footprint, developing new products, more market recognition, streamlining or identifying new processes and so on.
6. Define your target market. Where is the growth you need going to come from? If you did a good job defining your goal, you will have a great perspective on what will drive future growth. Understanding market share, industry growth sectors and customer share will drive how you need to target market.
7. Plan your strategies. Define the vision for establishing and owning your competitive place in your industry. This is your argument for how you will succeed. Just don’t get tactical during this part of the plan.
8. Define your tactics. Notice that this is step number 8 and not step number 1. If you have done a good job with steps 1-7, defining your tactics will become very clear.
9. Establish a timeline to guide the implementation of your plan of action. Make a list of all the tactics or action steps and prioritize them first quarterly, and then monthly.
10. A marketing budget is necessary to drive business growth, and every company should have a defined marketing budget as a part of their business growth plan—period!
11. Tracking will help you to determine which tactics are working and which are not. Couponing, surveying call-ins, traffic counts, percentage of sales increases, number of inquiries and web-driven leads are some of the common forms of tracking. What you may discover is that marketing made the phone ring, but sales suffered because internal execution was a problem. It's important for you to know what's working and what's not. It is equally important to understand the science of marketing — pulling out too soon can be pouring money down the drain.
12. Defining performance milestones and measurement guidelines to evaluate the degree of your plan's success monthly or quarterly will help you avoid taking action prematurely or waiting too long.
A marketing plan is the key to successfully growing your company. Invest quality time in planning, and it will pay off!
Kelly Borth is CEO and chief strategy officer for GREENCREST, a 23-year-old brand development, strategic and interactive marketing and public relations firm that turns market players into market leaders. Kelly has received numerous honors for her business and community leadership. She serves on several local advisory boards and is one of 30 certified brand strategists in the U.S. Reach her at (614) 885-7921, firstname.lastname@example.org, @brandpro or for more information www.greencrest.com.
Rich Johnson knew he had to get together and fight when the bank called in ViaQuest’s line of creditWritten by Dennis Seeds
Rich Johnson was preparing to wrap things up for the week at his company, ViaQuest Inc., at about 4 p.m. on a Friday. It was 2008, and while he knew the credit crunch was starting to affect the economy, the last thing he expected was to have bank representatives walk into his office and inform him they were not going to renew ViaQuest’s line of credit.
“That basically sucked the cash out of our account, and I needed to come up with a large sum of money to meet payroll on Monday morning,” says Johnson, president and CEO.
Johnson was in a state of shock. Lenders were waist-deep in the red ink flood, and many businesses were hurting.
“I was sitting at my desk on a Friday night, trying not to panic,” he says. “My strong faith had a lot to do with helping me not to panic, but the first thing I did was to calm down, and just try to clear my head. I started making phone calls to people who had the same experience; I had never had this experience. I knew that I’m a fighter — and I was preparing myself for a fight.”
While he understood the reasons behind the credit crisis, he was surprised that it knocked on his door.
“We had never missed a covenant payment,” Johnson says. “We weren’t overleveraged. It really had nothing to do with us as a company. It was what was happening with the banking industry. It just took us by surprise.”
ViaQuest at the time was a $15 million company. Its longest standing division serves people with developmental disabilities in the home and community-based settings, and it is one of the largest providers of those services in Ohio.
“We had 1,100 employees who were dependent on us, and we needed to act quickly,” Johnson says. “We are passionate about serving a very special population of people with disabilities, older adults. Our staff is the most remarkable employee base that you can imagine. The first reaction was not, ‘How is this going to affect me?’ It was, ‘How is it going to affect the people that we serve? Let’s fight to make this work.’”
As you can imagine, ViaQuest had a difficult time for the next 12 to 18 months.
“We were late paying vendors. We were late making a lot of payments,” he says. “We had to decide what we could pay and what we couldn’t pay. It was just a very dark time in our history and we came very, very close to not surviving.”
But not only did ViaQuest survive, the company grew. It now has 1,400 employees and is on track for revenues of $60 million this year.
Here is how Johnson put together multiple approaches to keep ViaQuest’s head above water — including an astonishing bailout for the immediate problem at hand.
Leave no stone unturned
Many business leaders may admit that one of the biggest fears is having your lender pull the rug out from under you. What Johnson found to help his situation, however, was akin to an angel investor stepping up to the plate and hitting a home run.
“When the bank came in and shut down my line of credit, they said they would not extend any credit to me without collateral to back that credit,” he says. “They already had my house that I lived in as collateral, and all my assets were in the company. I had to act quickly.”
The first person he called for help was his ex-wife, Jill, with whom he was still good friends.
“This was Saturday and I asked her if she would be willing to put up the house [she had received it as part of the divorce settlement] as collateral to fund my next payroll. She started crying and said, ‘You know, this is the house that our kids live in, and I know that you would never let anything happen to me or the kids. You have always taken care of us, and I know how passionate you are, and I know that this, too, will pass.’
“That’s how we survived,” Johnson says. “She put up her house as collateral; it got us to the next payroll.”
While such a bailout may often provide a little breathing space, it also is a cry for a major review of company operations.
Once Johnson started to review his options, he and his team worked on collections and vendors.
“Some vendors didn’t get paid for months, but they didn’t stop service,” Johnson says. “They hung with us. We are just very fortunate that we had a long history with them.
“It is at times like that when you find out what relationships are all about.”
Involve the rank and file
Before you spend all your time with financial matters, you need to let your people know during a crisis what is going on.
“Over the weekend I drafted a correspondence to all our employees and told them exactly what was happening,” Johnson says. “We are a very transparent organization. I am the sole owner. And good, bad or ugly, I always let people know where we are at all times with everything — I let them know what was happening.”
Johnson told his employees that they were fighting for the future and asked them to stand with him.
“I said I understood if they wouldn’t, or if they felt that their family was in jeopardy and they needed to take care of their family. I understood that, but I asked them to bond together and fight with me. And every person did.”
One of the greatest things you can learn during a time of crisis is about the perseverance of the company and its culture.
“A lot of people were very afraid, but we did not lose any employees during that time,” Johnson says. “Most employees elsewhere would have been running for the door. I’m fortunate to have the greatest employees in the world who said we are going to stand and fight with you, and we are going to see this through.
“Today we are fortunate enough to have another bank in place,” he says. “We actually are doing very, very well. The experience taught us to manage the business a lot more efficiently, and it really made us tougher.”
Find a silver lining
Going through a crisis offers a unique opportunity to focus on the company culture that you have been building.
“The No. 1 lesson that I learned is that we really work on our culture more than any other function in the company. We spend a lot of time building our culture and showing our employees how much we value them.”
Johnson points to quarterly Culture Crusader meetings, where employees talk about living out core values, and annual conferences where managers receive inspirational training.
“It has built a culture that even if we didn’t know if we were going to be around in the future, the culture that we built together really bonded us, and we made it through,” he says.
Making it through a crisis shows how strong your culture has become and offers a particular insight.
“I guess we have matured a little bit,” Johnson says. “I never would have imagined that would have happened because we didn’t do anything (out of order). It is not like we were doing something and the bank gave us a warning that said you had better stop. So now, we make sure that we have the proper systems in place. We make sure that we have the cash and not depend so much on credit.”
In ViaQuest’s case, executive team members realized that they needed a greater focus on the processes of collecting and billing.
“We were 100 percent government-funded, so if you don’t have your ‘i’s’ dotted and your ‘t’s’ crossed, if you don’t have the systems and processes in place, your collections can get backed up, and you can make any bank nervous,” he says. “So we make sure that we have all of our core processes down to mitigate any billing or collecting issues. Then we develop different relationships and have alternative measures in place if this is ever to happen again so that we would not be taken by surprise.
“I think we have a great, great billing department now,” Johnson says. “Our finance department is outstanding. If there are any accounts that are just a little bit overdue, they start working it.”
It’s also a good idea to consider the role of the line of credit. If you rely on it, it becomes your safety net.
“We do not look at it that way,” Johnson says. “We view us as not having any safety net, and we still operate like we need to meet payroll every month. We still operate today like we did during that six-month period of time when we needed to fund every payroll. It’s kind of like we are Depression-era babies hiding money under the mattress and all those things.
“We’ve been scarred a little bit so we don’t take that for granted, and it taught us a great lesson. We run better as a company because of it.” •
- Leave no stone unturned when seeking help.
- Involve all your employees in the recovery.
- Find a silver lining.
NAME: Rich Johnson
TITLE: president and CEO
COMPANY: ViaQuest Inc.
Education: I was one of those kids that the judge said, ‘It’s either jail or the service.’ I went into the U.S. Air Force right out of high school. It provided me with the G.I. Bill, and I finished at Capital University with a bachelor’s degree in accounting.
What was your very first job? I was 16 and I worked at a Rax Restaurant. I was the second employee hired by them in Marysville and got my baptism by fire in the restaurant industry. I did everything. They were famous for roast beef sandwiches.
Who do you admire in business? Herb Kelleher and Southwest Airlines and the way they built culture. I have to admit I am not a huge fan of how you fly with Southwest, but you always know that you can get there on time, and you know it’s going to be a fun trip. I wanted to build a culture like that. I really studied Southwest Airlines. In 2001, we signed up Southwest Airlines to speak at our annual conference. Our conference was two weeks after 9/11. I said, ‘Look, we all know what is going on right now in the world. We respect that, and if you want out of the speaking engagement, I completely understand.’
The speaker said, ‘We made a commitment to you. We understand what is going on in the world but our commitment that we made to you — we are going to honor it.’ And she showed up at our conference, was our keynote speaker and did not accept payment. It was absolutely moving. It was incredible.
What is the best business advice you have ever received? A gentleman gave me the advice, ‘If you don’t have time to do it right the first time, you’re not going to have time to go back and fix it. So take the time to do it right the first time.’ That really stuck with me. But my personal mantra that I started early in business is if you do the right things, the dollars will follow. You always do the right thing first and not let financial pressures get in the way of that. I have stood by that and there are times when we were going through all the ups and downs that we had that it would have been easy to cut corners and do something differently. But I always believed if you do the right things, the dollars will follow and everything will be in place. That’s how we have operated this company.
What is your definition of business success? Positively impacting as many lives as you can so you can make as many people in your organization successful. It is not monetary. It is changing people’s lives. It is changing the way things are done. It is changing the world. Innovators to me are a business success. When you say you have changed someone’s life or have helped them improve their life, that is business success.
Many small business owners only have a certain budget for insurance, so a strong relationship with an insurance agent who takes a proactive approach to mitigating risk and protecting their business is key. The cost of business insurance is not prohibitive, but replacing offices and not being able to work because of a loss can be.
“Remind yourself that having good coverage is one of the costs of doing business and part of your responsibility to yourself, your business and others who depend on you,” says Marc McTeague, president of Best Hoovler McTeague Insurance Services Inc., a SeibertKeck company.
Smart Business spoke with McTeague about what small business owners need to understand about their insurance coverage and risks.
What are the most important insurance coverages for small businesses?
Every business, even if it’s home-based, needs to have liability insurance. This provides both defense and damages if you, your employees, your products or services cause or are alleged to have caused bodily injury or property damage to a third party.
If you own your building or have content, known as business personal property, including office equipment, computers, inventory or tools, you will need property insurance that will protect you if you have a fire, vandalism, theft, smoke damage, etc.
It is also important to include business interruption/loss of earnings insurance as part of the policy in order to protect your earnings in the event the business is unable to operate.
Lastly, with commercial auto insurance, you can insure your work vehicles from damage and collisions. If you do not have company vehicles, but employees drive their own cars on company business, you should have hired and non-owned auto liability to protect the company in case the employee does not have insurance or has inadequate coverage.
The top 10 insurance coverages are:
- General liability insurance.
- Property insurance.
- Commercial auto insurance.
- Workers’ compensation.
- Professional liability.
- Employment practices liability.
- Directors and officers insurance.
- Privacy and security coverage, also known as cyber liability.
- Personal home and auto policy.
- Umbrella coverage.
Where do some business owners fall short on essential protection?
A business may fall short in identifying risks when its risk management measures are reactive and not proactive. It’s important that a business aligns itself with an insurance agent who takes a proactive approach to mitigating your risk. Meeting with your agent on a quarterly or semi-annual basis will help to identify exposures that could potentially cost a business everything.
In addition, a proactive approach to minimizing risks in the workplace may help to lower your insurance premiums by preventing future claims.
How much does the size and type of business impact what insurance is necessary?
Risks increase substantially as a business grows, as more employees are hired and as more services are rendered or products sold. While a crossbow manufacturer will certainly have different needs and risks than a website designer, having the right protection is equally important.
Creating a new revenue channel, opening a new location or making any significant change to how your business normally runs should be reviewed with your insurance agent. Major changes like these can lead to gaps in your insurance coverage, leaving a business exposed.
Business owners put a lot of time and energy into growing their business and providing for employees and their families, it is important they make sure it is properly protected.
Marc McTeague is President of Best Hoovler McTeague Insurance Services Inc., a SeibertKeck company. Reach him at (614) 246-RISK (7475) or email@example.com.
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Enforcement of the employer mandate has been delayed until 2015, along with the annual limit on out-of-pocket costs a patient pays above what insurance covers, but the rest of the Patient Protection and Affordable Care Act (PPACA) is still scheduled to proceed as planned — although it’s uncertain whether that schedule will be kept.
“Right now there’s been two official delays announced. In theory, all other elements of the PPACA are coming into play. But this is so fluid and volatile that we could see the Department of Health and Human Services (HHS) announce that the federal exchange is not ready,” says William F. Hutter, CEO of Sequent.
Open enrollment for the health insurance exchanges, aka marketplace, is set to start on Oct. 1 and continue through March.
“They’re trying to build awareness through a marketing campaign but aren’t sure what to do because they haven’t seen how it is going to work,” Hutter says.
Smart Business spoke to Hutter about the upcoming timetable for PPACA implementation and what to expect regarding scheduled deadlines.
What do these delays mean to the implementation of the PPACA?
Pieces of the PPACA are already in place. The Medicare tax is increasing, the decline in flexible spending dollars have come into play, and the underwriting criteria for carriers is going to change how they underwrite and create similarities in pricing models because plans have to be pretty consistent. The age compression standard — rates can only be three times as much because of age — has been set.
Additional taxes also have kicked in, including the Patient Centered Outcome Institute fee. Employer requirements to notify employees have increased, as well.
Major changes are occurring; no one knows how they are going to pull it off. There are so many variables at this time that no one can predict what’s going to happen.
There’s also the question of whether the exchanges will be ready to go on Oct. 1. As of now, only one is ready — California. There’s also Massachusetts, if you consider that an exchange. The HHS has been quiet following a flurry of releases months ago. Something was leaked that the federal exchange might not be ready and since then there’s been no information, which means they might push it close to the deadline.
Meanwhile, companies are left to fend the best they can in anticipation of open enrollment starting.
Are repeal or defunding possibilities?
The repeal votes are all pomp and circumstance. Defunding is possible, but unlikely. The real problem is that no one can figure out how to make the PPACA work. That includes insurance agents and carriers, enforcement entities and employers.
What difference does delaying the employer mandate a year make?
All it means is that employers don’t have to worry about fines or penalties for a year. We’re recommending that companies proceed based on what they think is the best course of action. Companies need to design solutions to fix some of the exposures of the PPACA; it doesn’t matter what type of business you have, what makes a difference is your financial wherewithal. It’s a matter of coming up with a basic solution to address PPACA requirements and deciding how much you want to spend — like getting a combo meal and choosing between small, medium and large. That decision will be based on factors such as company culture and environment.
One emerging tactic is to seek early renewal of plans because of the uncertainty surrounding the PPACA. If you can get your carrier to renew starting Dec. 1, 2013, then you don’t have to worry about the PPACA and its impact until December 2014.
Right now, there’s no breathing room for companies. What happens if you anticipate that the federal exchange will be ready and the HHS announces on Sept. 10 that it will be delayed? Then there are all of the challenges associated with technology, billing and verification of wages. There’s going to be a whole new system that will handle protected health information, is it going to be secure?
There are so many things to be considered; it makes sense to try to schedule your plan year to avoid the inevitability of the PPACA until there is more certainty.
William F. Hutter is CEO at Sequent. Reach him at (888) 456-3627 or firstname.lastname@example.org.
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During a merger and acquisition (M&A), both the buyer’s and seller’s retirement plans have ramifications on the deal and its aftermath.
“Make sure you get the right people involved in advance of any acquisition, whether you’re a buyer or seller,” says Don Dalessandro, QPA, QKA, Vice President of Finance at Tegrit Group. “It can be difficult because some people are not privy to this information, but if the CEO, CFO and others doing the deal don’t understand the plan, they should involve somebody that does before it comes back to haunt them.”
Smart Business spoke with Dalessandro about handling retirement plans in an M&A.
Why involve a plan administrator early in the M&A process?
A plan administrator can help with the financial and fiduciary due diligence, laying out the costs and liabilities associated with both retirement plans and how they match up. For example, if your company provides a 4 percent match, but the seller only gives a 1 percent match, you may need to calculate the extra cost of bringing newly acquired employees into the plan.
Retirement plans also have notification requirements. If a buyer or seller plans to merge or terminate a plan, it must follow Employee Retirement Income Security Act (ERISA) regulations. Examples are 30-day participant notifications prior to certain plan changes or a ‘blackout’ period where participant access to plan features may be curtailed. Also, if you terminate a plan, all participants must be 100 percent vested in all plan accounts, which could be an additional cost.
As a buyer, what else should be considered?
Think about whether it’s going to be a stock or asset purchase. If it’s a stock purchase and you absorb the selling company’s plan, you take on many of the risks and liabilities from previous years. In many cases, the buyer may request that the seller terminate its plan prior to the sale. This takes time and coordination, and may adversely impact participants’ retirement goals — as much of the plan participants’ money may be spent or used for other purposes.
With an asset purchase, even though you are not taking on liabilities, you still must consider the companies’ cultures and how to best integrate by comparing plan provisions, such as eligibility, matching contributions, vesting, etc. Whether you merge plans or not, you will likely change certain provisions of your plan as your company is growing and changing as a result of the acquisition.
You will want to understand who the decision-makers are, such as trustees, plan administrator, custodian, record keeper and others who may be making fiduciary decisions. Making a change to the decision-makers may require committee resolutions and amendments, which may be beneficial prior to the acquisition.
How should due diligence be conducted?
As a buyer, make sure the seller has administrated the plan according to ERISA regulations. Ask for prior Form 5500s. Companies with 100 or more plan participants are generally required to have audited financial information as part of the Form 5500 filing. Also, ensure that timely contributions have been made. There is appropriate fiduciary liability bonding, and an investment or retirement committee with meetings and written minutes. The company should be following proper procedures and policies, and all documents are in compliance and signed.
A possible deal breaker is an underfunded defined benefit plan, which promises to pay certain monthly benefits. If the liabilities are too high, it becomes difficult to terminate the plan. Additionally, it may require that you continue to fund and contribute to the plan, which can be expensive going forward.
After the sale, what’s critical to know?
In addition to following ERISA, if you maintain two separate plans by the last day of the plan year following the year in which the two companies merged, a coverage test runs on both.
If the plans have different matching structures, eligibility rules or provisions, they must meet the ‘benefits, rights and features’ test as a single entity. This ensures you don’t discriminate in favor of highly compensated employees. Many people forget, and then two years later realize they never did the testing. Like many of these decisions, it takes careful planning.
Don Dalessandro, QPA, QKA, is Vice President, Finance at Tegrit Group. Reach him at (330) 983-0527 or email@example.com.
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