Matt McClellan

If financial issues are keeping you up at night, the solution could be as simple as sitting down with your banker.

“I want to sleep well at night, and I want you to sleep well at night,” says R. Eric Dellapina, the president of the Stark County/Western Pennsylvania Region of FirstMerit Bank. “The only way to do that is by talking. It’s when people don’t talk to one another that they start to guess. When a client isn’t communicating with me, I assume the worst. Likewise, if the bank isn’t talking to its clients, those clients will often jump to the conclusion that things aren’t going well. The bank needs to communicate that it understands whatever problem the client is facing and is willing to help.”

Smart Business spoke with Dellapina about the business benefits of improving your relationship with your banker.

What are the five keys to having a better relationship with your banker?

  • Clear and direct communication is key. In order to have a good relationship, businesses should realize how important it is to have a banker who communicates clearly. Make sure you and your banker speak the same language. Don’t guess what your banker is saying. Make sure your relationship is strong enough that you can ask for clarification, or talk things over to make sure you are on the same page.
  • Not all relationships are created equal. You need to seek out a banker you can count on. Often, bankers are seen as fair-weather lenders; they’re there when times are easy, but as soon as times get tough, they’re not available to help. If you have a good relationship with your banker and have established trust, that is valuable. Your banker should stand up for you, be proactive, help your business be successful and be your advocate within the bank.
  • A banker must be knowledgeable about your business. This is fundamentally critical to all relationships. Not only does your banker need to understand your business, he or she needs to understand your competition and how your operations work. This can be accomplished by inviting your banker to tour your facility or by scheduling regular meetings. The more a banker knows about your company, specifically, the better that banker can help you, whether it’s through getting additional capital or restructuring debt.
  • Meet senior management. If you are my client, I want you to meet as many of my team members as possible. I want you to meet my banking assistant, my portfolio banker, my credit officer and my regional CEO. If I introduce you to everybody, you become more comfortable with the business/bank relationship as a whole. Additionally, if I’m unavailable, there are other people in the organization you know and trust that can support you.
  • A banker should be a trusted adviser. Businesses should have a good advisory team, consisting of a lawyer, banker and accountant. Those three professionals should work together in concert with you to make strategic decisions and plans, as well as develop a company strategy that will get your business to the next level. Giving your banker that trusted adviser status helps build the relationship and drive business success. If you don’t include your banker as part of your advisory team, you’re missing a vital part of the equation.

How can you develop a better relationship with your banker?

It all comes down to open, honest dialogue. People tend to play their cards close to the vest. They don’t open up with another individual until they know that person. But a banker’s job is to say: ‘Here’s how I see your problem. Tell me how you see it differently and tell me how we can work together to find a solution that makes everyone happy.’

It takes work and effort to develop that comfort level and trust where a client feels comfortable calling and asking for advice.

What is the best way for a banker to gain knowledge about the business?

Consider inviting the banker for an operational tour of your company. Let the banker meet the management team. The banker should be able to sit down with that team and discuss financial and operational issues, such as why the company needs new computer hardware. That meeting and discussion really helps a banker comprehend what the owner is trying to accomplish. Sometimes, the owner is determined to head down a particular path, but once the banker understands the situation, he or she can provide additional solutions that the owner never considered.

What particular traits should businesses look for in a banker?

It’s important to look for a banker you feel comfortable with. Trust is such an important factor in building any good relationship. You also need someone that can communicate effectively. In order to be successful, both the client and the banker need to understand each other’s goals and strategies. You also need someone who’s going to listen to you. I think we all know people who already start formulating a solution before they hear the whole problem. Make sure you and your banker completely understand each other’s needs and ideas.

R. Eric Dellapina is the president of the Stark County/Western Pennsylvania Region of FirstMerit Bank. Reach him at (330) 498-1532 or eric.dellapina@firstmerit.com. NICHOLAS BROWNING is the president and CEO of FirstMerit Bank’s Akron region. Reach him at nicholas.browning@firstmerit.com or (330) 384-7807.

If financial issues are keeping you up at night, the solution could be as simple as sitting down with your banker.

“I want to sleep well at night, and I want you to sleep well at night,” says Sean Richardson, the NorthCoast president and CEO of FirstMerit Bank. “The only way to do that is by talking. It’s when people don’t talk to one another that they start to guess. When a client isn’t communicating with me, I assume the worst. Likewise, if the bank isn’t talking to its clients, those clients will often jump to the conclusion that things aren’t going well. The bank needs to communicate that it understands whatever problem the client is facing and is willing to help.”

Smart Business learned more from Richardson about the business benefits of improving your relationship with your banker.

What are the five keys to having a better relationship with your banker?

Clear and direct communication is key. In order to have a good relationship, businesses should realize how important it is to have a banker who communicates clearly. Make sure you and your banker speak the same language. Don’t guess what your banker is saying. Make sure your relationship is strong enough that you can ask for clarification, or talk things over to make sure you are on the same page.

Not all relationships are created equal. You need to seek out a banker you can count on. Often, bankers are seen as fair-weather lenders; they’re there when times are easy, but as soon as times get tough, they’re not available to help. If you have a good relationship with your banker and have established trust, that is valuable. Your banker should stand up for you, be proactive, help your business be successful and be your advocate within the bank.

A banker must be knowledgeable about your business. This is fundamentally critical to all relationships. Not only does your banker need to understand your business, he or she needs to understand your competition and how your operations work. This can be accomplished by inviting your banker to tour your facility or by scheduling regular meetings. The more a banker knows about your company, specifically, the better that banker can help you, whether it’s through getting additional capital or restructuring debt.

Meet senior management. If you are my client, I want you to meet as many of my team members as possible. I want you to meet my banking assistant, my portfolio banker, my credit officer and my regional CEO. If I introduce you to everybody, you become more comfortable with the business/bank relationship as a whole. Additionally, if I’m unavailable, there are other people in the organization you know and trust that can support you.

A banker should be a trusted adviser. Businesses should have a good advisory team, consisting of a lawyer, banker and accountant. Those three professionals should work together in concert with you to make strategic decisions and plans, as well as develop a company strategy that will get your business to the next level. Giving your banker that trusted adviser status helps build the relationship and drive business success. If you don’t include your banker as part of your advisory team, you’re missing a vital part of the equation.

How can you develop a better relationship with your banker?

It all comes down to open, honest dialogue. People tend to play their cards close to the vest. They don’t open up with another individual until they know that person. But a banker’s job is to say: ‘Here’s how I see your problem. Tell me how you see it differently and tell me how we can work together to find a solution that makes everyone happy.’

It takes work and effort to develop that comfort level and trust where a client feels comfortable calling and asking for advice.

What is the best way for a banker to gain knowledge about the business?

Consider inviting the banker for an operational tour of your company. Let the banker meet the management team. The banker should be able to sit down with that team and discuss financial and operational issues, such as why the company needs new computer hardware. That meeting and discussion really helps a banker comprehend what the owner is trying to accomplish. Sometimes, the owner is determined to head down a particular path, but once the banker understands the situation, he or she can provide additional solutions that the owner never considered.

What particular traits should businesses look for in a banker?

It’s important to look for a banker you feel comfortable with. Trust is such an important factor in building any good relationship. You also need someone that can communicate effectively. In order to be successful, both the client and the banker need to understand each other’s goals and strategies. You also need someone who’s going to listen to you. I think we all know people who already start formulating a solution before they hear the whole problem. Make sure you and your banker completely understand each other’s needs and ideas.

SEAN RICHARDSON is the NorthCoast president and CEO of FirstMerit Bank. Reach him at Sean.Richardson@firstmerit.com or (216) 802-6565.

If financial issues are keeping you up at night, the solution could be as simple as sitting down with your banker.

“I want to sleep well at night, and I want you to sleep well at night,” says Sue Zazon, the president and CEO of FirstMerit Bank’s Columbus Region. “The only way to do that is by talking. It’s when people don’t talk to one another that they start to guess. When a client isn’t communicating with me, I assume the worst. Likewise, if the bank isn’t talking to its clients, those clients will often jump to the conclusion that things aren’t going well. The bank needs to communicate that it understands whatever problem the client is facing and is willing to help.”

Smart Business spoke with Zazon about the business benefits of improving your relationship with your banker.

What are the five keys to having a better relationship with your banker?

Clear and direct communication is key. In order to have a good relationship, businesses should realize how important it is to have a banker who communicates clearly. Make sure you and your banker speak the same language. Don’t guess what your banker is saying. Make sure your relationship is strong enough that you can ask for clarification, or talk things over to make sure you are on the same page.

Not all relationships are created equal. You need to seek out a banker you can count on. Often, bankers are seen as fair-weather lenders; they’re there when times are easy, but as soon as times get tough, they’re not available to help. If you have a good relationship with your banker and have established trust, that is valuable. Your banker should stand up for you, be proactive, help your business be successful and be your advocate within the bank.

A banker must be knowledgeable about your business. This is fundamentally critical to all relationships. Not only does your banker need to understand your business, he or she needs to understand your competition and how your operations work. This can be accomplished by inviting your banker to tour your facility or by scheduling regular meetings. The more a banker knows about your company, specifically, the better that banker can help you, whether it’s through getting additional capital or restructuring debt.

Meet senior management. If you are my client, I want you to meet as many of my team members as possible. I want you to meet my banking assistant, my portfolio banker, my credit officer and my regional CEO. If I introduce you to everybody, you become more comfortable with the business/bank relationship as a whole. Additionally, if I’m unavailable, there are other people in the organization you know and trust that can support you.

A banker should be a trusted adviser. Businesses should have a good advisory team, consisting of a lawyer, banker and accountant. Those three professionals should work together in concert with you to make strategic decisions and plans, as well as develop a company strategy that will get your business to the next level. Giving your banker that trusted adviser status helps build the relationship and drive business success. If you don’t include your banker as part of your advisory team, you’re missing a vital part of the equation.

How can you develop a better relationship with your banker?

It all comes down to open, honest dialogue. People tend to play their cards close to the vest. They don’t open up with another individual until they know that person. But a banker’s job is to say: ‘Here’s how I see your problem. Tell me how you see it differently and tell me how we can work together to find a solution that makes everyone happy.’

It takes work and effort to develop that comfort level and trust where a client feels comfortable calling and asking for advice.

What is the best way for a banker to gain knowledge about the business?

Consider inviting the banker for an operational tour of your company. Let the banker meet the management team. The banker should be able to sit down with that team and discuss financial and operational issues, such as why the company needs new computer hardware. That meeting and discussion really helps a banker comprehend what the owner is trying to accomplish. Sometimes, the owner is determined to head down a particular path, but once the banker understands the situation, he or she can provide additional solutions that the owner never considered.

What particular traits should businesses look for in a banker?

It’s important to look for a banker you feel comfortable with. Trust is such an important factor in building any good relationship. You also need someone that can communicate effectively. In order to be successful, both the client and the banker need to understand each other’s goals and strategies. You also need someone who’s going to listen to you. I think we all know people who already start formulating a solution before they hear the whole problem. Make sure you and your banker completely understand each other’s needs and ideas.

SUE ZAZON is the president and CEO of FirstMerit Bank’s Columbus Region. Reach her at sue.zazon@firstmerit.com or (614) 545-2791.

As the regulatory framework continues to evolve, the role of a company’s board of directors and its corporate governance policies and practices will continue to be under intense scrutiny.

“The board of a corporation has overall responsibility for the activities of the corporation,” says Aneezal H. Mohamed, an attorney with Kegler, Brown, Hill & Ritter. “If the board of directors is conveying conflicting information, that cannot be good for the organization. So the message coming out of board deliberations has to be consistent as such.”

Smart Business spoke with Mohamed about how to ensure your board is at its most effective.

Why is corporate governance important?

Effective corporate governance helps a company achieve its objectives, which generally are strategic and business planning, risk oversight, financial management, HR planning, compliance and accountability through effective controls and procedures. Also, effective corporate governance helps a company prevent corporate fraud, scandals, and possibly civil and criminal liability. At the end of the day, it makes good business sense; a company with a good corporate governance image enhances its reputation. It is attractive to investors, customers and suppliers and other entities would be comfortable doing business with a company that has a good corporate reputation.

What is the role of the board of directors?

Generally speaking, the primary duties of a board start with its fiduciary responsibilities. Members of the board of directors have a fiduciary responsibility to act in good faith and with a reasonable degree of care. They must not have a conflict of interest. So the interest of the company must take precedence over personal interest of the individual board members. Board members are also responsible for setting the mission of the company. The board can change the company’s mission, but it should only be done after careful deliberation. The board does not manage the day-to-day activities of the company, but it does set overall policy and exercises oversight responsibility.

What are some common problems that companies have with their boards of directors?

Because the board of directors is so critical to an entity, it is very important that the organization utilizes a well-thought-out nominating process to nominate qualified individuals to the board. One factor companies may need to assess when selecting a board member is whether the potential board member is able to devote the necessary time to be sufficiently engaged in fulfilling his or her obligations. The individuals selected to be on a board have responsibility for the activities of the corporation. The board acts on behalf of the shareholders to make these overall policy decisions. It is very important to have the right nominating process to select qualified individuals who will work to do what’s in the best interest of the company. If individuals are on too many boards, they may be stretched too thin and not have enough time to focus on board matters. Most large companies have a nominating committee handle the process of selecting potential candidates. They generally have a vetting process in place to identify the right candidate, and review qualifications and expertise. The committee is looking for what these people can bring to the table to add value in a very meaningful way — along with their ability to commit the necessary time.

How can a board that is not in line affect the company?

A board that is not in line will not be beneficial to the company or its shareholders. Keep in mind that the board works to advance the interests of the corporation and its shareholders. If a board presents a united front, then the message conveyed to shareholders, investors, the management team and the company’s other partners is that the company functions as an organization — not as individuals. A board that is not in line is not conveying the same message as a company that is very well organized and has good governance processes in place. If the message is not consistent that would not be good for a corporation.

How can the board debate the company’s direction while ensuring its message to shareholders is consistent?

A lot of work must be done behind the scenes. Board meetings should be a forum where the members can freely express their opinions and deliberate in private. It is critical that those deliberations remain private. There is no reason for those discussions or disagreements to be publicized, other than if something improper or illegal was being done. Board members should be able to deliberate in confidence and freely express their opinion, but the message that is conveyed to shareholders, investors and the management team should be consistent. That one unified message must always advocate what is ethically in the best interest of the company.

What steps can be taken to avoid trouble and ensure a strong, cohesive board?

The board of directors must remember its key purpose, which is to ensure the company’s prosperity by ethically and collectively directing the company’s objectives and advocating for what is in the best interest of the company. In addition to business and financial issues, the board must deal with challenging and complex issues relating to corporate governance, corporate social responsibility and corporate ethics. All of those issues play into making sure the message is consistent. The board also has oversight responsibility over the management team. That is important because if there is no accountability, it will not be in the best interest of the corporation.

Aneezal H. Mohamed is an attorney with Kegler, Brown, Hill & Ritter. *Mohamed is authorized to practice federal and Michigan law, but not Ohio law. Reach him at amohamed@keglerbrown.com or (614) 462-5476.

Saturday, 30 April 2011 20:01

How to insure entities in the public sector

The public sector provides a broad range of services, and insuring their risks can be challenging. Within a single entity, such as a state, city or county, there are prisons, airports, police, etc., and entities that provide zoning ordinances, maintain bridges, run golf courses, and oversee water and sewer utilities.

“Public entities have a very broad range of risks that need to be analyzed,” says William F. Becker, Executive Vice President and National Practice Leader — Public Sector, Aon Risk Solutions. “Many of these risks are unique, and trying to find a set of carriers who understand that and will still take on those risks can be challenging.”

Smart Business spoke with Becker, Steven P. Kahn, Managing Director of Aon Global Risk Consulting, and Scott Saunders, Vice President of Aon Risk Solutions, about insuring the public sector.

What is included in the public sector?

The traditional definition is any governmental entity, encompassing cities, states, counties, towns and special districts, along with authorities, commissions, school systems, utilities, transits and airports. Aon’s practice group also supports nonprofits, political organizations, Indian Country and higher education institutions, both public and private.

How are insurance needs different for public sector entities?

Public entities see some of the same issues as private entities, but there are certain risks in the public sector that are not seen in private organizations because they provide services that other organizations do not, such as prisons, fire and police, zoning and bridge maintenance. Pursuant to sovereign immunity laws, the public sector may have caps on the amounts for which they can be held liable, or immunity from suits. Also, there are some coverages required by statute. For instance, private companies need D&O insurance to cover their directors and officers, but a public entity covers their public officials instead of directors and officers. While their basic exposures and risk factors  are quite similar, the public entity-specific policies are worded specifically to insure these exposures.

How do caps and/or immunity from suits work for public entities?

In some states, there are caps on the amount of a claim against a governmental entity, capping its liability and reducing its costs. Many states have a per-claimant and per-occurrence cap. The cap differs by state and some states, such as California, have no caps. The caps would not apply to a claim in federal court if an entity is sued for discrimination, for example, and the caps do not apply to claims in other states.

Other states may have full immunity from certain suits, e.g., Michigan municipalities are immune from suits subject to certain exceptions, such as losses arising out of highways and sidewalks, motor vehicles and building maintenance, etc.

What issues may arise if public entities are not insured properly?

Government entities have a very limited ability to obtain funds from other sources. A large award could cause them to cut programs, impose a special tax assessment, or, in some cases, to declare bankruptcy, if allowed. This recently occurred in Boise County, Idaho, due to a zoning claim the county lost in court.  The county issued a permit but wouldn’t let the developer move forward. The developer took the county to court and it lost a $4 million judgment. The county was not insured and it declared bankruptcy.

How can organizations best understand their risks and ensure they have the proper insurance?

A thorough and creative process is necessary to identify and measure exposure to risks of accidental loss. This is done by inspections, interviews, analysis of budgets and financial reports, analysis of past claims data, review of major contracts and knowledge of operations. The organization needs a knowledgeable partner to help it place the best available coverage at reasonable terms.

How can these entities determine exposures?

To complete a thorough analysis of their exposures, public entities should set up inspections, conduct interviews with department heads, walk through the facilities, look at budgets, financial reports, past claims data and contracts to understand what operations are being performed that fall under different units of local government.

Employees working in the governmental entity know the operations but are often unaware of the risk or insurance implications.

Why do public entities need professional help?

Risk professionals can look at insurance policy agreements and exclusions to make sure that nothing is left uninsured — or if something is left uninsured by design, the professional can ensure that everyone understands that the entity will retain the risk.

Some claims, like auto accidents, are straightforward, but other types can be subtle. For example, if the public entity denies a zoning permit to someone and is sued as a result, will it be covered? Will employment practices claims be covered if employees are terminated  inappropriately?

In another example, if an airport, overseen by the city council, purchases coverage for bodily injury or property damage from the aviation insurance market, it should carry errors and omissions insurance for its oversight of the airport. The public entity may purchase E&O insurance from the carrier that is providing its general liability, but that carrier may not cover anything at the airport. Only someone well versed in insurance policies would recognize the gap between policies. If the airport policy doesn’t cover E&O and the general liability policy covers E&O but excludes the airport, there is uninsured exposure.

These more subtle exposures are the ones for which the public entity will need help from a knowledgeable partner.

William F. Becker is Executive Vice President, National Practice Leader – Public Sector, Aon Risk Solutions. Reach him at bill.becker@aon.com. STEVEN P. KAHN, CPCU, ARM, is Managing Director of Aon Global Risk Consulting. Reach him at (949) 608-6418 or steven.kahn@aon.com. Scott Saunders is a Vice President with Aon Risk Solutions. Reach him at (412) 594-7583 or scott.n.saunders@aon.com.

Aon will be a sponsor and exhibitor at PRIMA 2011 June 5-8 in Portland, Ore. For more information visit Primacentral.org.

When most people think of bullying, their minds drift to schoolyard battles long past. However, bullying in the workplace is a real problem that can make your employees feel as awful as those teenagers getting slammed into lockers. If you allow bullying to occur in your company, it can destroy your company’s culture as well as employee morale.

“A bullied employee is not a happy employee,” says Craig W. Snethen, attorney at law with Jackson Lewis LLP.

Legislation has been introduced in some states that would make it unlawful to subject an employee to an abusive work environment. For instance, if an employee resigns and claims that he or she was constructively discharged due to an intolerably abusive working environment, evidence of bullying can help support the employee’s claim.

Smart Business spoke with Snethen about how employers can curb bullying in the workplace and some of the potential liabilities involved.

What is considered bullying in the workplace?

Bullying has been defined as a systematic campaign of interpersonal destruction that jeopardizes a target’s health and/or career. It’s not mere incivility or rudeness. Bullying is a non-physical, non-homicidal form of violence.

Behaviors that may count as bullying, if they occur repeatedly for more than six months, include: (1) giving the ‘silent treatment;’ (2) refusal of requests for assistance; (3) receiving little or no feedback on performance; (4) subjection to pranks; (5) taking/destroying resources needed by the target to perform his/her job; and/or (6) the target doesn’t get praise to which he or she is entitled.

Why should employers be concerned about bullying in the workplace?

Generally, employers are and should be concerned about harassment and discrimination in the workplace. To be illegal and actionable in court, harassment or discrimination must violate the target’s civil rights. Therefore, the target must be in a ‘protected status’ group, such as race, gender, ethnicity, religion, national origin, age, disability, or sexual orientation.

By contrast, bullying is much broader than harassment or discrimination. Indeed, only 20 percent of bullying cases could potentially qualify as discrimination. In other words, bullying is ‘status blind.’ From a purely practical standpoint, however, a bullied employee is not a happy employee. Irrespective of whether the employee might have an actionable claim of harassment or discrimination, the employee may act out against the bullying in other ways, such as engaging in workplace violence and/or sabotage.

What are the legal dangers of allowing bullying in the workplace?

Currently, there are no laws in the United States that prohibit bullying. However, each time bullying laws are proposed, legislators become more sensitive to the issue and future legislation becomes more likely. When one state passes legislation, it’s going to make the argument all the stronger. In New York, for instance, proposed legislation has been introduced in the House that would make it unlawful to subject an employee to an abusive work environment (S 1823 § 762). The legislation would create civil liability for employers for the existence of an abusive workplace (S 1823 § 763).

Bullying heightens the likelihood that an employee may resign and claim that he or she was constructively discharged due to an intolerably abusive working environment. So, if the employee can articulate a harassment or discrimination claim based on some protected characteristic, the presence of bullying can enhance an employee’s evidence in support of such a claim.  Further, bullying can form the basis of common law claims such as intentional infliction of emotional distress, assault, battery, false imprisonment, defamation and/or tortuous interference with a contractual relationship.

How are employees handling the issue?

Unions are becoming more sensitized to bullying. In Massachusetts, a new collective bargaining agreement covering 21,000 state employees includes protections against workplace bullying, defined as behaviors that contribute to a hostile, humiliating or intimidating work environment, including abusive language or behavior. Under that agreement, an employee has 90 days to report a bullying incident and may be subject to grievance procedure, but no arbitration.

How can employers reduce their liability in regards to workplace bullying?

Obviously, employers should take reasonable means to prevent bullying in the workplace. At a minimum, employers should adopt and distribute widely an articulated policy, which provides for a prompt response including an evaluation of facts and investigation, as well as providing for prompt and effective remedial action.

In assessing a potential bullying situation, the employer should ask itself whether the conduct, if it occurred as alleged, would violate any significant rule or expectation of employee conduct. If the answer is yes, the employer should engage in a prompt investigation and the accused employee should be removed from the workplace if allegations are sufficiently serious and/or more harm could occur.

Action taken as a result of a good faith, thorough investigation that came to a reasoned conclusion can insulate a company from liability for wrongful termination and/or defamation.

Craig W. Snethen is an attorney at law with Jackson Lewis LLP. Reach him at (412) 232-0196 or snethenc@jacksonlewis.com.

Saturday, 30 April 2011 20:01

How to find quality in health insurance

Quality is something that consumers look for in almost every purchase they make. That includes both health care and health insurance.

But trying to define what quality means in terms of health insurance and what quality should mean to an employer trying to make choices for his or her company’s health coverage is not an easy thing to do.

“There are many aspects of health care quality and health insurance, but the simplest way to define quality in health insurance terms would be access to quality care,” says Sandra McAnallen, the vice president of network and provider relations for UPMC Health Plan. “Providing that access is what helps people to get the right care in the right place and at the right time as well as providing them with an excellent experience in terms of member service.”

Smart Business spoke with McAnallen about understanding what quality means in health insurance terms and its importance to employers.

How can an employer determine quality in health insurance plans?

Quality is a difficult thing to measure accurately, but there are certain measures that employers should look for and specific questions an employer can ask to determine if a health plan can deliver it.

For instance, for any health insurance plan you are considering, you need to research that plan’s network of hospitals and physicians for broader geographic coverage and specialty services. In many instances, a health plan’s directory of providers is available online.

A second thing to look for is accreditation. An accredited provider organization such as a hospital or a health plan is one that has met the standards of an independent organization. There are many national organizations that review and accredit health insurance plans and institutions. For hospitals, the Joint Commission accredits and certifies more than 18,000 health care organizations and programs in the U.S. Accreditation and certification from the Joint Commission is given to organizations that meet certain performance standards. The National Committee for Quality Assurance (NCQA) is an independent, not-for-profit organization that regularly measures the quality of care delivered by the nation’s health plans.

Is there any way to compare plans?

The NCQA provides information on health insurance plans that can be viewed at its website. You can see if a plan is accredited and compare its quality of care and member satisfaction scores with other plans. The NCQA’s website is: www.ncqa.org/tabid/1243/Default.aspx.

You could also look for state-specific reports to find out the rate of complaints for a health plan and the hospitals it uses. Also, you can look for stories about the health plan in various publications, such as magazines and newspapers.

How does a health plan demonstrate quality?

A high-quality health plan promotes effective and efficient care in a timely fashion with no disparity among social economic groups and a satisfactory experience with member services. A health plan should enhance its members’ experiences with its care and services and by promoting effective and efficient care. Members should be assured that they would receive the recommended care for all of their health needs including preventive services and care management for heart disease, diabetes, respiratory conditions, pediatric care, women’s health and behavioral health. The recommended care will lead to improved health and eventually lower costs.

For health plans, quality is a concept that is not limited to the delivery of health care services. Quality goals are focusing on improving population health, enhancing customer experience and managing appropriate medical utilizations and cost containment by applying evidence-based medicine and avoiding unwarranted variations.

What are other quality measures that an employer should look for in a health plan?

You need to investigate how the health plan ensures good medical care. Are doctors’ qualifications reviewed before they are added to the plan’s network? Is the care provided by a health plan’s doctors and hospitals reviewed on a regular basis? Does the health plan review its own services and make the changes needed to correct the problems? How are member complaints handled? Those are all questions that should be asked and answered.

Talking with current members of the plan to learn of their experiences also can be helpful. They may know if the health plan offers specific programs designed to deal with certain conditions. Specifically, a wellness program to promote a healthy workplace would be an important quality from an employer’s perspective.

Sandra McAnallen is the vice president of network and provider relations for UPMC Health Plan. Reach her at (412) 454-8770 or mcanallens@upmc.edu.

When an employer moves from a fully insured health care plan to a self-funded plan, it becomes responsible for 100 percent of the claims risk. That transition can be frightening, especially as medical costs continually increase. But purchasing stop-loss coverage from reinsurance carriers can help mitigate some of that risk.

“Stop loss allows an employer to transfer a portion of the claims risk to the reinsurance carrier in exchange for a monthly premium,” says Donna Cowden, senior vice president with Aon Hewitt, Health & Benefits.

Smart Business spoke with Cowden and John L. Boss III, executive vice president, Aon Risk Solutions, about how stop-loss coverage can help protect your business.

How can an employer limit risk with stop-loss coverage?

The employer can limit risk by purchasing aggregate coverage, which insures against an employer’s total annual claims exceeding an estimated dollar amount (with a corridor of 20 to 25 percent added), or specific coverage, which insures against a single, large, catastrophic claim that exceeds a selected dollar amount (deductible) during the plan year.  They work well together by protecting the employer if the year’s claims have exceeded the carrier’s claims estimate plus margin, and monthly by limiting the loss of a large, unexpected claim. Aggregate claim reimbursement occurs at the end of the contract period, while specific claim reimbursements take place as they occur during the plan year.

How can an employer determine which type of coverage is the best fit?

Employers need to determine what risk they are trying to protect against. Are they concerned about overall claims exceeding a budgeted amount and feel comfortable absorbing large losses that might occur during the year, or are they only concerned about a hit if a large, unexpected claim occurs?

Aggregate stop-loss coverage protects an employer against claim volatility, if annual claims exceed what is budgeted. Smaller employers have a more difficult time absorbing the claim fluctuations, so they will purchase aggregate coverage.

Most employers will purchase specific coverage but the level of the specific deductible will depend on their size and risk tolerance. Specific-only coverage is typically for employers with more than 5,000 covered lives.

How does stop-loss coverage work with a self-funded benefit plan?

Self-funded employers that purchase stop-loss coverage have the benefit plan document and the stop-loss contract. The employer’s plan document outlines benefit provisions and how benefits are paid. Ideally, a stop-loss contract will overlay the provisions in the employer’s benefit plan. The employer does not want the stop-loss contract to have exclusions or limitations that contradict or add to the employer’s benefit plan.

How can an employer determine whether it should purchase stop-loss coverage?

It is critical for employers to understand their risk tolerance and determine how much they can tolerate paying out without creating a cash flow issue. How easy is it to fund a $500,000 claim month when claims generally run $100,000 per month? Once that is determined, they can purchase the contract that provides them the appropriate protection.

In what other ways within the contract can employers share risk to keep the premium down?

One way is an ‘aggregating-specific,’ or ‘split-funded specific,’ contract and the other is a ‘tiered,’ or ‘coinsurance,’ contract. With an aggregating-specific/split-funded contract, the employer shares in the risk for a reduction in premium. The employer will accept claims up to the specific deductible and will accept additional claim liability generally equal to a 20 to 30 percent premium reduction. If the employer has no claims over its specific deductible during the year, it saves the amount of the aggregating deductible. If there is a claim in excess of the specific deductible, it is paid by the employer until the aggregating deductible is exhausted and the carrier pays the remainder. With a tiered/coinsurance contract, the employer agrees to share in more risk after the specific deductible has been exceeded for a reduction in premium. Once the specific has been exceeded, the employer may take on a reduced percentage of claims above the deductible up to a specified dollar amount, after which the carrier accepts all risk.

What potential pitfalls should employers be aware of when switching plans?

The first year an employer switches to a self-funded plan, claims incurred but not paid when it moved are the responsibility of the fully insured carrier. So instead of 12 months of claims for that first self-funded plan year, the employer has only nine to 10 months. The stop-loss rates and contract are referred to as immature and are discounted up to 20 percent. The second-year rate increase will look very high because not only is the rate increasing by trend but by the additional 20 percent because of a full claim year. An employer should purchase complementary contracts to prevent gaps in coverage.

How is health care reform affecting stop-loss coverage?

The most immediate impact is the change requiring benefit plans to have unlimited lifetime maximums. The stop-loss contract generally duplicates the benefit plan maximum, so when unlimited lifetime maximums were implemented, carriers struggled to determine the financial impact on their rates.  Stop-loss contracts should be reviewed to make sure the maximum reimbursement matches the employer’s maximum and the carrier hasn’t put a cap on the maximum. That would leave the employer at risk once the reimbursement maximum has been exceeded. We are also finding large employers that never had stop loss request very high specific deductibles because of the unlimited lifetime maximum.

Donna Cowden is senior vice president, Aon Hewitt, Health & Benefits. Reach her at (336) 728-2316 or Donna.Cowden@aonhewitt.com. John L. Boss III is executive vice president, Aon Risk Solutions. Reach him at (317) 237-2411 or John.Boss@aon.com.

Savvy business owners are always looking for ways to improve the health of both their employees and their business.

However, for some small businesses, establishing and implementing a comprehensive wellness program may not be financially feasible. But they may find help through the Indiana Small Employer Wellness Program Tax Credit, says Sally Stephens, president of Spectrum Health Systems.

“The purpose of the credit is to help more companies reap the benefits of a healthier work force,” Stephens says. “The credit allows these employers to not only allocate the necessary funds toward wellness but also to consider partnering with a wellness provider to assist them.”

Smart Business spoke with Stephens about how to determine whether your business qualifies for the credit and how it could help your company succeed.

What is the Indiana Small Employer Wellness Program Tax Credit?

The Small Employer Wellness Program Tax Credit, introduced in 2007, provides the financial incentive for small employers to implement a comprehensive wellness program. In doing so, employers can receive a state tax credit of up to 50 percent of the costs incurred by an Indiana small business for providing a qualified wellness program to employees.

The credit is funded by the cigarette tax that was introduced the same year.

How can this tax credit help small employers?

The credit allows many employers who, in the past, did not have the internal resources or could not justify the expense of providing wellness services. The credit now allows them not only to allocate the dollars but also to consider partnering with a wellness provider to assist them with this initiative.

How can an employer determine if it is eligible for the tax credit?

The criteria and application process are well defined on the state website. The tax credit is available to employers with two to 100 employees that have received certification from the Indiana State Department of Health for a ‘Qualified Wellness Program.’

To qualify, the program must offer incentives for weight loss and smoking cessation and offer preventive screenings. According to the state Department of Workforce Development, companies with 99 employees or fewer represent nearly 41 percent of all private sector employment, or more than 1 million employees.

Aside from the financial incentive, how can this initiative help employers?

Creating a work environment that supports healthy behaviors will bring an added benefit to everyone in the company. Wellness initiatives show management support for employees and enhance work culture. An effective wellness plan requires a strong program design, a supportive executive team and an encouraging management culture that supports employee participation.

Because employees are a company’s most valuable asset, investing in their well being can improve employee morale, help prevent turnover and potentially reduce long-term health care costs. A program’s success lies not only with the individual but also requires the support of the corporate leadership.

With the increasing cost of insurance and health care, wellness initiatives are some of the best means of reducing health care risk factors and establishing options for preventive health care. Wellness programs potentially reduce insurance costs and help to improve your employees’ overall well being, both now and in the long run.

What does an employer have to do to qualify for the credit?

The Indiana State Department of Health Advisory Board determines if a company’s wellness program can be qualified for the Small Employer Wellness Program Tax Credit. Once the wellness program is approved, the small employer will receive a certificate via the U.S. Postal Service. This certificate must be submitted to an Indiana tax professional with the employer’s tax documents. Only an Indiana tax professional can determine if the small business is eligible to receive the tax credit and file for it.

To qualify for the tax credit, you must meet the requirements defined by Indiana Code 6-3.1-31.2-3, found at www.in.gov/isdh/19950.htm. This includes having between two and 100 full-time employees, with a full-time employee defined as one who is employed at least 30 hours each week. A certified wellness program must be designed to improve the overall health of a company’s employees and include an employee-appropriate weight loss program, a smoking cessation program and the pursuit of preventive health care services

What elements must be included in a qualified wellness plan?

Each of the three above mentioned elements must include a detailed description of each area and include assessments, educational materials, a rewards program and a measurement tool. Assessments are evaluation tools used to determine the health status of the employer’s work force, while educational materials provide information to employees about each component of the wellness program and may include brochures, articles, newsletters and a website. Rewards programs provide incentives for motivating employees to participate in the various aspects of the wellness program, and measurement tools evaluate the success and validity of the wellness programs implemented.

Does every employee have to participate in order for a business to earn the credit?

No. However, programs with high participation levels have the best opportunity for achieving a positive return on investment, improved employee outcomes, reduced absenteeism and a work force that is present on  the job.

Sally Stephens is president of Spectrum Health Systems. Reach her at (317) 573-7600 or sally.stephens@spectrumhs.com.

Saturday, 30 April 2011 20:01

How to insure public entities

The public sector provides a broad range of services, and insuring their risks can be challenging. Within a single entity, such as a state, city or county, there are prisons, airports, police, etc., and entities that provide zoning ordinances, maintain bridges, run golf courses, and oversee water and sewer utilities.

“Public entities have a very broad range of risks that need to be analyzed,” says William F. Becker, executive vice president and national practice leader — public sector, Aon Risk Solutions. “Many of these risks are unique, and trying to find a set of carriers who understand that and will still take on those risks can be challenging.”

Smart Business spoke with Becker, Steven P. Kahn, managing director of Aon Global Risk Consulting, and Joseph J. Perry, vice president of Aon Risk Solutions, about insuring the public sector.

What is included in the public sector?

The traditional definition is any governmental entity, encompassing cities, states, counties, towns and special districts, along with authorities, commissions, school systems, utilities, transits and airports. Aon’s practice group also supports nonprofits, political organizations, Indian Country and higher education institutions, both public and private.

How are insurance needs different for public sector entities?

Public entities see some of the same issues as private entities, but there are certain risks in the public sector that are not seen in private organizations because they provide services that other organizations do not, such as prisons, fire and police, zoning and bridge maintenance. Pursuant to sovereign immunity laws, the public sector may have caps on the amounts for which they can be held liable, or immunity from suits. Also, there are some coverages required by statute. For instance, private companies need D&O insurance to cover their directors and officers, but a public entity covers their public officials instead of directors and officers. While their basic exposures and risk factors  are quite similar, the public entity-specific policies are worded specifically to insure these exposures.

How do caps and/or immunity from suits work for public entities?

In some states, there are caps on the amount of a claim against a governmental entity, capping its liability and reducing its costs. Many states have a per-claimant and per-occurrence cap. The cap differs by state and some states, such as California, have no caps. The caps would not apply to a claim in federal court if an entity is sued for discrimination, for example, and the caps do not apply to claims in other states.

Other states may have full immunity from certain suits, e.g., Michigan municipalities are immune from suits subject to certain exceptions, such as losses arising out of highways and sidewalks, motor vehicles and building maintenance, etc.

What issues may arise if public entities are not insured properly?

Government entities have a very limited ability to obtain funds from other sources. A large award could cause them to cut programs, impose a special tax assessment, or, in some cases, to declare bankruptcy, if allowed. This recently occurred in Boise County, Idaho, due to a zoning claim the county lost in court.  The county issued a permit but wouldn’t let the developer move forward. The developer took the county to court and it lost a $4 million judgment. The county was not insured and it declared bankruptcy.

How can organizations best understand their risks and ensure they have the proper insurance?

A thorough and creative process is necessary to identify and measure exposure to risks of accidental loss. This is done by inspections, interviews, analysis of budgets and financial reports, analysis of past claims data, review of major contracts and knowledge of operations. The organization needs a knowledgeable partner to help it place the best available coverage at reasonable terms.

How can these entities determine exposures?

To complete a thorough analysis of their exposures, public entities should set up inspections, conduct interviews with department heads, walk through the facilities, look at budgets, financial reports, past claims data and contracts to understand what operations are being performed that fall under different units of local government.

Employees working in the governmental entity know the operations but are often unaware of the risk or insurance implications.

Why do public entities need professional help?

Risk professionals can look at insurance policy agreements and exclusions to make sure that nothing is left uninsured — or if something is left uninsured by design, the professional can ensure that everyone understands that the entity will retain the risk.

Some claims, like auto accidents, are straightforward, but other types can be subtle. For example, if the public entity denies a zoning permit to someone and is sued as a result, will it be covered? Will employment practices claims be covered if employees are terminated  inappropriately?

In another example, if an airport, overseen by the city council, purchases coverage for bodily injury or property damage from the aviation insurance market, it should carry errors and omissions insurance for its oversight of the airport. The public entity may purchase E&O insurance from the carrier that is providing its general liability, but that carrier may not cover anything at the airport. Only someone well versed in insurance policies would recognize the gap between policies. If the airport policy doesn’t cover E&O and the general liability policy covers E&O but excludes the airport, there is uninsured exposure.

These more subtle exposures are the ones for which the public entity will need help from a knowledgeable partner.