As labor rates rise in China, shipping costs increase, the dollar weakens and supply chains grow more complex, many industry analysts are suggesting U.S. manufacturing activity will increase over the next five years.
And while some risks such as supply chain failures may be reduced if manufacturing firms are closer to operations and manage them more effectively, other risks — such as medical cost inflation for workers’ compensation and nonoccupational injuries — are on the rise, says Mike Stankard, managing director and Industrial and Materials Practice leader at Aon Risk Solutions.
“High-frequency, low-severity type risks, such as workers’ compensation or fire prevention, need to be managed on a day-to-day basis to prevent and mitigate losses,” says Stankard. “Businesses simply can’t overlook those because they face them every day. They also need to control losses that would prove catastrophic, such as large liability claims or the financial impact from natural disasters. Those risks can be managed with insurance because they are largely unpreventable, and businesses have an obligation to protect shareholders’ capital.”
Smart Business spoke with Stankard about how to manage risks facing the industrial and materials sector.
What are some risks that can impact the industrial and materials sector?
Aon Risk Solutions recently conducted a survey of business leaders in the industrial and materials sector to gauge their concerns, which included the economic slowdown — in both the U.S. and abroad, uncertainly surrounding raw materials and commodity pricing, and future innovations to keep up with customer needs.
In addition to the broad risks that drive macroeconomic issues affecting supply and demand, leaders must consider specific risks and manage them on a day-to-day basis to ensure efficient and effective execution of their business plan. In this area, risks include business interruption and supply chain failures, keeping up with emerging market opportunities and the risks and rewards of globalization.
What are some of the major drivers of risk?
The recession has had a profound impact on manufacturers that were forced to quickly adjust to changing demands for their products. The challenge was that no one knew just how low the economy was going to go. Some manufacturing employers reduced their work force by 40 to 60 percent and closed plants, although some of those reductions are starting to reverse. Many companies, especially automotive, used bankruptcy as the ultimate risk management tool to make long-term fixes to their macro-business models in the areas of labor contracts and raw material purchasing, shutting down inefficient plants and dropping marginal product lines.
Escalating health care costs continue to affect the work force both in terms of group medical insurance costs and workers’ compensation. When workers are injured, an employer is affected by wage replacement, medical costs and productivity leakage.
There’s also been reaction to all of the production moved offshore in the past 10 years. In 2011, natural disasters, such as the earthquake and tsunami in Japan, flooding in Thailand and earthquakes in New Zealand and Chile, put stress on the global supply chain, forcing companies to re-examine the vulnerabilities around their supply and customer chains. Many are now considering whether they were shortsighted when they moved production to low-labor rate countries that could potentially result in larger issues than just how much per hour they are paying employees.
How can mid-sized employers minimize their risks?
Mid-sized employers may want to consider increasing workplace safety to avoid injuries that may result in expensive medical costs. As not all accidents are preventable, effective claims management practices on post-accident behaviors can help control medical costs and get workers back on the job as quickly as possible, even if it’s for light duty work.
When looking at the supply chain, manufacturers need to re-examine their supplier base to look for potential bottlenecks, single-source suppliers that could cause problems down the road. To minimize the risk, contingent business interruption coverage insurance around supply chain failure is available, which can cover loss of revenue.
However, it is important to note that underwriters have changed their business practices to limit their exposure in this space. They want to know about your suppliers — where they are located and how much business you do with them. For example, they might reduce your limits or restrict coverage so it only applies to direct suppliers rather than indirect ones, even though both can have just as much impact on your business.
Once risk management practices are in place, how can you measure them for effectiveness?
Your insurance broker, who optimally deals with your industry, knows it well and works with your peer companies, should be able to provide best practice benchmarks and performance metrics that can be continually updated. They can give you guidance on how to prevent and minimize claims as well as advice on the quality of insurance, how much you should purchase, how you should measure and value business interruption losses, etc. For example, your broker could perform a comprehensive evaluation of your workers’ compensation processes and losses, analyzing your environment and all of the losses you had on a granular basis. After determining the root cause of those losses, the broker would make recommendations such as ergonomic corrections, improvement in communications around losses and reporting lags. These kinds of precise adjustments and the best practices associated with them could add up to millions of dollars in savings over time.
Mike Stankard is a managing director and Industrial and Materials Practice leader for Aon Risk Solutions. Reach him at (248) 936-5353 or email email@example.com.
Please visit aon.com/industrialandmaterialsreport to download a copy of the 2012 U.S. Industrial and Materials Industry Report.
Insights Risk Management is brought to you by Aon Risk Solutions
The entire health insurance industry is holding its breath right now, waiting for the Supreme Court to hand down its decision regarding the Patient Protection and Affordable Care Act.
But regardless of what happens, insurance brokers are urging companies to take steps now to ensure that they have the best insurance plans in place.
“We’re expecting most employers to maintain what they currently have,” says Danone Simpson, founder and CEO of Montage Insurance Solutions. “However, to be prepared, employers need to make sure they are offering a variety of insurance plans that can compete with a low-cost insurance plan in a health care exchange.”
Smart Business spoke with Simpson about how changes will impact business’s health insurance and how companies can work with their insurance carriers to prepare.
What critical steps do companies need to take in regard to their health insurance plans right now?
Employers with 50 employees or more, if they provide insurance, need to work with an insurance brokerage firm to make sure it offers a variety of plans, including a low-cost plan that can compete with health insurance exchanges. It’s a good idea to have two to four plans available.
States are currently putting together health insurance exchanges where employees can look for other plan options that may be lower in cost due to reduction in benefits. In addition, some of the the insurance carriers, are setting up exchanges. Our firm, Montage Insurance Solutions is setting up an exchange called SIMPLAN™ which will offer all the carrier's plans. If an employee finds an insurance plan on the exchange that he or she wants to purchase, the employee can purchase it on his or her own. So many individual plans however, may create problems because it could quickly become unmanageable for a company’s human resources department to assist employees properly. An HR department might already oversee one group plan — one set of plans with one carrier or two — but if employees buy individual insurance on their own, they will be going to the HR department, asking questions about very complicated and different plan designs from multiple carriers within the exchanges. Even if the reform bill is struck down, these exchanges likely will still exist in some form, as the legislation leaves the design up to individual states.
In addition to placing more strain on HR, under current laws, if an employer of 50 or more employees doesn’t offer what is considered affordable health insurance — 60 percent of covered expenses for a typical population, or employees paying less than 9.5 percent of family income coverage — businesses pay a penalty of $3,000 annually for each employee, with a maximum of $2,000 times the number of full-time employees minus 30. That means that a company with 100 employees would pay no more than $140,000 per year in penalties. The penalty also increases each year with growth of insurance premiums.
However, penalties do not apply to small employers. And if an employer has 25 or fewer employees and an average wage of up to $50,000, the company may even be eligible for a health insurance tax credit.
Will employers’ insurance be affected regardless of the Supreme Court decision?
That’s the part no one knows. The entire insurance industry is in limbo waiting to find out if laws that have already been passed, such as preventive care at no cost, will stay in place. If laws already in place are struck down, each individual insurance carrier will be handling it differently.
For example, the mandate of having young people ages 26 and younger on their parents’ plans will likely be kept by many insurance carriers, as it is a healthy demographic that has been profitable. On the other hand, carriers might not want to keep covering children up to age 18 with pre-existing conditions. If it is no longer law, it might not look good for insurance carriers to make that move, but it will cut costs.
Right now, most health insurance renewals with health insurance carriers will only have single digit increases this year (2012), compared to increases of 11 to 20 percent in 2010 and 2011. One exception might be increases of as much as 40 percent if a company with 50 employees or more has a lot of claims, as carriers want to move them off of their books.
One way to ensure that nothing changes with a business’s insurance plan is through grandfather status, in which a company has kept the same plan it had since 2010. However, carriers are charging more for those with such a status, as it is more costly for them to keep two platforms of insurance plans.
How can a company keep track of its health insurance carriers’ updates and changes?
Every carrier's legal department is reading and handling reform differently. However, it is easier for employers with group plans; not much will change for them as long as they offer at least one plan that is similar to those within health care exchanges.
Make sure you are working with a broker that educates your HR department, and consider education through seminars and informing employees of your benefits through annual enrollment meetings, an annual health-fair and wellness events. Our firm also updates constantly through social media, using powerpoints and whitepapers.. This is a national issue that impacts all employers, but there are also separate state nuisances. For example in California, Gov. Jerry Brown says he plans on keeping the California health insurance exchange in place, no matter what the Federal government decides.
Danone Simpson is the founder and CEO at Montage Insurance Solutions. Reach her at (818) 676-0044 or firstname.lastname@example.org.
Please join us on June 12th from 8:00 am to 12:00 pm PDT for the seminar, “Make your benefits count: cost, delivery, self-insurance and innovations” – A presentation and panel discussion with powerhouse health carrier executives, brought to you by Montage Insurance Solutions.
Smart Business will be presenting live streaming audio for this event. If you want to listen in, please register here.
If you are in California and would like to attend the actual live event, please use this registration link.
It’s a common misconception that if you have income or assets offshore and it never touches U.S. soil, then you don’t have to report it. That belief is proved wrong with a new tax form, Form 8938, which seeks information on individuals’ foreign financial assets, with substantial penalties for failure to report. In future years, entities also will be required to fill out the form.
“This area is just ripe for people to misstep, and the penalties for noncompliance in this area are incredibly steep, starting at $10,000,” says Henry J. Grzes, CPA, director, international tax, at SS&G, Inc. “Many tax practitioners, as well as taxpayers, are unaware of these new rules.”
Smart Business spoke with Grzes about Form 8938, why it was created and some the challenges taxpayers may face in staying on the right side of the law.
What is tax Form 8938, Statement of Specified Foreign Financial Assets?
Form 8938 requires individuals — if they meet certain filing thresholds — to disclose the existence of foreign financial assets they have an ownership interest in, which can be individually or jointly owned. The form was first required to be filed with 2011 tax returns. The law that requires disclosure of assets is complex, so the IRS initially decided only individuals would be required to file, but once it finalizes regulations and provides additional guidance, corporations, trusts and partnerships will also have to comply.
Why did the IRS create Form 8938?
It was created to make sure taxpayers are properly reporting the existence of and any income from a bank account, ownership in a foreign corporation, whether public or private, and other offshore assets. The IRS has been focusing on taxpayers with offshore activities, especially if those activities aren’t being properly reported on their tax returns.
The recent U.S. pursuit of UBS, a global financial institution, brought the issue to the forefront. UBS employees allegedly attended high-profile events such as the Super Bowl and solicited people to invest money with them by saying they wouldn’t disclose the existence of the investment to other parties..
What are the penalties for failing to properly file Form 8938?
There’s an initial penalty of $10,000 for failure to file, which applies to both spouses if you file jointly, even if only one spouse has foreign financial assets. Failure to file or failure to disclose an asset will also extend the statute of limitations for a return. For example, if you don’t file Form 8938 for the 2011 return until tax year 2013, the statute may remain open for all or part of your income tax return until three years after the date in which the 2011 Form 8938 is filed. If there is unreported income from the assets included on the 2011 filing, the statute of limitations is extended even further.
What advice would you give individuals who aren’t sure if they qualify for Form 8938?
Seek qualified help and inquire whether your tax preparer has experience in international reporting. Some tax practitioners might not want to take on such a filing burden because they aren’t familiar with the area and could be liable for potential preparer penalties.
The form can be confusing because whether you have to file depends on whether you file separately or jointly and whether you live in the United States or abroad. In each circumstance, there is a different filing threshold. In addition, a specified foreign financial asset may not be what you think. For example, holding precious metals directly doesn’t need to be reported on Form 8938, but if you hold precious metals in an account in a foreign financial institution, the account must be reported. When in doubt, report it.
It’s also hard to determine the fair market value of some assets, such as ownership in a closely held business. The IRS requests that you use readily accessible information to determine the maximum value of the foreign asset. If you can’t determine the value, put it down on the form as a value of zero. This is often the case where a taxpayer is a beneficiary to a foreign estate and no distributions were received by the taxpayer in the reporting year.
If individuals have to file the Foreign Bank Account Report (FBAR), why do they need to fill out Form 8938?
The rules for filing the FBAR and Form 8938 are promulgated under different titles of the U.S. code. Form 8938 is part of the Income Tax Act, so only certain individuals can access the information without a subpoena or legal reason. FBAR is part of the Bank Secrecy Act and is a law enforcement tool used to detect money laundering or terrorism.
Filing and reporting requirements for the FBAR and Form 8938 requirements are different; if you file either Form 8938 or FBAR, it doesn’t mean you have to file the other, but you may have to file both.
What happens if someone failed to file the form for the 2011 tax year?
The IRS is playing hardball. There is a reasonable cause provision that allows a taxpayer to avoid any late filing penalties if the failure to file or to disclose an asset is due to reasonable cause and not due to willful neglect. If you have a reasonable argument to put forth, it’s still going to involve time and money. You may not end up having to pay any penalties that might be assessed, but to get to that point, you will have to affirmatively show to the IRS that the facts support a reasonable cause claim.
For taxpayers who determine they need to file this form and did not include it with their 2011 returns, it would be wise to address this failure as soon as possible. Such a voluntary admission of noncompliance and taking corrective action to immediately cure this filing deficiency will generally be to an individual’s benefit when attempting to negotiate any penalty abatements with the IRS as a way to demonstrate a good faith effort to be in compliance with these new filing obligations.
Henry J. Grzes, CPA, is a director, international tax, at SS&G, Inc. Reach him at (919) 651-1616 or HGrzes@SSandG.com.
Insights Accounting & Consulting is brought to you by SS&G
Establishing job expectations and aligning training to those expectations is crucial to retaining newly hired personnel and enabling them to transition into being a valued member of the business.
Twenty-two percent of staff turnover occurs in the first 45 days of employment and the cost of losing an employee in the first year is estimated to be at least three times that of the person’s salary. However, new employees who go through a structured training program were 58 percent more likely to still be with the organization after three years, according to a study by The Wynhurst Group.
“When new employees receive quality training, it builds a comfort level that the company is investing in them and leads to longer-term employment,” says Danny Spitz, CEO of Everstaff. “The new employee should understand the company’s goals and how he or she can help in achieving them. At the same time, if somebody is fully trained, you should be able to encourage feedback for process improvement, which will allow the employee to take hold of the position and understand where he or she can make a difference.”
Smart Business spoke with Spitz about how businesses can use their orientation and training programs to ensure job responsibilities and expectations are clear.
How significant is a first impression, and how can you guarantee it goes well?
It’s extremely important because the first impression sets the tone for accountability. When hiring, it is essential to discuss what is required from the person and what the day-to-day responsibilities will be if hired. Explaining this during the interview process will allow both sides to have the same understanding of what the job entails and will cut down on turnover, as the expectations have been discussed. When the newly hired employee starts, it is important to have an up-to-date training program that matches the company’s operations and individual position responsibilities. This is where showing strong organizational skills as a manager is critical.
What’s important to remember when setting expectations for your new hires?
Having already discussed this during the interview process, it is still recommended that the manager outline the daily responsibilities and expectations during first-day orientation. I find it important to cover, but even more important to explain how the company will provide the training and resources to make the person succeed in their new position. More information provided to the individual will allow for a stronger comfort level, and even discussing the finer details such as hours, company standards, etc., is recommended.
What can employers do to make sure their training works with job expectations?
It’s good for managers to refer back to when they started, either in their current position or in a previous position when they were unfamiliar with the company. Remember what type of training was provided and build the current training around your experience. Recognizing the strengths and deficiencies of the training you received will allow you to build your own successfully program.
Often, the manager is fully responsible for training, but if it’s a larger organization, you can use current employees to conduct training on individual responsibilities of the job. Identify the strengths of your current staff members will allow you to involve them in the training of the new employee.
It all goes back to not waiting until the day before the person starts to develop a training plan. As you continuously evaluate your company, you should always update your training module and have a clear understanding of how long each step of the training process will take.
Successful managers have a set schedule, often two weeks, that maps out which functions should be trained when, giving time in between so the new employee can digest the task and not get overloaded. With a training schedule stretched out over a certain period of time, you can train the new employee, and then let that person go live on those responsibilities, allowing him or her to utilize the training to complete the individual task before moving on to the next training piece. Everybody has gone through training where you’ve done a quick overview, but once you get to the actual function and you’re on your own, you have to guess because it was covered so quickly.
If the resources are available, shadowing is great tool for training. Have the new employee shadow one of your senior employees doing the job function and then reverse the roles. The senior employee will shadow the new employee to make sure everything is being done efficiently and properly, while being a resource for additional questions. You always want new employees to ask questions — that’s part of the training.
How often should training programs be updated?
Your training program should be updated two to four times per year, although each update doesn’t mean there are large overall changes. It also depends on how often you hire.
Once you finish the training process, get feedback from the new employee on what he or she feels was a benefit. You really should do 30-, 60- and 90-day reviews, which will allow you to ask about their level of comfort with the daily responsibilities and see if additional training needs to be done.
These reviews give the newly trained employee a higher success rate of the job responsibilities and allow you to update the training module for the next hire.
Danny Spitz is the CEO of Everstaff. Reach him at (216) 674-0788 or email@example.com.
Insights Recruiting & Staffing is brought to you by Everstaff
Patients are walking billboards for your health care organization. Therefore, if you want to ensure and spread a positive message, having an excellent health care culture can help create the right atmosphere not only for patients, but for your staff, as well.
“If a health care organization doesn’t create a culture in which workers feel positive about where they work, it impacts patients,” says Patricia Reid, clinical nurse specialist and vice president of Health Care Education Initiatives at Cuyahoga Community College. “The health care environment is stressful. It’s important the organizational culture values the work that nurses and other ancillary caregivers provide. If the providers of care are not valued or lack the support of management, that dissatisfaction can indirectly be conveyed to patients. In today’s world, hospitals are graded by consumers through a nationally standardized satisfaction survey. These scores play a crucial role for hospitals, as they are publicly reported and available to all consumers of health.”
Smart Business spoke with Reid about how creating the right culture can increase patient satisfaction and lower staff turnover.
How are health care workers being trained to create a positive patient experience?
Today’s emphasis in health care is on a positive patient experience. Forty years ago, when patients were hospitalized, they were cared for and there was little emphasis on cost. With a greater awareness of health, and as costs have increased, so have patient expectations. Patients are more knowledgeable about their health and have become more discriminate in seeking care. Conversely, hospitals are being judged on the quality, safety and patient satisfaction within their institutions.
The Internet now provides a forum for patients to share both their good and bad health care experiences. They are demanding quality care. Health care workers are no longer caring for novice patients who are not knowledgeable of their health or the expectation of the hospital experience. Many patients come armed with suggestions of treatments or medications that may help in their care.
Health care is a much more collaborative environment and health care providers want to ensure patients understand why a particular treatment they may be asking for may or may not be appropriate for them. It’s important that care is collaborative and respectful for both patients and providers in order to support the highest quality of care and satisfaction for the patient.
Why is increasing patient satisfaction and lowering staff turnover so important to a health care facility’s quality of care?
Due to the recession, health care has not experienced the turnover it had experienced previously. Although there may be some higher attrition rates in the lower salary bands, there are many graduates in health care fields continuing to seek jobs. We will continue to see more hiring, and some predict a shortage as current health care workers continue to age.
The more turnover an organization has, the less consistency patient units will have on a day-to-day basis. In addition, there’s a lot of knowledge within a tenured staff that has been employed 10, 15 or 20 years, versus a new graduate. Most important, as new graduates come into the field of health care, it’s critical that experienced workers are available to assist the more novice workers in their roles. The culture of health care is about helping transform young staff into mature, confident health care workers. If there isn’t an expert they can go to, they must rely on their own knowledge, which can lead to mistakes.
Health care institutions also need to ensure that the more mature health care worker is knowledgeable about current trends in quality, safety and satisfaction, as many were not trained in these newly defined concepts. Health care workers must understand why patient satisfaction is so paramount to the quality of care. It’s more than just a score; it’s what the organization should be about.
Health care workers want to provide the best possible care. However, today they are being judged through quantitative measures, which is much different than 40 years ago.
What tools can those in the health care industry use to create this kind of positive culture?
It’s very important to train people in the educational setting, not just on the skills of taking care of patients but on how you provide quality care from a business perspective. Do you treat patients with respect? Are you efficient in answering their concerns? It truly is a reflection of a hospital’s culture, and you need to make sure all employees want patients to say, ‘That’s the best care I’ve ever received,’ regardless of the treatment or outcome.
How can people learn more?
On June 26, Corporate College presents ‘Disney Institute: Building a Culture of Health Care Excellence.’ The workshop covers leadership skills in the context of the Disney culture. It stresses that whoever you meet, whoever you greet, should have a positive experience. To achieve that, you have to be knowledgeable about your organization and everybody has to have the same goal. Not only does that create a good experience for the patient, but people feel good about working for that organization.
Today’s health care institutions are concerned about their staff-to-patient ratios and the bottom line, but just as much emphasis needs to be placed on the staff. Those on the front line providing patient care are the heart of the organization and they need to feel valued. The organization must recognize those who provide exceptional care and not lose these health care providers. Unfortunately, we commonly promote those with excellent bedside skills to management, instead of rewarding them monetarily to continue to do what they do well. Great caregivers eventually reach their maximum pay grade and the only option is a promotion to management, despite their desire to remain at the bedside. Organizations must rethink the paradigm and consider what truly makes a great organization and reward excellent providers so they can remain in that critical caregiving role.
Patricia Reid is a clinical nurse specialist and vice president of Health Care Initiatives at Cuyahoga Community College. Reach her at (216) 987-4659 or Patricia.Reid@tri-c.edu. To register for the Disney workshop, call (866) 933-5167 or email Patricia.Reid@tri-c.edu.
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There is a reason the saying “Location, Location, Location” has persisted in the real estate business.
Take, for example, CIO Thom Davis, of Omega Environmental Technologies, and his wife Grace, founder and CEO. In 2009, they moved their Dallas-based company 10 miles down the road to where they were living in Irving, Texas. They found that relocating to the new ZIP code brought a number of advantages.
“When you have your business in one city and live in another, it’s hard to be as involved as you’d like and still have your full work day,” says Davis. In addition to improving the personal amenities surrounding them, the couple also tapped in to a host of business perks with the help of the Greater Irving – Las Colinas Chamber of Commerce.
Smart Business spoke with Davis about what Irving has to offer, why they made the change and how other businesses may benefit from making the move, as well.
What led to the decision to move, and why Irving?
The business needed to double its space, as we’ve been pretty fortunate in our growth over the years. When we looked at where we should move, Irving was our first choice.
There were a number of reasons we picked Irving and one was to get closer to an airport. We manufacture and distribute mobile air conditioning parts for a range of vehicles to 87 countries, so we’re doing a lot of international business, shipping some 25 percent of our products through airlines.
We wanted to improve access in and out of the facility and be easily reached by customers and suppliers. The company is now about six minutes from the Dallas/Fort Worth International Airport.
It also was a good fit culturally. My wife and I had been living in Irving for 12 years and wanted to be more involved in the city’s civic life. Irving is a very diverse city — some 53 languages from 96 countries are taught in the school system — which fits in well with Omega because our 66 employees represent 13 nationalities.
Irving has two paid symphonies, one volunteer symphony, an award-winning musical theatre and many activities that are convenient and inexpensive. And that’s not even looking at the cultural benefits of both nearby Dallas and Fort Worth. Since relocating, 15 of Omega’s 66 employees and their families have moved into Irving.
What aspects of the city have helped your business?
Transportation and location are definitely big assets. There are major north/south highways and east/west thoroughfares that either run right through Irving or are on the edges of the city. One new addition is the light rail, which will be very convenient for foreign guests who are used to train travel, allowing them to visit companies in the area. The leg from downtown Dallas to Irving opens in July; the section that runs from Irving to the airport is under construction and scheduled to open in 2014.
There are plenty of comfortable hotels scattered throughout the city and there’s no price point visitors can’t find. Our customers typically stay for a week and many bring their families because when you’re leaving Brazil or Italy to come to the U.S., you’re not coming for an overnight stay. With Irving’s central location, visitors’ families are easily entertained in downtown Dallas, which is only 15 minutes away, and downtown Fort Worth, which is only 20 minutes away.
Are there any other factors about Irving that makes it a good fit for businesses?
There’s a willingness to help on behalf of the city, aided by the Greater Irving-Las Colinas Chamber of Commerce, because there’s an understanding of how important business is to Irving. Dallas didn’t offer any incentives when we looked at space still within the city but closer to the airport. With a smaller city — Irving consists of more than 216,000 people — there’s more support from city leaders and staff and it involves people who are higher on the administrative chain.
Irving has more than 8,500 companies, including the headquarters of five on the Fortune 500 list and a presence of almost 50 more on the Fortune list. It also has more U.S. Chamber Small Business Blue Ribbon Award Winners than any other city in the U.S. It’s a city that spends a lot of time and energy trying to recruit and help the small and large businesses already there.
How has the city helped your business since the move?
There were some incentives that came from the chamber of commerce and the city itself. Since most of our goods are shipped offshore and purchased in the U.S., the city granted us a tax abatement. Irving also designated us as a free trade zone, which means as long as we move products in and out of the city in 90 days we don’t have to pay personal property tax on those products.
What is your advice to other companies that are considering relocating?
The first thing you need to do is contact the chamber of commerce. Many chambers, such as the Greater Irving-Las Colinas Chamber of Commerce, are the economic development arms for cities. These chambers have put together programs to help make it a one-stop shop for new businesses coming in.
So instead of having of run all over trying to find this person and that person, the chamber will give you the guidance and help you address any issues, such as obtaining permits.
Thom Davis is chief information officer at Omega Environmental Technologies. Reach him at (972) 812-7099 or firstname.lastname@example.org. Visit Greater Irving-Las Colinas Chamber of Commerce at www.irvingchamber.com.
Insights Economic Development is brought to you by Greater Irving-Las Colinas Chamber of Commerce
Every employer is facing increases in the cost of health care, which are a function of price, utilization and intensity. And with every employer looking for ways to lower costs, imaging services are a prime target. Imaging services such as MRIs are one of the fastest-growing components of health care; and there are opportunities to help identify and limit all three cost drivers.
“High-cost imaging is something that you, as an employer, want to keep your eye on because it’s trending higher, typically, than the rest of your categories of care,” says Mark Haegele, director, sales and account management at HealthLink. “But the great news is that this is an area that you can control and you can manage.”
Smart Business spoke with Haegele about why imaging services costs are increasing faster than other health care areas and what employers — particularly self-funded employers — can do about it.
What is high-cost imaging and why is its use increasing?
Imaging services are tests such as X-rays and ultrasounds, as well as high-tech imaging including MRIs, CT scans, PET scans and nuclear cardiac imaging.
While some experts say that imaging growth has slowed in recent years, it’s still one of the fastest-growing segments of medical costs, accounting for nearly 15 percent of all health care costs, according to Blue Cross Blue Shield. As an employer, your inpatient costs may be consistent year over year and your physician costs might be consistent year over year, but for many employers, imaging costs are trending much higher than those in other areas.
How can employers address increasing use and cost?
Most managed care companies have drastic variations in their imaging contracts with providers within their network. At Hospital A, the cost of a MRI might be $600, while the cost of that exact same MRI at Hospital B, right down the street, is $4,000.
The discrepancy exists because, as managed care companies negotiate with hospitals, there is give and take on each type of care, from inpatient to outpatient to emergency room to imaging.
Hospital A may have offered the managed care company a good deal on MRIs in return for higher outpatient surgery costs, while Hospital B might need less income from its outpatient surgery but a higher MRI rate. Employers and employees are typically in the dark about these variations within a network.
In addition to educating employees on how to choose where they get their imaging services, you can align incentives or bonuses to drive employees toward lower-cost options. For example, if employees know their MRI co-pay is $25, do they really care if the MRI costs $600 or $4,000? The two MRI choices are both top-quality providers, and more than likely the exact same machine. But if you, as a self-funded employer, can offer the employee a $100 gift card if he or she chooses the $600 MRI location over the $4,000 location, your company saves more than $3,000.
How can employers help control overutilization of imaging services?
Overutilization issues often arise when there is no continuity of care by employees. An employee might go to a doctor and get a CAT scan at one hospital, but the next hospital doesn’t get the employee’s records, so the same test may be repeated. Overutilization occurs most often with aliments that are hard to diagnose, and in cases in which patients are constantly going in for tests for ailments such as migraines or for sleep studies.
Employers should use comprehensive case management to identify employees who have no continuity of care and/or have chronic problems that are most likely to result in overutilization. By managing health care cases closely, employers can help employees identify and retrieve previously done tests.
In addition, education can result in a decrease of utilization. A recent National Imaging Associates study found that a large percentage of MRIs are ordered to meet patient demand rather than to meet a true diagnostic need.
What is intensity of imaging services and what opportunities exist for employers to decrease these costs?
Intensity is when employees receive PET scans, when their problem could have been diagnosed with CAT scans. The intensity level of the service is higher than it needs to be, and therefore, the costs associated with that are higher than they need to be.
There are doctors who automatically run all MRIs, which translates into thousands of dollars, when they could have first run a CAT scan, which, in comparison, costs hundreds of dollars. For example, more than 10 percent of chest CT tests are ordered with no claim evidence of a previous plain film of the chest, according to a National Imaging Associates study.
In a self-funded environment, through physician profiling and comprehensive medical management, you can help reduce inappropriate intensity levels of services to employees. There are imaging programs in which employees call to pre-certify services, and if a higher level of care was ordered than is necessary, that can be managed down to a lower level of care.
By looking at all three factors — price, utilization and intensity — employers and employees can work together using benefit design, education and aligned incentives to lower the cost of imaging services.
Mark Haegele is director, sales and account management, at HealthLink. Reach him at (314) 753-2100 or Mark.Haegele@healthlink.com.
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Making the decision to become a publicly traded company is not easy for any company. The process can be cumbersome and expensive, and it’s not a decision that a private company makes lightly.
However, the Jumpstart Our Business Startups (JOBS) Act — signed into law by President Barack Obama on April 5 — may make that decision easier for companies that meet the definition of an emerging growth company (EGC). The law is designed to increase American job creation and economic growth by improving access to capital markets for companies.
“The premise of the act is to somewhat reduce the financial and regulatory burden of going public and to provide EGCs with avenues of communication that did not exist under the prior rules for the process of becoming a public company,” says Dale Jensen, partner-in-charge of the SEC practice group at Weaver.
Smart Business spoke with Jensen about what companies can expect from the newly signed JOBS Act and how it can help them on their journey to going public.
What are EGCs and how will the JOBS Act impact them in their quest to go public?
As defined by the act, an EGC is one that has less than $1 billion in total annual gross revenue. The act redefines the rules around accessing capital in the public markets for those companies defined as an EGC. The intent is to give them some advantages by reducing the burdens that, in the past, they had to overcome when going public.
Also, with additional changes in communications with the Securities and Exchange Commission (SEC) and certain allowable communications with qualified potential investors before filing documents, companies can better understand whether becoming public is the right choice for them.
What advantages does the JOBS Act bring to EGCs?
First, an EGC may submit a confidential draft registration statement with the SEC before going public to get feedback and work through initial comments on a confidential basis. Because the law is so new, the SEC continues to come out with additional guidance and clarification about the process.
Another advantage is that an EGC will only be required to have two years of audited financial statements, rather than the three years previously required.
Along those lines, the JOBS Act also delays the requirement for EGCs to have an auditor’s attestation to report on internal controls for up to five years, potentially. In addition, for the implementation of new or revised financial reporting standards, EGCs will be exempt until the time when such standards are required to be implemented by private companies.
Finally, there are other reporting exemptions for EGCs, such as permitting smaller reporting, scaled disclosures for executive compensation, which means significantly reduced reporting and disclosure requirements.
Will the creation of the JOBS Act lead to an increase in the number of publicly traded companies?
Possibly. The reduced burden and the new allowable communications with potential investors (qualified institutional buyers and institutional accredited investors) should enable more EGCs to become publicly traded companies. That said, the process to go public remains the same, but the reduced disclosure requirements and adjustments in the communication process with the SEC and investors should simplify the process and make it less cumbersome for companies that want to pursue that option.
However, with the increase in the number of shareholders a private company may have before it will be required to file with the SEC (increased from 500 to 2,000), there may also be increased opportunity for companies to remain private and raise additional capital. This could also provide an avenue for public companies that are currently below this threshold to exit the public markets.
What challenges of becoming a publicly traded company are not addressed by the JOBS Act?
An EGC needs to understand that even though there is a reduced cost burden of going public, it is still an expensive process. And, once the company has gone public, there is an increase in the cost and oversight related to being public.
Companies also need to consider whether going public is really the right decision for them. Just because the JOBS Act simplifies the process, does not mean that companies should move forward. Companies should consider the following questions: Do you have the organizational structure in place? Do you have the right personnel? Do you have the ability to do the necessary reporting? Are you organizationally ‘publicly fit?’
Finally, make sure you have the right partners in place — aligning with the right accounting and advisory firm and the right legal counsel is critical to a successful entrance into the public markets.
Dale Jensen, CPA, CFE, is the partner-in-charge of the SEC practice group at Weaver. Reach him at Dale.Jensen@WeaverLLP.com.
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The Patient Protection and Affordable Care Act (PPACA) has had a bumpy ride since before it became a law, but it might be facing its biggest challenge yet from the U.S. Supreme Court.
With the possibility that the court will strike down the entire act this summer, businesses need to start thinking now about how they will handle their health care coverage if that happens.
“I think people will be scrambling to figure out what this all means if the act were to be struck down,” says Bruce Davis, principal and leader of Health and Group Benefits at Findley Davies. “Employers need to take the time now to ask themselves, ‘What would we do Jan. 1, 2013, if the act is stuck down. What changes would we make?’”
Smart Business spoke with Davis about what challenges business face and how they should prepare if the Affordable Care Act is ruled unconstitutional.
What’s the current situation with the Affordable Care Act?
Everyone is waiting for the Supreme Court to render its opinion. Oral arguments were held in March, and the justices have indicated that they will render their opinion by July. It’s widely felt that the court will strike down the individual mandate within the act, which is the requirement that each citizen purchase health insurance. However, now there is a higher probability that the entire act will be struck down.
The American Benefits Council and the Blue Cross and Blue Shield Association filed briefs prior to oral arguments laying out strong cases that the individual mandate is so closely linked to the employer-shared responsibility (i.e. pay or play) provisions and insurance market reforms that the individual mandate can’t be excluded without striking those other parts, as well. In addition, some justices, such as Justice Antonin Scalia, have signaled their reluctance to wade through 2,700 pages of the law to figure out what should stand and what should go.
What are some of the challenges employers face if the entire act is struck down?
Companies have started planning for new health care reform requirements that will begin soon, such as the new communication requirements for summaries of benefit coverage, or determining how to report the aggregate value of employer-sponsored health coverage on their 2012 W2s.
Employers need to go beyond this to consider what they will do if certain PPACA coverage requirements no longer exist. For example, any organization that decided to forfeit its grandfathered status by increasing employee cost-sharing beyond specified limits would have to pay 100 percent for a comprehensive set of preventive care services, including contraceptive and sterilization services that concerned many religious employers.
If the Affordable Care Act is struck down, employers will have to balance the need to contain their health care expenses through cost sharing with the idea of sending employees messages that emphasize wellness and prevention.
Another consideration is that, under the act, employers aren’t able to cover over-the-counter prescription drugs through a Flexible Spending Account (FSA), health reimbursement arrangement, or Health Savings Account (HSA). Without the act, an employer might want to give employees incentives to use less costly over-the-counter medication.
It gets more complicated when employers start to unravel provisions they’ve already implemented. For example, under the Affordable Care Act, employers were able to extend coverage to dependent children up to age 26. If the act is struck down, will employers revert to pre-Affordable Care Act definitions of dependent children, such as to age 19, or to age 23 if a full-time student? Some employers might be uncomfortable with taking such coverage away, but without the act, that coverage will no longer be non-taxable.
Another example is the early retiree reinsurance insurance program (ERRP), in which the federal government paid out $5 billion to help employers sustain their retiree medical plans. Much of the ERRP was paid to state governments and to union health and welfare plans. If the Affordable Care Act were struck down, would a Republican-controlled House want that $5 billion back?
The Supreme Court is unlikely to provide any kind of transition rules or remedies if the act is struck down. While it’s possible the Obama administration would provide some direction, it’s unclear how the U.S. House will react. It’s anybody’s guess. Employers need to be prepared and start thinking about this.
What can employers do to prepare ahead of the court’s decision?
Employers need to take the time now to think about what they would or would not do as of Jan. 1, 2013, in the event the act is struck down. Many employers assume the act will remain in place, but it’s best to consider the opposite possibility and think about how such a verdict impacts the direction of their health plan and its cost-sharing features in terms of employee contributions, deductibles, co-pays or out-of-pocket maximums.
Employers should start having conversations among their leadership teams, especially human resources and finance, because there might be some tension between those two groups. For example, human resources may be inclined to leave things as they are to minimize concern on the part of their employees, while finance will be looking at all options to restrain growth in health benefit costs.
Bruce Davis is a principal and leader of Health and Group Benefits at Findley Davies. Reach him at (419) 327-4133 or email@example.com.
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