The Health Insurance Portability and Privacy Act (HIPAA) governs the use of Protected Health Information (PHI), and failure to comply with the requirements of the policy can be a costly mistake.
As an employer who sponsors a health plan, it is important to fully understand your responsibilities under the act, as failing to do so can result in severe penalties, says Jessica Galardini, president and COO of JRG Advisors, the management arm of ChamberChoice.
“As an employer, you may think that HIPAA doesn’t apply to you,” says Galardini. “But if you are an employer that also sponsors a health plan, ignorance of the law could lead to fines and even jail time.”
Smart Business spoke with Galardini about what plan sponsors need to know about HIPAA and how to ensure that you remain compliant.
What is the HIPAA Privacy Rule?
As required by the Health Insurance Portability and Accountability Act of 1996, the U.S. Department of Health and Human Services (HHS), in December 2000, released final federal regulations that govern the use and disclosure of personally identifiable health information — the HIPAA Privacy Rule. In most cases, the deadline for compliance with the HIPAA Privacy Rule was April 14, 2003. The rule was then updated by the Health Information Technology for Economic and Clinical Health Act (HITECH Act), which took effect in 2010.
The HIPAA Privacy Rule directly regulates health plans, health care clearinghouses and health care providers that conduct certain transactions electronically, and indirectly regulates plan sponsors.
What information is governed by the HIPAA Privacy Rule?
The HIPAA Privacy Rule governs personal health information, which is defined as information that is oral, written or electronic; individually identifiable; created or received by a covered entity; and relates to the past, present, or future physical or mental health or condition of an individual, the provision of health care to an individual, or the past, present, or future payment for the provision of health care to an individual.
What are plan sponsors required to do?
The compliance requirements indirectly imposed upon a plan sponsor by the HIPAA Privacy Rule vary based on whether or not the plan sponsor has access to PHI. A plan sponsor that offers a fully insured group health plan will be minimally impacted by the HIPAA Privacy Rule if its access to health information is limited to the following plan sponsor functions:
- Assisting employees with claim disputes as permitted by the employees’ written authorization.
- Receiving Summary Health Information (SHI) for purposes of obtaining premium bids or modifying, amending or terminating the plan.
- Conducting enrollment and disenrollment activities.
A plan sponsor that has access to PHI in order to perform plan administration functions must amend the plan documents to include a description of permitted uses and disclosures of PHI by the plan sponsors; certify to the group health plan that the plan documents have been amended; and comply with all of the administrative requirements contained within the HIPAA Privacy Rule.
What are the administrative requirements of the HIPAA Privacy Rule?
In general, the HIPAA Privacy Rule requires plan sponsors with access to PHI, together with the group health plan, to comply with all of the administrative requirements contained within the HIPAA Privacy Rule. For a summary of requirements, contact your benefits advisor or visit www.hhs.gov.
What are the penalties if an organization fails to comply with the HIPAA Privacy Rule?
Failure to comply with the HIPAA Privacy Rule may result in civil or criminal penalties. HIPAA’s civil penalties were increased by the HITECH Act but may not apply if the violation is corrected within 30 days. For violations in which the individual is not aware that the violation has occurred, the minimum penalty remains $100 per violation, up to $25,000 per calendar year for identical violations.
If the violation is due to reasonable cause, the minimum penalty is $1,000 per violation, up to $100,000 per calendar year. For corrected violations that are caused by willful neglect, the minimum penalty is $10,000 per violation, up to $250,000 per calendar year.
The maximum civil penalty for any type of violation and the minimum penalty for uncorrected violations caused by willful neglect is $50,000 per violation, up to $1.5 million per calendar year for identical violations.
The criminal penalties are:
- $100 per violation, up to $25,000 per year, per standard, for disclosures made in error.
- $50,000 and/or one year in prison for knowingly obtaining or disclosing PHI.
- $100,000 and/or up to five years in prison for obtaining information under false pretenses, and $250,000 and up to 10 years in prison for obtaining PHI with an intent to sell, transfer, or use it for commercial advantage, personal gain or malicious harm.
Taking the time to understand the rules will ensure that your organization is complying as it should under the law.
Jessica Galardini is president and COO of JRG Advisors, the management arm of ChamberChoice. Reach her at (412) 456-7231 or firstname.lastname@example.org.
Insights Employee Benefits is brought to you by ChamberChoice
While the future of health care reform in its entirety remains uncertain, many provisions of health care reform are already in place as a result of the Patient Protection and Affordable Care Act (PPACA). And there are things that businesses must be doing now to stay on the right side of the law.
As an employer, have you taken the necessary measures to ensure your business is compliant? If you haven’t, you could find yourself in trouble with the Department of Labor, says Ron Smuch, insurance and benefits analyst at JRG Advisors, the management arm of ChamberChoice.
“The DOL has begun exercising its investigative authority to enforce compliance with the health care reform law, requesting that health plan sponsors provide proof of compliance with PPACA’s mandates,” says Smuch.
Smart Business spoke with Smuch about the DOL’s audit requests related to PPACA compliance and what businesses need to know to stay on the right side of the law.
What areas has the DOL been looking into?
The DOL’s audit requests related to PPACA compliance have been divided into three categories — requests for grandfathered plans, requests for nongrandfathered plans and requests for all health plans.
A grandfathered plan is a group health plan that existed as of March 23, 2010 — the date PPACA was enacted — and that has not had certain prohibited changes made to it since that date. If a plan is grandfathered, it is exempt from certain health care requirements, such as providing preventive health services without cost sharing. However, if a plan makes changes — including changing providers, increasing co-insurance charges, significantly raising co-pays or deductibles, significantly lowering employer contributions, etc. — it loses its grandfathered status and must comply with additional health care reform requirements.
Regulations require a plan to disclose to participants (every time it distributes materials describing plan benefits) that the plan is grandfathered and, therefore, not subject to certain PPACA requirements. For grandfathered health plans, the DOL has been requesting records documenting the terms of the plan on March 23, 2010, and the participant notice of grandfathered status included in materials that describes the benefits provided under the plan.
If a plan has lost its grandfathered status, what must it do differently?
Plans that do not have a grandfathered status must comply with additional PPACA mandates, including providing coverage for preventive health services without cost sharing. For nongrandfathered health plans, DOL audits are requesting documents related to preventive health services for each plan year beginning on or after September 23, 2010, the plan’s internal claims and appeals procedures, contracts or agreements with third-party administrators, and documents relating to the plan’s emergency services benefits.
Some of PPACA’s mandates apply to all health plans, regardless of whether they have grandfathered status. For example, all plans must provide dependent coverage to age 26 and must comply with the PPACA’s restrictions on rescissions of coverage and on lifetime and annual limits on essential health benefits.
The DOL has been requesting the following information from both grandfathered and nongrandfathered health plans: a sample notice describing enrollment opportunities for children up to age 26; a list of participants who have had coverage rescinded and the reason(s) why; documents related to any lifetime limit that has been imposed under the plan since September 23, 2010; and documents related to any annual limit that has been imposed under the plan since September 23, 2010.
What else do employers need to demonstrate?
Employers should be prepared to further demonstrate their compliance by producing records of the steps they have taken to comply with PPACA requirements, including plan participation information, plan amendments or procedures that were adopted, and notices that were provided to those covered, such as the notice of grandfathered status or notice of enrollment for children up to age 26. Plans must also show that they cover out-of-network emergency services without requiring more cost sharing that would otherwise be required by covered participants using in-network emergency services.
If a plan’s PPACA compliance documents are maintained by a service provider, the employer should make sure the necessary documents are being retained and can be produced upon request. Your adviser can work as an intermediary with the insurance company/service provider to ensure compliance requirements are satisfied.
And if your company receives a PPACA audit request from the DOL, consult with your advisors immediately for more information on how to proceed.
What are the penalties for failing to comply?
Penalties are significant. Under PPACA, employers with more than 50 employees are required to provide coverage. Those that fail to do so will be assessed a fine of $2,000 per employee per year, minus the first 30 employees. So an employer with 50 employees that does not provide coverage would pay a penalty on 20 employees, or $40,000 a year.
An employer that offers coverage can also find itself in trouble. For example, an employer’s willful and intentional failure to comply with the Summary of Benefits and Costs requirement may result in a penalty of $1,000 per day per participant. And while the cost of providing coverage for employees is tax-deductible for employers, the cost of paying penalties is not.
Ron Smuch is an insurance and benefits analyst with JRG Advisors, the management arm of ChamberChoice. Reach him at (412) 456-7017 or email@example.com.
Insights Employee Benefits is brought to you by ChamberChoice
Employee productivity is important to any business’ success, and if an employee is too overwhelmed by personal or behavior problems to perform at his or her highest level, the company’s productivity will suffer as a result.
To address those issues, many employers are turning to Employee Assistance Programs (EAPs). An EAP can help identify issues facing troubled employees and direct employees to resources such as short-term counseling, referrals to specialized professionals or organizations, and follow-up service to help them address those issues, says Ron Carmassi, a sales executive with JRG Advisors, the management arm of ChamberChoice.
“EAPs offer a safe environment where an employee can discuss problems with a counselor who can make a confidential and professional assessment and provide referral to a mental health professional if necessary,” says Carmassi.
Smart Business spoke with Carmassi about EAPs and how they can assist your employees, improving both the lives of your workers and the productivity of your business
What are EAPs designed to accomplish?
First created many years ago in response to businesses’ concerns about the impact of employee alcohol and drug abuse on bottom-line productivity, employee assistance programs are now designed to deal with a much wider and more complex range of issues that are confronting today’s work force. Modern EAPs are designed to help workers with issues including family and/or marriage counseling, stress, depression, financial difficulties, crisis planning, illness, pre-retirement planning and other emotional, personal and wellness needs.
The expansion in the scope of EAP counseling is often attributed to the change in our social fabric. Double wage-earning households, an increase in the number of single parent households, economic crises, changing and more demanding career patterns, and technological advances have created new and different types of stresses, which affect the health and productivity of many employees.
Individuals experiencing a personal or family crisis and who are under chronic stress often have nowhere to turn for advice and assistance other than the EAP that is offered by their employer.
What is the benefit to employers that offer EAPs?
Many employers realize a direct link between employee well being and employee productivity. The difference in value and productivity between happy and unhappy employees can be profound, as personal and work-related problems can manifest themselves in poor job performance, adversely impacting the company’s overall productivity.
Employers often perceive that the biggest advantage of an EAP is the positive impact it can have on employee productivity, but there are other benefits as well. For example, businesses offering EAPs often see a reduction in absenteeism, an increase in morale, fewer work-related accidents, a reduction in incidents resulting from substance abuse and an overall reduction in medical costs, resulting in a significant savings for the company.
In addition, employers that include an EAP as part of their benefits package are often viewed as more ‘employee-supportive’ than competitors that do not offer this type of program. That, in turn, makes the EAP a tool for both employee attraction and retention, potentially resulting in lower turnover.
Another advantage of the EAP is that it frees up the company and its personnel to focus on operations, rather than devoting work time to issues that are not directly related to productivity, deadlines and other business activities that result in growth and added revenue.
What should an employer consider when choosing an EAP?
The characteristics of EAP programs vary, so it is important to compare programs to understand exactly what you are getting before you sign on. In addition to cost structure, other factors to consider before purchasing an EAP include the qualifications of the staff that will provide counseling.
Staff should be professionally licensed with established relationships with local and/or national health groups and they should also be engaged in continuing education initiatives so that they remain current. Be sure to inquire about the extent of training services because EAP training programs vary in scope and subject matter.
Convenience of services and responsiveness of staff are also important factors to consider, and business owners should seek out EAP providers with facilities in the same geographic region as the company so that employees can visit before, during or after work. The EAP should also include a toll-free telephone line that is operational around the clock
What would you say to employers who say they can’t afford to sponsor yet another benefit?
While employers understand the value of an EAP, many are concerned about the cost of implementing and maintaining this type of program, particularly with increasing costs for other insurance and employee benefit programs. And while it is true that the employer generally bears the cost of the EAP, many employers are surprised to learn they can institute an EAP at a relatively small expense to the company, often with monthly fees ranging from just $2 to $6 per employee.
More often than not, once employers become involved in an EAP, they come to believe that the return on that investment is well worth the cost.
Insights Employee Benefits is brought to you by JRG Advisors, the management arm of ChamberChoice.
With health care costs continuing to rise, many employers are turning to their health plans to find ways to cut costs. And one way to do so is to make sure that your health plan covers only those who are eligible, which can result in significant cost savings. Most employers do not like to hear the word audit, but a dependent eligibility audit can save a business a significant amount of money on their employee benefits, says Craig Pritts, a sales executive with JRG Advisors, the management arm of ChamberChoice.
“The objective of a dependent eligibility audit is to identify dependents who are not eligible to be on the health plan,” says Pritts. “Those can include dependents who have exceeded the age limit that allows them to be covered, divorced spouses or even friends, roommates or other relatives who are not eligible.
It is estimated that between 3 percent and 15 percent of dependents on an average plan are not actually eligible for coverage. And just one ineligible participant can have a substantial impact on a health plan, depending on the costs of their claims.
Smart Business spoke with Pritts about how performing a dependent eligibility audit and removing ineligible dependents from a health plan can translate into significant cost savings for employers.
Why should employers consider performing a dependent eligibility audit?
ERISA includes stringent eligibility rules for plan sponsors, and employers need to ensure that all plan documents, including the summary plan description (SPD), are consistent when defining dependents. A dependent audit helps ensure that you are in compliance with ERISA by providing benefits only to eligible participants.
It is recommended that plan documents be amended to reflect the process that will be followed in determining dependent eligibility going forward, i.e., frequency of audits, the verification process, potential penalties, etc.
One important factor to remember is the rule for dependent children based on the 2010 Patient Protection and Affordable Care Act (PPACA). For all plan years beginning on or after Sept. 23, 2010, children can be considered dependents until age 26, regardless of marital status and student status.
What are the steps to performing an audit?
There are typically two steps to performing a dependent audit. First, employers should establish a period of amnesty during which employees can voluntarily remove ineligible dependents from the plan with no penalty. The most common way of doing this is to notify employees of eligibility rules in writing so that they can review the status of covered dependents. Employers generally give employees one month to notify them of ineligible dependents they may have on the plan. Ineligible dependents that are voluntarily removed are then terminated from the plan at the end of the following month.
Second, for all dependents remaining on the plan after the initial amnesty period, employers should require employees to provide documentation to verify the dependent status/relationship and to confirm that such a relationship still exists. Examples of required documentation could include marriage certificates, domestic partner affidavits, birth certificates, adoption papers, tax forms, etc.
If an employee is unable to show proof of a dependent relationship — or declines to do so — the employer may impose penalties, terminate coverage or seek reimbursement for claims that were paid for dependents during the time in which they were deemed to be ineligible. While employers typically do not seek disciplinary action as a result of the initial audit, this is an option.
Many cases of dependent ineligibility are the result of oversight, such as forgetting to remove a child when that child reaches the maximum age limit, but other instances, such as failing to remove a former spouse, or stepchildren who live elsewhere, can be intentional and can be a serious issue to the employer. The health plan’s ability to provide for its intended beneficiaries is significantly compromised when ineligible dependents receive benefits.
Who should conduct the dependent eligibility audit?
Many employers choose to hire an independent firm to conduct an audit. This can be done on a risk-sharing basis, in which payment to the firm is based on the percentage of recovered amounts or estimated savings as a result of the removal of ineligible dependents from the plan. Using an outside firm can help your business with your employees’ perception of the independence and objectivity of the audit and make them less suspicious of the company gathering what they may perceive to be private information.
For a smaller employer who chooses to perform the audit internally, this may result in additional work but the potential savings can be worth the time and effort exerted to do so. It is important to weigh your company resources against the potential payoff of cost control and ongoing risk exposure when determining if a dependent eligibility audit is right for your company.
Talk to your benefits advisor to learn more and determine if a dependent eligibility audit is right for you. Because as many as 15 percent of dependents enrolled in a plan may not actually be eligible, spending money on an audit could prove to be an investment that saves your company a significant amount of money.
Craig Pritts is a sales executive with JRG Advisors, the management arm of ChamberChoice. Reach him at (412) 456-7253 or Craig.firstname.lastname@example.org.
Insights Employee Benefits is brought to you by ChamberChoice
Today, employers face many challenges when managing employee benefits programs.
With premiums ever-rising, employers must continually balance cost control measures with being able to provide a robust employee benefits package that will help retain and attract top talent, says Keith Kartman, client advisor with JRG Advisors, the management arm of ChamberChoice.
“To ensure that you are providing a benefits package that is both competitive and economical, you need to know how your offerings compare to others in your industry,” says Kartman.
Benchmarking is a practical and proven method that enables an employer to measure its current employee benefit offerings against competitors within the same market. As employee populations are becoming increasingly diverse, companies must meet the various needs of employees from multiple generations and different stages of life.
And with so many variables and choices, how do employers know they are hitting the mark?
Smart Business spoke with Kartman about how to benchmark your benefits program to ensure that it is competitive and economical.
How can benchmarking benefit employers?
Benchmark data provides valuable information and input to employers looking to evaluate their benefits package and compare it with others in the marketplace. In preparation for — and as a result of —health care reform, many suggest that the data that benchmarking can provide is crucial today, more than ever.
New regulations and provisions require significant changes to benefit plans and, in many cases, result in employers having to make difficult decisions. Knowing how other employers are approaching these issues can be extremely helpful in shaping your benefit program in this new health care landscape.
Employers will be responsible for implementing many new rules over the next few years and absorbing the costs associated with those rules, which, for most employers, will include cutting or shifting costs elsewhere. Knowing how other employers plan to address these benefit decisions can be advantageous, as these decisions could mean the difference between maintaining a competitive benefits package to attract the best and brightest and declining ability to recruit and retain quality employees.
Careful strategic planning includes ongoing evaluation of your organization to ensure that a comprehensive and competitive benefit package is offered to employees.
What are some recent trends in employee benefits offerings?
Offering a benefits package that balances cost and value, particularly in this uncertain economic and legislative time, is a perennial challenge. The results from a recent Society for Human Resource Management survey reflect this complex atmosphere.
One trend that is becoming more common among employers is that they are offering health care premium discounts to those employees who take a health risk assessment, who do not use tobacco products and/or who participate in wellness programs. The goal is to keep healthy employees healthy, while encouraging high-risk employees to change those lifestyle habits that can potentially have a negative impact on their health.
Properly managing and treating high-risk conditions such as high blood pressure, heart disease, diabetes and asthma can improve the health of your work force and help alleviate worsened health conditions and concerns in the long run.
What other trends are occurring in the workplace?
Another common trend is the replacement of traditional vacation, sick or holiday benefits with paid time off plans. Under a PTO plan, an employer creates a bank of hours or days that employees can draw from for various reasons, including taking a vacation, taking care of a sick child or an elderly parent, going to a doctor’s appointment or needing a personal day off from work for any reason.
Instead of vacation and sick days being itemized by the employer for a specific purpose, the employee uses the days or hours at his or her discretion.
PTO plans generally work best in an environment that is already flexible in nature and is open to modified work schedules, as PTO promotes a work/life balance by allowing employees to determine when they should take time off and what they should use it for. Flexible working policies such as job sharing and “flex” time have become an increasingly popular trend among employers.
Review your benefits program regularly, using benchmark data and employee surveys to evaluate and solicit feedback. Regardless of the industry your company is in, the current business environment is challenging.
Benchmarking will provide a better understanding of the key issues that are affecting a company’s performance through collaborating, comparing and analyzing data. The results will enable the organization to develop a strategic plan to address the issues highlighted within the benchmark report.
Keith Kartman is a client advisor with JRG Advisors, the management arm of ChamberChoice. Reach him at (412) 456-7010 or email@example.com.
Insights Employee Benefits is brought to you by ChamberChoice
Worksite health promotion is an investment in a company’s most important asset — its employees. Studies have shown that employees are more likely to perform well and less likely to exhibit presenteeism — showing up to work when sick and, as a result, underperforming — when they are in optimal health.
And the New Year provides a perfect opportunity to introduce or re-energize workplace wellness, says Renay Gontis, communications coordinator with JRG Advisors, the management company of ChamberChoice.
“While the idea of workplace wellness is not a new one, the implementation process may be,” says Gontis. “As the workplace dynamic continues to change due to an increased number of employees who are working remotely and/or with flexible schedules, employers are faced with new challenges. The absence of employees from the physical workplace makes it difficult to implement a one-size-fits-all wellness program, making it more important than ever to consider the individual’s needs, resources and environment when developing a wellness program. While one employee may be located in the city with easy access to local markets and fitness facilities, a more rural employee may not be.”
Smart Business spoke with Gontis about how to keep employees healthy and how to design a wellness program that meets the needs of everyone.
What are the challenges of creating a wellness program?
Employers are faced with the challenge of keeping employees engaged and participatory in the wellness program. With increased access to the Internet through smart phones, laptops and tablets, employers can look to online programs and/or utilize social media to encourage and motivate employees through online groups.
A social media site can provide a meeting place for co-workers with common interests such as running, walking and spinning to discuss upcoming wellness events, past successes and future goals. It may also add a competitive edge that will increase motivation and participation among employees.
How can an employer start to implement a wellness program?
When starting any new program in the workplace, getting buy-in from senior management is critical if the initiative is going to succeed. And because it is not always easy to get senior executives to attend lunch-and-learns, participate in office walks or other activities due to their schedules, it is important that they display their commitment in other ways. For example, management can illustrate their dedication to the program by allocating company resources to include a budget for wellness initiatives.
Incentives will engage and encourage participation from the work force. The incentives do not necessarily need to be large; however, they should be relevant to each individual company’s employee population. A great way to determine what kinds of incentives would be effective at a particular company is to survey employees about their hobbies, extracurricular activities and family interests. Having this information will help the employer select incentives that will not only motivate active employees to remain healthy but also encourage the less active employees to get involved and take a more active role in their health.
The incentives should be enticing and stick within the wellness theme. The last thing an employer wants to do is to offer counterproductive incentives such as membership in a cake of the month club or a gift certificate for an all-you-can-eat dinner. A few positive incentive examples include fitness club memberships, new walking/running shoes, massages and paid time off.
How can an employer get employees to buy in to a wellness program?
Employees may be suspicious of the motives surrounding the employer’s decision to promote workplace wellness, and the employer needs to be cognizant of this issue. Employees’ suspicions are aroused with just about every new program introduced into a workplace.
It can probably be attributed to human nature, the relationship between management and nonmanagement employees and perhaps the economic environment. For example, if downsizing is part of the work landscape and a new wellness program is launched, rumors might spread that selection of who goes and who stays is based on health status.
Before introducing a wellness program, check the current pulse of the organization. Honest and open communication will help curtail any suspicions that could potentially arise. Communicate to employees not only what you are planning with the program but also why it is being done. Discuss the benefits to the both company and the employee. Addressing suspicion simply and directly will work to the employer’s advantage.
Are there other options if an employer isn’t able to develop a full-blown wellness program?
Some employers may be reluctant or lack the resources to dive into a full-blown wellness program, and this is a common concern. But it is important to remember that even a small activity can plant the seeds of success for a company’s wellness program to grow.
Engage employees by offering some of the easier and less costly things, such as providing a health and wellness bulletin board or a newsletter. The employer can also coordinate walking groups during lunch hours, or introduce a salad bar lunch day.
Keep in mind that employers may want to avoid activities that may be perceived by employees as invasive, such as health screenings, until they are able to offer the employees the education and support for modifying lifestyle habits.
Renay Gontis is communications coordinator of JRG Advisors, the management company of ChamberChoice. Reach her at (412) 456-7011 or firstname.lastname@example.org.
Health and welfare benefits are a powerful tool to attract and retain employees. But as costs continue to escalate, employers are finding it more difficult to maintain competitive benefits, which are often one of the top three expenses for a business. When coupled with the multitude of other expenses associated with doing business, many employers are looking for ways to reduce the expense of benefits, says Amy Broadbent, vice president, JRG Advisors, the management company of ChamberChoice.
“Imagine an approach that would enable employers to control costs by establishing a predictable employee benefits budget for the next three to five years, while at the same time offering increased freedom of choice and flexibility for employees,” says Broadbent. “This is not as unrealistic as it might first appear, as a defined contribution approach allows employers to control costs while offering employees a wide range of benefit plans from which to choose.”
Smart Business spoke with Broadbent about how a defined contribution approach can help employers control costs and give employees a wider range of options.
How does the defined contribution approach work?
The driving product line is employer-sponsored health insurance. This unique approach is designed to lower both employer and employee costs, and the concept is simple.
In the traditional approach, the employer selects and funds the same insurance plan for all employees in a one-size-fits-all approach. The employer chooses one or two plans to satisfy all employees, yet, in reality, this canned approach only satisfies a few. A diverse work force equates to diverse needs. Every employee’s needs are different, and no one solution is going to meet all of them when it comes to benefits.
Alternatively, in a defined contribution approach, the employer designates a fixed amount of money, or a defined contribution, to each employee. Employees then use that money to purchase individual health care insurance, selecting products that specifically meet their needs and those of their dependents.
The defined contribution scenario enables employees to choose what they want, not what they are told they can have. This approach extends beyond medical benefits. Employers can make a strategic decision as to the amount of money they will make available and offer a wide range of insurance products, including dental, vision, life, disability, long-term care, cancer insurance, auto/homeowners insurance and so on.
How is the amount of money allotted to employees determined?
Typically, the amount of money allotted to employees is based on their eligibility tier (employee, employee/spouse, family) or their tenure with the company. The amount does not have to be the same for each employee. According to federal law, ‘a plan or issuer may treat participants as two or more distinct groups of similarly situated individuals if the distinction between or among the groups of participants is based on a bona fide employment-based classification consistent with the employer’s usual business practices.’
There is no maximum amount that employers can contribute, and no minimum that is required.
How can a defined contribution plan benefit employees?
A defined contribution, coupled with a Private Exchange platform will include employee tools and personal support to assist with the decision-making and selection process. This employee engagement results in a better understanding of the true cost of each product. Employees purchase based on their own personal needs and build their own custom benefits portfolio to guard against their personal risks, resulting in increased employee satisfaction.
Defined contribution offers multiple advantages for the employer, as well. Making a strategic decision relative to how much to spend per employee per year enables the employer to set predictable long-term goals, while eliminating multiple administrative tasks such as employee education, benefit communications, enrollment assistance, ongoing customer service support, compliance issues, etc.
A defined contribution approach allows employers to focus on their business, not on benefits. Employers can control their benefits budget and save money, expand their benefits and increase service administration at no added cost, and enable employees to have the tools and resources they need to purchase the benefits that work for their families and their personal budgets.
How can the defined contribution approach lower costs?
The approach shifts financial responsibility for health care from the employer to the employees, giving employees more responsibility and choice in how they spend their health care dollars. They have a direct financial incentive to spend those dollars wisely. The defined contribution approach to benefits offers an innovative solution for employers. This platform transforms the traditional approach to employee benefits and offers a sustainable win-win for employers and employees alike.
Amy Broadbent is vice president, JRG Advisors, the management company of ChamberChoice. Reach her at (412) 456-7250 or email@example.com.
From 1999 to 2009, employer-sponsored family health insurance premiums have increased an average of 131 percent, from $5,791 to $13,375, according to the National Conference of State Legislatures.
Of that, workers contributed an average of $3,515, with the rest of the burden falling on the employer.
As a result, rising costs have forced employers to choose alternative solutions that shift cost sharing to the employee in the form of higher deductibles and/or co-payments, creating a greater interest in voluntary benefits, says Joanne Tegethoff, account executive at JRG Advisors, the management company for ChamberChoice.
“The work force today is much different than it was 25 years ago,” says Tegethoff. “More women are working today. And with the divorce rate at around 50 percent, there are more single parents seeking benefits. Long-term employment is becoming the exception, and employees are more mobile. All of these factors are making voluntary benefits more appealing.”
And because competition for top-notch employees is stiff, offering quality and comprehensive benefits is key to recruiting and retaining employees.
Smart Business spoke with Tegethoff about how voluntary benefits can help attract quality employees and lower your cost of doing business.
What are voluntary benefits?
Voluntary benefits are insurance products available to employees for elective purchase via payroll deductions. These benefits are sponsored and made available by the employer, but the employee is typically paying 100 percent of the premiums. Many of the products can be taken as a pre-tax deduction, which provides additional savings to both the employee and employer.
The benefits offered often depend on the type of medical coverage the employer offers. For example, employers with a high-deductible health plan with at least a $1,000 individual deductible typically offer short-term disability insurance, which provides income protection should an employee be disabled in an accident outside of work; accident insurance; critical illness insurance; cancer insurance; term-life insurance; and universal life insurance, which is a flexible, permanent policy offering the protection of life insurance, as well as a savings element that is invested and builds cash value.
Short-term disability is typically offered if the employer does not offer group disability, and universal life is typically made available to a work force with a younger average age.
If an employer has a medical plan with a low or no deductible, they will not generally offer critical illness insurance, which pays a lump-sum benefit upon diagnosis of a critical illness.
Less common voluntary benefits that are appreciated by employees include long-term care insurance, dental and vision insurance, prepaid legal services, identity theft insurance, auto and homeowner’s insurance, and pet insurance.
Keep in mind that employees may feel overwhelmed and find it difficult to make a decision when too many products are offered. A successful agent will help the employer sort through the choices and narrow down the product offering.
How can a company begin to implement a voluntary benefits plan?
The employer first needs to determine whether employees have interest in taking advantage of voluntary benefits. Survey your employees to determine the level of interest and need.
Once interest is determined, you will need to select an insurance company that best meets your needs. Not all companies and policies are the same. Talk with your consultant or adviser to determine your needs and for assistance with the insurance company selection and implementation process.
An employer will select an insurance company that hosts group meetings to explain the available benefits to its employees. The insurance company should also conduct one-on-one meetings with employees to discuss their individual needs. If they are not interested, employees should sign a waiver stating they are declining the offered benefits.
In addition, the agent and the insurance company should conduct open enrollment meetings every year for new hires and for those employees who may have changed their minds about participating.
Do employers have any fiduciary responsibilities associated with offering voluntary benefits, even though they are not contributing financially?
Although most employers do not contribute to the cost of voluntary benefits, they still have a fiduciary responsibility under ERISA to police such plans if they engage in the promotion or distribution of benefits information related to these programs. They also have a fiduciary responsibility if they allow payroll-deducted payments on a pretax basis through a Section 125 cafeteria-style plan.
What does an employer gain by offering voluntary benefits?
Voluntary benefits add value and financial security to a company’s employees without impacting the employer’s bottom line. By implementing voluntary benefits, employers acknowledge the needs of their employees and allow the employees to select benefits based on their individual needs.
Joanne Tegethoff is an account executive at JRG Advisors, the management company of ChamberChoice. Reach her at (412) 456-7233 or firstname.lastname@example.org.
Many employers have reduced their work forces, but not their workloads, leading to more hours for the remaining staff.
The additional work, coupled with a still-uncertain economic environment, has placed tremendous personal and professional pressure on employees, and many are having a difficult time finding balance in their lives as a result, says Barbara Baldwin, account executive for JRG Advisors, the management company for ChamberChoice.
“Feeling stressed is a normal reaction to the uncertainty,” says Baldwin. “However, your employees’ physical and emotional health can impact productivity and make them more vulnerable to job-related stressors. Even if employees do not have control over their work hours, they should be encouraged to discover ways to bring satisfaction and balance to their work and home life.”
Smart Business spoke with Baldwin about what employers can do to help employees find work/life balance.
Why should employers be concerned about the physical and emotional health of their employees?
When their own needs are taken care of, employees are stronger and more resilient to stresses that they face both in the workplace and in their home lives. And the better your employees feel, both physically and emotionally, the better equipped they will be to manage work and home stress without becoming overwhelmed. A well-balanced work force will be more productive and happier overall.
What can employers do to help employees achieve balance in their lives?
It is important for employers to understand potential job-related stressors and to share techniques with employees on how to handle their professional workloads without becoming overwhelmed. Employers should encourage employees to take the following approaches to their work in order to lessen the stress.
* Prioritize the work and tackle the tasks in order of importance.
* Break large projects into smaller steps so that the scope of the project does not become overwhelming.
* Focus on one manageable step at a time, rather than taking on everything at once. Doing so allows you to create small successes for yourself on a daily basis.
* Maintain a network of contacts and make a point to connect with them periodically. Build relationships with other people in the company to share positive experiences and create a feeling of camaraderie.
* Develop the capacity to meet everyday challenges with humor.
How can employers impact employees’ home lives and help provide balance?
While the company may not have a direct relationship with employees outside of the work environment, their home-related stressors can impact work attendance and attitude and, as a result, have an impact on overall company morale.
An employer should start by implementing stress management techniques in the workplace. As employees become aware of these techniques and implement them in the workplace, some of them will be motivated to take this information and apply it to other areas of their lives.
For those who need additional assistance, provide written materials that offer suggestions about how to improve the balance in their lives. This type of information is readily available on the Internet.
Second, employers should consider allowing employees to work alternate schedules. Popular trends include allowing employees to work remotely from their homes, or giving them the option of working flex time through shorter work weeks, taking every other Friday off, coming in later or leaving earlier, or some other arrangement that works for both the employer and the employee.
However, these are not viable options for every employer as some, such as manufacturers, would not be able to function without set work hours for their employees.
What else do employers need to consider?
Finding the appropriate balance is a challenge, as both the family and work dynamic have changed. More than ever, today, parents want to be actively involved with their children’s extracurricular activities while maintaining their place among the work force. This is occurring at the same time that employers are looking for their employees to be connected to their jobs 24/7 through mobile devices.
These changes bring uncharted waters, and employers and employees alike are struggling to figure out how to make it all fit.
Both the employer and the employee need to be flexible and willing to work together toward a common goal — work/life balance — that will result in a more productive and happier work environment.
Barbara Baldwin is an account executive for JRG Advisors, the management company for ChamberChoice. Reach her at (412) 456-7256 or email@example.com.
With more employees continuing to work past the age of 65, employers can find themselves without answers when asked for advice about insurance benefits.
With health care reform and premiums that continue to rise, employers need information to deal with their older employees, says Crystal Manning, account executive/Medicare specialist at JRG Advisors, the management company of ChamberChoice.
“It’s a good idea to start with the basics,” says Manning. “When Congress passed the Medicare federal health insurance program in 1965, it was to provide health care benefits for people ages 65 and older, people younger than 65 who have certain disabilities and those of any age who have permanent kidney failure.”
Smart Business spoke with Manning about what employers need to know about Medicaid when dealing with employees ages 65 and older.
How does Medicare work?
Traditional Medicare has two parts. Part A provides hospital coverage and those covered do not pay a premium if they are age 65 or older and they or their spouse worked and paid Medicare taxes for at least 10 years. Those under age 65 are eligible if they have been entitled to Social Security benefits for two years or are either on dialysis or are a kidney transplant patient.
Part B covers doctors’ visits and other medical services, for which the covered person pays $115.40 per month in 2011. Services for both Part A and Part B are covered at 80 percent, with the Medicare enrollee paying 20 percent of any approved services.
And effective Jan. 1, 2006, Medicare Part D was added to the plan for the prescription drug component. Part D is not optional; anyone with Medicare Part A and B must also enroll in Part D. It is important to sign up for these benefits when you become eligible because penalties may apply if you fail to do so.
While many people retire at age 65, if you plan to continue working after age 65, there are rules that you need to be aware of. First of all, someone who is continuing to work should not decline Part A. In some instances, employees have been given improper advice to decline Medicaid in order to be eligible for a health savings account. This is a mistake, as it may result in penalties and the employee would not receive Social Security retirement benefits.
How would employees age 65 or older be covered?
If there are more than 20 employees in a company, the employer’s medical benefits plan — not Medicare — would be the primary source of coverage for an active employee over the age of 65. In this case, the employee does not need to enroll in Part B if he or she is satisfied with the coverage provided by the employer. However, if the employer has not set up a senior product plan, Part B would be an option.
After officially retiring, the employee would then be eligible for a special election period. If there are fewer than 20 employees in the company from which the employee is retiring, Medicare will be the primary coverage and the employee should enroll in Part B and look at a Medicare Advantage option.
These plans are a complement to Medicare and include a creditable drug benefit, some dental and vision benefits and, in some instances, even health club membership benefits. These plans usually have budget-friendly options.
In 2011, the Medicare Part D Annual Coordinated Election Period will run from Oct. 15 through Dec. 7, with an effective date of Jan. 1, 2012. There can be no changes to the plan once someone has enrolled, unless he or she chooses to go back to original Medicare only.
What is the employer’s role in Medicaid?
Each year, all employers, regardless of the size of the company, are required to send out a Part D creditable coverage letter to all employees. Although they may not realize it, the majority of employers are affected by Medicare Part D in some way. Even if your employee benefits package does not offer a specified retiree prescription drug benefit, you may have an active employee or one of their dependents who is, or will soon become, Medicare eligible.
A common mistake made by many employers is enrolling an employee who is 65 or older in COBRA. However, COBRA is not creditable coverage for Medicare. If a Medicare-eligible employee is put on COBRA because of a lack of knowledge of the employer, that person will be subject to Part D penalties, will inadvertently waive their enrollment options and would then have to wait until the next general enrollment period in order to become eligible.
As many employees choose to continue to work past the traditional age of retirement, employers need to be aware of the issues that will impact those employees. Employees who are working past the age of 65 present special challenges to their employers, who need to be knowledgeable about how Medicare will impact those workers.
Medicare is complex and requires the expertise of someone appropriately licensed/appointed to advise eligible individuals of the options available. In order to prevent mistakes that could potentially harm your older employees, it is a good idea to provide them with access to a Medicare specialist who can clarify any uncertainty.
Crystal Manning is an account executive/Medicare specialist with JRG Advisors, the management company for ChamberChoice. Reach her at (412) 456-7254 or firstname.lastname@example.org.