Also known as qualified retirement plans, profit-sharing plans are established by employers to provide employees with opportunities to save for retirement.
“Keeping good employees can increase company profits,” says Glenn Gelman, managing director at Santa Ana-based Glenn M. Gelman & Associates CPAs, “while also reducing the high cost of recruiting and replacing valued employees.”
Smart Business spoke with Gelman about how companies can fold profit-sharing plans into their overall business plans and use them to retain good workers while maximizing profits.
Why should companies be thinking about profit-sharing plans right now?
Profit-sharing plans serve as great employee retirement planning tools and as golden handcuffs in that they can have vesting restrictions that force employees to stay a certain period of time before they can obtain all their benefits. They also allow for retirement of key executives and open up spots for younger executives.
Right now, the majority of profitable companies have either a profit-sharing plan or a pension plan in place.
How can these plans serve as tax tools?
Qualified plans ‘qualify’ for favorable tax treatment under the Internal Revenue Service Code. As long as they meet the requirements for maintaining such plans, employers and self-employed individuals can deduct contributions made to the plan. Employees aren’t immediately taxed on the contributions made on their behalf, but at retirement when distributions are made. Employers may make additional contributions on a pre-tax basis, to certain types of plans such as 401(k) plans and earnings on retirement plan funds accrue on a tax-deferred basis as well.
At the time that the contributions are made, the income grows tax free within the pension plan.
How do these plans work?
In a profit-sharing plan, up to 15 percent of each employee’s eligible compensation can be contributed to a trust held for the benefit of the employees, including those shareholders who are owners. The amount contributed to a profit-sharing plan cannot be discriminatory, meaning it cannot favor highly compensated employees. However, if properly structured based on age or classification of employee, these plans frequently yield a significant benefit to highly compensated employees despite the discrimination rules.
What benefits can companies expect from using profit-sharing plans?
These plans improve employee morale and provide security for older employees. They also add nontaxable compensation for each employee, or at a minimum the tax is deferred and can be used within a 401(k) plan or as an addendum to a 401(k) plan to further increase employee benefits.
What challenges come with using these plans?
When complicated pension plans (such as defined benefit plans) are used, they often yield a higher percentage of benefit to the highly compensated. However, they are also less flexible and often require mandatory annual contributions.
How can a company get started with a profit-sharing plan?
The first step is to find a third-party administrator also known as a TPA who will not benefit directly from the investment side of the equation. These are professionals who prepare tax returns, design the plans, administer the plans and send out the participant statements, but they do not invest the money. They are the best people to design a plan because they don’t have a conflict of interest, whereby many large institutions will gladly manage your plan for free because they are going to earn commissions on plan investments.
What advice would you give a firm looking to start a profit-sharing plan right now?
In designing a plan, a company should look not only at how much is allocated to the highly compensated employee, but also how flexible the plan is in terms of mandatory contributions. There are also esoteric plans, such as the 412(i) defined benefit pension plan, which invests in annuities and life insurance. These plans take seven to 10 years to recover the tax surrender charges or the penalties for cashing in early on the insurance. I would also consider an Employee Stock Ownership Plan, which is a form of a qualified plan, if succession planning is a major concern.
GLENN M. GELMAN, CPA, MSD, is managing director at Glenn M. Gelman & Associates CPAs in Santa Ana, Calif. Reach him at (714) 667-2600 or firstname.lastname@example.org.
Companies that have Medicare-eligible employees and retirees should be aware of these and other new developments, says Cathy Batteer, vice president of Medicare for UPMC Health Plan in Pittsburgh. From “dual eligibles” to “open enrollment” and other key terms, companies either need to stay on top of the latest news or turn to a knowledgeable third party to help walk them through the basics.
Smart Business spoke with Batteer about how companies can most effectively work with their employees and retirees to ensure that they receive the maximum benefits from Medicare.
What types of trends are we seeing right now with Medicare?
The big news in Medicare right now is the Part D prescription drug benefit. The enrollment period for the Part D program began in January and wrapped up in May. And while eligible individuals can still enroll, they can only do so by paying a premium penalty unless they have ‘creditable coverage’ for prescription drugs from another source, such as an employer group plan. (If a Medicare beneficiary loses their creditable coverage they can enroll in Part D without a premium penalty being applied.)
Medicare Part D is a program through which Medicare beneficiaries can voluntarily sign up for, and that ‘dual eligibles’ (those eligible for both Medicare and Medicaid) will enroll in as well.
Many employers offer health care coverage that supplements their retirees’ Medicare coverage, and those employers who contribute have traditionally covered prescription drug coverage for their retirees. Medicare Part D presents an opportunity for the employers to be subsidized for that coverage, with companies making a choice between whether they wanted to receive the federal subsidy for their coverage or wrap their coverage into a Part D plan. In the last year they’ve had to make that choice, and then they will have to choose again for 2007.
Why should employers be thinking about these Medicare trends?
Employers need to think about what type of medical and pharmacy coverage they want to offer retirees. Right now, employers can either do what is called a contributory plan, meaning that the employer pays in part or in full for the retirees’ health care coverage. Or they can do a sponsored plan, through which the employer negotiates a plan package for the retirees and then communicates to their retirees the information about the premium that those retirees pay for themselves.
What Medicare-related challenges do employers typically run into?
The first issue concerns retirees, and the financial responsibility if any of the employer as it relates to whether they’re going to offer ongoing retiree coverage. The other challenge surrounds the issues an employer faces in dealing with the fact that many American workers have aging parents. Employers have focused in years past on child-care-related issues, for example, with not as much thought given to elder care. Whether someone is in Pittsburgh or another area of the country, they’re likely to have an aging parent who needs an increasing level of care. That takes people away from the workplace and results in lost work time and productivity. It’s going to become an increasing challenge for everyone who wants to make sure that the elder parents needs are met from an economic, health care and care management standpoint.
What benefits can Medicare-savvy employers expect?
Whether an employer has financial responsibility for retirees’ health plans or offers a sponsored plan, it is likely the company is looking for a cost-effective, quality product that works well for the consumer. Plans that can offer well-priced products and that include components that control health care cost inflation are appealing both to an employer who is paying the bill and/or the retiree who may be paying an increasing portion of the bill.
What future trends do you see when it comes to Medicare?
The Part D implementation was the biggest piece of social legislation since Medicare was introduced back in the 1960s. Whether it has staying power legislatively remains to be seen, as it may dependent on the next administration. With a high number of baby boomers on the cusp of retirement, Medicare issues will only increase. And with fewer and fewer people working and supporting those age 65 and over from a tax base standpoint, employers are sure to be impacted.
CATHY BATTEER is vice president of Medicare at UPMC Health Plan in Pittsburgh. Reach her at (412) 454-2909 or email@example.com.
Knowing this, some employers are creating health and wellness programs designed to proactively deal with these and other issues that their employees are facing. Originally introduced 25 years ago, the health and wellness movement has picked up steam over the last few years as more companies understand how health, wellness and health care go hand in hand.
“With the increasing health care costs of the last 10 years, health and wellness have once again come to the forefront as a viable way for employers to address those costs,” says Richard Citrin, Ph.D., and vice president of employee assistance programs at UPMC Health Plan. “Companies realize that they’re dealing with an increasingly unhealthy population in the workplace, and within our culture as a whole.”
Smart Business spoke with Citrin about how companies can set up effective employee health and wellness programs:
What trends are we seeing in employee health and wellness programs right now?
For starters, companies of all sizes are realizing the importance of gathering information about their workforces. Using tools like confidential health risk assessments, employers through their health plan can gain a good perspective on the healthy and unhealthy behaviors of their employees. Using this data, they can begin to take the steps necessary to help them manage their health care.
By identifying the key risk factors, such as rates of diabetes, high blood pressure and high cholesterol, employers, in conjunction with their health plan, can develop strategies that help employees modify their behaviors. That could mean encouraging workers to see their primary care physician for regular checkups, promoting the use of seatbelts while driving, or creating an environment that encourages healthy eating.
Finally, we’re also seeing a movement toward integration, where wellness is no longer a standalone product, but as an element of a comprehensive health care program.
How can a company go about putting together an effective health and wellness program?
First, ask yourself just how important this issue really is. Are you seeing increased health care costs? Are you noticing a lot of employees outside smoking during their breaks? Are you recording a lot of absences among workers?
By answering questions and using objective data, such as the Health Risk Assessment, you can begin to see the overall health status of your worker population. From there, you can develop a plan to take the steps necessary to improve the health of employees. For some companies, that may mean the formation of a Wellness Committee, composed of employees and managers that can plan a comprehensive wellness program. For other companies, having a health specialist come to the worksite to conduct a ‘lunch-and-learn’ on a specific health topic may be appropriate.
There are many small and simple programs that can be put in place such as stairwell program and ensuring that the company cafeteria offers an ample supply of healthy meal choices. Engaging and recruiting several ‘wellness champions’ within the workforce who can talk to their co-workers about the value of healthy eating and living can also drive participation and interest in a wellness program.
What challenges do employers face when setting up and implementing these plans?
There are two major issues.
The first one is persistence, and it’s by far the hardest challenge to overcome since many companies don’t have the resources to assign a full-time person to the task. As a result, the programs slowly lose steam as the excitement fades and employees lose interest in it.
The second issue involves confidentiality, and the role that the employer plays in a worker’s health care. It is important that the program respects employee privacy issues while also educating employees about the costs of health care. Creating an effective communication campaign that begins prior to program rollout and explains all aspects of the program sets the stage for effective cultural change within the organization.
Will we see more health and wellness programs used in the future?
While we expect to see an expansion of health promotion programs, many companies are also looking for more integrated health care services where care management, physician liaison services, disability management, workplace wellness and EAP services are fully integrated into a single program for the employer to purchase. As these programs evolve, we’re also going to see more customization and personalization for employees, and more coordination with physicians who can review health risk assessments and blood screenings.
RICHARD CITRIN is vice president of employee assistance programs at UPMC Health Plan in Pittsburgh. Reach him at (412) 647-9471 or firstname.lastname@example.org.
If everyone knows that a happy, healthy employee is a productive employee, why do so few companies tie the two concepts together when creating effective workforce strategies? It’s a question that an increasing number of companies are asking themselves as overall health care costs soar, good employees become harder to find and business competition increases.
Some employers are finding the answer to their problems in a concept known as “health and productivity management,” which, according to Sally Stephens, president of Spectrum Health Systems in Indianapolis, integrates data and services management for all aspects of an employee’s health directly with work performance. Applicable to companies of all sizes, the approach ties together all health-related functions within a specific organization.
Smart Business spoke with Stephens about the premise behind health and productivity management, and about how employers can begin implementing this strategy in their own companies.
What is health and productivity management?
It’s an emerging business strategy based on integrated information aimed at improving the total value of human capital. Health and productivity management has become an important focus for organizations seeking to meet strategic business objectives as well as manage total employment costs. It allows organizations to
- Identify factors that influence employee health and well-being
- Measure and manage the performance and the relationship between employer-sponsored programs and their overall impact on costs and the company as a whole
- Coordinate, prioritize and justify targeted management tools aimed at individuals, providers, conditions, plans and locations
Why is health and productivity management so important for today’s businesses?
Today, organizations can no longer look only at direct costs of health and disability costs. Instead, they must manage the significant impact that indirect costs such as replacement work wages, productivity losses, routine over-staffing and/or overtime premiums have on organizational performance. Since the same individuals are often served by multiple programs, organizations have started to recognize the synergies between these different programs and the benefits of coordinated benefits.
Where do companies go wrong when it comes to health and productivity management?
There are several areas where companies run into challenges with health and productivity management, mainly:
- Not recognizing the value of coordinated management across all benefit programs.
- Not identifying the root causes of excessive employee health costs and productivity loss by not analyzing by job type, location, and program specific experience.
- Relying on shifting costs to other programs to reduce costs in high-impact areas.
The good news is that most of these challenges can be avoided by analyzing an individual’s costs, utilization and clinical profile across multiple benefit programs. Ultimately, the organizations are most open to change that will be successful in implementing health and productivity programs.
How does a company improve on or institute health and productivity management?
The first step is to collect data to determine actual experiences in key health and productivity areas. These areas include health costs, productivity loss, absenteeism and worker’s compensation, among others. From there, they should compare those experiences to internal and external norms and benchmarks, and identify potential areas of improvement. The last step is to determine which areas can be best managed internally, versus those that require outsourcing.
What other issues need to be addressed?
Health and productivity must be positioned as a business strategy rather than a human resources initiative. It must be aligned with the overall business plan of the organization, and it must also be viewed as a way to improve the quality of work and life not just a means for cutting costs. To work properly, mechanisms for funding health and productivity must be clearly understood and well established in advance of implementation.
Communication along the way is crucial to the successful implementation of health and productivity initiatives. A good starting point is establishing interdisciplinary teams and shared decision-making strategies to ensure that health and productivity programs meet the needs of the entire organization.
Just how important will corporate health and productivity management be in the future?
Health and productivity management usage by firms is definitely growing in popularity. More sophisticated evaluation tools will be available as health and productivity management programs mature and expand. In the end, an organization’s ability to maintain a competitive edge will depends on its ability to manage costs across all benefit areas.
SALLY STEPHENS is president of Spectrum Health Systems in Indianapolis. Reach her at (317) 573-7600 or email@example.com.
“Health care is a big expense item for companies of all sizes,” says Anne Boland Docimo, MD, MBA, chief medical officer at Pittsburgh-based UPMC Health Plan. “They want to know what they can do to get a handle on medical costs and get the most out of their premium investments.”
Smart Business spoke with Docimo about the data collection and management strategies that companies can use to improve their health care strategies and employees’ health, while saving money along the way.
Overall, what role does data play in health care management?
Information like enrollment data, paid claims information, pharmaceutical details and other pertinent data that’s available through a health care provider is very valuable to employers. Through this data they may learn, for example, that 10 percent of their work force has been diagnosed with diabetes or asthma.
They can take that information...and use it in a clinical fashion to get a limited picture of opportunities they may have to address health care needs within their employee population.
What kind of data does a company need to collect and track regarding health care?
Enrollment data and paid claims are basic health plan functions, and that data should be available through the health plan provider’s database. Where the company can add on is by doing health risk assessments, which are reviewed and tabulated by insurance providers.
These assessments comprise a series of questions that employees self-report on their own health status. Studies have shown that results of self-reported health-risk assessments are quite accurate.
Health screenings are mini-exams performed on-site at a work place. Health screenings usually include measurement of height, weight, blood pressure and blood test screenings for high cholesterol and blood sugar.
How can a company collect and track health care data? Is there new technology that may help this process?
Employers can turn to their health insurance providers, and augment that data with one of the many online health risk assessment tests available. Fifty percent of the cost of care in the U.S. is for patients with at least two chronic illnesses.
Insurers can identify them and get them into programs that improve the management of that chronic illness, and which, in turn, lessens the cost trend for the company.
In other words, insurers can identify employees who are diagnosed with diabetes or asthma, and then use queries to identify gaps in care (missed annual tests and screenings, for example), and then do outreach to those employees.
How might HIPAA and other regulations affect the collection and storage of health care data?
Insurance firms can share data with the patients’ physicians on an individual, patient-specific level because HIPAA regulations allow covered entities to exchange information for treatment, payment or operations, as well as disease management program purposes. HIPAA regulations also govern the security of information that is collected.
All covered entities must address how they protect information from several different standpoints: administrative procedures and processes; facility security as well as electronic/IT safeguards. With employer groups, the data must be further protected in that generally only aggregated data that is the entire group’s statistics can be shared. So the insurance provider won’t be able to give an employer any employee-specific or dependent-specific data, as that type of disclosure to an employer group would be against HIPAA.
What benefits can a company expect from collecting and tracking health care data?
Employees who have chronic illnesses are going to have higher health care costs than those who do not. If you take the former, and ensure that their care is well-managed and that they’re following guidelines, then they’re going to be less expensive than if their chronic conditions were not managed.
As employers receive actionable information as a result of tracking data, they can develop communications, wellness and prevention programs addressing employee needs. These efforts will heighten employee interest and understanding about their personal role in managing their health. Once employees become engaged, the benefits to their personal health will follow.
Anne Boland Docimo, MD, MBA, is chief medical officer at UPMC Health Plan in Pittsburgh. Reach Docimo at (412) 454-5516 or firstname.lastname@example.org.
"Employers are trying to figure out what to do now, and where to go next," says Pamela Peele, Ph.D., vice president of health economics at UPMC Health Plan in Pittsburgh."Many are embracing the idea of managing the health of their employees as a way to get a handle on their ever-growing health care expenditures."
That means mitigating health risk among employees, says Peele, instead of focusing solely on disease management.
Smart Business spoke with Peele about how companies can come out winners by taking a pro-active approach to the concept of health economics.
What is health economics?
In a basic sense, economics is simply the study of the allocation of scarce resources. Health economics concentrates on issues related to the production, the financing and the provision of health care.
How does health economics apply to businesses?
One of the most important assets that a company has is its labor force, whose productivity is greatly impacted by the health of individual employees. Unhealthy employees tend to be unproductive employees, both in terms of being unproductive on the job and being absent from work.
We've all read about the correlation between poor health and on the job injuries, as well as workers' compensation claims and other health-related issues that impact a company's productivity. With that in mind, employers should be taking care of their employees' health much in the way that they would invest in an expensive piece of equipment.
How can a company use health economics to its advantage?
Realizing that companies have limited budgets, they simply can't do everything, so they must prioritize. That means figuring out how to use their scarce resources to best maintain employee health through the use of health economics -- and it starts with an analysis (such as a return on investment or cost-effective analysis) to determine where those dollars will be best placed in order to improve that level of health.
Using an economic model, employers gain a better understanding of where to allocate their resources across various types of interventions and programs, thus positively affecting the health of their employees.
Where do companies face challenges in this realm?
The hard part is realizing that with health economics, following the money is the wrong approach. Whether employers are self-insured or fully-insured, they'll find that a small percentage of their employees account for a large percentage of those expenditures. Try to follow that money line and you'll end up in the wrong place, because the next year those same workers will be perfectly healthy and back to work without any further intervention or programs needed. That's because outside of those individuals who are suffering from serious, chronic diseases, the majority will receive the health care they need and go on to lead healthy lives.
This is a hard concept for employers to embrace because they're so accustomed to following the money, when what they should be doing is targeting those individuals who are consistently high users of health care and focus on getting them into the kinds of care management programs that help them mitigate and solve their health issues.
Then employers need to identify the brewing health risks in their workforce and take positive steps to help keep their employees from developing chronic diseases.
What advice would you give business owners who want to integrate health economics into their own operations?
Figure out where you are first. That's a critical issue. Before companies start expending dollars or worrying about econometric modeling, they really need to take stock of what they have.
Savvy employers are using a variety of employee screening methodologies, such as onsite screening that includes blood pressure monitoring, lipid panels, glucose and body mass measures. They're also using educational elements (such as Web-based applications of health risk assessments) to help figure out the impending health risk of their work forces so they can focus their health care dollars on mitigating the health risks that exists in their workforce.
To make this initiative successful, companies need to first figure out what pieces of their plan are actionable, and which are manageable, and then translate that into steps that integrate health economics into an overall plan to create and maintain a healthy workforce.
PAMELA PEELE, PhD., is vice president of health economics at UPMC Health Plan in Pittsburgh. Reach her at (412) 454-7952 or e-mail at email@example.com.
That’s where a managed network service provider comes in. By taking over those tasks, and by allowing companies to focus on their core competencies, these third parties can alleviate much of the pain associated with constantly evolving technology.
“If a firm doesn’t have an IT staff, or if the staff it has spends all their time putting out fires, then managed network services is a good option,” says Randy Steinle, general manager at Houston-based Systems Evolution. “A managed network services provider can come in and actually become the firm’s IT staff, and help the firm make use of its technology investment.”
Smart Business spoke with Steinle about how companies can work effectively with managed network service providers to save time, money and hassle.
How do managed network service providers work?
They pro-actively monitor and manage companies’ networks for them. The third party in essence becomes the company’s IT staff, allowing the firm to do its job even better as a result of the technology expertise that is available. These third parties can help companies use technology to enforce internal processes to see how employees and the company as a whole are performing, or provide a matrix against which those processes can be measured, tweaked and improved upon.
Are we seeing more companies outsourcing network administration to third parties?
Outsourcing is an overused word, but at the end of the day the concept works when it’s done effectively and efficiently. Businesses are not afraid to spend money yet are very cautious about investing large sums in technology solutions. Driven by their bottom lines, companies that use the outsourcing model are finding that they get more for their operational expense money and can be more effective at driving their own business by shifting dollars to capital expenditures that return better ROI or competitive advantage. They also gain access to a wide range of resources that they wouldn’t normally have with a small or nonexistent IT department.
How can a company work with a managed network service provider?
Either the third party comes in and takes over the entire process or it complements an existing IT staff. Regardless of which approach is taken, the first step is to assess the firm’s inventory of assets, both in terms of hardware and software. That gives the service provider insight into how things are being handled, what improvements can be made, and what it actually has to work with. Next, the provider will interview key stakeholders in order to learn the company’s strong points, challenges and goals when it comes to IT. From there, the firm will make sure that the infrastructure is in place to support those goals and handle technology challenges that come along.
Once these exercises are complete, the managed network services provider will create a report that highlights any problem areas that need immediate attention, as well as ‘midrange’ items that should be addressed in the near future and the long-term strategies to achieve desired business goals.
What benefits can a company expect from working with a managed network services provider?
It gains the expertise and knowledge of someone who is charged with preventing problems, as opposed to simply putting out fires on the IT front.
This pro-active approach helps companies gain insights into what’s coming down the road, and allows them to do whatever possible to minimize system downtime, which is be very costly. Acting as a ‘virtual CIO,’ network service providers should be engaging clients in quarterly business reviews to make sure IT spending and infrastructure are in alignment with business goals. The providers should also supply valuable insights and matrices that allow companies to make more informed, intelligent IT decisions.
Are there any challenges that companies have to work through?
Companies have to seek out experts who have experience with their technology.
If you’re using a Unix server, a Windows database or Cisco firewalls, for example, then look for a managed network services provider whose staff has the certifications and experience necessary to work with these systems. You don’t want someone learning on your dime, so be sure to ask upfront about such issues.
The other area of concern involves the monitoring of the company’s internal systems, and just how quickly the third party can address issues when they come up. The best approach is to pick a firm that can take the monitored data and information and turn it into the kind of information that executives can use to make smart decisions.
RANDY STEINLE is general manager for Systems Evolution in San Antonio. Reach him at (512) 680-2442 or firstname.lastname@example.org.
“Identity theft is a huge issue right now,” says Nancy Stachnik, vice president, retail marketing manager at MB Financial Bank in Chicago. Defined as the act of deliberately assuming another person’s identity, identity theft is a crime that finds crooks rummaging through garbage cans to find old bank and credit card statements, stealing personal information in computer databases, and thieving information from organizations that store large quantities of personal information.
On the Internet, identity theft frequently takes place through e-mail, with schemes like “phishing” taking hold when an unsuspecting consumer or business owner gives out sensitive information to a party that looks or sounds like a legitimate firm, such as a bank or government agency. “They try to get you to give up personal information,” says Stachnik, a past victim of identity theft herself, “and it’s difficult to tell which are legitimate, and which are not.”
Smart Business spoke with Stachnik about what companies can do to protect themselves and their employees from identity theft scandals.
Why do businesses need to be concerned with identity theft?
Identity theft is one of the fastest-growing consumer crimes, and it applies to businesses as well. The indirect effects can be particularly damaging. Take for example the firm that accepts a credit card from someone who is using a stolen card, or someone who is impersonating another individual. Not only does the victim feel the negative effects, but the business also does. The crimes aren’t always computer based, nor do they have to take place in the online world. In fact, most of the identity theft that’s out there right now happens in decidedly low-tech environments, like mailboxes and garbage cans. Regardless of where it takes place, the fact that it’s a growing problem for both consumers and businesses makes it a problem that shouldn’t be ignored.
How can a business protect itself from identity theft?
A business has to protect its information just as closely as a consumer does. Tax identification numbers, for example, need to be guarded carefully and should only be released under controlled access. Credit card statements should be reviewed on a regular, and timely basis to ensure that they match up with actual receipts. If you’re using a business debit card, you’ll want to compare them to your bank statements to make sure that there are no unapproved charges on them. If your bank provides check images, check through them to ensure that no one has hijacked your checking account number. And remember that vigilance is your best weapon against criminals who will use Tax ID numbers, account numbers and other means of stealing identities and using them illegally.
Businesses also need to be vigilant in protecting their own records and those of their customers from identity theft. You don’t want people going through your trash and stealing information. Shredding, rather than just throwing away, sensitive documents is one way to ensure that they don’t get what they’re looking for. Guarding customer records is equally as important, since your company’s livelihood relies on their repeat business.
What other strategies should a company consider in its attempt to thwart identity theft?
The best defense is to have controls in place to protect any and all critical information. A trusted employee or colleague who has access to important passwords, for example and who is given autonomy in signing important documents could at some point turn dishonest and use that information to steal from the company. Business owners need to remain extremely vigilant, and not let their guard down, when it comes to protecting critical information and monitoring the types of reporting that would unveil a fraud right up front. A large sale to a new customer, for example, may turn out to be a fraud if that customer is using a stolen identity to make the purchase. To avoid falling prey to these schemes, be sure to check identification and credit before getting too enthusiastic over the size of an order.
Where can a business go for help with these issues?
There is quite a bit of information available online, as well as in other media, to help consumers and businesses protect themselves and respond accordingly to identity theft. There’s also a lot of resource material available for victims, or those who are trying to head off being a victim. There are also a couple of Web sites that serve businesses of all sizes to ensure they are not victimized by identity theft, such as The Identity Theft Center (www.idtheftcenter.org/busrisktest.shtml).
Will we see more identity theft schemes in the future?
This isn’t going away, and it’s something that we’re going to have to learn to live with. As companies do more business online and more business internationally, the risk of falling victim to identity theft will certainly rise. And while banks, credit card networks and other institutions scramble to put measures in place to deal with it, it’s ultimately up to the business to make sure that its own sensitive information is protected. It’s another cost of doing business.
NANCY STACHNIK is retail marketing manager at MB Financial in Chicago. Reach her at (888) 422-6562 or email@example.com
“Historically, consumers used to be responsible for all of their family’s health costs,” says Michael Taylor, executive director of marketing and communications at UPMC Health Plan in Pittsburgh. “That changed after World War II, as employers in a rapidly-expanding economy began offering health insurance as a way to attract workers.”
Smart Business spoke with Taylor about how those companies can better deal with rising health care costs:
Why are employers getting hit so hard with rising health care costs right now?
It may seem that way because today, employers are not only offering group health insurance, they are also paying an ever-expanding percentage of the premiums. While it is true that employees pay more than they previously did in dollar terms, the percentage of their responsibility is falling. Employee contributions, on a percentage basis, are less than half what they were in the 1970s.
At the same time, costs continue to soar. Americans are now spending roughly $2 trillion a year on health care expenses, representing more than 15 percent of the gross domestic product. On average, total family-coverage premiums have increased 73 percent since 2000.
How is this affecting the American worker?
Largely because of these rising costs, about 44 million Americans are uninsured. One survey pegged the percentage of workers receiving health care coverage from their employers at 61 percent, down from 65 percent in 2001. A contributing factor is a decline in the number of small firms that offer health insurance. And demands on the health care system continue as life expectancy rises (from 70 years in 1960 to about 77 years now), and patients insist on access to expensive new medical and pharmaceutical discoveries even as they live increasingly sedentary and unhealthy lifestyles.
According to an article in The New York Times, the average family premium in 2005 was $2,800, a 27 percent rise over two years. And the Los Angeles Times reported recently that family coverage costs are now beginning to surpass wage costs for a minimum-wage employee.
How can an employer avoid getting overwhelmed by these costs?
The first step is to understand that solutions can only come from a partnership between insurer, employer and employee. A new era of “consumerism” has arrived in health care, and all three parties need to be part of the process. Ideas are still emerging, but there are things employers can start doing right now. When choosing the right insurer, employers should ask a few important questions:
- What is the health plan doing to activate consumers to take a more active role in their health care? Robust tools and programs that enable members to better manage their own health care spending is a great start.
- What are the insurer’s administrative costs? The national average is about 11 percent. In general, more efficient health plans have lower administrative costs.
- Is the insurer accredited by a national organization like the National Committee for Quality Assurance? NCQA’s highest rating is “excellent.”
- What is the insurer doing to allow consumers to select higher quality hospitals and doctors? Getting sick members to better facilities where they get appropriate care can directly result in long-term savings.
What other steps can an employer take to manage health care costs right now?
Look closely at whether the health plan is monitoring physicians through consistent data analysis of their practices, and find out what type of communication procedures exist between the health plan and providers. Such reports identify physicians who fall outside their peer group for any one parameter.
Also examine what the insurer is doing to manage prescription drug costs. The health plan should offer integrated management of medical care and drugs for its members, and it should effectively promote generic drug utilization and adherence to maintenance medications.
How can an employer get its employees involved in reducing health care costs?
Again, this has to be seen as a partnership between insurer, employer and employee. The latest trend in insurance is to offer robust health promotion and preventive care programs. It’s not unusual for these programs to find a sizeable percentage of employees who are at risk even though they thought they were perfectly healthy. Smoking and obesity, for example, are common risk factors.
MICHAEL TAYLOR is executive director of marketing and communications at UPMC Health Plan in Pittsburgh. Reach him at (412) 454-7534 firstname.lastname@example.org.
“The health insurance industry has traditionally been slow to adopt technology, both for its members and its client employers,” says Michael Taylor, executive director of marketing and communications at UPMC Health Plan in Pittsburgh. “Now, we’re seeing signs that the industry is more focused on embracing technology and using it for the betterment of employers, doctors and consumers.”
Smart Business spoke with Taylor about new ways that technology is being applied in the health care field.
How can a health plan use technology to improve the consumer experience?
There’s no question that an informed consumer can help as a cost-saving mechanism. Knowing this, we’re trying to deliver as much information to consumers as possible, whether it’s information on healthy lifestyles, or on the highest quality doctors and hospitals.
Traditionally, a health plan provides information through a paper directory or some other offline publication. But an even better option is through an interactive tool, like a Web site. Through a consumer-centric site that includes tools and information, the industry can help consumers find the most appropriate doctors and hospitals for the procedure or condition they are trying to treat.
The consumer experience can also be improved by providing access to pertinent benefit information, such as status of recent claims, an explanation of benefits, or by employing convenient, real-time payment mechanisms like debit cards that enable integrated payment from the member’s flexible spending or health saving accounts.
Can technology provide a cost-saving mechanism for consumers and employers?
Yes. Health plans have been working on technologies such as innovative mechanisms to pay claims quickly or manage call centers efficiently for the last few years. A newer cost-saving approach is to use technology that eliminates barriers to care. One way is by allowing consumers to directly interact with their doctors, and for doctors to have access to health plan information.
The insurer’s role no longer is to impose itself on the doctor-patient relationship; rather it’s to be the consumer’s advocate and help them get the right care, in the right amount, at the right time. Positive outreach to both consumers and providers and employing streamlined technology to facilitate this is where the industry is headed.
How can technology make members better health-care consumers?
Through a Web site, for example, members can access specific information about their plans by logging in with a user name and password. As a consumer, I can get information pushed to me that is specific to my situation and my benefit plan.
If I’ve been newly diagnosed with a chronic condition, like diabetes or asthma, I’m able to sign onto the Web site and get pertinent information via the push delivery system. This is a very overt use of technology using a Web site. Other, simpler means involve Webcasts or e-mails that are customized for a specific condition or health topic.
How can a health plan use technology to benefit employers?
By getting people more engaged in their health care through technology. An employer might implement an incentive program that drives employees to a Web site where they fill out an online health risk assessment. Members take about 30 minutes to complete the profile, which includes demographic and health information about them and their family.
The technology then crunches the data and shows what types of health conditions the member is at risk for. These numbers can then be taken in aggregate to gauge the overall health of the employer’s work force.
Specific workplace health promotion programs, such as smoking cessation or diabetes management, can be tailored based on these group results. Not every employee will take time to fill out the survey, but by instituting an incentive program, the employer can increase the number of participants.
How can employers get employees onboard with health-plan related technology?
Regular communication is key. Many times employers send out benefits communications once a year, typically just before the start of a new plan year. A better strategy is to spread that communication out through the year.
This can be achieved through technology (e-mail, Webcast, streaming video, etc.) and will go a long way toward activating employees to engage in their health care. Keeping health care top-of-mind with employees is the key.
Michael Taylor is executive director of marketing and communications at UPMC Health Plan in Pittsburgh. Reach Taylor at (412) 454-7534 or email@example.com.