How to cover fire legal liability in your property lease agreement

It’s a new year, and if you are a business owner leasing space, this is the perfect time to pull out your lease agreement and review the insurance clause, especially the fire damage legal liability.

“Better yet, send this agreement to your insurance adviser for evaluation to be sure your insurance program meets the contract requirements,” says Shelley C. White, assistant vice president at SeibertKeck Insurance Agency.

The purpose of a contract is risk management, which is why it defines the obligations and benefits of each party — risk acceptance and avoidance issues.

Smart Business spoke with White about fire damage legal liability insurance clauses in property lease agreements.

What is the purpose of the insurance clause in a lease agreement?

This clause establishes the rights and obligations of each party with respect to insurance covering leased premises and the activities of the business owner. It identifies who must purchase the insurance, what coverage is required, limits of insurance to carry and each party’s rights to waive or not waive subrogate for losses.

Older lease agreements often make the tenant responsible for their negligence resulting in fire loss to the ‘occupied’ leased premises. The business owner is, therefore, liable for damage to real property in his or her care, custody or control.

What exactly is fire damage legal liability?

Fire damage legal liability, also known as damage to rented premises or fire legal liability, is an important provision under a commercial general liability (CGL) policy when a business is leasing either the building or partial space within a building. It provides coverage for property damage due to a fire to the leased or rented premises as a result of the insured’s negligence.

Why is this so important to review?

This is a frequently overlooked coverage. Insurance professionals are likely to focus on the major coverages within the CGL policy.

Fire damage legal liability is giveback coverage and limited. It covers only fire losses, and applies only to the leased or rented premises ‘occupied’ by the tenant. Limits are usually written at $100,000 or less, but you can increase the limit up to $1 million for a nominal charge.

How is coverage determined?

It’s always difficult to know what limit to show on the policy, but there are options. For example, if a tenant is leasing 25 percent of a building valued at $400,000, a limit of $100,000 is reasonable; if the tenant is leasing the entire building, he or she is underinsured.

How can you insure for this exposure?

There are several coverage options:

  1. Amend the lease to a triple net lease agreement, which requires the tenant to insure the building. This normally requires tenants pay for other expenses like real estate taxes, maintenance, repairs and utilities. A tenant leasing a portion of space doesn’t have this option.
  2. The tenant’s agent also can provide legal liability coverage on the property policy by endorsement, which can be written on an all risk or special (not just fire damage) form for broader coverage.
  3. The landlord can insert a waiver of subrogation clause into the lease agreement in favor of the tenant. This risk reduction method waives the subrogation clause in the landlord’s insurance policy so it doesn’t apply to claims against the tenant. The landlord’s carrier cannot seek restitution from the tenant for fire loss.

A waiver of subrogation is the most desired method of transferring the risk back to the property owner and least costly to tenants.

What if the tenant causes damage to other parts of the building?

The property damage limit under a CGL policy covers damages to ‘other’ parts of the building not occupied by the tenant for loss by fire due to the business owner’s (tenant’s) negligence. If the business owner has an umbrella policy, this limit will go above it for additional coverage. The umbrella limit, however, doesn’t go over the fire legal liability limit, which could create problems.

A periodic review of lease agreements is a key part of risk management, so be sure to provide these documents to your agent. It might prevent future financial problems.

Insights Business Insurance is brought to you by SeibertKeck

How HR plays a vital role in change management

Human resources is at the heart of the company, touching all employees and helping spread the message of the C-suite. However, many times these employees are the last to know about upcoming business changes, instead of the first.

Smart Business spoke with Danone Simpson, CEO of Montage Insurance Solutions about business change and HR’s role in shepherding it along successfully.

Why is HR the last to know about business change?

By working with many human resource leaders, I have often found their common statement is that they are ‘the last to know.’ They are the last to know when change is coming, whether that’s layoffs, mergers, acquisitions, financial difficulties and/or business decisions that can alter a company’s culture.

To begin with the end goal in mind is noble and important along with the understanding that ‘the most well-designed departmental communication program will not tear down silos unless the people who created those silos want them torn down,’ Patrick Lencioni says in his book, ‘The Advantage: Why Organizational Health Trumps Everything Else In Business.’

The well-developed HR professional understands this, because they are the change agent. Along with ensuring compliance measures are met, employee management and communication is critical.

What’s one of the biggest problems with change management?

Often the C-suite of small and midsize companies creates the plan, and then hands it off to HR to implement. Some even give it to supervisors who discuss it with staff members — a handoff that may have started above the C-suite level.

Lencioni, however, states that the success of top-down communication starts with building a cohesive leadership team and creating clarity. ‘Without these,’ he says, ‘no amount of communication is going to be effective.’

Every CEO could agree they have had plans thwarted due to breakdowns in the message — either it was not clear enough or the subculture of important departments did not accept the change because they were not a part of it.

How can the C-suite ensure the message is clear?

Lencioni shares his philosophy of the thematic goal. He recommends ‘every organization that wants to create a sense of alignment and focus must have a single top priority within a given period of time.’

This tight focus should be scheduled for three months to one year. Then, the leadership team has clarity around how to spend its time, energy and resources. ‘The thematic goal must become the responsibility of the leadership team,’ Lencioni says.

Where does HR fit into this focused way of doing business and making changes?

HR is the heartbeat of the company.

At a recent HR organization meeting with roundtable discussions, one person stated, ‘I need advice on how to help my CEO, and other executives, understand I can’t be the last to know about layoffs and other decisions that impact employees.’

Another HR executive/consultant shared how she found the same thing in her startup company, so she asked the leadership team to agree to read one article per week, or month, that she would send them. They agreed, and she sent an article about poor employment decisions similar to ones her leaders handed down to her. It was results based, stating facts of court cases and liability payouts for poor decisions. Another article was on employee engagement or team building exercises to help promote better communications down to the trenches. Her method worked, and now she is on the executive team.

Anita Gorino, owner of Creative Resources, says of HR executives, ‘First of all, don’t be the police. Ask good questions of your executives and then come up with a few key ideas that may lead to a deeper brainstorming session. Be a part of the strategy. Don’t find one million ways why new plans and ideas will not work.’

HR executives are needed to help create and implement employee management strategies, beginning with the ‘why.’ No longer can they be the last to know.

Insights Business Insurance is brought to you by Montage Insurance Solutions

The company holiday party — what could go wrong?

Deck the halls with boughs of holly and don your ugly sweater because ’tis the season to be jolly — at the company holiday party.

You want to show appreciation to your employees with some relaxation and merrymaking, but along with the fun comes some added insurance exposure. This is particularly true if you plan to serve alcohol.

Smart Business spoke with Andrew Rowles, vice president at SeibertKeck Insurance Agency, about how to plan ahead to ensure your company has a safe and covered holiday party.

What do employers need to know about liquor liability?

Liquor liability is coverage for the consumption of alcoholic beverages, so you want to make sure this is in place if you plan to serve alcohol. Some points to keep in mind are:

  • Be careful when selecting a caterer and venue. Ask if they have experience with handling liquor exposures, such as over serving, TIPS (training for intervention procedures) program, etc.
  • Check to see if your current insurance policy will include coverage for host liquor liability — that is if you provide the alcohol for free.
  • Some parties have a cash bar, so confirm that the caterer has a policy and contract that is in favor of you if a guest or employee is over served.
  • Make sure you discuss if your holiday party is only for employees or also includes customers/vendors.

When might your employment practices liability policy kick in?

Coverage for a hostile work environment could be created at a holiday party, if there is harassment or inappropriate games or jokes. So, make sure you have this in place before a fight breaks out over who got the bigger Christmas bonus.
Also you may need coverage for third-party liability. For example, a claim could arise if a non-employee, such as someone working the holiday party, accuses an employee of an inappropriate act, such as making an unwanted advance.

How are temporary or leased workers covered?

To cover short-term demand around the holiday seasons, many companies engage temporary or leased workers to assist with the extra workload. In every insurance policy, there are specific definitions that will define ‘who is an insured.’ It is important to clearly understand the difference that is outlined in your policy and review if they are covered under your liability insurance.

Many companies overlook the importance of properly structuring the insurance policy, but having your insurance policy cover the actions of a temporary or leased employee could be important at a holiday party, or at your company, if things get out of hand.

What are other kinds of coverage that could be useful to consider?

Event liability insurance protects you if someone causes property damage to the venue or is injured at the event. Many commercial general liability policies have minimal coverage for leased/rented facilities, with limits typically at $100,000. Special events policies can be purchased for a minimal charge — sometime as low at $150 — depending on your party attendance. Purchasing a special events policy could help reduce your liability for a holiday gathering.

Event cancellation insurance is coverage to reimburse the company due to a canceled or postponed event for unforeseen events, such as bankruptcy, vendor issues, weather, etc.

Hired and non-owned auto liability is coverage written to protect your company if you are named in a lawsuit because of an employee driving on your behalf.

It’s important to think about what possible business exposures your holiday brings — before the fun starts. That way you can plan, with the help of your insurance agent or broker, how to minimize the risk so your merriment isn’t spoiled.

Insights Business Insurance is brought to you by SeibertKeck

How your insurance score affects your rates and what you can do about it

When it comes to borrowing money, you most likely are aware that your credit score is a major factor for what a lender offers. An insurance score, however, is a term that isn’t so well known, even though this particular number can play a very big part in how much you’ll be charged for insurance coverage over time.

Insurance scoring is a model, developed by your insurance company — all companies have unique models — that determines a customer’s likelihood of experiencing future insurance claims based on his or her financial behaviors.

Smart Business spoke with Kevin Franczkowski, client advisor at SeibertKeck Insurance Agency, about insurance scoring, shedding light on this misunderstood facet of insurance.

How does an insurance score affect rates?

The scoring is based on the analysis of a consumer’s credit report information. The models are based on actual claims history of consumers with similar financial behaviors.

These models use predictive characteristics to anticipate possible loss, and it will greatly affect your rates for your insurance policy, whether it is for health, homeowners, auto or life insurance. The better your score, the better your rates.

An insurance score typically ranges from 200 to 997. Scores that fall below 500 are generally considered to be poor, while anything above 770 is considered good, according to

Very few individuals possess a perfect insurance score, although it is possible to obtain.

Is an insurance score the same as your credit score?

No. Your insurance score is not the same as your credit score.

Your credit score is used to predict your future credit behavior. Your insurance score is used to predict the possibility of future claims. The difference is very important to remember.

Your insurance score does not measure your income, and these scores are just one aspect of underwriting and rates.

Insurance scoring enables your insurance company to make better risk selections and develop more accurate pricing, helping you to save more money.

What factors affect your insurance score?

The factors that are evaluated and used to determine your unique insurance score can include, but are not limited to:

  • Outstanding debt.
  • Length of credit history.
  • Late payments.
  • Collections.
  • Foreclosures.
  • Bankruptcy.
  • New requests for credit and the length of time since the most recent credit inquiry.
  • Your number of open accounts.

Personal information such as age, gender, income and address are not used to determine your unique insurance score.

How can you improve your insurance score?

There are several ways to improve your insurance score. They include paying your bills on time, re-establishing good credit and keeping a watchful eye on your available credit. And keep in mind that your most recent history is more important than past years.

Maintaining a good insurance score by keeping your overall debt down and by filing fewer claims over a certain period of time, generally based on a three to five year time frame, also will help keep your premium down.

After a catastrophic loss to your home, such as a fire, your insurance company may essentially restore you financially, so you can focus on the things that really matter: your family, your home and surviving an emotional crisis.

Insights Business Insurance is brought to you by SeibertKeck

The 2015 Affordable Care Act transitional guidance — in laymen’s terms

“As we head into 2015, I’m encountering several employer groups who are coming to me to make sure they know what needs to be done to stay compliant with the latest Affordable Care Act regulations,” says Tobias Kennedy, executive vice president at Montage Insurance Solutions.

Let’s assume you already know the broad strokes of the legislation. You understand the Employer Shared Responsibility (ESR) provision, which says if you add the total of your full-time employees plus your full-time equivalent employees and that equals 50 or more, you need to offer insurance — good insurance that doesn’t make your employees pay too much for coverage.

Your biggest questions now may concern clarifying some of the transitional pieces of the legislation.

Smart Business spoke with Kennedy to get a high-level look at the employer who is trying to pin down his or her needs for the rest of 2014 and the beginning of 2015.

What’s the first step to understanding transitional relief?

The transitional relief you get depends on your employee size, so it’s important to calculate that correctly. If you are unsure, there are good resources available, but you basically average the month-by-month totals for your full-time employees and add your full-time equivalents.

The good news is that 2014 has some ‘one time only’ relief where you can pick any continuous six months for the determination. In other words, you can do the calculation based on data from January through June, and take the remaining few months of 2014 to plan for what you need to do next year.

Once you’ve calculated your size, what are the rules?

If you have less than 50 employees, don’t worry at all — the ESR provision doesn’t apply to you.

If you have 100 or more employees, the rules begin for you in 2015, so be sure you’re offering affordable coverage. If you are offering coverage to at least 70 percent of your eligible employees, you’ll be considered compliant for 2015.

What about employers with between 50 and 99 employees?

This is really the most complex piece of the transitional guidance. Basically, if you meet a few conditions, you don’t have to worry about the ESR provision until your first renewal in 2016. Those conditions are related to your workforce size and benefits.

If you can check off each of the bullet points below, and you’re in this size range, you can hold off on being ESR compliance until your 2016 plan renewal:

  • You did not reduce workforce just to qualify. You can reduce workforce for other reasons, but you need to be able to justify the reduction.
  • You keep your in-force coverage the same or similar to what you had on Feb. 9, 2014, the day before they released this news. By ‘the same or similar’ they mean that when you look at the employee only tier of your benefits on Feb. 9, 2014, you either cover the same percentage of the cost or cover 95 percent of the same dollar amount. You can change the benefits themselves, such as co-pays, deductibles, carrier, etc. The government just wants you to keep the premium split in line and be sure that if any changes are made, the new plans are still above a 60 percent actuarial value.

Assuming you can check these boxes, it’s business as usual until your 2016 plan renewal without fear of penalties levied from the ESR compliance.

Insights Business Insurance is brought to you by Montage Insurance Solutions

How to combat the alarming trend of social engineering fraud

Your CFO gets an email from one of your international vendors. It says, “We’ve made a few changes and we’re switching banks. Here is our new SWIFT (international routing) code and account number. Please remit all future payments here.”

The email is from somebody the CFO recognizes with the right logo and email signature. He or she forwards the message to whoever will make the necessary changes to your online system, and the next time you need to make a payment to that vendor, your company uses the new information.

About a month later, your CFO gets an email from the company, asking why you haven’t paid them. He or she sends the record. Your international vendor says, “That’s not my account number.”

So, if the money is gone, you’ll want to make a claim on your crime policy. In nearly every case, however, your policy will exclude the claim because it was voluntary parting.

Smart Business spoke with Richard B. Hite, CEO of SeibertKeck Insurance Agency, about a new kind of crime endorsement that can provide coverage for social engineering fraud that is hitting an increasing number of companies.

What is social engineering fraud?

Social engineering fraud is deceptively gaining the confidence of an employee to induce him or her to part with money or securities. The fraudulent party might pose as a trusted vendor, client or employee through the act of phishing — sending emails from what appears to be a reputable source.

Why doesn’t a standard crime policy cover voluntary parting?

There is a voluntary parting exclusion in nearly every crime and/or property policy. Voluntary parting is when you willing give your property and/or assets away. Even if you were tricked into doing so, by voluntarily giving this away, an insurance company typically won’t cover your claim. For example, the carrier will say that you should have investigated and confirmed before changing that billing information.

Most businesses have some kind of crime insurance. They may not have enough or the right type, but they have a crime policy. It’s only when they go to actually use it that they find out how little it actually covers because it wasn’t written correctly.

Again, even if you buy standard computer fraud coverage on your crime policy, which is becoming more widespread, it won’t cover an instance that involves voluntary parting through social engineering fraud.

Who is being affected by this kind of fraud?

Social engineering fraud is an alarming trend; at our office, two claims have been filed in the past 60 days.

Even if your company conducts vendor background screenings, employs fraud detection systems, segregates financial duties and educates employees on how to detect fraud, it still may fall victim.

Smaller companies may lack proper financial or wire transfer controls, while large companies don’t always keep as close an eye on every single financial transaction.

For instance, your company’s accounts payable manager receives an email from a familiar overseas supplier. Your manager tries unsuccessfully to reach the bank, and the supplier’s emails asking you to pay the invoice become more urgent. Finally, in order to keep the supplier happy, the manager wires the money. Then, the next day, the real supplier calls in a panic and says it has been hacked.

How are insurance companies responding?

Carriers are starting to offer businesses the ability to buy an endorsement that fully carves back the voluntary parting exclusion for social engineering fraud. This is in response to the increasing number of claims being uncovered through a traditional crime policy.

With a full carve back, there is still a standard of proof but it allows your coverage to trigger in the event that you or your employees are duped or defrauded.

Some policies may include language that could stretch to cover this same type of claim, but voluntary parting will still be a burden to the insured.

This fraud is a trend that is only going to escalate in the business world, so ask your broker today about better protecting your company from social engineering fraud.

Insights Business Insurance is brought to you by SeibertKeck

Spread the culture: What the C-suite needs from HR

CEOs, CFOs and COOs all require specific things from their HR department.

The CEO develops the mission, vision and direction of the company, fine-tuning the key words that express “why” you do what you do and for whom, and then where you are going as a company.

CFOs then have to budget and balance the dreams, and COOs create action plans with every department.

So while the C-suite is busy creating their 20 Mile Marches, per Jim Collins in his book “Great by Choice,” how does all of this truly get to the most important person in the company — the employee?

You don’t want CEOs just espousing this message from their office without ensuring the employees are a part of the planning, whether that’s in an intimate forum for a smaller office or throughout the world for large companies.

Beyond the C-suite, the answer is one of the most important departments — HR, the heart of the company.

Smart Business spoke with Danone Simpson, CEO of Montage Insurance Solutions, about getting your team involved in company planning and ensuring they understand and are committed to the plan, via HR.

Why is employee buy-in important?

Every employee has to understand the mission, purpose and values of the company. They have to want to be a part of the journey. Inc. CEO Tony Hsieh identifies employees who are not on the same track with his mission and literally pays them to quit. Now, others have joined in such as Jeff Bezos, CEO of Amazon, who offers $2,000 to any new employee that wants to leave, and up to $5,000 for more veteran employees who would prefer to seek employment elsewhere, according to a Huffington Post article.

Even here at Montage Insurance Solutions, employees know that we want to retain people who want to be a part of the team, and they should feel free to move on if that is where they feel they’d be more successful.

Companies today cannot afford to have employees who don’t care or show up just for the paycheck.

So, is creating the right culture the key?

Hsieh understood culture was where he had to start and created an internationally recognized three-day culture boot camp to train other CEOs how he did it. When Zappos was first started, it sounded strange to think of women buying shoes online. Yet today he not only proved the naysayers wrong, he built a profoundly successful business.

In 2011, Jamie Naughton, Zappos’ speaker of the house, spoke at the Pepperdine University Graziadio School of Business and Management, where she shared the Zappos value proposition that, “Zappos is committed to WOWing every customer.” At that time they had over 10 million customers to wow.

Naughton clearly understood what Hsieh needed, and she became the courier of that message. She spoke at universities and HR organizations worldwide, ultimately becoming the company’s chief culture ambassador. This is what CEOs, presidents and business owners want and need.

How do you recommend HR help spread the culture?

The HR team should begin with this end in mind and hold no hostages — either the employee joins in or doesn’t.

HR executives who partner with their C-suite are the ones that work to ensure the company’s mission and vision are communicated consistently, from the first interview and continuing often thereafter.

It takes first wanting to be a part of that culture yourself, and then spreading it like wildfire. A company can be dry without a cohesive culture. It takes both ingredients, vision and culture, to create a company that can make a difference in this world — and is on the lips of its employees and customers.

Insights Business Insurance is brought to you by Montage Insurance Solutions

How to avoid the three biggest pitfalls with products recall insurance

If you make, grow or package a product, your company faces products recall risk. Yes, a general liability policy responds to any bodily injury or property damage your product causes, but that’s not your only exposure. Products recall insurance picks up business interruption, lost profits, recall expenses, the cost to rehabilitate brand image and provides response funds for adverse publicity, says Karl Henley, vice president at SeibertKeck Insurance Agency.

The true cost of most product recalls is almost always in excess of $1 million — and that can run into hundreds of millions of dollars for a large company.

“Most companies don’t have the resources to address the impact of a widespread product recall. They just can’t absorb the financial loss and frequently fail as a result,” Henley says. “That’s why you should at least look at this and see what your exposure is.”

Smart Business spoke with Henley about what business owners must understand about products recall insurance.

Why do business owners make mistakes with products recall insurance?

Large companies get it, but the middle market relies on the advice of their agent. Unfortunately, there aren’t many agents that specialize in products recall insurance.

There is a fundamental misunderstanding of how the coverage works, which impacts whether a client is matched to the correct policy structure and carrier. The three biggest pitfalls of a products recall policy are the need for first- or third-party coverage, coverage triggers and coverage territory.

What do employers need to know about first- and third-party coverage?

Every products recall policy has two considerations: first-party coverage and third-party coverages.

From a liability perspective, first party covers your out-of-pocket expenses — the costs of notifying customers, any storage expense, the cost to dispose of the product and any costs associated with conducting the recall. This is what most agents/carriers offer, which covers base expenses only.

Third party is often the one people don’t buy because they don’t realize they need it or don’t fully analyze their exposure. This is where you pick up a customer’s diminished value in their product because of your product, for example, when your product is an ingredient or component part. You should also consider coverage for your business interruption losses and brand reputation/rehabilitation expenses.

Recall expenses also are broken into a first- and third-party basis. Some policies only cover your expenses for a recall; some cover the expenses you pay to a third party, like your customers, to pull your product from the shelf or make repairs. Many contracts include indemnification language where you’ve agreed to reimburse these costs.

Where do business owners make mistakes with coverage triggers?

Coverage triggers are a critical area to review. Most policies are written so that if your product has caused or is reasonably considered to have caused bodily injury or property damage, your product recall policy will trigger. However, as an example, the U.S. Food and Drug Administration can issue a recall without an illness occurring. Some carriers cover this expense and others will not. It’s critical to understand how the insurance company writes their form.

In addition, two acts recently elevated the government’s ability to have stronger oversight into consumer products — the Consumer Product Safety Improvement Act of 2008 and the Food Safety Modernization Act of 2011. Both have raised the bar as far as the standard that companies have to jump through for consumer safety.

How does coverage territory come into play?

A lot of products recall policies are written with only a coverage territory of the U.S. However, many companies have global exposure. You want to make sure your coverage territory is extended to cover where your products are actually going.

What’s the biggest takeaway?

Take time to understand your coverage territory, coverage triggers and first- and third-party exposure before you buy the policy. From there, look at the financial condition of your company and assess what kind of financial risk it can self-insure to reduce the cost of the policy, which allows you to right size your coverage.

Insights Business Insurance is brought to you by SeibertKeck

How to combat firming insurance prices through loss control

The insurance market is always cycling between hard and soft. As it firmed up over the past few years, employers have had fewer low-price options.

Expect your broker to communicate with you about prices, says Craig Hassinger, president of SeibertKeck Insurance Agency. In this environment, even if it’s not a typical market turn, employers have had to take the initiative.

“Business owners need to proactively work to eliminate risk by putting in place policies and procedures that need to be formally written down and followed,” he says.

Smart Business spoke with Hassinger about how to react to the hardening market and premium increases.

What’s the difference between a soft and hard insurance market?

In a soft market, insurance companies look to gain market share and grow, so they take on more risk at lower prices. This is good for the insured to a point because there are more options. However, it’s called a cycle for a reason, and a soft market tends to quickly change — and competitive insurance options dry up. As insurance companies take on more underpriced risk, they start to get bad results, which eats away at their surplus and they pull back. This turn is usually predicated after a catastrophe such as 9/11.

What are the current market conditions?

Rather than just one catastrophe, the turn over the past few years is more because of a series of weather events. These property-driven stresses on the market have hurt insurers and pricing has firmed.

Previously, the insurance market turned on a dime from soft to hard — all rates across the board. In this market, only some prices increased. Property and workers’ compensation premiums went up, while liability and vehicle rates stayed pretty even. Insurance companies’ base portfolios are not making a whole lot, so they eventually have to make up the difference with larger premium increases or covering less risk.

Insurance companies have hit those with high-loss ratios hard with premium increases or non-renewing policies. In these cases, it can be hard to find replacement insurance. However, the best of the best are still treated well — businesses with low-loss ratios.

Have some industries been hit harder because of the unevenness of the turn?

Yes. A property manager who manages apartment buildings or commercial office buildings was probably hit harder. Other industries that rely more on liability and vehicle insurance may not have seen as much change.

Regardless of industry, make sure your loss control program is up to date and follow any risk management recommendations from your insurance company or broker. You also may need to increase deductibles or further spread your risk.

How can you combat the harder market?

Business owners need to do what’s necessary to become the best of the best. Put in policies and procedures to mitigate your risk and decrease losses. For example, employers can utilize systems like Fleet Watch, which closely monitors drivers and vehicle usage to provide data. Employers can drill down, find risks and eliminate them to keep rates down.

Employers also should use data provided by their broker to reach the right decisions, such as whether to raise deductibles or stop loss limits.

A good broker will help analyze everything from your current vendor/client contracts to previous losses. There might be risks you aren’t aware of. For instance, there could be a better way to create a contract so you push the risk out to a subcontractor. Communicate with your broker regularly. Brokers typically have a stewardship meeting well before the renewal to go over your policies and formulate a renewal strategy. If your renewal includes diminished coverage or added exclusions, then it may simply be a matter of pushback. You and your broker might tell your insurance company that if this is to be done, then something will be needed in return, while being prepared to look elsewhere. A proactive broker handles these negotiations for you.

Combatting this market cycle is about consistent loss control and having a strong business model. A little dose of long-term thinking combined with a professional insurance broker goes a long way in helping you navigate through the hard and soft market cycles.

How your business is impacted by new ACA reporting requirements

There are a few new reporting requirements the Affordable Care Act (ACA) has created, but with the overwhelming amount of disparate information on the topic, many employers still have more questions than answers.

They want to know which are necessary for them, when the reporting is to be done and whether or not there are fees involved.

“Companies need to be sure their team understands what is required to satisfy these new ACA regulations,” says Tobias Kennedy, executive vice president, Montage Insurance Solutions.

Smart Business spoke with Kennedy about a few of the key points of the ACA from a reporting standpoint.

What do employers need to understand about the Patient Centered Outcomes Research Institute fees?

Patient Centered Outcomes Research Institute fees are also known as PCOR, PICORI, PCORI or CERF fees. This is a relatively small fee that fully insured companies can be assured their carrier handles automatically. However, companies who are self-funded and have a health reimbursement arrangement (HRA) are responsible for this fee.

If your company is self-funded and has an HRA, or if you are unsure if this applies to you, ask your broker or work with a CPA to ask about the second quarter Form 720, which is due by July 31. Depending on the plan anniversary, the fee is either $1 per year per covered life or $2 per year per covered life with most companies using a ‘snapshot average’ method of calculating the figure of lives covered in the fee — although there are a few different safe harbors.

How is the reinsurance fee being handled under the ACA?

A reinsurance fee is also calculated off of the number of covered lives, but it is a substantially higher amount. The fee for 2014 is $63 per year per covered life with 2015 and 2016 fees not announced yet, other than to say they ‘will decrease.’ The calculation for the number of covered lives is due by Nov. 15 and is submitted to the Department of Health and Human Services (HHS).

Similar to the PCOR fees, fully insured groups will have this done for them by their carriers, whereas self-funded companies will need to take action. Also, similar to the PCOR fees, there are a few different safe harbors and companies will want to work with their consultants to correctly apply whichever they deem most suitable.

Within 30 days of submitting the count to HHS, companies will be notified of the amount they owe, and that payment will be due back within 30 days of the company’s receipt of notice.

What about Forms 6055 and 6056?

Forms 6055 and 6056 are simply reporting measures and do not levy fees. The first time this comes into play is in 2016 for the 2015, so companies have a little more time on this than the PCOR/reinsurance fees.

The 6055 is where insurance carriers and self-funded companies report all of the people they cover, and it deals with the individual mandate. Basically, it is a resource for the government to double-check that people who claim to have an insurance policy — and thus to have satisfied the individual mandate — are indeed covered.

The 6056 is a report where companies list out all of the employees they offer coverage to, which helps the government with the subsidies. This is required by all applicable large employers — fully insured or self-funded. Because subsidies are only available to people not otherwise offered affordable coverage, this helps the exchange track people that might be applying for subsidies but who are actually ineligible because of their employer’s offering.

Remember if you need any additional help or have any questions about ACA reporting requirements, don’t hesitate to contact your health care reform experts.

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