Reduce employer expense, increase take-home pay with FSA, HRA or HSA

Acrucial health benefits decision an employer must make when it comes to an employee benefits program is the employee contribution strategy.

“The contribution strategy should be carefully considered because employees rate their contribution (payroll deduction) more importantly than the benefit level and often more than the network providers,” says Ron Carmassi, sales executive at JRG Advisors. “A skilled, experienced benefits professional working in tandem with the company’s HR can save an employer time and money.”

Smart Business spoke with Carmassi about employee contribution strategies — the second of two articles on health insurance cost reduction.

What types of employee contribution strategies should employers consider?

The consumer-driven health care approach and plan coupled with the correct contribution strategy can lower monthly premiums while engaging your employee population to manage more of their health care and make smarter decisions. The main accounts utilized in consumer-driven health plans are Health Savings Accounts (HSA), Flexible Spending Accounts (FSA) and Health Reimbursement Accounts (HRA). All three are designed to get employees more engaged with health care decisions.

How can an HSA drive down costs?

An HSA is only available to individuals enrolled in a qualified high-deductible health plan that is approved by and meets the standards set by the IRS. This type of account can reduce employer costs because, typically, high-deductible health plan premiums are lower than traditional plans.

Individuals, employees and employers can contribute to the account. The insured’s funds, deposited pre-tax, can be used to cover qualified medical expenses. Withdrawals for qualified expenses or post-retirement care, contributions, and gains or investment are also tax-free.

The IRS will allow a single insured person to deposit up to $3,400 in 2017, and anyone enrolled with a spouse or dependent up to $6,750 in 2017.

How does an FSA differ?

These accounts are similar to HSAs in that an employee can use pre-tax dollars to pay for qualified medical expenses. There are even options to use the account for certain dependent care and transportation expenses. But this account is employer-established and only funded by the employee or the employer. An employee may choose how much to deposit in the account pre-tax from their paycheck and what qualified items to use the money for.

For 2017, the maximum that may be deposited in an FSA account is $2,600 and only up to $500 may be carried over. So, consider what the FSA will be used for to avoid overfunding and losing money. These accounts don’t offer investment options and don’t earn interest, but they do allow a person to use pre-tax dollars for medical and non-medical items and services. It is important to verify items approved by the IRS for purchase with an FSA.

What is an HRA? How does it work?

With HRAs, an employer selects a plan with a higher deductible and a lower monthly premium. This account is employer-funded and the savings generated by the lower premium can be used to reimburse the employee for some portion of the deductible and out-of-pocket costs. These reimbursements are tax deductible for the employer and tax-free to the employee. This type is owned by the employer and typically administered by an insurance company or a third party administrator.

There are more restrictions on HRAs due to the Affordable Care Act. There may be limits on how much the employer may contribute. When considering an HRA, employers should work closely with an experienced benefits advisor to be sure to remain in compliance.

How should employers choose between the three options?

These reimbursement options should be studied and reviewed carefully to determine which type is best to help reduce your employee benefit program costs without lessening benefits. By better managing benefit costs, your employee benefits package can have even greater depth and flexibility, while also promoting employee wellness and healthy lifestyle alternatives.

Insights Employee Benefits is brought to you by JRG Advisors

What’s needed to deliver empathic, compassionate customer service

You can train your employees in the technical components of a job, but it’s difficult to train somebody in compassion and empathy if they aren’t naturally hardwired with those skills or attitudes, says Steven Knight, senior vice president of Member Engagement at Quantum Health.

Empathy and compassion are key to connecting with and relating to your customers. They aren’t simply nice to have; they’re essential for the kind of service where your employees put themselves in another’s shoes and truly understand their perspective.

“Relating and connecting to individuals allows us to earn their trust and have the opportunity to best support them,” Knight says. “In our world, that’s supporting them through health care experiences to make sure they’re achieving the right financial, clinical or humanist outcomes. In other industries, relating to and connecting with individuals so that they trust you is your ability to create brand loyalty.”

If customers feel like you aren’t listening or supporting them, or that you have adverse interests, your ability to earn that trust and support them in whatever they may need is severely diminished, he says.

Smart Business spoke with Knight about how to find and support employees who can deliver best-in-class customer service.

How can employers best identify the right job candidates for this role?

First, be active on social media — not just about the perks of working at your company, but also the mission of the organization.

When recruiting, a three-part process can help narrow down candidates and give you a starting point. Behavioral assessments help show what feeds and starves an individual. Are they geared toward collaboration or control? Cognitive assessment is also important. Employees have to be prepared to pivot quickly and provide the right expertise in a moment’s notice. Finally, look at their background. People from helping professions — retail, hospitality, food services, etc. — where they look customers in the eye, relate to how they are feeling and help them solve a problem in the moment, are especially successful at delivering compassionate, empathic customer service.

When you bring people in for interviews, be transparent and upfront about what the job entails. Allow candidates a chance to observe somebody doing the job, and ask questions and get the real story. If people know what to expect day one, they’ll be more effective as they go through training and onboarding.

It’s worth the cost to make upfront investments. If someone comes in and doesn’t understand what a day-in-the-life is like or the true culture, you potentially incur additional training or turnover costs.

What can business leaders do to encourage this across their organization and then sustain it over time?

In order to operate a customer-first business model, it needs to permeate throughout your organization’s mission. Let your customers tell you what they need to have the right experience, and then make those the foundation of everything you do from how you train and hire to evaluating the quality of customer service.

Everyone should go through the same training, whether they are in customer service, IT or sales. They need to truly understand the customer to make that the north star of the entire organization.

Allow for real-time coaching and feedback. It’s not handing out a sheet of metrics and telling them, based on a score, how they performed. It’s not sharing what went well or a missed opportunity three months after the fact. It’s experienced staff mentoring others, doing real-time conversations on a per call basis. It’s having a quality team reviewing customer interactions, which then become coaching discussions.

Share positive feedback throughout your organization on a regular basis and tie it back to the mission — that way it’s not just marketing, it’s truly part of the culture.

In addition, if you want your employees to deliver compassionate, empathic customer service, treat them that way within your walls. Successful leaders won’t operate in isolation. They should have an ability to connect and meet people where they are, because that’s what you’re asking of your employees — to be able to meet customers where they are.

Insights Employee Benefits is brought to you by Quantum Health

How to identify health conditions and costs within your workforce

Today’s health care environment is riddled with complex plan designs and rigorous government regulations, leaving many employers to feel as though their hands are tied when it comes to unique, innovative and cost-saving solutions. There is a new strategy and technology, however, that enables small employers to identify risk, influence behavior and ultimately control costs.

Smart Business spoke with Aaron Ochs, managing consultant at JRG Advisors, about risk analysis, which is part one of two articles on health insurance cost reduction strategies.

What is risk analysis?

The ability to anticipate claims or predict claims costs hasn’t been available in the small group market due to the absence of claims data from the insurance companies … until now.

Newly developed technologies include risk analysis and predictive modeling tools that make it possible to take a deeper dive into the health composition and risk factors of an employer’s workforce. For example, companies can proactively identify markers for chronic illness in order to predict health care costs and determine if a fully insured plan or alternative strategy, such as self-funding, is viable.

Why might a self-funded plan work better?

A self-funded plan differs from a fully insured plan in that it offers an employer more control over the plan. In addition, self-funding provides protection against excessive costs in years with high claims, opportunity to keep profits from favorable years and the availability of data, including claims utilization.

While self-funding is not a new concept, it is new to the smaller employer — with many insurance companies now offering level-funded premium options (a form of self-funding) to groups with as few as 10 employees.

How would a risk analysis typically work?

The deeper dive (risk analysis) begins with the collection of employee data that is captured through a custom access portal. The portal is insurance company accepted and an Affordable Care Act and Health Insurance Portability and Accountability Act compliant online benefits application tool specifically designed to reduce the amount of time, cost and paperwork for employers.

Employees are asked to complete an online enrollment interview. Once completed by employees, the employer receives a confidential de-identified aggregate report that includes an overall analysis of the employee population. This expert analysis empowers the consultants to guide the business owner through the benefit decision process with the power of knowledge.

Gaining insight into the composition and health status of the employee population means plan design decisions can be strategic rather than ‘throwing a dart blindfolded’ to find a tolerable solution.

What else do employers need to know about risk analysis?

Often, the same portal technology can reduce or eliminate many administrative burdens by providing the added support of employee enrollment, communication and plan/election waivers. The solution is a faster and more efficient approach to benefits. This means the employer can essentially build its own health plan, which can lead to generous cost savings, greater transparency, understanding and better overall cost control.

A staggering 50 percent of the average employer’s health care budget is spent on members with preventable conditions. With the strategies and technologies that exist now, even small employers can take control of their health plans.

Talk to an advisor today to learn how risk analysis tools can guide you to the benefits strategy to fit your needs and ultimately reduce cost.

Insights Employee Benefits is brought to you by JRG Advisors

How to get the most from your employee benefits adviser

“What is interesting about the employee benefits brokerage and consulting business, different than other professional services, is the lack of transparency and understanding around the scope of services and associated fees. As the marketplace evolves, I believe employers will begin engaging brokers in the ‘value conversation’ around their services rather than just the insurance rates they’re able to deliver,” says Joe Roberts, area vice president at Arthur J. Gallagher & Co.

“Many of them are satisfied with their relationship because they don’t know what they don’t know,” Roberts says.

Because many employee benefits brokers don’t disclose their fees, employers don’t know the true value of what they’re getting.

“When it comes to compensation and value, don’t be afraid to bring it up,” he says. “To me, it makes good business sense.”

Smart Business spoke with Roberts about evaluating the quality of service you get from your employee benefits adviser.

How important is service when it comes to your benefits adviser?

The employee benefits brokerage business model has gone through a transformation over the past decade. Historically, the broker focused on the annual renewal, plan design and insurance placement; now shopping the plans and delivering spreadsheets is a relatively small part of what benefits advisers do for their customers.

A top-tier benefits adviser functions as an extension of the HR and finance teams, providing expertise and related services. By spreading the investment across its clients, brokerage firms have the scale to hire subject matter experts in areas such as compliance, communications, wellbeing and engagement, and employee advocacy — and the good ones make this investment.

Best-in-class advisers will branch out further, to help employers understand how benefits fit into the organization’s overall value proposition to its employees. They might provide services like professional and organizational development, advice around technology, outsourced benefits administration or total rewards compensation modeling.

How can you tell if you are underserved?

In today’s world, selling insurance is a relatively small part of what an adviser does. If you’re working with someone who you feel is here to ‘sell’ you something, you’re probably being underserved.

The adviser should understand your business and your workforce, how employees are paid and how the benefits fit into the overall compensation package. Their services should be proactive, and they should be providing thought leadership focused on helping your organization grow.

Is it important to have an adviser familiar with your industry?

There is value in understanding the industry, especially if you’re looking for someone to help with your human capital investment or total rewards program. What do you need from your workforce? What challenges do you have in recruiting/retaining the type of talent you want? What competition is in the market for that talent?

A good adviser will know the market and the competition, in order to help your company have the advantage in finding top talent. A young person out of college or someone with several years of experience will have different needs. You want to ensure your benefits and compensation package align with the needs of your workforce.

How often should you evaluate your adviser?

There’s nothing wrong with having a long-term relationship with your employee benefits brokerage firm as long as the relationship is vibrant. Like any relationship, things can get stale if the client is taken for granted. The consultant needs to provide thought leadership to challenge the status quo and educate the employer on what is out there and how it relates to their objectives.

Services need to be proactive and relevant to the employer’s specific needs. Every company is unique with different business challenges, workforce demographics and philosophies. The servicing team needs to be aware and sensitive of changes in things like demographics — how you communicate to a group of Generation Xers is different from how you’d communicate with millennials.

If you don’t feel you’re getting thought leadership and proactive service, it’s time for a broker request for proposal.

Insights Employee Benefits is brought to you by Arthur J. Gallagher & Co.

How to achieve a successful employee benefits strategy

“The traditional approach of gathering census information, marketing to insurance companies and implementing changes close to open enrollment deadlines is a Band-Aid solution for one year at best. In today’s world an employer needs to evaluate the level and expertise of service when it comes to risk management, creative solutions, consulting and compliance,” says Michael Galardini, director of sales at JRG Advisors.

Smart Business spoke with Galardini about how organizations need to take a strategic approach to employee benefits.

Rather than a traditional approach, how should employers address employee benefits today?

Old habits can be hard to break. In the wake of the Affordable Care Act (ACA) and costly health insurance premiums, a company’s strategy and approach needs to adapt to the changing health care landscape.

A company should focus on the 4Cs of employee benefits — consulting, creative solutions, compliance and cost. The concept of this 4Cs approach is maximized when the company uses a three-year strategy to develop a benefits program.

The ‘traditional’ broker will not achieve significant cost reductions by simply raising the plan deductible, copays, shifting contributions to the employees or leap frogging between insurance companies year-after-year to save a few percentage points on renewal increases.

What do the 4Cs actually mean in practice?

Consulting: The analysis and review of an employee benefits program should start with an interactive dialogue, research and gathering of data by an experienced, knowledgeable broker working in tandem with the employer’s HR team or benefits administrator.

Once the risk is quantified, a strategy can be developed to target options designed to help the employer manage the risk within the parameters of coverage, network and premium funding.

The benefits program results should be monitored throughout the year. Proper monitoring of the benefits strategy and a proactive approach to any needed changes are imperative to ensure the program is on pace to meet the goals of the company.

Periodic strategy meetings should also take place to provide both employer and employees on-going education, as well as updates on industry or insurance company changes.

Creative solutions: The results of a thorough consultative analysis and risk assessment will identify solutions to achieve desired outcomes within the employee benefits program. Various solutions can then be implemented in order to shift the curve to lower costs and favorably impact premiums.

Creative solutions can include negotiation, gap and voluntary insurance, cost transparency tools, benefit administration platforms, alternative premium funding and streamlined services administration.

Compliance: Employers need to consider legal issues relating to employee benefits and the increased taxes, reporting and penalties imposed by the ACA. Choosing a broker who can provide specialized knowledge, experience and guidance with ACA and the Employee Retirement Income Security Act is critical to ensure that any audit fees and penalties are avoided.

Cost: The implementation of a consultative strategy, creative solutions and adherence to compliance regulations will ultimately help the employer achieve manageable budget objectives, reduce risk and better predict costs for their employee benefits program.

By following this approach to employee benefits, employers are able to identify the risk in their employee population, implement a risk strategy through creative solutions and monitor results through consultative analysis to ensure they are achieving their coverage and budget requirements.

Insights Employee Benefits is brought to you by JRG Advisors

How to build a culture that delivers empathy and compassion

Building your organization’s culture needs to be an intentional effort that ties into all of your operations. This is especially true in a service-oriented business where the product is the experience.

“We help people through the health care journey, and in order to do that we have to build an environment where we’re providing empathy and compassion for our own employees,” says Shannon Skaggs, COO at Quantum Health. “If you don’t have an environment that’s wired to be empathic and compassionate, you’re never going to be able to transfer that same empathy and compassion to your end consumer.”

Each organization has to understand what its consumers need — staying laser focused on that while building a culture around those values.

Smart Business spoke with Skaggs about his lessons in what it takes to build a strong company culture.

What are the tangible results of a strong culture?

Some people think of culture as something to use as a recruiting tool, where they’ll get pingpong tables and have free food. That’s a mistake. If the culture truly drives the business’ operations, it will show up with strong net promoter scores, more internal promotions and lower turnover rates. People will want to stay and grow with your company, which means better returns for your clients. Even if you have great systems and processes, the best results come from a culture where the workforce is comfortable with making mistakes and trying new ideas.

In order to facilitate a change in culture, where do you recommend executives start?

Staying focused is crucial, so spend time determining exactly what your customers need from your business. Once you’ve come up with a mission and driving principles around that, everything in the business needs to reflect those pillars, whether you’re hiring, training or even just naming rooms in your building. It’s not about marketing. It’s about finding out exactly what your consumer needs or wants from you in your space, and then molding the environment around those things.

Transparency is important. If the workload is going to increase or something is going to change, call that out early and ask for concerns. Otherwise, you’re just letting it happen and trying to triage afterwards.

It’s also a good idea to tie the work back to the social mission of your organization. That kind of rally cry that everyone can get behind — like helping people — is critical when challenges or tough problems come up during busy days.

What obstacles can derail this change? What signs will point to a turnaround?

If you don’t have a strong management team and communication structure, you could perceive it to be a great culture at a certain level, but it may fall apart underneath. A pipeline of management with strong communication ensures the culture is cross-pollinated and there’s feedback from the frontlines.

It can be a challenge for C-level executives to meet regularly with employees face-to-face and let them drive the agenda of meetings, but that’s where you’ll get the best ideas. There will be uncomfortable conversations occasionally, but the way you handle those sets the tone for the culture and your authenticity.

If your employees feel empowered to solve problems, making appropriate decisions without getting approval first, that’s a sign your culture is getting stronger. When decision-making is pushed to the level it should be, there are fewer escalations to the executive team. You’ll also see indicators like higher morale and lower turnover.

Is there anything else you’d like to share?

You don’t have to go from zero to a completely culture-optimized environment. You can start with small things. For example, give employees who interact with customers as much control of their environment as you can, like moveable desks. Allowing them to stand half the day and sit the rest may sound trivial, but it’s important in a job where they don’t have control over what they’ll deal with from hour to hour.

Start with simple moves and then measure and get feedback from your frontline employees. Is it working or not? Don’t be afraid to fail; you’ll try things that won’t work. What your employees will react to is how you respond in those moments.

Insights Employee Benefits is brought to you by Quantum Health

Browse, point, click: Embrace today’s benefits technology

We buy everything from clothing to groceries with a simple click. People — both young and old — prefer online shopping, as opposed to fighting crowds and searching store aisles. This self-service shopping mentality is also becoming the preferred method when it comes to buying employee benefits.

“Now, more than ever, employers are looking to manage costs while reducing administrative burden. And, employees want the convenience of shopping for benefits online utilizing smartphones and tablets,” says Ron Smuch, insurance and benefits analyst at JRG Advisors.

Smart Business spoke with Smuch about embracing employee benefits technology.

How have employee benefits changed?

As the health care landscape has changed, so too has benefits technology. Although HR systems have existed since the 1980s, they weren’t developed to be very robust or flexible because they did not have to be. Now, employee benefits administration has become quite complicated and, according to many HR managers, a nightmare. The demand for technology has created a boom in software development and platforms that support enrollment, status changes, compliance, COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) and record keeping.

This technology growth is the product of several key factors, such as the inception of the Affordable Care Act and its compliance requirements, particularly how and to whom benefits are offered as well as how enrollments and waivers are tracked and reported. Another key factor is the popularity of high-deductible health plans. Employee cost sharing causes employers to embrace the concept of defined contribution aimed at empowering employees to make coverage choices for their specific needs, utilize those coverages wisely and ultimately take an active role in managing their health.

Employees are no longer simply enrolling in a set benefits plan that may not suit their personal circumstances.

Why do some employers hesitate to get this technology?

Many employers still shy away from benefits administration technology under the false assumption that their employee population prefers paper enrollment. A 2016 LIMRA Study: Benefit Communication and Enrollment revealed that 38 percent of employers believe employees want to use a computer to enroll in employee benefits and 27 percent believe that employees still want to enroll with paper forms. Conversely, 68 percent of employees said they prefer online enrollment and only 16 percent preferred paper forms. Surveyed employees who preferred online enrollment felt that companies still using paper enrollment were stuck in the past, out of touch with today’s technology or thought that it would simply be better done electronically.

The study also found that 10 percent of employers automatically re-enroll employees annually in some type of benefit, but less than 10 percent of employees prefer this process.

With more millennials entering the workforce, LIMRA believes the disconnect between employers’ paper-centric enrollment mentality and the modern technological approach of their employees will only grow.

How can employers find the right solutions?

While there are many benefits technology solutions on the market today, it is imperative you find the right technology to fit the needs of your company, your benefits program and your employee population. You should work with a knowledgeable employee benefits professional who has experience with benefits technology software to help you align your company goals with the correct technology solution.

Consider questions like: What are your ultimate employee benefit objectives? How could technology support your objectives? Does your employee benefits program present any major challenges? How might technology help alleviate those challenges?

Implementing the right benefits technology solution can not only ease the administration burden on your company and HR staff, but also improve your employees’ awareness and understanding of their benefits. The end result is a more engaged employee, which has been proven to increase productivity and performance.

Insights Employee Benefits is brought to you by JRG Advisors

What solves the no-one-size-fits-all problem of employee benefits? Choice.

Voluntary benefits help employers meet the diverse needs of today’s workers, while requiring only low-impact administration. At the same time, voluntary benefits allow employees easy access to needed personal and family protection without having to shop around in a market that otherwise might overwhelm them.

Smart Business spoke with Douglas Fleisner, sales executive at JRG Advisors, about the advantages of adding voluntary benefits to your benefit plan.

What do companies need to know about voluntary benefits?

Voluntary benefits are easy to buy, featuring guarantee issue and ultra-simple forms. They are easy to keep, as payroll deduction means no bill to forget and no checks to write.

Employee diversity is real, based on factors like culture, generation, family status, behavioral preferences and economic category. Voluntary programs allow the employer to offer a broad palette of benefits without adding an additional cost to the company.
Lots of small and midsize companies are saving money by increasing deductibles on their health care plans and offering voluntary benefits to bridge the gap.

Difficult economic times mean tough either/or choices for small and midsize business owners. For many, adding voluntary benefits to compensate for cutbacks elsewhere in a benefits package or to enrich an existing core benefits plan — particularly one with a high deductible — makes more sense than making cuts in critical areas of a business, laying off key employees or losing them to a competitor with a richer benefits package.

How do these benefits work?

With a voluntary benefits portfolio, employees are encouraged to focus on whether they need a given product, and how much to purchase. Instead of the employer paying for accident, critical illness, disability, life, vision and/or dental insurance as core employee benefits, business owners have begun to see the wisdom of providing those kinds of benefits on a voluntary basis, a la carte-style, where employees can pick and choose among them and pay for the ones they want and can afford.

Not only does offering voluntary benefits cost small employers virtually nothing and help level the benefits playing field with larger companies, it also affords employees access to various types of insurance coverage, typically with looser underwriting requirements and at group rates that are lower than if they went out and got coverage on their own.

What should an employer consider when offering voluntary benefits in its portfolio?

First, employers wishing to offer voluntary benefits must show their support for the benefits program if they want them to be successful with the employees. Such support on behalf of the employer lends itself to motivating employees to see the value of voluntary benefits for themselves and their families. An employer should talk to employees to help determine what offerings would be most useful.

In addition, employers should carefully examine their current benefits package to determine which benefits are popular and those that are not. Most importantly, employers need to determine the type(s) of voluntary benefits that offer the most value for the lowest cost. This is crucial to the success of the voluntary benefits program due to employee’s perceived value.

As the program is implemented, employers should educate employees on what voluntary plans are available and the benefits of enrolling. Lastly, employers should follow up with employees on a regular basis to ensure that they are satisfied, and that there are no problems

So, in the end, what’s special about voluntary benefits is their responsiveness to the needs of customers. Employers can easily offer benefits that will be meaningful to a broad spectrum of employees while keeping costs down, and employees can easily make informed selections of benefits that meet their needs.

Insights Employee Benefits is brought to you by JRG Advisors

Self-funding is a viable strategy for more and more employers

Almost every employer that offers a group health benefit program is searching for methods to lower the company’s spending. To cut health insurance spending, employers can modify plan designs, change insurance companies and shift more costs to employees. These methods, however, often only provide a temporary Band-Aid solution, rather than a long-term strategy to effectively and efficiently manage an employee benefits program.

“Because of the effects of the Affordable Care Act and ever-escalating costs, employers need to focus on where their medical dollars are being spent, to accurately assess what plan changes need to be made in order to be more efficient and stabilize costs,” says Domenic Pascucci, a consultant at JRG Advisors. “Self-insurance — normally considered a funding method only available to large employers — is now a viable option for employers as small as 25 employees or less.”

Smart Business spoke with Pascucci about self-funded health plans and how they might fit in with your employee benefits.

What’s important to understand about self-funding?

As the term implies, in a self-insured or self-funded health plan, the employer takes on direct financial responsibility for employees’ health care costs. Rather than being in a larger risk pool, the self-funding employer takes on the risk for its own employee group.

Some customization can be applied to the structure of these contracts. For example, all of a health plan may be self-funded, or a contract might be purchased to cover certain types of claims. Most self-funded employers buy stop-loss insurance to cover catastrophic claims, capping their financial risk exposure.

Self-insured health plans are exempt from most state insurance laws and mandates, and not having to pay regular premiums to an insurance company can result in substantial savings. An employer also only pays for the claims that actually occur, not the claims an insurance company projects may occur.

Despite these advantages, many employers, especially smaller ones, tend to avoid self-funding — perceiving it as too risky. A recent Kaiser Foundation survey found 82 percent of employers with 200 or more workers are self-insured. Conversely, only 13 percent of employees in firms with three to 199 employees are in a self-insured plan.

How does a business owner know if self-insurance is right for his or her company?

Self-insurance is not the right approach for every employer. Some companies will benefit from such an arrangement; others will not.

Self-funding can provide more control. Coverage can be customized since you aren’t purchasing a pre-packaged product. Self-insured plans are subject to ERISA, but aren’t bound by state insurance laws and state coverage requirements. You can truly meet employee health care needs with a plan that makes sense.

As a self-insured company, you pay health claims as they occur, rather than paying a monthly premium regardless of actual claims activity. This can be attractive, especially during periods where health claims are low. On the other hand, you have to handle large claims as they come in. Remember, however, that stop-loss insurance limits this exposure and there are other methods to minimize payment swings, such as level funding.

When you pay a premium to an insurance company, you pay for more than just claims. It takes into account the insurer’s overhead costs, including advertising, technology, legal, allowance against their own financial risk and a profit margin. Self-insured employers don’t pay these hidden costs, but they incur other expenses like third-party administration of claims and the premium for stop-loss insurance.

Workforce demographics also can make a self-insured solution either more or less attractive. Young and healthy employees don’t necessarily guarantee a less expensive self-insured solution; nor will older and unhealthy employees always break the bank. Remember, self-funding means your company bears the risk associated with your employees, along with the protection of a stop-loss carrier.

It’s worth closely analyzing this risk with a professional who can give you well-thought-out estimates of your company’s potential liability. Only then will you be able to intelligently decide whether self-insurance is for you.

Insights Employee Benefits is brought to you by JRG Advisors

How alternate funding and tools can help control small group health plans

Today’s health care environment is riddled with complex plan designs and rigorous government regulations, leaving many employers to feel as though their hands are tied when it comes to finding unique, innovative and cost-saving solutions.

But a new concept is emerging that will enable small employers to identify current and future risk, influence behavior and control costs.

Smart Business spoke with Aaron Ochs, a consultant at JRG Advisors, about strategic analysis and risk management in the small group health insurance market.

How is the small group health insurance market changing?

Typically, small employers have been unable to maximize the value of their medical benefits due to lack of claims utilization and analysis from their insurance company. In the typical buying arrangement, the small group market is a fully insured contract that does not offer the employer much control over the health plan. Self-funding works differently.

In addition to providing protection against excessive costs in years with high claims and the opportunity to keep the profits from favorable years, the availability of data, including claims utilization, is a significant advantage for the employer. Knowing the health and risk factors of the employee population helps the employer determine the appropriate benefits strategy.

Self-funding is not a new concept; but it is new to the smaller employer — with many insurance companies offering level-funding premium options (a form of self-funding) to groups with as few as 10 insured employees.

With level funding, the employer puts aside enough money to cover anticipated claim expenses and the monthly premium remains level for the entire plan year. If claims are less than the funded amount at the end of the year, a rebate or credit is issued. If claims exceed the funded amount, the employer is protected by stop loss.

How can employers use data as a tool to help?

The ability to anticipate or predict claims costs hasn’t been available in the small group market due to the absence of claims data from the insurance companies — until now.

This is where newly developed risk management and predictive modeling tools come into play, making it possible to take a much ‘deeper dive’ into the composition and risk of the smaller employer, proactively identifying members with markers for chronic illness to predict health risks and determine if self-funding is a viable solution.

The deeper dive begins with employee data that is captured through a custom access portal, scrubbed and reviewed. The portal is an insurance company-accepted, Affordable Care Act and HIPAA compliant online benefits application tool designed to reduce the amount of time, cost and paperwork for employers. Employees are asked to complete an online enrollment interview. The employer receives a confidential de-identified aggregate report with an overall analysis.

This expert analysis guides the business owner through the benefit decision process with the power of knowledge. Gaining insight into the composition and health status of the group means plan design decisions can be strategic rather than an annual game of ‘pinning the tail on the donkey’ to find a tolerable solution.

What kind of results can employers expect?

Often, the same portal technology can reduce or eliminate many administrative burdens by providing the added support of employee enrollment, communication and plan election/waivers. The solution is a faster and more efficient approach to benefits. This means employers can essentially build their own health plan, which can lead to generous cost savings, greater transparency and understanding, and better overall cost control.

Over half of an average employer’s health care budget is spent on members with preventable conditions. It’s time for small employers to take control of their health care plans. Talk to your advisor to learn how these funding arrangements and risk analysis tools can help with your strategic benefits planning needs.

Insights Employee Benefits is brought to you by JRG Advisors