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

What does a new president mean for employee benefits?

With the inauguration of President-Elect Donald Trump imminent, it is still not certain what his administration will ultimately mean for health care.

“Many promises regarding health care reform were made on the road to the White House, and now the question is: How or will those promises be delivered upon?” says Frances Horn, employee benefits compliance officer at JRG Advisors. “More importantly, many employers want to know how Trump’s presidency will affect them. But until a detailed proposal is released, speculation remains and the only certainty is that change is coming to health care.”

Smart Business spoke with Horn about the state of employee benefits under a new administration.

What can employers expect to see?

Trump campaigned on revamping the health care system as a top priority for his administration. With the Republicans retaining control of the House and Senate, the stage appears set for significant changes, possibly even a ‘repeal and replace’ of health care reform. At the same time, there have been comments on the possibility of retaining some elements of the Affordable Care Act (ACA).

In order to repeal the ACA, Senate rules require 60 votes, which the Republicans do not maintain. However, a Republican Congress and president can utilize the budget reconciliation process to repeal significant portions of the law. Budget reconciliation may only include provisions that affect the revenues or expenditures of the federal government. Thus, the individual mandate, premium tax credit, Medicaid expansion and other imposed taxes of the ACA could be addressed. However, popular insurance reforms such as the ban on pre-existing condition exclusions, coverage for dependent children to age 26, prohibition on annual and lifetime limits for essential health benefits and community rating are unlikely to be affected by the budget reconciliation process.

Besides legislation, what other avenues could reverse the ACA or other policies?

It is common that when the White House changes party, the incoming administration seeks to impose a moratorium on regulations that haven’t yet gone into effect. As the president-elect appoints new leaders in the Department of Labor, Treasury Department, and Department of Health and Human Services, he may consider exercising his authority to change regulations or withdraw previous guidance. Since legislation can be time consuming and regulations often require a notice and comment process, regulatory authorities may take a position of non-enforcement against current ACA provisions.

Trump could issue Executive Orders early in his presidential agenda and will likely rescind many of President Barack Obama’s Executive Orders. This may include any that have a connection to benefits, such as the overtime rule or paid time off for federal contractors. This could then lead to new agency regulatory rule-making to revise or completely repeal the rules.

Numerous issues in the benefits arena — the fiduciary rule affecting retirement plans, which does not go into effect until April 2017, many ACA rules (though most are now final) and paid sick leave rule for federal contractors — could be affected. Due to timing, though, many plan sponsors have already made plan design and operational changes and it may be more trouble than it is worth to reverse those decisions.

What areas addressed in Trump’s campaign bear watching?

Key areas to watch, include promises to:

  • Allow individuals to fully deduct their health insurance premiums.
  • Permit insurance to be sold across state lines.
  • Expand Medicaid grants to the states enabling them to cover more of the local population.
  • Direct the Food and Drug Administration to immediately enact safety standards to enable prescription drug importation.
  • Propose significantly higher contribution limits and federal ‘seed’ contributions via tax credits for Health Savings Accounts.

Until a specific proposal is released, employers may want to stay the course. Any new developments during this transition of executive power will be monitored and reported upon.

Insights Employee Benefits is brought to you by JRG Advisors

The four Cs of employee benefits every business should follow

It should be no secret: The employee benefits broker of the past will not provide the necessary strategic approach required to achieve the goals of a successful and comprehensive employee benefits program.

The traditional broker-employer 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.

Smart Business spoke with Michael Galardini, director of sales at JRG Advisors, about the most progressive ways to develop and manage your employee benefits.

How should business owners be adapting with employee benefit management?

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 four Cs of employee benefits — cost, creative solutions, consulting and compliance. The concept of this four Cs approach is maximized by using a three-year strategy in developing a benefits program.

The traditional broker will not achieve significant cost reductions by simply raising their plan deductible, co-pays, shifting contributions to the employees or leap frogging from insurance company year after year to save a few percentage points on renewal increases.

What exactly is involved with implementing each of the Cs?

  • Cost: Utilizing risk analysis software tools, a company can now identify medical conditions that are present within their employee population. This risk analysis can also be done by properly dissecting claims, if the employer is large enough to receive appropriate data from the insurance company. Armed with an accurate risk assessment, the broker can work with the employer in a variety of ways to correct or improve the identified medical conditions and implement a customized risk management solution tailored to the group’s specific needs.
  • Creative Solution: Various strategies can then be implemented in order to shift the curve to lower costs and favorably impact premiums. These strategies can include gap insurance, self-funded/level-funded premium options, defined contribution-private exchange or voluntary insurance products to help offset employees’ out-of-pocket costs.
  • Consulting: Through ongoing consultative analysis an experienced, knowledgeable broker should work closely with the company’s HR team or benefits administrator to closely monitor the changes and results throughout the benefit 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. The broker should also conduct periodic strategy meetings to provide both the employer and employees on-going education, as well as updates on industry or insurance company changes.
  • 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 that can provide specialized knowledge, experience and guidance with ACA and the Employee Retirement Income Security Act of 1974, or ERISA, is critical to ensure that any audit fees and penalties are avoided.

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

Time to review Health Reimbursement Arrangements for 2017

Late last year, the IRS provided guidance on compliance under the Affordable Care Act (ACA) for group health plans, particularly Health Reimbursement Arrangements (HRAs).

In preparing for 2017, employers that offer HRAs should review plan documents and plan operation to ensure compliance with some of the new requirements.

Smart Business spoke with Frances Horn, employee benefits compliance officer at JRG Advisors, about what employers need to know about HRAs for the coming year.

How do HRAs generally work?

In 2013, the IRS advised that in order for an HRA to meet the ACA market reforms, it must be integrated with group health plan coverage. Generally, market reform requires that a health plan provide preventive services at no cost and no lifetime/ annual limits on essential health benefits. An HRA is integrated with group health plan coverage, if it meets the following requirements:

  • The employer offers group health plan coverage, other than the HRA, that is ACA compliant.
  • Employees receiving HRA benefits are enrolled in group health plan coverage.
  • HRA eligibility is limited to employees enrolled in group health plan coverage.
  • Employees have the opportunity to opt out of the HRA annually and upon termination of employment, or upon termination unused balances are forfeited.
  • Reimbursements are limited to copayments, coinsurance, deductibles and medical care expenses that aren’t essential health benefits, or the other non-HRA coverage provides minimum value.

Due to these integration requirements, an HRA that covers more than one current employee is unable to reimburse the cost of premiums for individual health coverage.

What’s critical to know about reimbursement of spouse or dependent expenses?

The usual practice of employers offering an HRA as a benefit to employees was to permit the qualified medical expenses of spouses and dependents to be reimbursed, regardless if they were covered under the employer’s plan or not.

With the integration requirement, this capability no longer exists. The integration rule states that an HRA may not be used to reimburse expenses for a covered employee’s spouse or dependent, unless that spouse or dependent is also covered under the employer’s integrated group health plan.

The 2015 IRS notice clarified this, and this rule is applicable to those plan years beginning on or after Jan. 1, 2017.

What about retiree HRAs and individual health expenses?

Information provided in the 2013 IRS notice for a HRA plan that has less than two current employees was confirmed in the 2015 notice. An HRA covering only retirees or an HRA covering only one employee isn’t subject to the ACA market reforms.

Therefore, it is permissible for a retiree HRA to reimburse the expense of individual market coverage. This type of HRA is deemed an eligible employer-sponsored plan and would cause individuals to be ineligible for a premium tax credit on the exchange.

To apply this provision, the HRA must only cover retirees. Thus, an HRA plan covering both retirees and current active employees cannot reimburse individual health care covered purchased by retirees.

This rule was applicable for any plan years beginning on or after Dec. 15, 2015.

In summary, providing employee benefits through a HRA has been popular for many years. The ACA market reforms, however, changed the practice such that HRAs for current active employees cannot reimburse the expense of individual coverage. Improper payment of individual coverage can result in a penalty of $100 per day per affected individual.

As 2016 winds down, employers should review their HRA practices to ensure compliance in 2017.

Insights Employee Benefits is brought to you by JRG Advisors