What if the leaders at IBM had stuck to making punch card equipment? What if after making the transition to the personal computer market, they had stayed entrenched there?
Punch card equipment is long gone, and with recent PC sales numbers significantly in decline, the leaders of IBM have stayed ahead of monumental changes in the market and kept the company moving forward for decades.
An open mind.
Too often, CEOs place self-imposed limitations on themselves, both in business and personally. The status quo becomes acceptable and new ideas become verboten. When this happens, growth is stifled — a dangerous situation. Many business gurus will tell you that you are either growing or dying. A stagnant company sees itself as not losing ground, but as its competitors move forward, its relative position in the market fades, even though it views itself as standing firm.
The only way to avoid this is to keep an open mind. CEOs need to constantly grow and learn from a personal perspective — so they constantly improve their leadership and people skills — and also from a business perspective — so new ideas are allowed to push the organization forward.
While there are many approaches to keeping an open mind, here are three ways to get started.
- Embrace trial-and-error. Finding success might require experiencing a dozen failures. Whether it’s a new way of running a meeting or trying to find the next innovative product, accept the fact that success has a cost. Don’t eliminate an idea because it goes against what the company has always done.
- Seek knowledge. As a professional, a CEO should never stop learning. There should always be a curiosity about your industry that drives you to seek an understanding of the latest trends and strategies, but you should be constantly looking at other industries as well. Often, best practices in one industry can be applied to another. If you are the first to make the move, it will give you an advantage over the competition.
- Find a mentor. The right mentor can make you aware of your blind spots. Without someone to offer a different perspective, it is easy to fall into familiar ways of thinking, thus stifling the chance of new ideas taking root.
The longer a CEO runs a business, the easier it is to fall into the trap of doing what worked yesterday or last week. When this goes on long enough, the business ends up with an overall strategy that is several years old.
You would never say, “Let’s use the same strategy we developed five years ago,” but because of a closed mind, that’s what ends up happening by default.
Be vigilant about your search for knowledge. In the end, it will make you a better leader and improve your company’s chances for success.
Fred Koury is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or email@example.com.
When you flip a light switch, turn on the water or start your car, you expect reliability every time. For employees, it’s just as mandatory that they be reliable, by showing up on time, completing the tasks at hand and basically doing their jobs time and time again.
By the same token, your employees expect you, as their leader, to be reliable. This means when you say you’ll do something, you do it, when they need direction, you provide it, and when the chips are down, you’ll be there for them.
Being reliable is good, but being too predictable — not always. In fact, being too conventional can make your company a “me, too” organization that only reacts to what the competition does, rather than taking the lead. It can be a bit more daring to set the trend, but if managed and controlled correctly, the rewards dramatically outweigh the risks.
Warning signs that your leadership has become too predictable occur when your subordinates begin finishing your sentences and know what you will think and say before you utter that first word on just about every topic. Compounding the problem is when your employees begin to perpetuate the negative effect of you being so darn predicable by believing it themselves and telling others, “Don’t even think about that; there’s no point bringing up your idea about X, Y or Z because the boss will shoot you down before you take your next breath.” This bridles creativity and stifles people’s thinking and stretching for new ideas.
It’s human nature for subordinates to want to please the chief. Under the right circumstances, that can be good, particularly if you are the chief. But it can be a very bad thing if you are looking for fresh concepts that have never before been run up the flagpole.
Uniqueness is the foundation of innovation and the catalyst for breaking new ground. George Bernard Shaw, the noted Irish playwright and co-founder of the London School of Economics, characterized innovation best when he wrote: “Some look at things that are and ask why. I dream of things that never were and ask why not?”
The “why not” portion of this quote is the lifeblood of every organization. A status quo attitude can ultimately do a company in, as it will just be a matter of time until somebody finds a better way.
As a leader, the first step in motivating people to reach higher is to dispel the image that you’re exclusively a predictable, same-old, same-old type of executive who wants things a certain way every time. There are dozens of signals that a boss can give to alter a long-standing image and dispel entrenched mindsets. You can always have a midlife crisis and show up at work in a Porsche or Ferrari instead of your unremarkable Buick. This flash of flamboyance will certainly get people questioning what they thought was sacrosanct about you. The cool car might also be a lot of fun; however, the theatrics might be a bit over the top for some, not to mention a costly stage prop just to send a message.
A better solution is to begin modifying how you interface with your team, how you answer inquiries from them and, most importantly, how to ask open-ended questions that are not your typical, “How do we do this or that?”
Another technique is when somebody begins to answer your question, before you’ve finished asking, particularly in a meeting, abruptly interrupt the person. Next, throw him off guard by stating, “don’t tell us what we already know.” Instead, assert that you’re looking for ideas about how to reinvent whatever it is you want reinvented or improved in giant steps as opposed to evolutionary baby steps. If you’re feeling particularly bold, for emphasis, try abruptly just getting up and walking out of the meeting. In short order, your associates will start thinking differently. They’ll cease providing you with the answers they think you want. Some players will hate the new you, but the good ones will rise to the occasion and sharpen their games.
If you want reliability, flip the light switch. To jump-start innovation, you could begin driving that head-turning sports car. Better yet, get your team thinking by how you ask and answer questions and by not always being 100 percent predictable but always reliable.
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. Reach him with comments at firstname.lastname@example.org.
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Nicholas DeIuliis keeps Consol Energy Inc. on its toes by turning potential energy into kinetic energyWritten by Gregory Jones
If you ask Nicholas DeIuliis about the state of the energy industry these days, he would tell you it’s the nature of the industry that keeps it exciting and evolving.
DeIuliis is president of Consol Energy Inc., a more than $6 billion, publicly owned producer of coal and natural gas and one of the leading diversified energy companies in the U.S. He and Consol have been focused on new technologies, new energies and, above all else, keeping Consol one of the leading producers in its region.
“Energy has always been a big issue within our regional economy, national economy and now the global economy within the last number of years,” DeIuliis says. “Consol Energy still looks upon those tried and true forms of energy, but what’s really changed in the last number of years is how we’ve evolved in deploying technology in both the coal and natural gas side.”
As the industry continues to push forward, the success of companies such as Consol depend upon its ability to keep employees safe, effectively communicating and remaining innovative.
“The most important thing we do is we establish what our values are and we literally numerate them for our teams,” DeIuliis says. “We say what our top values are and which is first, second and third. For us, No. 1 is safety. Second is compliance. And third is continuous improvement and taking a long-term view.”
Here is how DeIuliis is helping to drive those values at Consol Energy that, in turn, help drive the company.
In the energy industry, there are all kinds of dangers that employees face while on the job. DeIuliis and his team take great pride in running a company that focuses on keeping its workforce safe.
“Safety has always been something that is critical to us throughout our history, and we’ve been around for about 150 years,” DeIuliis says. “So we’ve learned what works very well and also learned the hard way through those 150 years what doesn’t work very well when it comes to safety.”
DeIuliis wants to take the challenge of safety and turn it into an opportunity, which sounds simple, but it’s often very challenging.
“We first started with the philosophy of safety itself,” he says. “What is our culture going to be when it comes to safety? Is it truly going to be our top value that will not change during market swings? A value is something that is constant. So first and foremost, that is our most important top value.
“Secondly, if it’s our top value, what’s the expectation going to be? Are accidents part of the business of extracting natural gas or coal resources, or can we truly take an approach of zero accidents of any kind across the entire employee base as the expected outcome and expected goal?”
Consol has taken the latter approach and created an absolute zero program that says the only acceptable standard of performance is no accidents to the employees on any given day across the entire company.
“Anything that’s an accident no matter how small or slight is an exception to that rule and a violation to that philosophy,” he says. “So you have that philosophical change that needed to occur to turn a challenge into opportunity, and over the last three or four years, it has turned and evolved into the culture and philosophy.”
Now DeIuliis and Consol have to find the ways to further improve the company’s safety outlook.
“What are the tactical things we’re going to do to improve our performance?” he says. “How are we going to bring the science and technology to the table to get smarter about risk identification, hazardous mitigation and overall employee training? All of those things lead you to a better place on safety performance.”
Communication is king
In conjunction with safety performance, how well Consol Energy communicates its message relates to how easily and effectively it can improve the organization.
“Communication is the lifeblood of taking a concept or an opportunity and making it a reality,” DeIuliis says.
Consol Energy has nearly 10,000 employees and 6,000 to 8,000 contractors on top of that. So communication throughout the organization is critically important to furthering a concept, philosophy, a new technology or standard, and whether or not that comes to fruition — and when it comes to fruition.
“Sometimes the when part is just as challenging and just as important as whether or not it actually comes to fruition,” he says. “You can’t overemphasize the importance of communication, especially in a complex and large organization or a complex and large world such as what we’ve seen in the energy space throughout the U.S. and the globe.”
Saying that your company communicates is easy, but actually getting results from your communication is much more difficult. You have to utilize multiple communication tactics.
“We use what we call a portfolio approach to communication,” DeIuliis says. “We don’t put all our eggs in one basket, one means or one method of communication. We will utilize a range of those like you would in an investment portfolio.”
Consol uses everything from closed-circuit TVs that update employees on safety procedures, initiatives, technological breakthroughs, compliance issues and regulatory issues to training programs to make sure that employees are engaged.
“We look at that as an investment in communication that is going to get that know-how rate of return, which will be very good, not just for the shareholders of the company and stakeholders but, most importantly, for the employees themselves, because they will be in a more safe and compliant place,” he says.
“There’s a whole range of different communication tools that we use … that will put us in a better position to succeed in that communication challenge and opportunity.”
In order for communication to be most effective, especially in a company the size of Consol, there has to be someone who has ownership of the messages being spread throughout the business.
“The communication approach goes back to the messaging and the content of what you’re saying,” he says. “The ownership is across the entire company. In reality, it extends beyond the employees within the company. It extends to our partners and other stakeholders that touch or deal with the company in some, way, shape or form. It might be the customers downstream that we’re selling the coal and natural gas to; it could be our contractor partners providing services at our rig sites and coal mines or anyone in between.”
While everyone owns a part of the communication process, it’s also critically important that that communication process and the messaging behind the communication are viewed as owned by action, not just by words with the leadership of the company.
“The leadership of the company for us means many different people, not just our CEO and chairman,” DeIuliis says. “It’s our CEO and chairman all the way down to the mine foreman, all the way down to the employee working on the barge line or all the way down to someone standing on one of our rigs right now.
“It’s a group effort and everybody has a role and a responsibility. Your actions have to be consistent with what you’re saying.”
Just as important as safety and communication are within the energy industry, so too is the need to remain innovative. Recent substantial growth in natural gas drilling and advancements in clean coal technology are two areas driving energy these days.
DeIuliis and Consol look inside and outside the industry in order to bring the best innovation to the forefront of the company’s operations.
“There are two broad groups I look to over time for help and insight,” DeIuliis says. “One is the management team that we work with and around. They’re the best and brightest in the industry. Getting that comfort level and that trust level with the exchange of ideas and thoughts as time goes on is the lifeblood of any successful organization.”
The other broad group DeIuliis looks at is almost the mirror image of his leadership team. He looks toward entities and individuals with insights and experiences outside the industries Consol works within.
“It’s amazing how many already established processes, technologies and concepts are out there in entirely different industries that are being viewed as innovations and ground-breakers with the coal, natural gas and fossil fuel industry that we operate in,” he says.
“Every time we tend to look outside our box and outside our industries, we always come away with an injection of innovation that keeps us going.”
As the world of business and that of energy continue to evolve and change as time goes on, the success of a company comes back to its values.
“In the energy industry, we’ve seen a lot of volatility and a lot of peaks and cycles through the years,” DeIuliis says. “We’ve become used to a certain extent of the things that will enviably occur. But if you go back to the values, and those that are truly the values of your organization, and if you’re the safest and most compliant operator in that environment, you’re going to be the most successful or profitable whether it’s a market peak or trough.”
The key to managing through those kinds of ups and downs has been simplicity.
“The way we manage in those downturns is sticking to those values and as long as we’re pushing for better safety performance, compliance and continuous improvement, we will be fine in any market,” he says.
How to reach: Consol Energy Inc., (724) 485-4000 or www.consolenergy.com
Find ways to improve the processes of your business.
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The DeIuliis File
Consol Energy Inc.
Education: Graduated with a chemical engineering degree from Penn State. He received a master’s degree in business administration and a juris doctorate from Duquesne University.
Career: DeIuliis began his career in Consol Energy’s research and development group in 1990. He became vice president of strategic planning responsible for optimizing the value of Consol Energy’s assets resulting in the creation of CNX Gas Corporation, where he served as president and CEO from its 2005 inception until early 2009. He has been the president of Consol Energy since February 2011.
DeIuliis is also director at-large of the board of directors of the Independent Petroleum Association of America, a director of the U.S. Chamber of Commerce and the Bituminous Coal Operators’ Association Inc.
Regionally, he is on the advisory boards of the University of Pittsburgh Cancer Institute, the Pittsburgh Penguins Foundation and the Catholic Foundation. He is a registered professional engineer in the Commonwealth of Pennsylvania and a member of the Pennsylvania Bar.
As businesspeople and business leaders, we have full plates. Whether it’s balancing work, home, community, social obligations, aggressive business targets, strategic initiatives to sponsor/support/implement, unwelcome external influences, or customers expecting more for less, prioritizing all of that can be a daunting challenge.
Prioritize and focus are the business vernacular terms we always hear. We smile grimly, mutter “uh huh,” and return to our overwhelming pressure cooker without changing a thing about what we do or how we are approaching our work.
But those words really are the key to managing our crazy world of over-commitment and under-capacity — when combined with two more words: critical few. Prioritizing and focusing on the critical few results, products and people who truly matter more than others is job No. 1 for executives.
How to look at it
The facts: You have a critical few customers, without whom your business would dramatically suffer. Ensure that your organization serves those customers disproportionately well. That does not mean ignore the others; ideally, all customers would be served flawlessly.
You have a critical few products/offerings that make up the 80 percent in the 80/20 of your business. Ensure you get them flawlessly right. Your brand is set by those core products or services. If you get it wrong there, the rest may not matter.
You have a critical few employees/direct reports who play a disproportionately impactful role in the success of your business. Your time should reflect that understanding. It doesn’t mean ignore everyone else; it simply means that you cannot leave to chance that your key people are sufficiently directed, motivated, feeling challenged by their work and appreciated.
They are people you can build the rest of the organization around. You’ve got to get it right with these folks above all others and then rely on their help to reinforce and motivate the rest of the organization.
Optimize and organize
So clearly, identifying your critical few customers, products and people is job No. 1 for results. How do you optimize your short list of the critical few? Simply answer these three questions:
? What are the critical business results you need to deliver?
? Who are the key performers who will deliver those results?
? What are the critical few behaviors that your key performers must do?
That reads like common sense, and it is. But achieving it isn’t so simple.
Don’t forget reliability
You know your critical results and key performers right now, but what about those all-important critical few behaviors that people must do to make it work? If people don’t do the right things, you won’t get results.
Many initiatives are designed to get those critical few behaviors to occur — behaviors that we think should automatically happen, but they don’t. How do we get people to do the right things reliably?
It’s not about making people happier at work. Many happy workplaces go belly-up. It’s easy to be distracted by things that create fun and do little to improve performance.
It comes down to (1) pinpointing those actions, which if performed reliably, will move the needle for your organization and (2) ensuring there are reinforcing consequences for those critical few behaviors and corrective consequences for behaviors inconsistent with what you need. That alignment is necessary, and it is often overlooked.
So in a nutshell: Ensure focus on the critical few results, people and behaviors. Don’t allow yourself or your organization to be distracted. Without the critical few happening well, you will spend many more hours fixing things than growing your business. ?
Business owners are still cutting corners to cut costs and stretching their staffs in an attempt to stretch their budgets, but a lackluster economy shouldn’t be the only thing affecting their business decisions.
When companies try to manage “on the cheap,” the result can be anything but savings. The price of cutting corners in HR can lead to escalated risks, decreased productivity, increased turnover and ultimately higher costs.
Risk of noncompliance
To mitigate risk and minimize costs, HR compliance should be a constant consideration for business owners. Employment laws govern how companies hire, schedule, compensate and behave toward their employees. Adhering to these and other government regulations is not just the lawful thing to do, but it’s also the smart thing to do to protect a business from unnecessary risks.
Federal wage and hour laws are one of the most common noncompliance violations for companies. According to one report, the average settlement per case is nearly $13 million.
Allegations include employers’ failure to pay minimum wage, unpaid overtime and inaccurate “exempt” or “nonexempt” employee classifications. Exempt, or salaried, employees are not eligible for overtime pay regardless of extra hours worked, while nonexempt, or hourly, employees can earn overtime.
Corporate anorexia and the cost of turnover In a lean economy, making do with less is simple common sense, but when companies try to operate with too little staff, the unhealthy result is what some experts call “corporate anorexia.”
Remaining employees are expected to carry a heavy portion of the company’s workload. When consistently stretched too thin, employees become less productive, and the most marketable and highest-performing employees eventually look for better opportunities.
Experts estimate that turnover costs companies anywhere from one-half to five times an employee’s annual wages depending on his or her position within the company.
While that may sound like an exaggeration, consider the hard costs of recruiting and training a new employee. Add to that the softer costs of lost productivity and lost opportunity.
So why would a business owner ever choose to ignore employment laws? Or risk losing the most experienced staff? For most, it’s not a conscious choice but an unavoidable outcome.
When a company is making do with less, its HR function is often severely understaffed or nonexistent. How can a small business owner or a one-person HR department effectively manage the volume of duties and stay abreast of constant changes in employment law?
HR experts suggest that when limited means dictate that companies cut corners, they should focus on the fundamentals. That includes a comprehensive employee handbook and regular compliance audits.
A handbook is the first line of defense in employee matters. It outlines company policies and establishes a guideline for behavior. When employees review and sign a handbook, they acknowledge that they have reviewed and understand the company’s policies and intend to abide by them.
Regular compliance audits can help ensure a company is properly meeting its obligations and can help identify potential risks before they become costly oversights.
Business owners can also augment their HR by outsourcing part or all of the function. Professional employer organizations and HR outsourcers employ experienced human resource professionals who have extensive knowledge in a variety of HR disciplines.
PEOs and HROs also dedicate significant resources to developing proven processes and systems that can help minimize the most common and costly mistakes. As for cost, many qualified firms cost roughly the same as one full-time HR employee.
Cutting costs can be smart, maybe even necessary, but cutting corners on critical functions or deeply into staff can backfire. If you cant cover all the bases, focus on HR’s fundamentals and enlist assistance where needed.
John Allen is president and COO of G&A Partners, a Texas-based HR and administrative services company that manages human resources, benefits, payroll, accounting and risk management for growing businesses. For more information about the company, visit www.gnapartners.com.
In 2014, new entities will be part of the health insurance world — health insurance marketplaces.
Health insurance marketplaces are key components of the Patient Protection and Affordable Care Act (PPACA). They are designed to make buying health coverage simpler by providing easy-to-understand information that allows consumers to make apples-to-apples comparisons of a wide variety of products. Marketplaces are intended to make health coverage more affordable by promoting increased competition among health insurers under new market and product standards. In addition, certain consumers may be eligible for premium tax credits and cost-sharing reductions that will further reduce health insurance costs. Qualifying small employers also may be eligible for a tax credit.
“Health insurance marketplaces have the potential to increase consumerism in health insurance,” says Sheryl Kashuba, vice president, Health Policy and Government Relations, and chief legal officer for UPMC Health Plan. “However, employers need to understand how they will operate and who they will serve.”
Smart Business spoke with Kashuba about what employers need to know about health insurance marketplaces.
What is a public health insurance marketplace?
The public health insurance marketplace, sometimes referred to as an exchange, will comprise two new marketplaces where consumers and employers will be able to purchase health insurance. Coverage will be available to individuals via the Health Benefit Marketplace and to small businesses via the Small Business Health Options Program (SHOP) Marketplace.
In Pennsylvania, companies with 50 or fewer employees will be eligible to purchase on the SHOP in 2014 and 2015; in 2016 and beyond, employers with 100 or fewer employees may purchase on the SHOP.
In some states, the state itself will operate these public exchanges. In other states, including Pennsylvania, the federal government will operate federally facilitated marketplaces. In order to sell coverage on public exchanges, including on the federally facilitated marketplace, insurers must receive certification that their plans meet the requirements established by the PPACA for qualified health plans (QHP).
How does an insurer earn qualified health plan status?
A qualified health plan is a health insurance plan that has been certified by a marketplace as meeting certain standards; plans must receive QHP certification in order to be sold through a public marketplace. The certification standards include coverage of all essential health benefits, adherence to established limits on cost sharing such as deductibles, copayments and out-of-pocket maximum amounts, establishment of quality standards and a host of other requirements.
Who can purchase coverage through a public marketplace?
Most U.S. citizens and lawful residents will be eligible to purchase coverage on the health insurance marketplace. Any small employer meeting the employee limits established in its state may purchase coverage via the SHOP.
What is a private health insurance marketplace?
A private health insurance marketplace is run by a private sector entity, such as an insurer or broker. Private marketplaces may be designed to allow employers to control costs through defined contribution models and to allow employees expanded coverage options. These marketplaces also may offer a broad range of retail products, such as life insurance and even non-insurance products.
Must every employer purchase insurance from a marketplace?
No. While both the SHOP and private marketplaces will be designed to offer a variety of coverage options, some individuals and employers may prefer to continue to purchase coverage outside these new distribution channels. Employers will continue to have the option to do so. However, premium tax credits and cost-sharing reductions for individual market coverage and tax credits for qualifying small group plans will only be available through the public Health Benefit and SHOP marketplaces, respectively.
Sheryl Kashuba is vice president of Health Policy and Government Relations and chief legal officer at UPMC Health Plan. Reach her (412) 454-7706 or email@example.com.
Insights Health Care is brought to you by UPMC Health Plan
Most employers offer a defined benefit plan, where they select one or two health insurance options to offer their employees. This approach is being replaced by defined contribution plans.
“Under a defined contribution plan, the employer is choosing a fixed dollar amount for employees and they use this money to purchase their benefits. Employees can select from multiple options, not just the traditional one or two plans, and personalize their selections based on their needs,” says Mary Spicher, sales executive with JRG Advisors, the management arm of ChamberChoice.
Smart Business spoke with Spicher about utilizing defined contribution plans.
Why the shift to define contribution plans?
The shift is directly related to health care reform and an effort to reduce insurance costs. This is not a new concept; for the past 20 years most employers have used a defined contribution plan for retiree benefits. Retirees are given a defined amount of income to apply toward defined contribution 401(k) plans, removing employer risk and allowing employees to make investment decisions based on their needs.
In the 1990s, rising costs led companies to evaluate retiree health plans and cap the amount they pay for benefits. As costs continued to rise, companies declined to raise the capped amount, creating a defined contribution health plan. This has now migrated to active employee health plans.
How do these plans work?
Employers can control costs and keep expenses more predictable from year-to-year. A defined contribution plan creates a consumer-driven health plan where employees use the employer’s defined contribution to purchase health insurance specific to their needs. The employer can keep the defined contribution the same for all or use a tiered structure where employees pay the difference for more expensive plans and benefits. Exchanges, including benefit options with low to high deductible plans combined with a health savings account, copayments and ancillary products, were developed so employees can purchase plans with defined contributions.
An employer can change the defined contribution by a set amount annually, regardless of the actual plan increase, or simply keep it the same based on its financial stability. The decision to alter benefits plans — i.e. increase the deductible, change the copayments on medical and prescription drugs, etc. — is the employee’s responsibility.
What’s the effect on ancillary products?
The one-stop shopping through exchanges simplifies administration and allows employees to purchase ancillary products as part of their health plan. The convenience predicts substantial growth in everything from short- and long-term coverage to pet insurance.
Insurance is viewed as protection of an employee’s income and assets against unpredictable events. If employees get sick, they use their health insurance. If they need time off work for an illness or accident, they have short-term or long-term disability insurance. Some expenses for a serious illness like cancer might not be covered by the employee’s health plan. And, if the employee were to die from the illness, life insurance protects the family financially.
What does health care reform mean for the future of defined contribution?
Employers are deciding whether to continue to offer a health plan, and if so, what type, based on the new legislation and cost. So, employees may become more familiar with a defined contribution health plan through the public insurance exchanges. Products sold through the state or federal exchanges will be limited to essential health benefits or a benchmark plan for health, dental and vision. Health plans in a private health insurance exchange offer more inclusive coverage.
Bottom line, defined contribution is the future. Employers have been waiting to see how reform affects rising costs before changing their traditional thinking. Early indications predict that health care reform won’t eliminate increases, so providers still need to deliver more efficient care, especially with high-cost cases. However, defined contribution, consumer-driven plans are helping employers control their costs.
Mary Spicher is a sales executive at JRG Advisors, the management arm of ChamberChoice. Reach her at (800) 377-3539 or firstname.lastname@example.org.
Insights Employee Benefits is brought to you by ChamberChoice
Health savings accounts (HSAs) are a savings vehicle increasingly being used to offset health care costs and improve awareness when utilizing health care simply because there is additional skin in the game. Further, HSAs provide potential savings and accumulation of assets that work well with long-term financial planning.
“HSAs encourage us to be better consumers, plan ahead and consider the ramifications of health care, as it applies to your long-term financial plan,” says Michael Bartolini, President and CEO of First Commonwealth Insurance Agency.
“It might be a very good opportunity to save more tax-deferred and tax-free money, depending on your situation,” says Nancy Kunz, Lead Financial Planner at First Commonwealth Financial Advisors.
Smart Business spoke with Bartolini and Kunz about how health savings accounts operate and where they fit in with your financial planning.
How does an HSA work in conjunction with your health insurance?
Many people are going to a high-deductible health care plan that has premium savings as a result of the larger upfront deductible. The idea is to shift those premium savings to an HSA, which can be used to pay for unreimbursed medical expenses on a pre-tax basis. The list of applicable expenses is long and includes dental, vision, long-term care insurance premiums, home improvements for medically necessary conditions, etc.
An HSA does not have to be provided by an employer; it can be set up on an individual basis. You also are able to accumulate funds year after year, with the idea of using those dollars against future medical expenses.
The current annual contribution limits, which tend to increase, are $6,450 for a family or $3,250 for an individual. If you are over the age of 50, you are able to contribute an additional $1,000.
How does this differ from a flexible spending account?
Typically provided by employers, a flexible spending account (FSA) works on a pre-tax basis for many of the same unreimbursed medical expenses, but the money does not roll over to the following year. If the monies that are in the FSA are not spent by the end of the calendar year, they are lost. Unlike an HSA, all monies you plan to contribute to the FSA throughout the year are available as soon as you sign up, whereas only the actual contributions are available in an HSA.
How does an HSA help you better manage health care expenses?
When something hits your pocket or you have a new cost, it causes you to be more responsible and a better consumer. If you have to pay $2,000 first with the high-deductible health plan, you’re going to be more mindful of where you go for health care expenses, including which hospital or provider you choose for a procedure.
The economics of health care don’t follow traditional economics where you choose wisely based on price points and/or quality. What one provider may charge for an MRI versus what another provider charges could be very different, but you’re not likely to care if it’s a $10 or $15 copay. We don’t have the mindset that even if insurance companies are paying, so are we — one way or another.
HSAs and high-deductible health plans with their greater level of upfront deductible pushes consumers to exert more energy to pick up the phone and find out what a procedure costs. In addition, many health insurance carrier websites are starting to populate this kind of transparent data to show provider price points.
How does an HSA fit into your overall financial plan?
An HSA can act as another retirement vehicle, especially if you start young enough to accumulate funds without having to — or choosing not to — use those dollars against medical expenses. Once you’ve reached age 65, HSA funds can be used without penalty for any purpose. An HSA also will follow you wherever you go; it’s not tied to an employer.
Many people have reached their maximum on 401(k) or IRA contributions, so depending on your age and health needs, this may be an option to look at seriously for tax benefits and long-range financial planning.
Michael Bartolini is president and CEO at First Commonwealth Insurance Agency. Reach him at (724) 349-6028 or email@example.com.
Nancy Kunz, CFP®, ChFC®, CLU®, is lead financial planner at First Commonwealth Financial Advisors. Reach her at (412) 562-3232 or firstname.lastname@example.org.
Insights Wealth Management is brought to you by First Commonwealth Bank
Ronald Reagan was well known for not only his confidence but also his positive outlook and sense of humor. He had a way of never taking himself seriously and always found a way to find humor even during the direst times.
In fact, following the assassination attempt, he told his wife, “Honey, I forgot to duck.”
His constant positive outlook made him appealing to voters and is one of the reasons he continues to score high in polls ranking presidents.
Do we approach life and leadership the same way that Reagan did? Do we always take a positive outlook into the start of each day?
Some CEOs act as if being in charge makes them a victim and complain of the burden. Leadership is a privilege that all of us should learn to enjoy. We have to train ourselves to enjoy the process, not just the end result.
Let’s take some time to reflect on the victories, no matter how small, and celebrate them. Learn to reflect on the great clients we have and the great people who work for us instead of focusing on the one unhappy customer or an employee with a bad attitude. But most importantly, we shouldn’t take ourselves too seriously.
Each day that passes is a day that we do not get back. We have to look at each day as a series of moments and find the happy things that put joy in our life.
These can be simple things — a funny comment from your child, something silly you heard on the radio or a bright, sunny day. When we start focusing on these small joys in life and start stringing them together, we’ll find that an entire day has become joyous. Enjoy the time you are in now and don’t spend so much time fretting about tomorrow. Be intentional: Start by writing down four little things a day at work that bring you joy on a daily basis and build from there. This can even be a conversation around the watercooler that makes you laugh. String together a few days like this, and we are well on our way to a more joyous life.
By developing this habit, we will be more inclined to treat people better, and they, in turn, will treat others better, which will increase the overall positive culture of our workforce. The work environment is a bigger factor in why employees leave than money is, so focusing on providing a more joyful environment will also help your business in the end.
Whether in business or in life, it all comes down to being joyful. Happiness is fleeting based on circumstances, but joy becomes permanent once we have cultivated it. Start by focusing on the little joys and build from there. Remember, people won’t remember what you said, but they will remember how you treated them.
Fred Koury is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or email@example.com.