With the ongoing implementation of health care reform, many employer groups have missed the obligations set forth in the Employee Retirement Income Security Act of 1974 (ERISA).

“The federal government has started systematic audits of group health plans, primarily for compliance with health care reform. They will also include compliance for ERISA. A key provision requires plan participants to be provided with a Summary Plan Description (SPD),” says Chuck Whitford, a client advisor at JRG Advisors.

A SPD is a document that is provided to plan participants to explain the plan’s benefits, claims review procedures and participants’ rights. ERISA contains standards for distribution and the information that must be included.

Smart Business spoke with Whitford about what you should know about your SPD obligations.

What are big misconceptions about SPDs?

The two biggest misconceptions among employers are 1) only large employers are required to provide SPDs and 2) the benefit booklet issued by the insurance company fulfills the obligation to provide participants with a SPD. In fact, all group health plans subject to ERISA must provide participants with a SPD, regardless of size. Both insured and self-funded group plans must comply with ERISA’s SPD requirements.

The insurance company booklet will contain detailed information regarding the plan benefits and coverage. In many cases, however, the plan sponsor (typically the employer) will need to provide additional information not contained within the insurance booklet to comply with the SPD content requirements.

What are employers’ SPD responsibilities?

Employers are responsible for providing a SPD within 120 days of starting a group health plan; within 90 days of enrollment for new participants; within 30 days of a participant’s request for a SPD; every five years if material modifications are made during that period; and every 10 years if no changes have occurred.

The plan sponsor also must provide a SPD to the Department of Labor within 30 days of the request. Failure to do so can result in a civil penalty of up to $110 per day for each day such failure continues, subject to a maximum penalty of $1,100 per request. Multiple requests for the same or similar documents are considered separate requests.

A companion document, a Summary of Material Modifications, must be provided within 210 days after the close of the plan year in which a change was adopted. If benefits or services are materially reduced, participants must be provided notice within 60 days from adoption.

In addition to the SPD, the Affordable Care Act requires plan administrators and issuers to provide a Summary of Benefits and Coverage 60 days in advance of any change in plan terms or coverage that takes place mid-plan year.

The plan administrator is required to provide the SPD to participants in a manner reasonably calculated to ensure actual receipt of material by the participant.

Employers may deliver the document by hand or send it by U.S. mail. First class is preferred, but second or third class is acceptable if return and forwarding postage is guaranteed and address correction is requested. If the SPD is sent electronically, it must follow the Department of Labor’s safe harbor provision applicable to the electronic delivery of SPDs.

How can employers streamline their efforts?

For the sake of simplicity, rather than having a separate SPD for each benefit offered, an employer can combine all ERISA-covered benefits under a single document that includes the SPD. It can function as both the plan document and the SPD.

Rather than being another paperwork burden, use this document to streamline compliance efforts. Besides the required plan provisions, there are many administrative functions that are not required to be in the plan document, such as filing creditable coverage certifications and distributing various notices. When the government audits, it asks the employer to prove it met all additional requirements, such as showing the notices or certifications and producing evidence they were provided as required.

It makes sense for employers to review what and how they communicate ERISA-required information to plan participants. You will want all documents in order when the Department of Labor comes calling.

Chuck Whitford is a client advisor at JRG Advisors. Reach him at (412) 456-7257 or chuck.whitford@jrgadvisors.net.

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Whether you love it, hate it or are still “on the fence,” the implementation of health care reform is in full swing.

“While escalating health care costs have long been a concern of employers who desire to offer a quality, competitive employee benefits package to their workforce, health care reform has presented even more challenges in terms of changing legislation, compliance issues and requirements,” says Ron Smuch, insurance and benefits analyst at JRG Advisors. “The business decisions that employers face today are more complex and require educated consideration and guidance.”

Consumerism, however, is a strategy often overlooked by employers in their efforts to keep health care costs down.

Smart Business spoke with Smuch about how to better manage health plan costs by promoting consumerism strategies.

How does consumerism help with costs?

Employees who make smarter, more cost-effective health care decisions have a positive impact on health care costs for themselves and for their company. Many employees simply underestimate the value of asking questions, researching health care options and taking a more active role in their health care purchasing.

What does it mean to engage employees to be wiser health care consumers?

Most people already practice ‘consumerism’ with purchases they make. Individuals will dissect a newspaper or magazine in search of coupons that will save them 50 cents. Yet when it comes to health care, which is a more complex and costly service, rarely do they ask questions or even consider other options that could save money.

How can you get started?

Making more conscientious health care decisions starts with educating employees on how their health insurance plan works. They need to know what is covered and what is not, and which providers or facilities to use to receive the most cost-effective, quality outcomes-based care.

Employees should be educated to ask their doctor questions such as: ‘How much does the treatment cost? Is there another option that is equally effective but less costly? What are the risks or side effects?’

Another area to educate employees is about prescription drugs. Surprisingly, many people mistakenly think that there is a difference between generic and brand name prescription drugs. They are unaware that the difference lies in the drug name and, yes, you guessed it, the cost.

How can making wise choices extend to emergency room use?

A trip to the emergency room is one of the most expensive types of outpatient care. Emergency rooms should only be used for true emergencies, as they are staffed, equipped and best suited for medical emergencies. Going to an emergency room for non-emergency care is a poor use of health benefits and is very costly.

Consumers should consider using an urgent care facility to assist with non-emergent care needs. For example, if you have a cold or unidentifiable rash that needs attention sooner than waiting through the weekend to see your general practitioner, consider going to an urgent care facility.

What’s the best way to create and implement a strategy that engages employees?

While these are just a few examples of wise health care purchasing, companies need to choose an advisor who can properly review its workforce demographics, utilization, trends, risks and rewards to create the consumerism strategy that is engaging, measureable to objectives and effective in achieving established goals.

Today’s health care landscape requires a consultative approach and commitment to strategic planning, expertise, innovation and technology. Companies should partner with an advisor who takes a proactive approach to educating employees about consumerism strategies. Through the use of employee communications, fliers, posters and payroll stuffers, employees can be educated to make wiser health care decisions and in turn become smarter health care consumers.

At the end of the day, quantifying the overall plan cost savings and improving employee health is the best and most rewarding engagement tool for employers and their employees.

Ron Smuch is an insurance and benefits analyst at JRG Advisors. Reach him at (412) 456-7017 or ron.smuch@jrgadvisors.net.

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Effective communication is a vital aspect of the employer-employee relationship regardless of industry and geography, says Renay Gontis, communications coordinator at JRG Advisors.

“The opportunity for quality dialogue demonstrates to employees that they are valued by the company. Conversely, a lack of value placed on communication can make them feel underappreciated, fostering discontentment and low morale,” Gontis says.

Smart Business spoke with Gontis about how to utilize the many channels for communication to supply employees with timely and accurate company news and information.

What tools can be used to communicate?

In today’s technological environment, employers have a variety of communication tools. And the majority of these tools are free. Consider the options available and how to best interface these tools with your current communication style. Emails, videos, blogs, newsletters and bulletin boards can all streamline the process and make it easier to communicate more frequently and effectively. Of course, face-to-face communication should remain an integral part of the communication process.

When should you communicate with your employees?

A formalized communication campaign and schedule will vary by business and company structure.

Items such as holiday schedules, recurring meetings and office hours can be efficiently introduced annually and reinforced on a company intranet or bulletin board, for example.

Other news such as that which impacts the overall company structure, success and progress should be communicated immediately, and in person even if that requires a Web interface for remote office locations or off-site employees. For example, if your company is considering a merger or reorganization, employees should be notified. Nothing diminishes morale and loyalty more than when employees hear about significant changes secondhand.

Other updates such as company goals, financial initiatives and benefit changes should be communicated on a quarterly or annual basis. If you engage employees in workplace wellness, you should communicate information about initiatives and results on a monthly basis.

How can you best engage employees?

It is important to encourage and solicit two-way communication so employees feel comfortable sharing their thoughts and opinions with management. Sharing information with employees is essential; however, it is equally as important, if not more critical, to listen to their thoughts, concerns and ideas. This will bring additional value to the employees, while providing the employer with excellent feedback for future changes and improvements.

Employees do best when they feel engaged, informed and acknowledged, and are working for a company that cares about their individual needs. Quality and ongoing communication using a variety of tools and methods will improve employee morale and productivity.

Should employee demographics be considered?

Absolutely, consider demographics. A younger workforce will typically be more receptive to modern communication strategies such as blogs, social media tools, company intranets and other electronic communications. An older demographic may still prefer face-to-face and printed communication tools.

It is important to understand your employee comfort levels in regards to technology. Employers may consider surveying their employees to determine what forms of communication they prefer and what types of information they would prefer the company share with them on a regular basis. An employee survey will provide the insight needed to tailor a communication campaign, schedule and methods of delivery that will resonate with the workforce.

Ask your advisor today to identify communication options and how they can help you implement them for your employees. Consistent communication is a critical component for success.

Renay Gontis is a communications coordinator at JRG Advisors. Reach her at (412) 456-7000 or renay.gontis@jrgadvisors.net.

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The Patient Protection and Affordable Care Act (PPACA) made sweeping changes to the insurance industry landscape.

“Business owners and HR professionals will need to be in compliance with the rules and regulations set forth by PPACA. And, individuals will have increased questions about the health insurance marketplaces, individual mandate and underwriting,” says Michael Galardini, sales executive at JRG Advisors, the management arm of ChamberChoice. “As a result, employee benefits professionals will be asked to help guide both businesses and individuals through the changing marketplace.”

Smart Business spoke with Galardini about employee benefits trends small and large employers can expect to see in 2014.

What changes will small employers face?

Small employers, categorized as any employer with fewer than 50 full-time employees, will see a drastic change in 2014 in the way health insurance rates are developed for each group. Before PPACA, insurance companies could develop rates based on gender, industry, group size, health status and medical history. Post PPACA, small group rates are no longer rated, and small group insurers will only be able to vary premiums by family size, geography, tobacco use and age.

With the changes in underwriting, there also will be changes to the plan designs being offered to small employers. The establishment of Health Insurance Marketplaces and their product offerings has created a change in product design. The plan designs being offered are 90 percent, 80 percent, 70 percent and 60 percent coinsurance plans, which share the financial responsibility with the employees. These plans create larger out-of-pocket costs that most individuals are not accustomed to paying. Particularly in Western Pennsylvania, the population as a whole is most familiar with rich plan designs with no coinsurance, low deductibles and copays.

Explaining these product differences with a one-on-one approach is important to help each individual understand how his or her plan works. The business owner and/or HR professional as well as an outside advisor need to engage each employee to ensure everyone properly understands the available solutions.

What can large employers expect to see?

Large employers or those with 50 or more full-time employees also will notice significant changes in the future.

Beginning in 2015, large employers will be required to offer coverage to employees working 30 hours or more a week. There also are requirements to the type of plan that must be offered to these individuals as well as a contribution limit. The plan design must be at least a 60 percent coinsurance plan, and the employee’s contribution cannot be more than 9.5 percent of his or her household income. There are two fines an employer could receive:

  • Penalty A: Employers that do not offer coverage to full-time employees (working 30 hours or more a week) will be subject to a penalty equal to $2,000 per full-time employee minus the first 30.
  • Penalty B: Employers that offer coverage that is not of minimum value or not affordable (or both) will be subject to a penalty equal to $3,000 for every employee who receives subsidized coverage through the marketplace.

Large employers should be talking to their advisor in 2014 to determine if they will meet these guidelines.

Are there any other upcoming changes?

Lastly, and probably most significantly, is the individual mandate. Individuals are required by March 31, 2014, to have a qualified health insurance plan or pay a fine. The fine for 2014 is the greater of $95 or 1 percent of income. Individuals can purchase insurance through the marketplace or directly from an insurance company. The marketplace could offer a subsidy based on an individual’s income to help pay for premiums.

A qualified advisor will be well versed on the products available to individuals and business owners. The changes due to PPACA provide more options to purchase health insurance products, but the marketplace for health insurance is ever changing. Business owners and HR professionals need to be aware of when these changes occur and how they can impact their business.

Michael Galardini is a sales executive at JRG Advisors, the management arm of ChamberChoice. Reach him at (412) 456-7235 or michael.galardini@jrgadvisors.net.

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The Patient Protection and Affordable Care Act (ACA) will have a profound effect on most employers that offer health plans in 2014.

“Passing the law was the easy part. The process of issuing regulations and guidance between three separate federal agencies — Health and Human Services, Department of Labor and the IRS — is the difficult part. Add to the mix an occasional court ruling and you have the perfect recipe for confusion and the risk of misinformation,” says Chuck Whitford, client advisor at JRG Advisors, the management arm of ChamberChoice.

Smart Business spoke with Whitford about points to consider in the coming year with the ACA.

What’s the first step going into 2014?

Going back to basics, determine if your plan is ‘grandfathered.’ A plan that essentially hasn’t changed since March 23, 2010, is most likely grandfathered. However, if you changed insurance companies before Nov. 1, 2010, or passed along the majority of the rate increases to employees, the plan you thought was grandfathered may not be.

You must tell employees if you have a grandfathered plan. A grandfathered plan can be exempt from some of the ACA rules, such as covering preventive care at 100 percent, continuing coverage for ‘adult dependents’ to age 26 and nondiscrimination rules for fully-insured plans.

How will the exchanges affect employers?

You will most likely be asked questions about the new health insurance benefits exchanges, also known as marketplaces. They are primarily online marketplaces for purchasing health insurance, run either by a state or the federal government. The federal government has a hand in, at least, running exchanges in 33 states. There are two types — one for individuals and one for small employers, generally up to 50 employees.

There have been glitches in these online systems. Once problems are fixed, it should be easier for individuals to review available plans and see if they qualify for subsidies to reduce premiums or, in some cases, reduce the cost sharing of deductibles and coinsurance.

What’s important to know about full-time equivalent (FTE) employees?

For the purpose of the ACA, a full-time employee works 30 or more hours per week, or 130 hours per month. The law requires employers to track the number of full-time employees and add up the hours worked by their part-time employees each month (up to 120 hours per month) and divide by 120 to determine the number of fractional ‘equivalent’ employees.

Employers with 49.99 or fewer FTEs don’t have any requirements to offer coverage and won’t be assessed penalties. The ACA still will impact their health plan’s rates, and they must comply with the 90-day waiting period limit and other ACA provisions.

Employers with 50 or more FTEs must offer coverage, deemed affordable and of minimum value, to all full-time employees and dependents to age 26. If any full-time employee receives subsidized coverage in an exchange, it triggers employer penalties. The ACA defines affordability as the employee’s cost for single coverage not exceeding 9.5 percent of income. A plan covering at least 60 percent of costs on average is considered minimum value.

In July, the Obama administration announced a one-year delay in the penalties and employer reporting. This can create a different set of issues for an employer that offers coverage to employees that work, say, 40 hours per week and has employees who work between 30 and 39 hours per week. These employers may want to hold off extending coverage to their 30- to 39-hour employees until 2015. However, with the individual mandate, employees not offered employer-sponsored coverage might go to the exchange. Some will qualify for a subsidy and also may qualify for cost-sharing reductions. Fast forward to 2015, employers wishing to avoid the nondeductible excise taxes (penalties) may extend eligibility of an affordable plan that meets minimum value to these employees, removing exchange subsidies and increasing the employees’ cost.
Because of the complex nature of the ACA, employers are encouraged to review their employee benefits strategy and communications for 2014 and beyond with a qualified advisor.

Chuck Whitford is a client advisor at JRG Advisors, the management arm of ChamberChoice. Reach him at (412) 456-7257 or chuck.whitford@jrgadvisors.net.

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Workplace dynamics continue to change. Regardless of industry, employers need to set themselves apart.

“With more women in the workforce, a divorce rate of 50 percent creating more single parents, and a significant increase in mobile or remote employees, the need for a competitive and employee-centric benefits package is critical,” says Ron Carmassi, a sales executive at JRG Advisors, the management arm of ChamberChoice.

“A package that includes voluntary benefits will help attract and retain quality employees, while at the same time reducing overhead and improving morale. A win-win scenario,” he says.

Smart Business spoke with Carmassi about how your company can use voluntary benefits to create flexibility for employees, while saving money on benefit premiums and underwriting.

What are voluntary benefits?

Voluntary benefits consist of a variety of insurance products offered at the workplace through the convenience of payroll deduction. They can be added to your current benefits package.

Employers might offer a mix of products including critical illness, cancer, accident, disability, life, pet, auto, homeowners insurance and more. Employees then have the flexibility to choose the coverage that fits their personal needs and budget.

What is the value of voluntary benefits?

The needs of each employee vary based on family and financial dynamics. There is no one-size-fits-all solution for benefits in today’s work environment.

Full-time employees still expect their employer to provide some level of health insurance. However, they are looking for additional offerings to protect themselves and their families. One employee may have a need for pet insurance. Another may have young children and find peace of mind in an accident plan. While another has a family history of cancer, thereby finding great value in a cancer policy.

In addition to choice, voluntary benefits offer a one-stop shopping experience, making it easier for employees to purchase insurance that typically is not offered at the workplace, such as auto and homeowners. These types of benefit packages also often have discounted premiums and/or reduced underwriting.

What is the future of voluntary benefits?

There is a marked increase in the number of employers offering a defined contribution model, which provides a complementary platform for voluntary products. A defined contribution or cafeteria-style approach offers choice among medical, dental and vision benefits and also includes a variety of voluntary benefits.

The defined contribution model allows employers to identify a specific dollar amount or ‘defined contribution’ for each employee, typically by coverage tier. Each employee selects benefits based on their individual needs. Any costs in excess of the defined contribution allowance are the responsibility of the employee.

The defined contribution model gets away from the one-size-fits-all mentality and allows employees greater choice while offering the employer more budget certainty.

How can business owners get started with adding voluntary benefits to their benefits package?

Voluntary benefits are a great way to enhance your benefits package, differentiate from competitors and increase employee satisfaction — all with little or no impact on your budget.

Work with your advisor to decide what voluntary product offering makes sense for your team and educate your employees on the advantages of these voluntary benefits so you both can reap the rewards.

Ron Carmassi is a sales executive at JRG Advisors, the management arm of ChamberChoice. Reach him at (412) 456-7015 or ron.carmassi@jrgadvisors.net.

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Published in Pittsburgh

The U.S. government enacted Medicare 48 years ago to help senior citizens who were finding it difficult to obtain private health insurance coverage.

It originally consisted of Medicare Part A for hospital insurance and Part B for supplemental medical insurance. A payroll tax paid by employees, employers and the self-employed funded Part A, available to those 65 or older; it had a $40 annual deductible. Part B was open to aged citizens and legal aliens who lived in the U.S. for at least five years for a $3 monthly premium.

Medicare costs have climbed at rates substantially above growth in general inflation or GDP. Today the Part A deductible is $1,184 and the Part B premium is $104.90 with a $147 annual deductible.

“Nearly 50 million Americans — 15 percent of the nation’s population — depend on Medicare for their health insurance coverage. With increasing life expectancies and more baby boomers turning 65 every day, that number is expected to double between 2000 and 2030,” says Crystal Manning, a Medicare specialist at JRG Advisors, the management arm of ChamberChoice.

Smart Business spoke with Manning about how Medicare coverage operates.

Why is Medicare important?

Medical costs have become expensive, especially for those older than 65 and already retired. They are more prone to diseases and injuries, and need a plan that covers drugs, hospital stays and doctor’s visits to ensure necessary medical care. The Medicare benefit structure has remained stable, but medical technology has rapidly increased the tools available to diagnose and treat patients.

Medicare applies to individuals who can’t afford private health insurance, which prevents severe financial hardships from chronic or long-term diseases like kidney failure. Medicare also is available to people of all ages with qualifying disabilities that keep them from earning a living.

How is Medicare funded?

Medicare funding comes partially from payroll taxes. Federal Insurance Contributions Act (FICA) taxes are comprised of a Social Security tax that contributes to Social Security retirement benefits and a 2.9 percent Medicare tax. With Medicare taxes, employers withhold 1.45 percent from employees and then match it. High-income Social Security beneficiaries also pay income tax on Social Security income. Some of that goes into a trust fund used to pay doctors, hospitals and private insurance companies when Medicare patients use their services.

How were Medicare Parts C and D created?

Prescription drug costs are increasing as more seniors rely on new drug therapies to treat chronic conditions. Many cannot afford to maintain their health. This trend will continue as out-of-pocket spending for prescription drugs rises.

In 1997, Medicare benefits became available through private health plans. Now known as Medicare Advantage plans (Part C), they replace and cover all Part A and Part B benefits, with the option to add prescription drug coverage. The Medicare Prescription Drug, Improvement, and Modernization Act created a specific drug only benefit (Part D) through private insurance companies.

In the 2000s, 25 percent of Medicare beneficiaries had no drug coverage. Today, beneficiaries can join a Prescription Drug Plan for drug coverage, or join a Medicare Advantage plan, which covers medical services and prescription drugs. However, seniors need to join a drug plan when first eligible to avoid paying a monthly late enrollment penalty of 1 percent.

What’s critical to know about Medicare?

The drug benefit has a major coverage gap called the ‘doughnut hole,’ which begins when total retail drug costs — not what you personally spend at the pharmacy — reach $2,970. In 2013, anyone reaching the doughnut hole receives a 52.5 percent discount on brand-name formulary drugs and a 21 percent discount on generic formulary medications. Part D beneficiaries remain in the doughnut hole until their true out-of-pocket costs exceed $4,750.

Seniors need to choose the right Medicare coverage. However, know that Medicare isn’t part of the Affordable Care Act’s health insurance exchanges. Your benefits won’t change and you don’t need to do anything.

Crystal Manning is a Medicare specialist at JRG Advisors, the management arm of ChamberChoice. Reach her at (412) 456-7254 or crystal.manning@jrgadvisors.net.

Insights Employee Benefits is brought to you by ChamberChoice

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Economic hardships, the sluggish job market and continued uncertainty surrounding the future of health care reform have taken a toll on employees. Now is the time to demonstrate your commitment to your workforce and boost morale by finding ways to effectively communicate your organization’s employee benefits package.

“Employers in the United States spend nearly 40 percent of payroll on benefits. That being said, a strategic approach to benefits communication is no longer a business tactic geared toward only large organizations; it is a necessity for employers of all sizes,” says Jessica Galardini, chief operating officer at JRG Advisors, the management arm of ChamberChoice.

Smart Business spoke with Galardini about taking a strategic approach to benefits communication.

Why should employers be taking a strategic approach to benefits communication?

A strategic approach can boost employee appreciation and comprehension. Maximize your annual open enrollment period by reiterating the positive aspects of what your company offers. ‘Value-adds’ such as paid holidays, vacation time or paid time off, and profit-sharing plans should not be overlooked.

Remind employees about the relevance of the financial contributions made on their behalf. Employers often pay a significant portion of the premiums for medical, dental and vision benefits, and full premium for life and disability insurance benefits. It’s not uncommon for employees to overlook how much employers pay for all components of the benefits package, which is why personalized benefit statements can be powerful communication tools. Referred to as the ‘hidden paycheck,’ these statements incorporate annual salary, the total value of all employee benefits, paid time off, etc.

What should be considered when preparing a benefits communication strategy?

A variety of factors should be considered, including life stages. In what stage of life are your employees? Are they single? Newly married? Ready for retirement? Employees have different needs from their benefits packages at different stages of their lives.

Employees respond differently to technology, which also should be taken into consideration. Email communications, a company intranet site and/or webinars might be well received by some, while others will benefit more from group forum discussions and presentations. Technology creates greater efficiencies and a new approach to benefits communication, but it should not be substituted for face-to-face and ongoing personal communication.

Another challenge is communicating with employees working remotely or in other locations, as well as those working weekends and/or shifts other than 8 a.m. to 5 p.m. Monday through Friday. You also are faced with new employees entering your workforce and older employees who might retire. People get promoted, married, divorced and have children. All of these life stages and factors can present challenges to effective communication if not taken into consideration upfront.

How do employers develop a benefits communication strategy?

Utilize your benefits advisor to help develop the communication strategy that will work for your organization. Ongoing education and communication are critical since the benefits needs of employees change throughout the year. So, provide employees with instruction and access to make needed changes. Effective programs work best when communication is employee friendly. Employees need to be shown how benefits work together, and they need guidance in order to make the best decisions.

If your organization is facing a change in benefit or contribution structure, make sure to plan how it will be communicated. Be honest, accurate and concise when delivering any message that relates to change. Your advisor can provide benchmarking data to compare your package to others in your industry, geography, etc., to help keep changes in perspective.

Because benefits have a profound impact on job satisfaction, effective benefits communication is one of the most challenging responsibilities facing employers today. The right approach and techniques can put some control back in the hands of employers, and boost employee morale.

Jessica Galardini is the chief operating officer of JRG Advisors, the management arm of ChamberChoice. Reach her at (412) 456-7231 or jessica.galardini@jrgadvisors.net.

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Friday, 31 May 2013 22:57

How PPACA will impact small employers

Most news surrounding the implementation of the Patient Protection and Affordable Care Act (PPACA) pertains to the employer penalties for noncompliance with the large employers’ shared responsibility provision that begins with the 2014 plan year. However, how does PPACA apply if an employer has fewer than 50 full-time equivalent employees?

“This has been a subject of great confusion among business owners,” says Chuck Whitford, client advisor, JRG Advisors, the management arm of ChamberChoice.

Smart Business spoke with Whitford about how smaller business owners need to be counting employees carefully and preparing for PPACA provisions.

How is employer size defined?

A large employer is defined as having 50 or more full-time equivalent employees during a testing period that can be from six to 12 months. Full time is defined by the government as 30 hours per week.

The term equivalent is used to account for those who work less than 30 hours per week. For example, if an employer has 30 full-time employees working 30 hours each week and three part-time employees working 20 hours each week, it has 32 full-time equivalent employees. The part-time hours per month are added, then divided by 130 to determine additional full-time equivalent employees.

There is some relief for seasonal workers.

How does PPACA apply to small employers?

The employer penalties are just one piece. All employers are subject to certain rules if providing a health insurance plan, such as:

  • Waiting periods for eligibility cannot exceed 90 days, beginning in 2014.

  • Continuing to cover dependents of employees until age 26, in most cases.

  • Providing a Summary of Benefits and Coverage to each employee at specific events, such as open enrollment.

  • Supplying 60-day notification for any plan changes, except at renewal.

What are some other considerations?

If a plan is not grandfathered — hasn’t changed since the law went into effect in 2010 — then it must continue to waive all cost sharing for preventive care services, which includes women’s preventive care for plans renewing on or after Aug. 1, 2012.

Employers also must offer employees information on the public insurance exchange whether providing health coverage or not. The law requires this notice be distributed each March; however, it has been delayed in 2013, pending Department of Labor guidance.

In 2014, all non-grandfathered small group plans will have limits on the deductibles charged in-network. The maximum deductible will be $2,000 per individual and $4,000 per family. There also will be out-of-pocket limits that apply to all non-grandfathered plans. These limits are the same as those for high deductible health plans, which this year is $6,250 for an individual and $12,500 for a family.

How will the pricing methodology change?

The biggest change for small employers will be the pricing methodology applied to group insurance plans. Insurance companies will be unable to use gender, industry, group size or medical history, and therefore are limited to family size, geography, tobacco use and age. The companies can charge the oldest ages no more than three times what they charge the youngest ages. Many insurance companies use a ratio of 7:1 or higher, so this should result in higher rates for younger, healthier groups and better rates for older, less healthy groups. In addition, there will be new taxes and fees passed through to the employer in 2014.

Where do small employers have flexibility?

A small employer, with fewer than 50 full-time employees, has more flexibility in determining how many hours an employee must work to be benefits-eligible. For example, a small employer can establish 37.5 hours as the minimum to be eligible for the company health plan, so employees regularly working less than 37.5 hours aren’t eligible. Those employees most likely are eligible for a subsidy to purchase coverage in the public insurance exchange. But, as a small employer not subject to the employer penalties, there are no financial consequences.

Because of the complexities, employers are encouraged to review their employee count and other pending health care reform legislation with a qualified advisor.

Chuck Whitford is a client advisor at JRG Advisors, the management arm of ChamberChoice. Reach him at (412) 456-7257 or chuck.whitford@jrgadvisors.net.

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Published in National

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 mary.spicher@jrgadvisors.net.

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