3 questions to ask before moving to a private exchange
Originally posted July 24, 2014 by Andrew Bloom on https://ebn.benefitnews.com
As employers grapple with how best to deliver health insurance to their employees, the concept of private insurance exchange or marketplace is quickly gaining traction. In a private exchange model, rather than continuing to assume the responsibility for making healthcare decisions for plan participants (or managing the risk on their behalf), an employer transfers responsibility to employees. This transfer of power enables employees to make important decisions on behalf of their families. Employers have something to gain, too: predictable healthcare costs.
But there is more involved here than simply choosing a private insurance exchange over a traditional benefits delivery model. This is not a simple switch you flip. In fact, the move to a private exchange could be difficult for employees who generally are not accustomed to making benefits plan decisions for themselves, or who balk at the potential of an increased out-of-pocket burden. It’s incumbent upon employers to guide them through the transition to help them accept the idea that having more power and choice is a good trade-off to taking on more risk. To do this, the employer must introduce a defined contribution approach to the workforce and embrace concepts like premium transparency, fixed dollar contributions and multiple plan options.
When done properly, a private exchange will help you achieve the three C’s of benefits: consumerism, compliance and cost-containment.
In short, there’s a tremendous upside toward embracing this strategy, which is a reason why most employers are investigating the option of private exchanges. For virtually every organization, it is not a matter of “if” joining a private exchange is right; it is a matter of “when.”
The key to answering “when” a private insurance exchange is right for your organization starts with understanding where you are on the course. This will help you determine what tools and resources are necessary to help get you there.
Here are three simple questions to consider:
1. How do your employees enroll in benefits today?
2. Do you have a health/wellness and cost management strategy in place?
3. How active are your employees in your current benefits decision-making process?
Depending on the answers to these questions, you may need to:
- Alter your benefits philosophy and design benefits plans and programs to help you move further down the path on the engagement spectrum.
- Design an aggressive wellness and health management strategy. While a private exchange may provide short-term cost savings, it is not a silver bullet. You must continue to drive better behaviors to control costs associated with your program over the long term.
- Execute an ongoing communication strategy that educates employees to become smarter consumers of benefits and better prepared to accept the responsibility and risks associated with making healthcare decisions.
- Implement benefits administration technology that will allow you the flexibility of managing your current program as well as a private exchange, thus affording you the flexibility of a smooth transition.
- Leverage an experienced third party, regardless of implementing a private exchange, to manage the administrative complexities and ever-changing regulatory requirements surrounding your benefits program. This is critical to eliminating costly mistakes and ensuring regulatory compliance.
Before pushing off from the starting line, consider if your organization and employees are ready for such a significant shift in benefits delivery. Keep in mind that preparation for a private exchange is a bit like running a relay. Before the starting shot is fired, everyone in your organization must fully trained to make it around the track.
Employers have an opportunity to transform the delivery, management and overall outcome of their health and welfare programs for the better. A private insurance exchange will be a critical component of your benefits program, but only after you determine your readiness and strategy before taking the first step.
Include health care cost in plans
Originally posted August 3, 2014 by Redding Edition on https://www.ifebp.org
The possibility of having to pay major health care costs in the future is a primary concern of planning for retirement these days. Is there some way to plan for these expenses years in advance?
Just how great might those expenses be? There’s no rote answer, but recent surveys from AARP and Fidelity Investments reveal that too many baby boomers might be taking this subject too lightly.
For the last eight years, Fidelity has projected average retirement health care expenses for a couple — assuming that retirement begins at age 65 and that one spouse or partner lives about seven years longer than the other. In 2013, Fidelity estimated that a couple retiring at age 65 would require about $220,000 just to absorb those future health care costs.
When it asked Americans ages 55 to 64 how much money they thought they would spend on health care in retirement, 48 percent of the respondents figured they would only need about $50,000 each, or about $100,000 per couple. That pales next to Fidelity’s projection and it also falls short of the estimates made in 2010 by the Employee Benefit Research Institute. EBRI figured that a couple with median prescription drug expenses would pay $151,000 of their own retirement health care costs.
AARP posed this question to Americans ages 50 to 64 in the fall of 2013. The results were 16 percent of those polled thought their out-of-pocket retirement health care expenses would run less than $50,000 and 42 percent figured needing less than $100,000.
Another 15 percent admitted they had no idea how much they might eventually spend for health care. Not surprising, just 52 percent of those surveyed felt confident that they could financially handle such expenses.
Prescription drugs may be your No. 1 cost. EBRI currently says that a 65-year-old couple with median drug costs would need $227,000 to have a 75 percent probability of paying off 100 percent of their medical bills in retirement. That figure is in line with Fidelity’s big-picture estimate.
What might happen if you don’t save enough for these expenses? As Medicare premiums come out of Social Security benefits, your monthly Social Security payments could grow smaller. The greater your reliance on Social Security, the bigger the ensuing financial strain.
The main message is save more and save now. Do you have about $200,000 after tax saved for future health care costs? If you don’t, you have yet another compelling reason to save more money for retirement.
Medicare, after all, will not pay for everything. In 2010, EBRI analyzed how much it did pay for, and it found that Medicare only covered about 62 percent of retiree health care expenses. While private insurance picked up another 13 percent and military benefits or similar programs another 13 percent, that still left retirees on the hook for 12 percent out of pocket.
Consider what Medicare doesn’t cover, and budget accordingly. Medicare pays for much, but it doesn’t cover things like glasses and contacts, dentures and hearing aids — and it certainly doesn’t pay for extended long-term care.
Medicare’s yearly Part B deductible is $147 for 2014. Once you exceed it, you will have to pick up 20 percent of the Medicare-approved amount for most medical services. That’s a good argument for a Medigap or Medicare Advantage plan, even considering the potentially high premiums. The standard monthly Part B premium is at $104.90 this year, which comes out of your Social Security. If you are retired and earn income of more than $85,000, your monthly Part B premium will be larger. The threshold for a couple is $170,000. Part D premiums for drug coverage can also vary greatly. The greater your income, the larger they get. Reviewing your Part D coverage vis-à-vis your premiums each year is only wise.
Takeaway: Staying healthy may save you a good deal of money. EBRI projects that someone retiring from an $80,000 job in poor health may need to live on as much as 96 percent of that end salary annually, or roughly $76,800. If that retiree is in excellent health instead, EBRI estimates that he or she may need only 77 percent of that end salary — about $61,600 — to cover 100 percent of annual retirement expenses.
Obamacare Challengers Eye Supreme Court Date
Source: https://insurancenewsnet.com - Originally posted by Kimberly Atkins of the Boston Herald.
Aug. 03--The legal battle over Obamacare federal subsidies could land before the nation's top court as soon as next year after challengers asked the U.S. Supreme Court to take up the case.
If the high court grants the request and ultimately rules that the Obama administration lacked authority under the law to authorize subsidies for individuals who purchase health care through the federal exchange rather than state-created exchanges, it would gut a crucial source of funding for the law and severely threaten its viability.
The Supreme Court petition, filed late Thursday, comes just more than a week after federal appellate courts in Virginia and Washington, D.C., issued conflicting opinions as to whether the text of the law, which allows individuals to qualify for subsidies if they purchase insurance on exchanges "established by the state," applies to those in the 36 states that either refused to set up an exchange or for some other reason require residents to go to the federal exchange to enroll.
The Virginia plaintiffs, who claim that they would have qualified for the unaffordability exemption from the law requiring them to purchase health care but for the existence of the federal exchange subsidy, went directly to the Supreme Court instead of asking a full panel of the Virginia federal appellate court to rehear that case "because it's important to get a resolution as soon as possible," said Sam Kazman, general counsel at the Washington-based Competitive Enterprise Institute, which coordinated and funded the challenges to the federal subsidy.
Kazman said the case, one of several legal challenges to various provisions of the law that was largely upheld by the U.S. Supreme Court in 2012, was legal and not political.
"Once you get agencies going beyond the implementation of the law to actually rewriting it, one, it spells trouble and two, it's unconstitutional," Kazman said.
The Justice Department declined Friday to seek immediate Supreme Court review of the D.C. federal court that struck down the administration's interpretation of the law the same day the Virginia court upheld it. Instead, it asked a full panel of the D.C. Circuit to review the three-judge ruling.
The 7 Most Destructive Phrases to Avoid at Work
Originally posted July 27, 2014 by David Van Rooy on https://www.inc.com
Sometimes leaders make statements that have an effect entirely opposite of what was intended. These phrases might be well intended, but the interpretation can be very damaging. Instead of leading to efficiency and productivity gains, these phrases can result in destructive consequences. Use the seven phrases below with great caution and be sure that people understand what you are trying to convey. Otherwise,instead of being helpful you are apt to find negative outcomes, including resentment, lowered creativity, reduced engagement, and higher turnover.
1. We already tried that: This is a statement borne out of something that did not work in the past. Maybe it was an idea that was ahead of its time, or maybe it wasn't executed properly. Regardless, it should not forever be used as an excuse not to try again. Particularly as the time gap widens, what once failed may now be a wild success.
2. That's not your job: Role clarity is essential, and none of us like it when someone needles into our area without asking. At the same time, this statement prevents people from stretching themselves to do more. It's important to encourage people to make the most of their ability, and allowing them to take on stretch assignments and projects outside their immediate area can advance this.
3. Whose job is on the lineif this doesn't work?: With any goal or project, there needs to be a person that is accountable for its success. But this can be done in a positive way. Statements like this or "Who gets fired if this doesn't work?" create an atmosphere of negativity and fear. This will prevent people from taking strategic risks that can set your business apart.
4. Don't reinvent the wheel: If the wheel was never "reinvented" Lamborghinis and Porsches would be driving on top of 4 wooden disks! Many market leading companies lost their edge--or even went bankrupt--when the failed to try to make their products better. Think Kodak, Blockbuster Video, AOL, etc. Other dangerous variations of this phrase are "If it ain't broke don't fix it" and "We've always done it that way."
5. That won't work: Don't just shut someone down. Ask the right questions to get at the heart of what they were trying to do or propose. Provide suggestions and engage in an interactive dialogue and you may soon find something that will work.
6. Just get it done. This is another phrase that leads to a culture of fear. As a result, people feel immense pressure to deliver, regardless of how it gets done. At its best, employees don't treat each other as well and corners get cut; at its worst, people begin to delve into practices that might be borderline unethical, or even illegal. Instead ask them what they need in order to get the job done.
7. I already knew that. Sure you may have, but a "shut up" statement like this will make people feel little. They are subsequently less inclined to speak up next time they have an idea. Thank them for the suggestion, or better yet, give them credit for the idea.
Open enrollment checklist for employers
Originally posted July 23, 2014 by Alan Goforth on https://www.benefitspro.com
Wrestling with the implications of the Patient Protection and Affordable Care Act could make the upcoming open enrollment period one of the most challenging in memory. Mercer, a human resources and benefits company in New York City, encourages companies to approach the fall season with a plan.
Mercer’s proposed checklist includes:
- Consider offering a consumer-driven health plan. The momentum behind this type of plan continues to grow, with 39 percent of large of large employers offering one last year and 64 percent expected to do so within two years.
- Communicate early and often to the newly eligible. Mercer’s research indicates that one-third of employers still need to make changes to comply with the requirement to extend coverage to all employees working 30 or more hours per week. Start communicating right away with newly eligible employees about who is eligible, why they are eligible, how eligibility was determined, what this means and what they have to now consider. Information should also be delivered to those who still remain ineligible and the options these employees may have in the public exchange arena.
- Make voluntary benefits a big part of the message. Voluntary benefits can deliver significant value to employees and are an important element of a thoughtfully designed benefits program. They can also be used to overcome misperceptions and confusion around other benefit offerings. These offerings also can assist employees who remain ineligible for the employer-sponsored medical plan.
- Use open enrollment as an opportunity to reinforce wellness campaigns. This is particularly important if any perceived compliance penalties are going to be introduced next year, such as increased premiums for those who do not participate in health screenings.
- Deploy decision support and mobile technology to support the accountability theme. Participants are being asked like never before to take accountability for their health benefit decisions and cost outlays. For example, some employers are providing digital “wallet cards” for smart phones and other devices that contain benefit information and contacts needed at the point of service or anywhere else a participant needs this information and/or advice.
Average worker needs to save 15% to fund retirement
Originally posted July 22, 2014 by Nick Thornton on https://www.benefitspro.com
A typical household needs to save roughly 15 percent of their income annually to sustain their lifestyle into retirement, according to a brief from the Center for Retirement Research at Boston College.
Generally, workplace retirement savings plans should provide one-third of retirement income, according to the study. For lower income families, defined contribution or defined benefit plans should provide a quarter of all retirement income. Higher income families will need their retirement plans to provide about half of all retirement income.
Middle-income families will require 71 percent of pre-retirement income to maintain living standards after they leave the workforce. About 41 percent of their retirement income is expected to come from social security.
Low-income families need an annual savings rate of 11 percent in order to sustain their lifestyle into retirement, which is lower than middle-income families (15 percent) and high-income families (16 percent). For lower income families, social security will replace a greater portion of pre-retirement income.
The Center’s National Retirement Risk Index says that half of Americans lack adequate savings to maintain their standard of living into retirement. A “feasible increase” in savings rates by younger workers can greatly affect their retirement wealth.
For those middle-income workers ages 30 to 39 who lack enough savings, a 7 percent increase in annual savings can provide adequate retirement funding. But middle-income workers age 50 to 59 who lack retirement savings would have to increase their annual savings rate by 29 percent, an unlikely expectation, the report adds.
For those older workers behind the curve, a better funding strategy would be “to work longer and cut current and future consumption in order to reduce the required saving rate to a more feasible level.”
Delaying retirement to age 70 greatly reduces the annual savings expectations workers need to meet in order to fund retirement.
A worker who starts saving at age 35 will need a 15 percent annual savings rate in order to retire at age 65. But if the same worker delays retirement until age 70, only a six percent annual savings rate is necessary.
A worker who starts saving at age 45 would need to save 27 percent annually to retire at 65. But by delaying retirement to age 70, the same worker only has to save 10 percent to maintain their standard of living after retirement.
What Americans think about health insurance & hiring practices
Originally posted July 25, 2014 by Lynette Gil on https://www.lifehealthpro.com
In a recent survey from Gallup, the majority (58 percent) of Americans said that they would justify charging higher health insurance rates to smokers. And about 39 percent said that they would justify raising health insurance rates to those significantly overweight.
Both percentages have gone down slightly since 2003, when Gallup asked these questions for the first time: from 65 percent for smokers having to pay higher rates and 43 percent for those significantly overweight.
The results are part of Gallup's July 7-10 2014 Consumption Habits survey, in which telephone interviews were conducted with a random sample of 1,013 adults, aged 18 and older, living in all 50 U.S. states and D.C.
The survey also asked participants if companies should be allowed to refuse to hire smokers or those significantly overweight. Most Americans agreed that there should not be discrimination against both. Only 12 percent said that companies should be allowed to refuse to hire people because they are significantly overweight (down from 16 percent in 2003); 14 percent said the same about smokers (up one percentage point from 13% in 2003).
Even though most Americans oppose “hiring policies that would allow companies to refuse to hire smokers or those who are significantly overweight,” it is unclear if those views are because they do not think smoking and obesity negatively affect workplace performance or they “simply reject discrimination of any kind in hiring,” the report says.
According to the report, smoking and being overweight are associated with higher health care costs, and even the Patient Protection and Affordable Care Act (PPACA) allows for higher insurance premiums for smokers. Some would argue that allowing companies to refuse to hire smokers and people who are overweight, or charging them higher health insurance rates, might help encourage healthier lifestyles.
Revisiting Medical Loss Ratio Rebates
Originally posted July 5, 2012 by Bob Marcantonio on https://www.shrm.org
The Patient Protection and Affordable Care Act (PPACA or ACA) requires insurers to report their Medical Loss Ratios (MLRs) to regulators and to meet certain MLR targets. If an insurer exceeds the minimum MLR, the insurer must issue a rebate to the policyholder. The first of these annual rebates is due in August 2012. How are rebates determined?
Rebates are determined according to the prior year’s MLR. Rebates issued in August 2012 will depend on 2011 performance and are not group or individual specific. They are calculated at the carrier and market segment (i.e., individual, small group and large group) level. In some instances the individual and small group markets may be merged.
The ACA defines a small employer as an employer having at least one but no more than 100 employees. However, it provides states the option of defining small employers as having at least one but not more than 50 employees in plan years beginning before Jan. 1, 2016.
Generally, if you have fewer than 100 employees (using the definition for full-time equivalents) you will be purchasing coverage in the small group market.
The MLR is calculated by dividing the medical expenses of the carriers’ segment by the net earned premiums. Medical expenses include claims and activities to improve health care quality as defined in the rules. Net earned premiums include premiums paid by the policyholder minus taxes, licensing and regulatory fees. The MLR threshold for large groups (51+ benefits eligible) is 85 percent and the threshold for small groups (50 or fewer benefit eligible employees) is 80 percent. Certain states have received exemptions until 2014 that allow the MLR to be lower than those levels. In the case of states having more stringent MLR requirements, those requirements supersede the lower federal requirements.
Below are answers to common questions about MLR rebates.
My plan’s paid loss ratio is less than the target. Do I get a rebate?
Not necessarily. Rebates are not issued based on a single plan’s performance. Rebates depend on the insurer’s performance in a given market segment as outlined above.
How will insurers issue rebates?
For group health plans, insurers must issue the rebates to the plan. The plan must then pay out the rebates to the plan’s participants. If a group health plan terminates after the plan year but before the insurer issues rebates and the insurer cannot locate the plan, the insurer must attempt to issue the rebates directly to participants.
Who may receive a rebate?
Only fully insured policyholders are eligible. A policyholder can be an individual or an employer-sponsored group health plan. In the case of a group health plan receiving a rebate, Employee Retirement Income Security Act (ERISA) regulations regarding fiduciary duty apply. If the rebate is small—$20 or less for a group health plan—the insurer does not need to issue the rebate to the plan.
What should you do if your group receives a rebate?
The Department of Labor (DOL) issued Technical Release No. 2011-04 outlining the proper handling of rebates. The release states that:
"If the participants and the employer each paid a fixed percentage of the cost, a percentage of the rebate equal to the percentage of the cost paid by participants would be attributable to participant contributions. Decisions on how to apply or expend the plan’s portion of a rebate are subject to ERISA’s general standards of fiduciary conduct. Under section 404(a)(1) of ERISA, the responsible plan fiduciaries must act prudently, solely in the interest of the plan participants and beneficiaries, and in accordance with the terms of the plan to the extent consistent with the provisions of ERISA.
"With respect to these duties, the Department notes that a fiduciary also has a duty of impartiality to the plan’s participants. A selection of an allocation method that benefits the fiduciary, as a participant in the plan, at the expense of other participants in the plan, would be inconsistent with this duty. In deciding on an allocation method, the plan fiduciary may properly weigh the costs to the plan, the ultimate plan benefit, and the competing interests of participants or classes of participants provided such method is reasonable, fair and objective. For example, if a fiduciary finds that the cost of distributing shares of a rebate to former participants approximates the amount of the proceeds, the fiduciary may decide to allocate the proceeds to current participants based upon a reasonable, fair and objective allocation method.
"Similarly, if distributing payments to any participants is not cost-effective (e.g., payments to participants are of de minimis amounts, or would give rise to tax consequences to participants or the plan), the fiduciary may utilize the rebate for other permissible plan purposes including applying the rebate toward future participant premium payments or toward benefit enhancements."
When will insurers issue the rebates?
Under the regulations, the first rebates are due Aug. 1, 2012, although the precise dates of receipt may be before the deadline, depending on the insurer. Insurers will send written notices to subscribers informing them that a rebate has been issued. Plan administrators should be prepared to field questions from employees who receive such notices.
Additionally, insurers not issuing a rebate must send letters to subscribers explaining the MLR rule notifying their health insurer had a medical loss ratio that met or exceeded the requirements.
How much might the rebates be worth?
The not-for-profit Kaiser Family Foundation released statistics garnered from insurers’ filings to the National Association of Insurance Commissioners. In the large-group segment, total reported rebates are $541 million nationwide. Among the insurers, 125 reported they expect to issue rebates to large groups covering 7.5 million enrollees. Insurers in 14 states do not expect to issue rebates in 2012. The largest average per-enrollee rebates projected are in Vermont ($386), Nebraska ($248), Minnesota ($146), New York ($142) and North Carolina ($121).
Among large group enrollees, 19 percent are projected to receive rebates nationwide. Taken in total, the average annual rebate in the entire large group segment per year will be $14 per enrollee, according to rebate estimates based on insurer filings to the National Association of Insurance Commissioners (NAIC).
IRS releases draft of employer reporting form for health reform law compliance
Originally post July 25, 2014 by Matt Dunning on www.businessinsurance.com.
The Internal Revenue Service has issued draft versions of the reporting forms most employers will begin using next year to show that their group health insurance plans comply with the health care reform law.
The long-awaited draft forms, posted late Thursday afternoon to the IRS' website, are the first practical application of employers' health care coverage and enrollment reporting obligations under the Patient Protection and Affordable Care Act since the regulations were finalized in March.
The forms are the primary mechanism through which the government intends to enforce the health care reform law's minimum essential coverage and shared responsibility requirements for employers.
Beginning in 2015, employers with at least 100 full-time employees will be required to certify that benefits-eligible employees and their dependents have been offered minimum essential coverage and that their employees' contributions to their premiums comply with cost-sharing limits established under the reform law. Smaller employers with 50-99 full-time employees are required to begin reporting in 2016.
Additionally, self-insured employers will be required to submit documentation to ensure compliance with minimum essential coverage requirements under the reform law's individual coverage mandate.
“In accordance with the IRS' normal process, these draft forms are being provided to help stakeholders, including employers, tax professionals and software providers, prepare for these new reporting provisions and to invite comments from them,” the IRS said in a statement released Thursday.
The IRS said it expects to publish draft instructions for completing the reporting forms by late August and that both the forms and the instructions would be finalized later this year.
Last year, the Obama administration announced it would postpone implementation of employers' minimum essential coverage and shared responsibility obligations under the reform law for one year, largely due to widespread complaints about the complexity of the reporting requirements.
Though several months have passed since the administration issued a simplified set of information reporting rules, many employers have delayed preparations for meeting the requirements until the forms and instructions are available for review, said Richard Stover, a principal with Buck Consultants at Xerox in Secaucus, New Jersey.
“A lot of employers really haven't been doing anything about reporting requirements, even with the final regulations in place, because they were waiting for these forms,” Mr. Stover said. “This is something they've been anxious to see.”
Education heightens employee satisfaction with benefits, employers
Originally posted July 23, 2014 By Melissa A. Winn on https://eba.benefitnews.com
Employees are increasingly dissatisfied with their benefits, and therefore dissatisfied with their employers.
This trend, according to new research released by Unum, highlights the correlation between employers’ benefit offerings and the ability to attract and retain top talent. What’s more, the survey found employees who receive education about their employee benefits tend to be more satisfied with their benefits — and ultimately their employers. Benefit advisers working with employers can stress the importance of benefits education on employee satisfaction and how that translates into better employee attraction and retention.
The survey results released Tuesday show employee satisfaction with their benefits continues to closely relate to satisfaction with their employer. More than three-quarters (77%) of those workers who rate their benefits package as “excellent” or “very good” also rate their employer as an excellent or very good place to work. By contrast, only 17% of employees who consider their benefits package to be fair or poor rate their workplace as excellent or very good.
Also, 79% of workers who rated the education around their benefits as excellent or very good also rated their employer as excellent or very good — compared with only 30% of those who said the education they received was fair or poor.
“This research underscores the value of an effective benefits education plan because when an employee understands their benefits, they tend to value them more and in turn may then value their employers more for providing access to them,” says Bill Dalicandro, vice president of the consumer solutions group at Unum.
The Unum research reiterates recent findings from the Aflac Workforces Report that small business employees are not only dissatisfied with their employer’s benefit offerings but also willing to take a pay cut to work for an employer offering better benefits.
Unum’s online survey of 1,521 working adults, conducted by Harris Poll, finds that only half (49%) of U.S. workers rate their employer as an excellent or very good place to work and less than half (47%) of employees who were offered benefits by their employer rated their benefits as excellent or very good. This is the lowest rating of benefits in six years of conducting the research.
The survey also shows employees do not feel they are getting the information they need about the benefits they’re being offered. Only 33% of employees who were asked to review benefits in the prior year rated the benefits education they received as excellent or very good – a drop from 2012 and a reversal to the upward trend in ratings since 2009. In addition, nearly three in 10 (28%) rated their benefits education as fair or poor.
“With health care reform and other changes in employee benefit plans, employees have so much information to digest right now,” explains Dalicandro. “Employers can play such a great role in helping their employees understand their options so they will feel comfortable making benefits decisions.”