Strategies for Controlling Benefit Costs in Hard Economic Times - Part 2
Presented by:
Barbara Hostetler
Hostetler Insurance Associates, Inc.
April 14, 2009
AGENDAAGENDA
I. Controlling FUTURE Costs
II. Individual Health Plans
III.Mini-Medical Plans
IV.Disability Insurance
V. Structuring Fringe Benefits on Government Work
CONTROLCONTROL
How can you work with your employees to control future
costs?
CONTROLCONTROL
How do you work with your employees on benefits now?
COMMUNICATION!COMMUNICATION!
Communication is the most effective tool for working to
control benefit costs.
COMMUNICATION…COMMUNICATION…
Communication does not require that you institute a
democracy for benefit decisions.
COMMUNICATION…COMMUNICATION…
Why do employers want to keep benefit costs a secret?
COMMUNICATION…COMMUNICATION…
Instead of keeping costs a secret, you need to SHARE
them!
COMMUNICATION…COMMUNICATION…
Consider shifting your focus from “Salary & Benefits” to
“Total Compensation”
TOTAL COMPENSATIONTOTAL COMPENSATION
Total Compensation =
Cash
Health & Welfare Benefits
Other Benefits
TOTAL COMPENSATIONTOTAL COMPENSATION
Explaining “Total Compensation” allows the
employee to see the true cost of his compensation package.
TOTAL COMPENSATIONTOTAL COMPENSATION
Explaining “Total Compensation” will help
employees to appreciate their benefits.
TOTAL COMPENSATIONTOTAL COMPENSATION
Explaining “Total Compensation” will allow you to show how increasing one benefit may reduce another.
TOTAL COMPENSATIONTOTAL COMPENSATION
Excel Template for Small Groups
TOTAL COMPENSATIONTOTAL COMPENSATION
Software / Services Available for Large Groups
RESOURCESRESOURCES
http://www.freetotalcompstatements.com/ws/Home.php
http://www.charltonconsulting.com
http://www.compackage.com/
COMMUNICATION…COMMUNICATION…
Think about who would best-present your benefits
information…
COMMUNICATION…COMMUNICATION…
Consider holding your annual benefits meeting AFTER
hours and inviting spouses…
WELLNESSWELLNESS
Tap into your plan’s built-in wellness benefits
WELLNESSWELLNESS
Encourage healthy practices by example – eat well and
exercise
WELLNESSWELLNESS
Encourage healthy practices by rewarding good behaviors
WELLNESSWELLNESS
Consider basing your employee contributions on
unhealthy practices, i.e. charging more for smoking or
obesity.
WELLNESSWELLNESS
Know what wellness benefits your health plan provides and
explain them to your employees
WELLNESSWELLNESS
Wellness will NOT impact your rates immediately, but
they will lead to lower premiums in the long-run.
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
When rates go so far out of control that you cannot
continue your group health plan…
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
the last option will be to cancel your group plan and
allow your employees to purchase health plans on
their own.
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
There are many things that you need to know before moving toward individual
insurance…
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
Individual health insurance is AVAILABLE to everyone, but
not necessarily AFFORDABLE for everyone.
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
Individuals / Families in excellent health have many
options that are less expensive than group health
plans.
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
•Fewer “mandated” benefits
•Pre-existing condition limitations that are not cancelled-out by HIPAA
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
•Specific condition exclusions
•Limited Rx benefits
•Limited or no Mental / Nervous benefits
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
If your individual health plan rate is more than $581 / month
today, you may want to consider moving to individual health plans that are partially
employer-paid.
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
Highmark Blue Shield offers a health plan of “last resort” in the
state of Pennsylvania – available to all Pennsylvanians
who do not have access to other health insurance.
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
Under many circumstances, full coverage for pre-existing
conditions is available – regardless of the condition
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
$750 Deductible Comprehensive Plan
80/20 Coinsurance
$3,750 Annual Maximum Out-of-Pocket
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
No Office Visit Copayments
Separate Rx Deductible and 50% Rx Copay
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
No agent representation or commissions
Direct relationship with Highmark
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
Pennsylvania requires that group health plans offer a conversion option when
coverage is lost.
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
In some cases, the conversion option is less
expensive than the Highmark guaranteed
program.
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
Employees should pay the premium for an individual
health plan, and any employer contribution should
be run through payroll and be taxed.
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
Employees over age 65 should seriously consider moving to the Medicare system for their benefits.
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
Employers may not discriminate based on age, and therefore cannot force employees to move out of
the group health plan into a Medicare plan.
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
Replacing your group health plan with cash
toward individual benefits may hurt your ability to
hire and retain employees.
INDIVIDUAL HEALTH PLANSINDIVIDUAL HEALTH PLANS
Employees may not know where to turn – help them
by recommending a broker who can provide
multiple options.
BREAKBREAK
Take a 5-Minute Break…
MINI-MED PLANSMINI-MED PLANS
Limited health plans that provide up-front benefits
and max-out at a low benefit level.
MINI-MED PLANSMINI-MED PLANS
Available on a group basis – either partially employer-paid or entirely voluntary through
payroll deduction
MINI-MED PLANSMINI-MED PLANS
Provides benefits for:
Several Office Visits / Year
Preventive Visits / Tests
Daily Hospital / ICU Care
Accidents
MINI-MED PLANSMINI-MED PLANS
Additional benefits may sometimes be purchased:
Vision
Dental
Short-term Disability
MINI-MED PLANSMINI-MED PLANS
Backwards Insurance – covering the front end
instead of the catastrophic claims.
MINI-MED PLANSMINI-MED PLANS
Not “Insurance” – will not prevent the patient from
getting Medicaid benefits.
MINI-MED PLANSMINI-MED PLANS
Often guaranteed-issue / no medical underwriting
required.
MINI-MED PLANSMINI-MED PLANS
Often used for part-time employees as a retention
tool.
MINI-MED PLANSMINI-MED PLANS
Better than “nothing” but not a good replacement for group
or individual health insurance.
DISABILITY INSURANCEDISABILITY INSURANCE
When money is tight you may be tempted to eliminate
disability benefits
DISABILITY INSURANCEDISABILITY INSURANCE
If you are going to eliminate disability benefits – eliminate
the short-term disability benefit and/or exchange it for a long-term disability benefit.
DISABILITY INSURANCEDISABILITY INSURANCE
Consider a change to a Paid Time Off (PTO) benefit with
accumulating unused days in lieu of a short-term disability
benefit.
DISABILITY INSURANCEDISABILITY INSURANCE
Short-term disability is a much-used and much-
abused benefit, making it very expensive for the very
limited protection it provides.
DISABILITY INSURANCEDISABILITY INSURANCE
Short-term disability provides benefits for lost wages due to
a disability, often starting immediately and lasting up to
6-months.
DISABILITY INSURANCEDISABILITY INSURANCE
Short-term disability is much-used to allow for a short-term recovery following an illness
or injury.
DISABILITY INSURANCEDISABILITY INSURANCE
Short-term disability insurance does help to
reduce your workers comp claims by allowing for
benefits without “faking” a work-related injury.
DISABILITY INSURANCEDISABILITY INSURANCE
Short-term disability insurance will NOT help your employee much in the event
of a total disability.
DISABILITY INSURANCEDISABILITY INSURANCE
Long-term disability insurance will make the difference in
allowing your employee to live a comfortable life while totally
disabled – pay the mortgage, buy groceries, pay the bills, etc.
DISABILITY INSURANCEDISABILITY INSURANCE
Long-term disability insurance is hardly ever used, but when
needed, it will be a true benefit to your employee and
their family.
DISABILITY INSURANCEDISABILITY INSURANCE
Long-term disability costs much less premium because
it is used so infrequently.
DISABILITY INSURANCEDISABILITY INSURANCE
Consider adding long-term disability benefits in lieu of
low-deductible health insurance.
BREAKBREAK
Take a 5-Minute Break…
PREVAILING WAGEPREVAILING WAGE
Contractors who do State or Federal work need to plan
their Fringe Benefits carefully to bid competitively.
PREVAILING WAGEPREVAILING WAGE
Base Wage = $30 / Hour
Fringe = $10 / Hour
Total = $40 / Hour
PREVAILING WAGEPREVAILING WAGE
Paying the Fringe portion in cash means that you must pay payroll
taxes on those “wages” – that adds substantially to your labor
cost.
PREVAILING WAGEPREVAILING WAGE
Paying the Fringe portion in benefits allows you to avoid those taxes – that is how the Fringe was meant to be used.
PREVAILING WAGEPREVAILING WAGE
You may take credit against the Fringes for “bona fide” benefits only – such benefits must be communicated in writing with
premiums paid to a third party.
PREVAILING WAGEPREVAILING WAGE
Examples of “bona fide” benefits are:
Medical Insurance
Dental / Vision Insurance
Disability Insurance
Life Insurance
Retirement Benefits
PREVAILING WAGEPREVAILING WAGE
Retirement benefits may be used for the balance of the fringes that are not used for
other benefits.
PREVAILING WAGEPREVAILING WAGE
Retirement plans must be specifically written to be able to accept the fringe money
legally.
PREVAILING WAGEPREVAILING WAGE
Fringe Benefit retirement plans may be administered along-side of your existing
retirement plan.
PREVAILING WAGEPREVAILING WAGE
Fringe Benefit retirement plans may not have a vesting schedule
– the fringes must be used for the immediate benefit of the employee who earns them.
QUESTIONS?QUESTIONS?
THANK YOU!THANK YOU!
Have a great day!