strategies for controlling benefit costs

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.


Why do employers want to keep benefit costs a secret?


Instead of keeping costs a secret, you need to SHARE

them!


Consider shifting your focus from “Salary & Benefits” to

“Total Compensation”

TOTAL COMPENSATIONTOTAL COMPENSATION

Total Compensation =

Cash

Health & Welfare Benefits

Other Benefits


Explaining “Total Compensation” allows the

employee to see the true cost of his compensation package.


Explaining “Total Compensation” will help

employees to appreciate their benefits.


Explaining “Total Compensation” will allow you to show how increasing one benefit may reduce another.


Excel Template for Small Groups


Software / Services Available for Large Groups

RESOURCESRESOURCES

http://www.freetotalcompstatements.com/ws/Home.php

http://www.charltonconsulting.com

http://www.compackage.com/



http://www.charltonconsulting.com/

http://www.compackage.com/


Think about who would best-present your benefits

information…


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…


the last option will be to cancel your group plan and

allow your employees to purchase health plans on

their own.


There are many things that you need to know before moving toward individual

insurance…


Individual health insurance is AVAILABLE to everyone, but

not necessarily AFFORDABLE for everyone.


Individuals / Families in excellent health have many

options that are less expensive than group health

plans.


•Fewer “mandated” benefits

•Pre-existing condition limitations that are not cancelled-out by HIPAA


•Specific condition exclusions

•Limited Rx benefits

•Limited or no Mental / Nervous benefits


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.


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.


Under many circumstances, full coverage for pre-existing

conditions is available – regardless of the condition


$750 Deductible Comprehensive Plan

80/20 Coinsurance

$3,750 Annual Maximum Out-of-Pocket


No Office Visit Copayments

Separate Rx Deductible and 50% Rx Copay


No agent representation or commissions

Direct relationship with Highmark


Pennsylvania requires that group health plans offer a conversion option when

coverage is lost.


In some cases, the conversion option is less

expensive than the Highmark guaranteed

program.


Employees should pay the premium for an individual

health plan, and any employer contribution should

be run through payroll and be taxed.


Employees over age 65 should seriously consider moving to the Medicare system for their benefits.


Employers may not discriminate based on age, and therefore cannot force employees to move out of

the group health plan into a Medicare plan.


Replacing your group health plan with cash

toward individual benefits may hurt your ability to

hire and retain employees.


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.


Available on a group basis – either partially employer-paid or entirely voluntary through

payroll deduction


Provides benefits for:

Several Office Visits / Year

Preventive Visits / Tests

Daily Hospital / ICU Care

Accidents


Additional benefits may sometimes be purchased:

Vision

Dental

Short-term Disability


Backwards Insurance – covering the front end

instead of the catastrophic claims.


Not “Insurance” – will not prevent the patient from

getting Medicaid benefits.


Often guaranteed-issue / no medical underwriting

required.


Often used for part-time employees as a retention

tool.


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


If you are going to eliminate disability benefits – eliminate

the short-term disability benefit and/or exchange it for a long-term disability benefit.


Consider a change to a Paid Time Off (PTO) benefit with

accumulating unused days in lieu of a short-term disability

benefit.


Short-term disability is a much-used and much-

abused benefit, making it very expensive for the very

limited protection it provides.


Short-term disability provides benefits for lost wages due to

a disability, often starting immediately and lasting up to

6-months.


Short-term disability is much-used to allow for a short-term recovery following an illness

or injury.


Short-term disability insurance does help to

reduce your workers comp claims by allowing for

benefits without “faking” a work-related injury.


Short-term disability insurance will NOT help your employee much in the event

of a total disability.


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.


Long-term disability insurance is hardly ever used, but when

needed, it will be a true benefit to your employee and

their family.


Long-term disability costs much less premium because

it is used so infrequently.


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.


Base Wage = $30 / Hour

Fringe = $10 / Hour

Total = $40 / Hour


Paying the Fringe portion in cash means that you must pay payroll

taxes on those “wages” – that adds substantially to your labor

cost.


Paying the Fringe portion in benefits allows you to avoid those taxes – that is how the Fringe was meant to be used.


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.


Examples of “bona fide” benefits are:

Medical Insurance

Dental / Vision Insurance

Disability Insurance

Life Insurance

Retirement Benefits


Retirement benefits may be used for the balance of the fringes that are not used for

other benefits.


Retirement plans must be specifically written to be able to accept the fringe money

legally.


Fringe Benefit retirement plans may be administered along-side of your existing

retirement plan.


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.


For additional information, go to www.fibi.com.

http://www.fibi.com/

QUESTIONS?QUESTIONS?

THANK YOU!THANK YOU!

Have a great day!

strategies for controlling benefit costs

Economy & Finance