Archive for October, 2012

HRAs: Make Sense… Brokers & Employers Would be Wise to Take Another Look!

Consumer-Driven Health Care (CDHC) Solutions like Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) have helped millions of Americans to more consciously and cost-effectively manage their health care. Recently, health care spending accounts have become the topic of much debate amid the push for health care reform. Proponents of health care spending accounts argue that these solutions have played a major role in reducing health care costs for many Americans, and that placing limitations on such solutions (such as the proposed $2,500 cap on FSA contributions) would be a costly mistake.

Throughout the debate, and even before health care reform was at the top of the agenda, surprisingly little has been said about another less common—but still equally compelling—CDHC Solution: Health Reimbursement Accounts (HRA). HRAs are similar to FSAs and HSAs in that they allow employers to set aside tax-advantaged dollars that can be used by participating employees to pay for qualified health care expenditures. Unlike FSAs or HSAs, HRAs are solely employer-funded, and contributions to an HRA cannot be made through employee salary deferrals under a cafeteria plan. HRA contributions are not included in an employee’s income, so employees do not pay taxes on amounts contributed to their HRA accounts. One of the major benefits of the HRA compared to the FSA or HSA is the flexibility that it offers to the employer. Employers choose how much to contribute into their employees’ accounts, and employers also define the health care expenditures that are deemed qualified for tax-free reimbursement. HRA distributions are tax-deductible for the employer (when used for a qualified expense according to the plan), and, like an HSA, unused HRA funds roll over from year to year (provided the plan is set up to allow rollovers).

The fact that unused funds can roll over from year to year provides an incentive for employees to save toward future health care expenses and manage their funds wisely. It also acts as an important benefit to participants when comparing the HRA to the more popular FSA. From an employer’s perspective, the HRA also offers a strong advantage over the HSA. Since the account is employer-funded, the employer retains unused HRA funds should an employee leave the company. Better yet, HRA funds do not have to physically “sit” in an account; rather, the employer can simply report HRA funds as a liability on the balance sheet until a qualified claim is transacted. This is an important, but often overlooked benefit of the HRA that provides greater flexibility to the employer, frees up potentially large amounts of cash that can be used for other operations, and sacrifices zero benefit to the participant.

The advantages of an HRA might lead one to believe that it should be the standard, and not the exception, when it comes to CDHC plans. And yet, although HRAs have been around since 1954 and were reintroduced to the marketplace by the IRS in 2002, they have not taken off as quickly as the FSA or HSA. There are two probable reasons for this trend. First, many brokers have been hesitant to present HRAs to their clients because of the additional complexity many associate with an HRA plan. The second reason is that, until recently, there have been very few processing platforms capable of delivering efficient HRA administration to the employer.

But with demand comes innovation and opportunity, and brokers and employers would be wise to take another look at the HRA. As insurance premiums rise and health care reform efforts persist, there is no doubt that the HRA will become an increasingly attractive option. Employers and those who work in the benefits industry can capitalize on this valuable benefit by taking advantage of the new technology solutions that make HRA administration easier and more affordable than ever.


7 Tips to Keep Health Care Costs at Bay

With more health care changes looming in the wake of Health Care Reform legislation, employers have rising health care costs to address and need to keep their eye on the ball.

Health care costs for midsized businesses have risen 5% to 8% per year over the past five years, according to McGraw Wentworth Inc., a consulting and brokerage firm in Troy, MI that specializes in employee benefits in the middle market and tracks costs based on data submitted by local companies.

At IntegraFlex, our advice to employers is to stick to the issues at hand and not let the Health Care Reform distract them.

Everyone has been so focused on Health Care Reform and the cost increase, but it’s important not to lose sight of the next couple of years.  You need to think long-term and benchmark your plan and look at solutions/strategies.

Although most employers tend to look at health care once a year at renewal time, they should review it several times a year.  If you wait for renewal to come around it’s always a scramble to try to decrease the rates!  Things need to be well thought out and enough time given so that a solution/strategy can be developed prior to renewal.

Though many employers have focused on just staying in business, now is the time for businesses to think strategically about how their plan design will look three to five years out. Three years is practically long term in health care.

With the rate increase coming, what can be done to contain it over the long-hual?

Here are 7 tips  for small businesses to consider in managing their health care costs:

Shop the market

Particularly in the small and midsize market there have been some changes in the past 18 months in terms of competitiveness of products.  Some popular plans have had fairly large rate increases this year, while other insurance companies have whole new product lines or new features with higher out-of-pocket costs that keep premium rates down.  Other companies have greatly expanded their networks.

Specialty drug plan design

A number of health plans are coming out with special plan designs for high-cost specialty drugs such as injectables for multiple sclerosis and rheumatoid arthritis that generally cost $1,000 or more a month.  Plan designs can offer incentives for using non-formulary or non-preferred drugs or therapeutic alternatives that can keep premium rates down for employers.  Although it may only result in a 1 percent to 2 percent savings for employers in the short term, it may become a more important consideration in the future with many of these types of drugs currently in the pipeline.

Consider wellness plans

If companies are not focused on keeping employees healthy, it will cost them in the long term — especially in the small to midsize range.

It’s the disability costs, (worker) compensation costs and the overall costs from lack of productivity when people are not feeling well.

It’s a good idea to take 5% to 8% of the health care budget and invest it into a wellness plan.

Some wellness-based preferred provider organizations (PPO) plans have outcome-based program incentives for employees to stop smoking, keep body mass index below a certain level or maintain cholesterol levels.  Those who achieve the desired outcome — or in some cases just participate — have a lower premium rate or better benefit.  This won’t fit for every employer, but a lot of people like it.

Be wary of becoming the “plan of choice”

While many employers want their health plan to be better than the market in order to attract talent, this can drive up the cost of their plan over time.

What you often find since the market has changed in the last few years is that couples will always take that plan for their family at renewal time.  In effect, you are covering another employer’s employees.

To dissuade that, spousal provisions have become popular.  This is a monthly surcharge — the median being $100 — that an employer tacks on if an employee’s spouse is eligible for other coverage but doesn’t take it.  An employee who has a stay-at-home spouse or whose spouse doesn’t have available coverage does not have to pay the surcharge.

Employees might object to this, but for an employer whose employee contribution is below market, the rate even with the spousal provision is still reasonable.

Employers should look closely at their enrollment rate and how their plan compares to the market.  How many employees are taking it and how many of them have dependents on it?

The market median is 58% of dependent enrollment.  If you have 70% of employees enrolling dependents, you may have plan of choice issues going on.

Funding the plan

Large companies are considered companies who have  100 employees or more — and some say that number should be much higher.  However, this is far from the contrary, employer groups under 100 employees are very capable of choosing a self-funding route that allows more individualized plan design and potentially lower costs over time.

An employer self-funds its health benefit plan by paying the medical costs for its employees and using a third-party administrator to process claims.  Most small businesses contract with an HMO or insurance company to cover employees and dependents in a fully-insured arrangement.

A number of insurance companies have come up with plans for companies with as few as 50 to 60 employees to do self-funding or partial self-funding.

By converting from fully-insured to self-funding, companies can continue the same coverage with their health care plan and everything appears the same for employees, but employers might be able to better control costs.  They are in effect gambling that they will have lower health care costs as a company than they would by being placed in a one-size-fits-all group rate with companies of similar size.

When self-funded, employers typically pay an administrative fee to the third-party administrator and purchase stop loss insurance or reinsurance.  If an employer purchases reinsurance at $35,000 and an employee wracks up $200,000 in claims, the company is liable for $35,000 and the reinsurance kicks in to cover the other $165,000.

Small businesses that consider self-funding should know it’s a bit of a gamble.  It may make sense if the demographics for a particular employer are favorable and the company believes costs can be managed at a lower rate.

A company might save significant money over a year, but you may have a bad month or two.

Communicate with employees

Companies, especially those that have high turnover or a high number of contract employees that don’t come into the office daily, need to make sure they have strong communication to get employees to understand what the actual health care costs are.

The goal is to get employees to at least consider the impact of their behavior on the company. This relates back to the idea of wellness programs. You want your employees to participate in behaviors that benefit, not diminish, their health.

In effect, I’m handing you an American Express Platinum card and letting you go wherever you want to eat.

Review the broker

Most companies use agents to find the best health care program for them even when they grow large enough to hire a human resources manager, which provides its corporate members with human resources services.

When companies start maturing, they may start hiring HR people, but they have a lot of responsibilities beyond health care, such as recruiting or payroll.

Most companies don’t hire a benefits administrator until they have more than 500 employees, and they continue to rely on consultants until they hit 1,000 or so employees.   And some never take over benefits management.

You need to figure out that blend between using outside help versus inside help.

Although, most base commissions for brokers are 3 percent to 5 percent for smaller companies, but be warned, what brokers do for that commission varies significantly.

Most bid out coverage, but the question should be, are they coming up with strategies, benchmarking plans and providing data, handholding (a company) through complying with healthcare reform and COBRA or helping communicate the plan?


5 Tips for the 2013 Open Enrollment Campaign

Old strategies for open enrollment communication aren’t working anymore.

Healthcare Reform and the economy, combined with a renewed focus on Wellness and Health Care Consumerism, are driving enrollment campaigns to adapt to changing and challenging times.

“Healthcare Reform is in full swing with the recent upholding from Supreme Court ruling, the media and political scene has heated up tremendously, leaving your employees with more questions than answers.  And, most employers are looking farther ahead, toward excise taxes, state exchanges and even higher incentives for wellness plan participation.  Whether you’re focused on a single aspect of your program or the whole thing, the forces driving change are broader than they’ve ever been.

“Clearly, the era of “we’ll take care of everything for you” is over and “we’ll help you find your way” is here to stay.  Employers have a responsibility to educate employees about making good short-term decisions and helping them see the longer-term picture of how health and financial security stack up.

So, how can HR and benefits managers communicate to employees this year?  Here are five tips for the 2011 open enrollment campaign:

1.   Neither your company nor your employees can, in one simple or even complex action, solve any of the countless systemic problems related to health care costs.

Yet, there are concrete, simple actions that do help control costs — in both the short- and long-term.  Keeping the focus positive and on what’s within reach encourages and motivates employees and their families — and makes Healthcare Reform an opportunity.

Focus on the tangible behaviors that impact your employees’ pocket book and your bigger health care picture, such as:  getting preventive care, participating in biometric screenings and other wellness programs, enrolling in more cost-effective plans, switching to generics, using the prescription mail order program, and taking advantage of accounts like FSAs, HRAs and HSAs. Also, use enrollment as an opportunity to promote those programs your company continues to invest in that are largely unnoticed and underused by employees.

2.  Whether you’re trying to explain a new program or re-engage employees in existing programs, you now have a tougher time than ever getting them to pay attention.  What works is focusing on their needs — not the company’s — first, and providing meaningful examples.

Many companies are putting their efforts behind getting people to voluntarily elect Consumer- Driven Health Plans (CDHPs) among existing offerings or offering no other choices.  In either scenario, make sure you give personal, real-life examples of how the plans work.

For instance, employees with family coverage need to be clear about how the family deductible works.  Those with a chronic condition may appreciate free preventive medicines for the first time.  Highly compensated individuals will be interested in the investing options in the HSA and how to shelter the maximum amount from taxes.  And, all of them are going to have a lot of questions long after enrollment is over.

3.  As in previous years, keep open enrollment communications simple and direct.  Employees don’t use or understand benefits jargon.

Constantly question your communication style; are you using every-day, real-life language as simply as possible?  Define terms.  Repeat concepts.  Try different formats to say the same things.  Don’t overwhelm with too much print.  Use visuals.

And keep in mind:  bullet points, graphics, charts, and Q&As are your — and their — understanding-enabling buddies.  This is especially important as benefit plans become more complex.  A results-based wellness program or value-based plan design needs to be communicated in a way that makes sense to employees, without raising their suspicion or fears.

4.  Not only is our news cycle 24/7, now we can access it at home, on the train, in the part, in the car, and every other place imaginable.  People are staying connected and in touch continuously with mobile applications and social networks.

The gap between how the rest of the world communicates and how companies communicate benefits is growing wider and wider.  And, companies that don’t act risk losing their credibility all together.  Put channels in place that will help you communicate frequently all year long.  Social media tools like blogs and microblogs are perfect for the task?— and are easily implemented, with little to no risk.  Not sure what to say?  There are countless resources, tips, and reminders you can find online — Google, Twitter, Facebook, YouTube — to help you get started.

5.  While it’s tempting to lay out a long-term timeline of potential changes, there are too many things influencing the health care system to make short- or long-term predictions or promises, even though your employees may ask for them.

We recommend an honest acknowledgement of this tension and a commitment to regular communication so your employees feel you are hearing and responding to their concerns. Keeping your communication focused on what matters now will help everyone be prepared for what’s ahead.

Annual Wellness Exams: Smoke Detector vs Fire Extinguisher

One of the best ways to prevent illnesses before it happens is to get your Annual Wellness Exam.  It focuses on prevention and is a “Smoke Detector” vs a “Fire Extinguisher.”  Wellness exams allows for both you and your Doctor to have a conversation about your health concerns and potential illnesses before they become a serious issue.  It provides you the opportunity to ask about your medical history or general questions about your health.  Plus, it’s a good time to evaluate what health screenings you should schedule for the future and review any medication you may be taking.  To put it simply, it’s your way of being able to “look under the hood” and fix any cracked hoses, etc. by staying up on your health.

How Often Should a Wellness Exam be Conducted?

Exams should be scheduled periodically depending on your age and general health, but for most, at least once per year.  This is something to discuss with your doctor in terms of duration between visits.

What is Expected to Come out of a Wellness Exam?

If you don’t already have a Doctor, begin by finding one who has an organized office with a helpful staff that has the ability to listen and explain things in a way that you’ll be able to understand.  Call ahead and ask when the next wellness exam appointment is available.

Typically, your doctor will begin by checking your vital information, for example, your blood pressure, vision, pulse, weight and height.  Once they have an overview of your current health, the Doctor might spend some time asking questions and evaluating other aspects of your overall health picture so that they may advise you on ways to improve your current health.  You’ll want to be prepared to answer questions regarding your medical and family history.

Other possible questions could include:

  • Do you currently have any concerns about your current health?
  • Do you have any conditions that might require regular medical screenings?
  • What medications are you currently taking?
  • What are your nutrition and exercise habits?
  • Do you use tobacco, alcohol or other recreational drugs?

You can assist your Doctor in performing the exam by being prepared with a few items before your appointment.  Bring your list of questions about any health problems you’ve had since your last visit.  Consider any future health risks.  A list of current medications that you’re taking will help the Doctor.  Be sure to bring your Insurance Medical ID Card, FSA Debit Card (if you’re participating in a FSA & your plan offers a FSA Debit Card), arrive on time and work with your Doctor to maintain the best possible health that you’re able to.

NOTE:  Healthcare Reform Laws require most insurance plans to cover wellness visits with no out-of-pocket costs to you.  However, check your benefit booklet first to find out how your medical insurance plan covers wellness and what’s included before scheduling your wellness appointment.

8 Ways to Maximize and Spend Down Your FSA Before 2013

1.  Review expansive list of eligible expenses – It has been found that nearly 80 percent of household decision makers had trouble identifying expenses they could purchase with a health care FSA. There may be a number of items you need to buy or that you already bought that are eligible for reimbursement.

• Two easy-to-browse lists of health care and dependent care eligible expenses is our FSA Eligibility List and FSA Quick Reference Guide – Eligible Expenses.

2.  Request prescriptions for purchased OTC medications – If you were directed by your doctor to use over-the-counter medications this year to treat an illness or for wellness purposes, you can be reimbursed through your FSA for these expenses if you request a prescription.

• Due to changes included in the health reform law, as of January 2011, over-the-counter medications cannot be reimbursed through an FSA without a doctor’s prescription.

3.  Submit any outstanding receipts – If you haven’t yet submitted receipts for health care expenses like prescriptions or doctor’s appointments or dependent care expenses like day care or summer camp, make sure you find them and get reimbursed. Afterward, be sure to review how much (if any) is still left in your account.

4.  Purchase medical supplies – If you need medical supplies on a regular basis, it can be helpful to have a backup supply on hand. This includes contact lenses and solution, prescription glasses and even band aids. However, be careful to consider the expiration dates on some of these products when you purchase them.

5.  Schedule routine medical appointments – Make sure everyone in your family has gotten routine check-ups with their physician, dentist and optometrist. If you see a specialty doctor, such as a chiropractor or acupuncturist, make sure you get needed care before the end of the year or grace period, as well.

6.  Get a flu shot and vaccinations – Be sure everyone in your household has gotten a flu shot and is up-to-date with vaccinations.

7.  Invest in wellness – Promise yourself that you’ll get back on track with your wellness goals this year, and you’ll save yourself a lot of future medical expenses. Smoking cessation is eligible, as is weight-loss counseling, as long as receipts are accompanied by a letter of medical necessity.

8.  Log your miles – Gas and transportation fees to and from eligible medical, dental and vision appointments are eligible for reimbursement, as are visits to the drug store or pharmacy to pick up your medications. The mileage rate for 2011 is 19 cents per mile.


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