Employee Benefits & Workers' Comp News August/September 2010   

  Volume 20, Number 4

Creative large companies (200+ employees) are able to find savings through partially self-insuring the employees’ medical benefits.  Using a scaled down version, Riviera Insurance Services is working with smaller employers that have less than 50 employees so they may have an affordable program that emulates some of the traits of the partially self-insured medical benefits programs.

Please keep in mind two recent studies as we further explore a new structure of group medical insurance for employers with less than 50 employees:

• A Watson Wyatt study states that 72% of plan participants incur only 11% of total healthcare spending, while 4% with chronic or catastrophic illnesses incur over 50% of all healthcare costs.
• Another study from Pacific Business Group on Health cites 50% of employees account for less than 3% of costs and 85% spend less that $1,000 per year.

With this information in mind, one option to consider is the Employer Driven Health Plan™ (EDHP) cost model developed through Ben-E-LECT. The EDHP model starts with a PPO low premium/high deductible ($2,500-3,000 range) insurance product.  The employer structures the high deductible so that the employee’s deductible and out of pocket maximum is similar to the cost of the traditional small deductible PPO plans typically offered by businesses, thus the cost to the employee remains fairly level.  The employer assumes responsibility for the majority of the high deductible for any plan participant who incurs medical expenses beyond $250-$500. 

When our Riviera team meets with a potential client, we assist management in determining if an EDHP plan is practical for that particular company. We review pricing with various premium and deductible structures, possible claim scenarios, and the cost of the Third Party Administrator (the TPA assists with claims, deductibles, and payments to insurance companies). Comparing these costs to a traditional PPO will assist in the decision making process.

The EDHP model becomes a compelling choice when the savings for expected claims usage produces a savings of 30% or more and the worst case scenario produces no more than a 5-10% cost over the traditional small deductible PPO model.

Cost, plan structure, and doctor network are also important from the employee’s perspective.  Designing the EDHP model needs to take into consideration the following for each plan member:

• monthly premium
• deductibles
• co-pays
• out-of- pocket maximum
• network of physicians and facilities

When changing to the EDHP model, employers want to make sure there is clear and timely communication with all plan participants. Both employers and employees will want to be educated on the new benefits program. At Riviera Insurance Services we work with management to assist in this communication process. Communication will include the following items:

• monthly premium
• deductibles
• co-pays
• out-of- pocket maximum
• how to process a claim
• contact information for individual assistance

The EDHP model is a creative way to combat escalating costs.  There is an immediate benefit of significant savings on the monthly premiums; a benefit that the employer may chose to share with the employees in one or more ways. (Ask us how!) Understanding that the usage of healthcare services has traditionally been low for a large percentage of plan members allows the employer to consider assuming some of the risk of a large deductible model.

Quality and affordable healthcare insurance is everyone’s goal.  At Riviera, we truly enjoy working with clients to find the right solution for each individual business.

¹Source: Watson Wyatt Worldwide, “Financial Incentives Alone Unlikely Curb Health Care Costs, Watson Says,” April 24, 2006
²Source: “PBGH Member Benefit Strategies Promoting Quality, Value and Access,” February 2005.

“Oh, and remember: next Friday... is Hawaiian shirt day. So, you know, if you want to, go ahead and wear a Hawaiian shirt.”
-Bill Lumbergh, Office Space

Are traditional ideas of work “benefits” not cutting it in your company?  You are not alone.  Across the country, businesses big and small are doing their part to give their employees more active and healthy lives.  In return, employers are seeing a more efficient and loyal work force, reduced health care costs, less down time due to sick days, and a more positive and competitive work environment. 

Most working Americans are now putting in well over 40 hours a week at their job.  Until recently, the reduced time at home and the reduced health that comes with such hours have received little concern from businesses, resulting in poor health and diet and amazing levels of stress among American workers.  

All this has had a disturbing affect on our population, becoming a major contributor to the epidemic of obesity and increased danger of heart disease among working adults.  For employers, this manifests itself through increased health insurance costs and a greater number of sick days and worker compensation claims.

Times, however, are changing and many businesses are discovering the benefits of internally promoting healthier lifestyles for employees. 

While daycare, workout facilities, and health seminars are becoming commonplace in the corporate world, there are other companies going so far as to offer in-house chefs and adoption assistance. 
And while more complex programs may be outside the reach of your own business there are always examples of how even a small amount of change can greatly benefit both the employer and the employee:

Beyond the Water Cooler:  Employee Benefits for the Modern Business:

Education
Education is key to making a change in any situation.  Providing popular health magazines and pamphlets on preventative care and services in a common area is a simple way to keep employees up to date on common health concerns. 

Healthy eats
When catering a company event, having a business lunch, or even brown-bagging it lean towards well balanced meals and healthier foods.  Encourage others to look for healthy food options.

Activity 
More and more companies are sponsoring corporate challenges and sporting league teams in an effort to have an active workforce.  Competition can work to strengthen the bonds of team members as well as provide valuable exercise.

Wellness leave
While sick leave has been an aspect of business for years it is only recently that more progressive companies have begun integrating a wellness leave for their employees.  These programs give employees a chance to look after their own health and often includes time to care for a sick child.  Time for preventative care reduces the cases of longer term illness.

Discounts
Contact local health food stores, gyms, or fitness centers and talk to them about providing discounts to your employees in exchange for increased business.  Any attempt to make a healthier lifestyle more available to your employees is beneficial.

Team building
Team building events, whether they take the form of weekly meetings or help from an outside company, have the valuable effect of reducing stress by creating a more united and respectful work force. 

Stress management and awareness
Become an expert in noticing unrelieved stress.  While pressure from work helps to increase productivity, unrelieved stress can show itself through irritability and short temper, increased errors, and prolonged fatigue.  Even a few words of encouragement can make a huge difference in an employee’s day.  Reduced stress from work is shown to improve overall health and plays a huge factor in employee retention.

In-house Clinics
Talk with your health care provider about having an annual or bi-annual health fair.  In addition to education opportunities this is a great opportunity for employees to have blood pressure and cholesterol tests.  From high cholesterol to substance abuse issues these clinics can provide valuable help to your work force.

Lead by example       
Providing an example of healthy living to your employees is the key to an effective program.  Making choices for yourself will give a company health program the strength it needs to be effective in creating workplace change.

As a leader in your business, what can you do to increase awareness of living a healthy lifestyle? 

Quality of work correlates to the quality of life that an employee is leading.  Quite simply, healthier employees work harder and take fewer sick days.  By taking small steps, or even large steps, to improve overall employee health you can increase productivity and strengthen your retention rate by decreasing employee burnout. 

The benefits of work have grown beyond the promise of a casual Friday.  The time is now to show employees how valuable they are to our success.

With spring in full bloom on the Central Coast and the first year of Riviera Insurance completed, I am happy to say that things are moving into place quite nicely.  With everything new coming about I thought it might be time to review a few things, specifically, your company’s benefits package and how efficiently it is working for you.  As the cost of plans is consistently on the rise, it is critical review policies annually.

Recently, Steve Woodward and I were working with a tech start up. This company came to us and asked us to cover every aspect of their insurance program.  Their biggest concern was creating a competitive and efficient benefits package, something we felt confident in developing. 

This particular entrepreneur had successfully built his last company up to several hundred employees and he wanted a program for his new company that would be open to similar growth.  We were hired to develop an employee benefit plan that provides flexible options for the employees and is sustainable as the business expands.

Contrastingly, I remember the first time Steve and I sat in a room together with the CFO and HR Director of a different company.  Almost instantly, the CFO focused on the expected rate increase and wanted to cut benefits. Meanwhile, the HR Director told the CFO that their current benefit package was not a competitive recruitment tool, and that it affected the talent they could attract and retain.  Debate ensued.

In the end, we compromised.  The employer saw their cost rise and employees saw their co-payments increase.

Today Steve and I try to approach things a little differently.  Over time, we have refined our approach and designed a viable solution for both sides of the issue.

Our first point of business is to find a price range that the company is comfortable budgeting.  From here, we establish a fixed dollar amount that the employer will pay for each employee.  In some cases, there may be different dollar levels, dependent on job title.

We then work with the HR Director to establish a menu of plans.  Key components include doctor network and the spectrum of plan design features; HMO, PPO, and HSA are common acronyms on this menu.  With new options available every year it is critical to educate both employer and employees to help them choose individual plans.

When current or perspective employees are looking at the benefits package, they should see a spreadsheet detailing each plan and cost. This simple method of education allows the employees to take more control over their health insurance; benefiting them, and their employer.

Changing benefits, to combat increased costs, is never easy.  However, employers who embrace the change will find solutions that work for them and their employees.  At Riviera Insurance, we are dedicated to making the most of your insurance investment in the face of rising costs.

We are here to help you design and implement an effective employee benefits plan.  Please let us be of service.

The true cost of care extends well beyond what someone pays out of pocket for home and facility care if they don’t have long term care insurance. There is an additional financial burden placed on today’s workforce and businesses. When parents need care, often time it’s the grown children who step into the role of care giving or managing the care needs of their parents. Of the 44.4 million caregivers, 59% of them are working aged adults.¹

Employees lose ground financially in lost wages from salary and bonus due to arriving late, leaving early, unpaid leave and missing out on training and promotions. The average working caregiver will lose $659,000 over a lifetime in wages, social security and retirement pension.²

Employers also pay a price when employees become working caregivers. This is due to increased absenteeism and decreased productivity. When caring for a family member employees are not only physically absent but mentally absent and disconnected from their work. Costs associated with lost productivity include work interruptions, family crises, absenteeism and replacing employees to name a few. On a national basis, employer costs for working caregivers range from $11.5 to 29 Billion per year.³

When you consider the net financial impact, it is not surprising that long term care insurance is the fastest growing employee benefit in America today.⁴ An increasing number of companies both large and small are offering employees the opportunity to purchase individual long term care policies. As an employee benefit, long term care insurance can be implemented on a voluntary, sponsored and/or an executive carve-out basis. Coverage is not only available to employees, but family members (spouses, parents, in-laws, etc.) can participate as well. With as many as 3 insured lives, employees & family members can receive reduced underwriting and discounted premiums, yet still have the value that individual policies offer over true group plans.

Does long term care insurance make a difference? Absolutely! Long term care provides a firewall of protection around employees’ 401(k) and retirement plans; and working adults whose parents who own long term care insurance are twice as likely to stay in the work force and have fewer social stresses.⁵ Long term care insurance helps families, working adults and business protect their bottom line against the devastation of uninsured long term care expenses.

1. Caregiving in the U.S., National Alliance for Caregiving and & AARP, April, 2004.
2. Mature Market Institute: The Juggling Act Study 1999.
3. MetLife Study of Employer Costs for Working Caregivers, 1997.
4. MetLife Study, 2005
5. The MetLife Study of Employed Caregivers: Does Long Term Care Insurance Make a Difference, 2001.

Brad Tisdale
Director of Risk Management
Mission Wealth Management, LLC
1123 Chapala Street, 2nd Floor
Santa Barbara, CA 93101
(805) 882-2360
btisdale@missionwealth.com

Dear Clients and Friends.  I hope the attached gives you some ideas and insights to healthcare today.  As always our team is here to answer any questions or help.  Steve

While wages, job type, and environment play important roles for new employees the health benefits are becoming a major part of the job finding process and a huge cost for employers. When individuals enter the job market the concerns for their health are often first on the list. In addition compensation packages are major attractants for your current employees. Your wages may be first rate, but without a competitive benefits plan you risk being looked over by new entrants to the job market and you risk losing current employees to competition. For your business the compensation package must work for you to not only protect your employees, but also attract and retain the workforce. It is all a part of the compensation package. In many cases, it is a cost of doing business.

So how do you, as a business owner, cope with the ever increasing costs of medical insurance? Over the years we have seen employers take several paths in their search for a cost effective solution. Many make adjustments to the level of coverage. Co-pays & deductibles go up or the percentage of the employee’s payment of the premium increases. These are tough decisions and all too often the consequences create ill feeling between employees and their employer. This is unfortunate as next to the direct pay check taking care of your employees' health is one of the best ways to show how valuable each employee is to your company.

Today insurance companies and their brokers are working with employers to find creative ways to overcome these problems.

When an employee looks at his or her compensation, they typically focus on the pay check they receive. They are often unaware of or forget additional sections of the compensation package that the employer provides or pays for. This makes it difficult for you to adjust coverage as the prices of benefits change. Few employees are fully aware of the expense of these items. By giving the employee a customized report (Employee Benefit Statements) you can show them all of the costs and benefits associated with their employment. The benefits package is a powerful motivating tool and when presented properly to your employees, helps to remind them of their value to the company. Most employees are surprised when they see everything the employer provides and pays for.

You can also control costs through a combination of high deductible group medical policies, which can qualify you for either Health Reimbursement Accounts (HRA’s) or Health Savings Accounts (HSA’s). HRA's and HSA’s are starting to change how employees make decisions on their health care. HSA’s allow employees to lower their monthly premiums anywhere from 20-40% at the same time, give them an opportunity to save/finance their healthcare for any future needs. Contributions to HSA's can be saved towards Long Term Care, Retirement packages, or medical costs and there is no time limit on use of the funds, giving the plans flexibility and providing your employees with long term care. You also benefit as benefit costs are reduced and your employee moral is boosted when they see that you are helping with their retirement plans. Further more the plans are available for all sizes of business. And, finally, all contributions are tax deductible, up to $2700 for individuals and $5450 for families.

In separate studies the United Health Group, Inc. and Blue Cross concluded that when employees start becoming involved with how to spend their money on health care there are positive results seen in the employer’s costs. One study followed 55,000 workers over a three year period and saw the cost of the high deductible group medical fall 3 to 5 percent while traditional group medical costs increased by 8 to 10 percent. The second study saw premium increases for the high deductible plans at a 6% rate while the traditional plans increased by 11%.

Partially self funding the group medical is another option. In this program the employer is participating in the cost of claims (up to a point) with the potential of paying less than the traditional (guaranteed cost) premium. This type of program has the potential of reducing costs and, while historically it has been reserved for larger employers, these plans are now beginning offered to smaller groups.

Another consideration is to offer a set dollar amount for your employees to spend on their healthcare needs. To help determine this dollar amount employees have the option of 3-5 plans offered through their employer. Having an array of different plans to choose from allows your employees to “buy-up” to the program that is best suited to their needs. Your employees can then “buy-up” using payroll deductions. By having a Section 125 plan all deduction can be done on a “pre-tax” basis, giving better value to their dollar. When offered choices and a variations of plans to choose from, your employees will feel that they have received the best possible option in coverage.

As your company grows and time moves on it is important to stay up to date with group medical policies and the newest methods of providing it. As new options become available and practices change it is vital to have a broker who will provide you with money saving ideas and who continuously works to find new and creative ways of giving you and your employees the best options possible in their benefits package. At Riviera Insurance we are dedicated to finding these unique solutions and you can be confident that as we enter the holiday season we will have you and your employee's health on our minds more than ever.

Each employer has unique circumstances and what works best for one will not necessarily be productive for another. However, given that medical insurance costs are rising, alternatives need to be considered and it is vital to your business that you provide employees with proper and competitive coverage. We are confident that, over time, you will find that by changing your company's methods, so that employees share more of the responsibility in deciding how their health care dollars are spent, you can improve company moral and actually decrease the cost of doing business.

Q & A with Steven Woodward by Susan Ahrens

SA: Share with me a little bit about you?

SW: I grew up in a somewhat “Malcolm in the Middle” situation, except without the constantly stressed mother, we were good kids. My older brother and younger twin brother (I beat him by just over five minutes) grew up in the high desert and used the Mojave Desert as our playground for years. I spent most of my time outside of school hiking, riding motorcycles, and hunting. Much to my mom’s dismay my brother and I also considered ourselves herpetologist, though not one of the best. We’re guessing that at least once a month, one we managed to lose one of our “subjects” with of course my mother finding it.

SA: What are some of your hobbies?

SW: Outside of work I need to be in the outdoors. I have been hunting since my childhood and I still manage to get out for the dove and quail season openers each year and I try to make a few fly fishing trips each year to our summer home in Montana. Locally, I keep horses and I love getting my wife and kids out on the trails and beaches to go riding. Of course, golfing is almost required in the business world these days. It has been a long time passion since I was 9 years old. Having two children has allowed me to work with kids, teaching and coaching sports. I enjoy watching kids growing up and teaching them respect for all aspects of sports is one of my biggest passions. For me the lessons that I can teach kids through sports are the same values and skills that I use in my daily business and relationships. It makes me proud to see how much I can help the kids in that aspect.

SA: Are you married or single? If married, share with me a little about your family.

SW: I’ve been married to my wife Debbie for 12 years and we are the proud parents of Garrett (8.5) and Taylor (5). While Debbie maintains control of the Woodward Household the kids are constantly active. Garrett is an all-around athlete and Taylor has started her first year in soccer.

SA: Who is your favorite fictional character(s) and how do they inspire you?

SW: The three Stooges. Growing up with three boys in the family we were constantly beating up on each other. While things often escalated beyond a cream pie in the face or an eye poke the Stooges reminded us to keep things fun. I also realized that if I was going to live that way I’d need to know a lot about Health Care Benefits. So in a way Curly, Larry, and Moe helped me into my career.

SA: How did you get started in the insurance industry?

SW: One of the brother’s in my fraternity at Cal Poly San Luis Obispo had a father in the insurance industry. After college I was invited to join the industry working in a corporate office and I stayed there for 8 years. I loved the work and 8 years ago I made the transition to the Agency side.

SA: Why are you still in the insurance industry? What is your passion for this business?

SW: Working on the corporate side taught me about the industry and being an Agent has given me the chance to really work closely with the people we were helping on the corporate side. My goals have always been to make insurance as simple as possible for people, to educate them about the need for proper coverage, and to get them coverage without breaking the bank. With insurance I get to care about people’s health and I can be an advocate for them. Knowing that I am providing a vital service and improving people’s lives has helped develop my passion for the business and kept me involved for the last 16 years.

SA: If I were looking around for another agency, what makes you unique?

SW: Riviera Insurance has a wealth of knowledge at their disposal, but the people working their also have good hearts. With insurance you are putting your employees, their families, and your own families in your agency’s hands. It is important to know who it is you are trusting and the Riviera team is made up of the people I trust the most.

SA: Do you foresee any big changes in the insurance world?

SW: Recently I have seen a change to previous insurance standards where not everything is 100% paid. I think it will become similar to automobile policies where the deductible is higher, but rates begin to drop. While policies will become more affordable larger portions of expenses will be incurred by the policy holder. Regardless of these trends I believe that having insurance is a benefit to the individual and the family.

SA: What is the best word that describes you?

SW: I think that my wife and my co-workers would call me passionate. I want the best in my work and in my play and I’m willing to put in the time and effort to achieve that. I’m proud to be a passionate individual, with all the benefits and issues that can come with that. Being passionate about what I’m doing has always given me the drive to excel. I’d like to think that I bring my game face to the table all of the time and that has helped me succeed.