Posts Tagged ‘healthcare’

Is The Classic 105 Plan Compliant With Federal Law?

Thursday, July 23rd, 2015

The post below is a guest blog from Jon Dingledine who serves as Vice President of Consulting for CAI’s employee benefits partner Hill, Chesson & Woody.

Ahealth cost compliances healthcare costs continue to rise, innovations in the marketplace continue to produce new products and ways to finance your medical insurance. One that you may have heard about recently (or are likely to soon hear about) is being touted as a tax overlay system sometimes called a “Classic 105 Plan.” The arrangement claims to reimburse 75% of unreimbursed medical expenses for employees. The program is supposed to save the employer money in premiums by raising deductibles, copays and out-of-pocket maximums.

Once the plan design has been leaned up, employees can choose to make a significant pre-tax salary reduction (in some cases as high as $15,000-$20,000 per year). The reduction amounts are held by a TPA and made available for medical reimbursements. Any unused portion in the account is forfeited at the end of the year. To make up for the significant reduction in the employees’ take-home pay, the employees are given a loan by the TPA each payroll period in an amount close or equal to the salary reduction amount. No taxes are paid on this amount because it is considered a loan, however there is no evidence that the loan is ever intended to be repaid. The loan is secured by a life insurance policy on the employee, held by the TPA. Fees paid to the TPA for the arrangement are between $150 and $200 each month, taken from the employees’ pre-tax salary reduction.

While the program claims to be ERISA, ACA and HIPAA compliant, our compliance team and other legal experts have serious concerns that this type of arrangement is not compliant with federal law, including the IRS Code. This type of arrangement can also have significant implications for the employee’s social security, the employer’s fiduciary duties under ERISA, and in some instances may subject the parties to criminal liability.

Rest assured that HCW is always reviewing the health and welfare benefit landscape, and we will continue to vet new programs and funding arrangements to ensure that the decisions your company is making are best fitted to your benefit strategy.

Are We Beginning To See Price Transparency In Healthcare?

Thursday, April 16th, 2015

The post below is a guest blog from Jay Lowe who serves as Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.

healthcare transparencyAs pricing in the healthcare market continues to rise, we, as consumers of this healthcare, will begin seeking more cost-efficient ways to pay for this. Many experts agree that one way to begin to slow this rise is to become smarter with our healthcare buying decisions. A ‘smart healthcare consumer’ is one who seeks out the highest quality of care at the lowest price and understands the impact of their healthcare buying decisions.

One of the major hurdles to this is the lack of understanding on where to find information. In areas where there is a lot of competition for healthcare, costs can vary for the same procedure at different facilities. However, based on one’s medical plan, the cost to the patient may be the same by the time the deductible and coinsurance limits are met. The patient doesn’t realize there is a cost difference because his or her out-of-pocket expenses remain the same. It is the insurance company that is ultimately paying the difference, which causes potential increases to premiums at the next renewal.

This disconnect of the user of the healthcare (the patient) and the payer of the healthcare (the insurance company) is beginning to shrink as we see a shift to more consumer-driven health plans like high deductible plans and HSA-qualified plans. More of the actual charges are now being paid by the member on these types of plans. Due to this, the demand for greater pricing transparency is increasing.

We are now beginning to see the marketplace respond as third party companies are unveiling new technology designed to give us more precise information on the cost and quality of the services we seek. The Milkin Institute School of Public Health points to a number of new resources designed to give consumers cost information. Additionally, the health insurance carriers are redesigning their cost comparison tools on their member websites. Just recently, Blue Cross Blue Shield of NC introduced a new pricing tool that integrates the member’s underlying health plan to show actual out-of-pocket cost for procedures at different facilities. This gives members a true shopping experience when seeking care.

Some carriers have developed phone apps that compare expenses and outcomes for many services and procedures, allowing consumers to find healthcare providers, urgent care centers, and emergency facilities, as well as average costs for medical services.

Ultimately, we will be able to evaluate our healthcare costs quickly and easily. It will be our responsibility as consumers to use this information efficiently and hopefully make an impact to our premiums.

2014 NC Policies & Benefits Survey Reveals Total Rewards Practices of NC Employers

Tuesday, September 9th, 2014

survey dataDuring last month’s Compensation and Benefits Conference, Molly Hegeman, CAI’s Vice President of HR Services, shared information on what NC employers are doing in regard to their total rewards packages. Her presentation included statistics from the 2014 NC Policies & Benefits Survey. The only local survey of its kind shares employers’ answers to 320 questions related to workplace policies and employee benefits practices.

This year’s survey had participation from 384 employers located throughout North Carolina. Forty-four percent of participants are located in the Research Triangle region, 25 percent are in the Charlotte area and 17 percent are located in the Piedmont/Triad region with the remaining participants in the East/Southeast region.

Some key findings from the survey revolving around health and welfare benefits include:

  • Nearly all employers provide medical insurance to their employees. About 78 percent of employers offer a traditional PPO plan, about 27 percent offer a consumer driven HAS plan.
  • Regarding employer contribution to the insurance premium, on average, employers pay 80 percent of the premium for employee only PPO coverage and 55 percent of the premium for family PPO coverage for full-time employees.
  • About 71 percent of employers do not offer domestic partner benefits. In turn, about 18 percent of employers do offer domestic partner benefits regardless of sex of partner. About 11 percent offer benefits with sex restrictions.

The survey also covered time off and results revealed several things, such as:

  • About 72 percent of employers have a PTO policy. On average, employers provide 6 days of PTO upon hire, 13-14 days of PTO after 1 year of service, 15 days of PTO after three years of service, 17-18 days of PTO after 5 years of service and 20-21 days of PTO to employees after 10 years of service.
  • About 68 percent of employers have a formal sick plan that is separate from a PTO policy. On average, employers provide 9 sick days to full-time employees per year.
  • On average, employers provide 9 paid holidays to full-time employees and 5 paid holidays to part-time employees per year.
  • About 9 percent of employers offer a maternity leave policy separate from short-term disability or FMLA.

Pay practices is another subject the survey tackled. Participant responses include:

  • About 61 percent of employers indicated a pay philosophy of paying employees at or above market rate. In turn, 34 percent have no formal pay philosophy.
  • To determine compensation decisions, about 77 percent of employers use external market analyses, about 70 percent use internal job evaluations, about 58 percent use skill or competency-based methods, and 11 percent have no formal method.
  • The most common type of base pay increase employers give is performance based according to up to 83 percent of employers. About 22 percent give an across the board increase, about 17 percent give a cost of living increase, and about 6 percent give some other type of increase.

CAI provides this survey every two years. Other topic areas the survey covers include retirement plans, workplace culture, recruiting and staffing, termination and HR metrics.

The 2014 NC Policies & Benefits Survey can be purchased from CAI’s store here. If you’re interested in participating in next year’s survey, please contact a member of CAI’s survey team at



Are Gated Health Plans the Way of the Future?

Tuesday, July 22nd, 2014

The post below is a guest blog from Steve Byrd who serves as Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.

hcw 7 14As employers continue to identify new ways to control their health plan costs, many employers are considering gated health plans as an option. A “gated” health plan, offers a different spin on the traditional wellness incentive that employers and employees have become used to.  Instead of offering employees lower payroll deductions through the completion of a health assessment or completion of a biometric screening, employers are now considering the option of offering richer benefits as well.

In a recent survey, more than 1,000 employers were asked to disclose current plan designs and changes they expect in the next three to five years. It’s a way for employers to control costs and reward employees for their healthy lifestyles.

52 percent of employers said their current health plan focuses on traditional trend mitigation approaches, such as employee cost shifting. Interestingly enough, it dropped to 21 percent when asked if this would be their preferred approach in three-to-five years.

Employers are beginning to lean more towards plans that require employee action.

In the upcoming years, over 60 percent of employers plan to introduce a gated plan, where employees must complete a task to obtain access to richer design options, compared to only 20 percent who “gate” their employees today. In the past we’ve seen incentives to help lower payroll deductions, but now with gated plans, there is an option to improve benefits.

Employees are also considering implementing the following tactics to mitigate health costs:

  • 72 percent of employers are or will be reducing subsidies for dependents
  • 52 percent of employers anticipate using unitized pricing—where employees pay per person and not individual versus family—up from 5 percent today
  • 42 percent of employers are considering offering high-deductible health plans as a full replacement plan, up from 15 percent today
  • 24 percent of employers plan to offer employees tools to guide decisions in plan selection and utilization, up from 19 percent today
  • 92 percent plan to offer cost transparency tools, up from 49 percent today

While employers are evaluating these new options, and continuing to ask their employees to become more engaged, it is important they evaluate their plan designs carefully.  These new gated plan options are permissible under HIPAA wellness rules.  However, it is very important to ensure they are designed correctly, as they must be carefully structured to comply with both ADA and GINA requirements.  Also, these plans would need to provide a reasonable accommodation to anyone who can’t participate due to a disability, as restricting eligibility in a plan based on participation could be seen as more of a penalty than a monetary premium differential.

Employer vs. Federal Marketplace Open Enrollment

Thursday, June 19th, 2014

The post below is a guest blog from Dax Hill who serves as Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.

hcw juneEmployers with “non-calendar” plan years may find themselves in the middle of a dilemma with the Marketplace open enrollment.

In preparation of the “pay or play” provision under PPACA, some employers are looking to shift contributions towards the employee portion and away from the dependents coverage.  This strategy will help employers avoid penalties under 4980h of the tax code and make coverage “affordable” for the employee only portion.  However, redistributing premium contributions towards employees only coverage could significantly increase the cost for those employees with dependents.  These employers might assume that the dependents could then go apply for coverage though the Federal Marketplace – which works only if the employer’s open enrollment coincides with the Federal Marketplace open enrollment period. For 2014, the Open Enrollment Period was October 1, 2013–March 31, 2014. In 2015, the proposed Open Enrollment Period is November 15, 2014–February 15, 2015.

What happens if the employer increases dependent premiums during their open enrollment and the employer’s open enrollment does NOT coincide with the Federal Marketplace open enrollment?  In this scenario, an increase in premium is NOT a qualifying event for the Federal Marketplace – meaning that the dependents would not be eligible to enroll for medical coverage until the next Marketplace open enrollment.  Things can get more complicated assuming that your Section 125 plan runs on the same non-calendar plan year as your medical insurance plan year.  If dependents decide to remain on the employer’s medical insurance plan and pay on a pre-tax basis, the dependents would not be allowed to come off of the employer’s medical insurance plan unless they experienced a life qualifying event. At which point, they would again miss the open enrollment for Federal exchange.  You can see that this could become a vicious cycle and lead to frustration to both employers and employees.

There is a push to modify the regulations to allow individuals to obtain coverage mid-year through the Marketplace for non-calendar year plans.  In the meantime, employers should understand the regulations and strategies allowing individuals to enroll onto the Marketplace.

Contact an HCW consultant regarding possible solutions to this problematic situation.


The Movement Towards Performance Based Pay In Healthcare

Tuesday, March 18th, 2014

The post below is a guest blog from W. Hunter Walton, JD who serves as Principal, Health & Welfare Consultant  for CAI’s employee benefits partner Hill, Chesson & Woody.

 hcw 3 14 2014Recently, Congress passed a clean debt ceiling bill that raised the nation’s debt limit without any strings attached. Before the vote, however, there were serious discussions to revamp the way physicians are paid under Medicare.

Under current law, physician pay is tied to the Sustainable Growth Rate (SGR), a formula which many doctors and politicians think is insufficient to adequately compensate doctors for their work. For the past several years Congress has adopted a kick-the-can-down-the-road approach, which just delays scheduled reductions in pay. But after years of searching for a solution, members of Congress this week appeared to have reached a permanent solution to repeal the SGR and replace it with a system of payment tied to performance. This would be in line with trends we are seeing elsewhere in Medicare – with the growth of Accountable Care Organizations – as well as in some aspects of private insurance.

While the provision was eventually dropped from the debt ceiling bill, it will likely provide an important starting point from which future negotiations will be based. As we see an increase in preferred and high-performance networks in private insurance and a movement to tie payment in government health programs to performance, expect to see the effects of performance based pay trickle down to your health benefit and medical management strategies. Find out more about this in the February 10th edition of The Fiscal Times.


Encouraging Preventive Care Among Your Employees

Thursday, January 3rd, 2013

Dax-HillThe post below is a guest blog from Dax Hill who serves as Principal, Health & Welfare Consultant  for CAI’s employee benefits partner, HCW Employee Benefit Services.

The old saying “An ounce of prevention is worth a pound of cure” is very appropriate for today’s healthcare coverage plans. Employers and employees are able to pay less if they are proactive in trying to avoid illnesses that can cost thousands or more to treat.

But knowing what you are supposed to do and making it actually happen are two very different concepts. How do you inspire your staff to turn your dreams of prevention into a reality? Here are some suggestions:

 1)  Clearly communicate to employees what their benefits are. We talk a lot about communicating benefits to employees. If your workforce knows precisely what options are available to them, and how to better use their benefits by taking advantage of preventive services – they will! Communications experts agree, that effectively communicating benefits is key for prevention to occur among employees. As the Affordable Care Act begins to be implemented, employees:

  • Want to understand the big picture of healthcare.
  • Want to know what their employer knows when they know it.
  • Want their employer to also share what they don’t know.

 2)  Seek medical providers using interactive health records. A new study reports that medical records patients can access online may encourage more people to get recommended screening tests and immunizations. The use of electronic health records (EHRs) allows doctors, hospitals and other providers to communicate more easily as well as help more patients know the tests and treatments they need. Providers are being encouraged to switch to EHRs and will face federal penalties if they do not convert by 2015, so check to see if and when your primary care physicians plan to make the changes.

 3)  Investigate programs being offered by the Prevention and Public Health Fund. The Affordable Care Act’s Prevention and Public Health Fund is designed to assist major national groups such as the Centers for Disease Control with developing programs to discourage tobacco use as well as address obesity and other conditions that result in chronic diseases which are expensive to treat. Among those available for possible inclusion in your workplace from the Centers for Disease Control are:

  • National Diabetes Prevention Program
  • Immunizations
  • Tobacco Use Prevention
  • Workplace Health

There are many other options available for preventive healthcare designed for specific requirements. To see what might work best for the needs of your company, contact a health and welfare consultant at HCW.

The Importance of Explaining Your Healthcare Plan to Employees

Tuesday, November 27th, 2012

The post below is a guest blog from CAI’s employee benefits partner, HCW Employee Benefit Services.

Have you heard your employees ask: “Why do I have to pay more for my healthcare plan this year?” or maybe, “I’ve been to my doctor only for my physical this year and passed it, so what’s the problem?”

The answer to these questions is complex, and your employees need the right information from you for a credible response.

To be effective in explaining healthcare plan costs to employees, you need to emphasize the following:

1)      Healthcare costs continue to rise. We all know this, but the exact figures bring home the stark impact of what is happening.

2)      Efforts to control these costs have produced few savings. No reform launched so far to address the situation has made a significant dent in keeping fees down. The impact of the Affordable Care Act may change this, but there are already indications that at least some features of it will place additional reporting and projecting burdens for insurers. That will likely mean the costs of those activities will be passed along to your employees through their healthcare plans.

3)      There is no easy solution. Healthcare costs may not improve until the overall health of U.S. citizens improve. While there have been various efforts to encourage groups to diet and exercise more, we lack a national effort designed to curb our bad habits, which is hurting us.

Obesity in particular raises the risk of many diseases that are expensive to treat, and the results are increased premiums for all of us to cover. Higher healthcare costs will naturally follow when the Centers for Disease Control and Prevention:

Another factor is that the existing healthcare system favors quantity over quality in terms of service. The emphasis for physicians is on patient volume rather than outcomes, satisfaction and cost savings for patients. This setup encourages excessive services and treatments for patients, which leads to expensive healthcare plans for employers.

To lower the costs of healthcare, we need to overhaul changes in these areas in a unified effort. Improved patient outcomes, more efficient delivery of care and reduced health risk factors are all components that must be combined with lower costs per unit in order to lower the total cost of healthcare.

If you need to provide additional information to your employees, contact HCW Employee Benefit Services. We provide employers with those details so they can illustrate what factors are increasing healthcare costs, as well as what employees can do to help their organization keep health plans affordable.

(Photo:  Phil Sexton)

7 Takeaways from CAI’s 2012 Compensation and Benefits Conference

Thursday, September 6th, 2012

CAI hosted its annual Compensation and Benefits Conference on Tuesday, Aug. 28 and Wednesday, Aug. 29 at the McKimmon Center in Raleigh. More than 200 HR professionals and company leaders participated in the event that focused on trends and best practices in total rewards.

The conference featured presentations from a variety of professionals responsible for advising companies on their compensation and benefits strategy. Some notable presentations included CAI’s Director of HR Services, Molly Hegeman, detailing marketplace trends for salaries and benefits in North Carolina, and Peter Marathas, Partner in the Employee Benefits & Executive Compensation Group, who imparted the audience with tips to handle the recent changes in health care.

Other topics covered at the conference included flexible scheduling, health care management, mistakes related to wage and hour law, and multi-generational retirement planning. Below are some key takeaways from last week’s conference:

  1. Marketplace trends show an increase in consumer-driven health plan options (CDHP), well-being programs, and companies giving employees financial education and advice. These trends show a decrease in 401K matching, salary budget, promotions, teleworking and recognition programs.
  2. Employee time off costs are virtually equal to health care costs, and time off is one of the highest valued benefits to employees, second only to pay.
  3. Top 5 Wage-Hour mistakes include considering salaried employees exempt, averaging work hours, errors in recording work schedule, believing child labor laws aren’t applicable to your own child, and thinking any person may be an independent contractor.
  4. Chronic diseases make up 75 percent of national medical costs, and 80 percent of chronic conditions are modifiable or preventable. National data supports that effective wellness programs improved employee health and impact overall healthcare costs.
  5. A survey from AonHewitt revealed that health benefits satisfaction is declining, more than half of employees do not know how their pay is determined, most employees don’t understand the value of their pension plans, and 80 percent of respondents fear that they will not have enough money in retirement.
  6. According to CAI’s 2012 Wage & Salary Survey, NC companies project to increase employee salaries by 2.9 to 3.6 percent for 2012. Percentage of companies giving performance-based merit increases is 81.2 percent and those giving general increases in 36.2 percent.
  7. Companies that don’t manage total rewards effectively are missing valuable input from their employees, leading to lower engagement and higher turnover; missing opportunities to manage total rewards as a portfolio, which may lead to higher costs and lower effectiveness; and introducing unnecessary risk into their total rewards approach.

CAI holds four conferences each year. The Triad Employment Law Update is CAI’s next conference and will take place at the Koury Center in Greensboro on Wednesday, Nov. 7, 2012. For more information related to CAI’s conferences, please check out CAI’s conference page.

Long Term Care Insurance – A Changing Landscape

Tuesday, September 4th, 2012

The post below is a guest blog from CAI’s employee benefits partner, HCW Employee Benefit Services.

For people who are unable to fully perform activities of daily living due to chronic or disabling conditions, long term care provides the range of care and support services needed over an extended period of time.

One way to protect an individual’s ability to pay for these services is through the purchase of a long term care (LTC) insurance policy.  These policies, which have historically been purchased individually or provided through an employer, can help offset the expenses associated with nursing home care, home healthcare, personal and adult daycare.

The projected need for long term care is staggering.  In 1994, 7.3 million Americans needed LTC at an average cost of nearly $43,800 per year.  In 2000, the numbers increased to 9 million Americans with need at a cost of $55,750 per year. By 2030, estimates show that more than 23 million Americans will need long term care at a cost of nearly $300,000 per year!

The recent healthcare reform legislation attempted to address this escalating need through a provision called the Community Living Assistance Services and Support Act (CLASS).  After performing a deeper actuarial review of the numbers, the United States government pulled the plug on the CLASS Act due to an unsustainable funding model.

Unrelated to the reform attempts to address LTC, there is a lot of turmoil in the private LTC insurance marketplace today.  Due to a low return on investment caused by low interest rates and the unknown future cost of medical care for those with LTC plans, many insurance carriers have recently left the marketplace:

  • Unum and John Hancock have exited the group market
  • Guardian and MetLife have left the LTC market completely
  • Prudential exited the individual market

This financial uncertainty and lack of providers has left many employers unsure about whether they want to offer group LTC insurance at all. At a minimum, they are wondering if they should wait until they improve their comfort level with the product and the market turmoil subsides.

HCW Viewpoint

From an individual’s point of view, there is little doubt a great need for long term care insurance still exists.  In fact, about 70 percent of individuals will need some type of long term care assistance after turning age 65. However, only 10 percent of seniors have LTC policies, and only 15 percent of all employers currently offer a long term care insurance plan.

But, just because there is an “individual” need for long term care insurance, that doesn’t mean that employers should jump into the waters headfirst and integrate LTC coverage into their benefit offering.  As with other benefits provided, it’s important to determine what you are trying to accomplish by offering group LTC coverage and how this fits into your overall benefit strategy.

Some helpful questions to ask may include:

  • Are your employees asking your organization to provide LTC coverage?
  • Are your competitors offering coverage?
  • If you elect to provide LTC insurance, how will you position it to increase its perceived value with employees?
  • Can you determine the right product and coverage mix of group and individual LTC coverage to sustain the associated costs over the long haul?

The unknown financial risk in this market, coupled with low returns on investment, have led insurance carriers to modify their plan designs away from generous, unlimited-benefit duration plans to plans with maximum-year payouts.  Additionally, insurance carriers are moving to simplified underwriting (where several medical questions are asked) in order to better manage their risk.  These trends lead to a more conservative approach and should help stabilize the LTC market.

Also, with a timely purchase of LTC insurance, individuals may find the right combination of coverage and premium with the right carrier.  It is important to understand how LTC insurance fits into their overall retirement planning.  This is true whether employees are seeking an individual policy or supplementing an employer-sponsored base plan with additional coverage.

Even as several carriers are no longer offering LTC coverage, there are a few carriers that have been more optimistic in their approach.    If interest rates rise and the economy rises with them, we may see more competition with more carriers willing to enter (or re-enter) the LTC marketplace.  It’s key to seek advice specific to your organization’s goals to ensure that you have the most up-to-date information in the ever-changing landscape of LTC insurance.

Photo Source: Muffett