Cost Cutting Health Benefits

Reviewing Your Options

Like many employees, businesses consider ways they can cut expenses during difficult economic times. One common focal point of such is employee benefits programs, especially in the area of health benefits. Considering that health benefits are frequently the most expensive aspect of a company’s benefits program, this may seem like a reasonable, logical place for an employer to take cost-cutting measures. However, employers should carefully consider what the consequences will be from making cuts to their employee benefits programs; whether or not there are any alternative cost-cutting options available; and, if benefits cuts are a must, how they can lessen the impact.

The Consequences

Perhaps you, as an employer, have decided to target your employee benefits program and make some significant cost shifts toward your employees with the idea that you will cut costs and save money. If the cost shift involves higher deductibles and/or co-pays for employees, then they may procrastinate seeing a physician when they’re suffering symptoms of illness or injury, forgo or delay filling vital prescription medications, and do without wellness care. If the cost shift involves premium increases, then many employees, especially young and relatively healthy ones, might decide to drop coverage all together. The exodus could leave your plan with a larger and more undesirable risk pool.

These types of cost shifts can very well cost the health plan more money over the long run. Furthermore, it can negatively impact your company’s financial bottom line when it comes to employee morale, productivity, disability costs, and absenteeism.

An Alternative

An alternative to cost shifts would be to focus your benefit dollars on the measures that will enhance employee well-being and overall health. Some ideas would include:

  • Using incentives to motivate employees to participate in wellness activities, such as weight loss and fitness programs, tobacco cessation classes, and nutrition education and counseling
  • Using incentives to motivate employees to participate in activities that can screen and detect serious medical conditions, such as glucose level testing, blood pressure screenings, cholesterol testing, and completion of health risk assessments
  • Providing extensive preventive care coverage
  • Having an employee assistance program (EAP) available to your employees can be especially helpful during poor economic conditions since it can provide resources and/or referrals for things like financial counseling, crisis intervention, and stress management

If You Must…
Despite the negative consequences, you might feel that cost-shifting is your only feasible option. If so, make sure that you do everything possible to soften the blow to your employees, such as:

  • Offer voluntary benefits to your employees. This will cost you little, if any, money. While the employee will be responsible for most to all of the cost, they’ll benefit from group rates, convenient payroll deductions for the premiums, and the ability to personalize their coverage selections to meet their own unique needs.
  • Offer flexible spending accounts (FSAs). FSAs let employees pay for health care expenses with pre-tax dollars and get the most of their health care dollars.
  • Offer employees consumer-directed health plans (CDHPs). These plans combine a health savings account (HSA) with a health plan that has a higher deductible.

All of the above options have a commonality in that they each require an employee to get more personally involved in their own health and the management of their health-related benefits. Whether the change makes the employee more vigilant in scheduling preventive care visits, participating in wellness activities, or budgeting their future health care expenses, the point is that the employee is assuming more responsibility for their health care and management thereof. It is this greater individual responsibility on the part of the employee that can be one of the best long-term cost-management tools available to an employer.

At Cleary, we know how important a comprehensive benefits package can be to your continued success. Give us a call today at 617-723-0700 or contact us by e-mail and we will work with you to create a plan that meets your business objectives, takes into account state and federal laws, and capitalizes on incentives and innovative solutions now being offered.

SCA Contracts

Impending Legislation

The Department of Labor (DOL) published a final rule on August 29, 2011 implementing Executive Order #13495 on “Non -Displacement of Qualified Workers” under SCA contracts. This rule will not be effective until the Federal Acquisition Council issues regulations, which should happen very soon. It will pertain to every contract under the Service Contract Act and the only exemptions must be approved by the head of the contracting department. Employees of the predecessor contractor must work for three months before being eligible “to be offered the first right of refusal“. An employment offer must be made to all the predecessor employees in writing or electronically. The predecessor employees will be given ten days to accept an offer from the successor contractor. All workers eligible must be service employees. A successor can refuse to hire a predecessor employee if they can prove that the employee is not qualified. The predecessor must provide a list of their employees within ten days before the end of their contract. The prime contractor is also responsible to ensure that these rules are flowed down to all their subcontractors. The DOL’s Wage and Hours Division will be responsible for auditing these rules.

Earlier, on August 10, 2011, the Office of Federal Contract Compliance Programs (OFCCP) published an advance notice of proposed rulemaking in the Federal Register on a new Compensation Data Collection Tool. OFCCP is increasing its audit and investigative activity, and this would be another tool to root out non-compliance with Equal Employment Opportunity and anti- discrimination requirements. While a proposed rule is likely in the next several months, a number of questions regarding the scope and details of the data collection tool and related items must be addressed.

The Professional Services Council’s (PSC) Labor Relations Committee has invited OFCCP to speak at their next meeting on September 21, 2001 in Arlington, VA. They will be exploring these two important rules, both of which have wide ranging implications for the government services industry.

At Cleary, we know how important a comprehensive benefits package can be to your continued success. Give us a call today at 617-723-0700 or contact us by e-mail and we will work with you to create a plan that meets your fringe benefit obligations and provides your employees with valuable benefits.

Earthquake Insurance

Why It’s Important for Everywhere

When most people think about earthquakes in the United States, Alaska and California are the first two states they think of. However, Tuesday’s earthquake in Virginia shattered this idea. The initial 5.8 magnitude quake was followed by several aftershocks, which were felt as far away as Georgia, Chicago and Toronto. Although there hasn’t been extensive physical damage, the feeling of safety many people had was shaken. Many residents of the larger cities on the East Coast relocated there after experiencing tremendous earthquakes in California. One of the most important things that has become apparent from the Virginia earthquake is the need for preparedness and ample insurance coverage.

Earthquake damage isn’t covered under most business or homeowners insurance policies. Chris Hackett, Director of Personal Lines Policies for Property Casualty Insurers Association of America, stated that most policies don’t cover damage from sinkholes or earth movement. However, fires or other incidents that are triggered by an earthquake may be covered by property insurance. He encourages policyholders to thoroughly read their policies to understand any exclusions.

Many people think they won’t experience a major earthquake during their lifetime. This is especially true for those who live in areas where earthquakes happen every 100 years or less. Although many people may not experience a strong earthquake like the recent Virginia incident, there are over 5,000 incidents recorded each year by the USGS. Damage from earthquakes has been recorded in all 50 states in history. There have been reports of damage in 39 states alone since 1900. This proves that while some people may not live in areas that commonly experience earthquakes, they’re still not immune to the threat.

Earthquake coverage can be purchased as a rider to a personal or business property insurance policy, and insurance costs vary by location, building type and the age of the building:

It’s much more expensive to insure older buildings
Brick structures are more expensive to insure
Buildings with wood frames withstand the force of earthquakes better, so it’s cheaper to insure them

Every earthquake policy also has a deductible. This means that homeowners must pay upfront for a portion of the damages before the insurer pays the remaining amount. The deductible may be up to 20% of the structure’s replacement value. The percentage depends on the insurer and the location of the structure.

Concerned about your personal insurance coverage? At Cleary, our experienced Personal Lines department will work with you to evaluate your insurance needs, identify exposures and create a customized insurance portfolio. Give us a call today at 617-723-0700 or contact us by e-mail.