Slip and Falls: Where Do You Stand?

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Presented by: Christopher F. Hawthorne, CPCU, CIC

As we settle into winter, it is an appropriate time to revisit the issue of liability from slip and falls (S&F). As mentioned in prior Cleary Quarterly articles, Massachusetts laws have changed, making it easier to establish liability to those involved. As such, we are seeing an increasing number of slip and fall claims filed against our clients. When someone is injured, who is responsible?

 

S&F claims can be quite large and long-lasting claims. When a person is initially injured, the extent of the damage, medical bills, possible lost wages and other pain and suffering are unknown and therefore a personal injury attorney will often wait as long as possible before filing a lawsuit against the potentially responsible parties. However, it is always a good idea to gain knowledge about how to claim for slip and fall even before visiting the attorney!
 

As an example, Mr. Smith is walking into a local restaurant and slips on ice. After Mr. Smith falls and injures himself, he or his attorney may identify several potentially responsible parties. Those responsible might be the restaurant, the property owner or a snow removal contractor if one is used. All three will need to notify their General Liability insurance carrier and potentially, three different carriers will then post a reserve on their insured’s file be it the restaurant, the property owner and the snow removal contractor.

 

All three carriers then will wait to hear from Mr. Smith’s attorney. These losses can sit for several years before the actual suit arrives to allow the loss to grow. Meanwhile all three parties are paying premiums based on the assumption that their insurance is responsible and this can raise the rates for all three.

 

To avoid this scenario, consider the following risk management steps:

  1. Risk Transfer between the property owner and the restaurant via the lease. The lease should spell out who is responsible for snow and ice removal and be clear to what degree. (Parking lots, walkways, steps, roof, etc.)
  2. Risk Transfer between the responsible party above and the snow removal contractor. This agreement should be just as clear in terms of which party will handle the different areas where snow and ice will accumulate.
  3. In each case an attorney should be used to have the responsible party indemnify, hold harmless and defend the other party.
  4. Verification of Insurance and the limits for the ultimate responsible party with particular attention to affirming that there is no exclusion in General Liability policy of the responsible party for the removal of ice and snow.

 

In this example, if the property owner via the lease takes responsibility and also hires the snow removal contractor, then the lease should protect the restaurant and the contract between the snow removal contractor and the property owner should protect the property owner.

 

The end result after a slip and fall is the easy identification of which party will handle the claim and allow the other two parties to protect their loss history and future premiums. This subject deserves close attention by all three parties to make sure they know where they stand after someone falls.

Cadillac Tax and Other Key ACA Taxes Repealed

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On Dec. 20, 2019, President Trump signed into law a spending bill that prevents a government shutdown and repeals the following three taxes and fees under the Affordable Care Act (ACA):

  • The Cadillac tax on high-cost group health coverage, beginning in 2020;
  • The medical devices excise tax, beginning in 2020; and
  • The health insurance providers fee, beginning in 2021.

The law also extends PCORI fees to fiscal years 2020-2029.

ACTION STEPS

Employers should be aware of the evolving applicability of existing ACA taxes and fees so that they know how the ACA affects their bottom lines. Cleary Insurance, Inc. will continue to keep you informed of changes.

Cadillac Tax

The ACA imposes a 40 percent excise tax on high-cost group health coverage, also known as the “Cadillac tax.” This provision taxes the amount, if any, by which the monthly cost of an employee’s applicable employer-sponsored health coverage exceeds the annual limitation (called the employee’s excess benefit). The tax amount for each employee’s coverage will be calculated by the employer and paid by the coverage provider.

Although originally intended to take effect in 2013, the Cadillac tax was immediately delayed until 2018 following the ACA’s enactment. A federal budget bill enacted for 2016 further delayed implementation of this tax until 2020, and also:

  • Removed a provision prohibiting the Cadillac tax from being deducted as a business expense; and
  • Required a study to be conducted on the age and gender adjustment to the annual limit.

Then, a 2018 continuing spending resolution delayed implementation of the Cadillac tax for an additional two years, until 2022.

There was some indication that these delays would eventually lead to an eventual repeal of the Cadillac tax provision altogether. The Cadillac tax has been a largely unpopular provision since its enactment, and a number of bills have been introduced into Congress to repeal this tax over the past several years.

The 2019 continuing spending resolution fully repeals the Cadillac tax, beginning with the 2020 taxable year.

Health Insurance Providers Fee

Beginning in 2014, the ACA imposed an annual, nondeductible fee on the health insurance sector, allocated across the industry according to market share. This health insurance providers fee, which is treated as an excise tax, is required to be paid by Sept. 30 of each calendar year. The first fees were due Sept. 30, 2014.

The 2016 federal budget suspended collection of the health insurance providers fee for the 2017 calendar year. Thus, health insurance issuers were not required to pay these fees for 2017. However, this moratorium expired at the end of 2017. A 2019 continuing resolution provided an additional one-year moratorium on the health insurance providers fee for the 2019 calendar year, although the fee continued to apply for the 2018 calendar year.

The 2019 continuing spending resolution fully repeals the health insurance providers fee, beginning with the 2021 calendar year. Employers are not directly subject to the health insurance providers fee. However, in many cases, providers of insured plans have been passing the cost of the fee on to the employers sponsoring the coverage. As a result, this repeal may result in significant savings for some employers on their health insurance rates.

Medical Devices Excise Tax

The ACA also imposes a 2.3 percent excise tax on the sales price of certain medical devices, effective beginning in 2013. Generally, the manufacturer or importer of a taxable medical device is responsible for reporting and paying this tax to the IRS. The 2016 federal budget suspended collection of the medical devices tax for two years, in 2016 and 2017. As a result, this tax did not apply to sales made between Jan. 1, 2016, and Dec. 31, 2017. A 2018 continuing resolution extended this moratorium for an additional two years, through the 2019 calendar year. The moratorium is set to expire beginning in 2020.

The 2019 continuing spending resolution fully repeals the medical devices tax, beginning in 2020. Therefore, as a result of both moratoriums and the repeal, the medical devices tax does not apply to any sales made after Jan. 1, 2016.

PCORI Fees The ACA created the Patient-Centered Outcomes Research Institute (PCORI) to help patients, clinicians, payers and the public make informed health decisions by advancing comparative effectiveness research. The Institute’s research is funded, in part, by fees paid by health insurance issuers and sponsors of self-insured health plans. Under the ACA, the PCORI fees were scheduled to apply to policy or plan years ending on or after Oct. 1, 2012, and before Oct. 1, 2019.

The 2019 continuing spending resolution reinstates PCORI fees for the 2020-2029 fiscal years. As a result, specified health insurance policies and applicable self-insured health plans must continue to pay these fees through 2029.

This ACA Compliance Bulletin is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.
© 2019 Zywave, Inc. All rights reserved.

“Prepare & Prevent, Don’t Repair & Repent”

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Presented by: Jonathan Hall

When was the last time you checked your smoke alarm? How about your fire extinguisher? Where will you and your family meet when you need to evacuate? If you don’t know the answer to these questions, you are not alone. September is National Preparedness month and it’s important for all of us to take a moment to ensure what we value is safe. The best way to protect yourself is to prevent a loss from occurring.

Did you know that the US Fire Administration found in 2017 that every 24 seconds, a fire department in the United States responds to a fire somewhere in the nation? In addition, a home fire occurs every 88 seconds and half of home fire deaths happen between 11 p.m. and 7 a.m. Taking steps to prepare and prevent will save your life and your property. My family and I went through our own fire safety and prevention planning this month. We found two malfunctioning fire alarms and a fire extinguisher that expired four years ago!

“Prepared, Not Scared”

The thought of needing to rely on an emergency kit or plan seems frightening, but not something I prioritize in my daily life. Having an emergency plan for any type of disaster will ensure you and your family are prepared in the case of a fire, hurricane, tornado, earthquake, or any other potential disaster. If your house is located near a forest, it might be possible for it to be burnt into ashes by wildfire. To prevent such conditions, you may need to protect your home with a fire defense plan that might avert major loss to the structure. Also, creating an emergency kit to keep in your home and your car takes moments vs. what it could save you in the event it wasn’t accessible when you needed it most.
You can also create your own custom emergency plan for any weather related scenario by visiting: Connect with Weather. Ready.gov/September provides a vast amount of information on what you’ll need to plan for in the event of an emergency. They also have several characters and fun activities if you’re creating a plan with kids. I feel better prepared in the event something does happen. As Gandhi said “the future depends on what we do in the present.”

 

References

https://www.ready.gov/

https://www.usfa.fema.gov/data/statistics/

http://www.connectwithweather.com/create-your-plan

https://www.usfa.fema.gov/prevention/outreach/smoke_alarms.html

 

Are You Ready for the Massachusetts Paid Family and Medical Leave?

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Be Prepared for the January 1, 2021 Law

Starting in 2021, the state of Massachusetts will offer paid family and medical leave benefits to employees. Payroll deductions for employees begin October 1, 2019. This program allows employees to receive a portion of their pay while on leave to recover from an illness or injury, bond with a new child, take care of a sick or injured family member or certain military-related events.
  • Eligible employees: Consistent with the financial eligibility requirements for unemployment insurance.
  • Benefit percentage: Dependent on if employee earns more or less than 50% of the Massachusetts average weekly wage.
  • Elimination period: Benefit payments begin on the 8th day.
  • Maximum benefit payment period (within a 52 consecutive week period): 12 weeks family leave. 26 weeks family leave to care for a covered service member. 20 weeks medical leave. 26 weeks in aggregate for family and medical leave. Consecutive leave isn’t required. Intermittent leave is acceptable (e.g. each Tuesday for physical therapy appointment).
  • Maximum benefit: $850/week for the first year. 64% of the state average weekly wage annually thereafter. In many cases it’s important to maintain your current short term disability program so higher wage earners who gross more than $70,000 annually will not be impacted and employees will have the ability to receive more than 26 weeks’ worth of benefits. Carriers will be able to adjust your rates to accommodate for the state being primary payer.
Premium payment
The premium cost for the family and medical leave benefit is 0.75% of employee wages up to the Social Security cap. The medical leave contribution is 0.62% of payroll. The family leave contribution is 0.13% of payroll. Who pays the premium depends on the size of the employer:
  • Employer has less than 25 employees – Employees pay premiums.
  • Employer has 25+ employees – Employees and employers share the premium. Contribution rates are as follows:
    • Medical leave – 60% employer, 40% employee
    • Family leave – 0% employer, 100% employee

Employees aren’t charged more than the state’s rate. Employers may choose to pay more to give their employees coverage beyond the minimum requirements of the state plan.

Let’s look at an example
Olivia is expecting her second child soon. While her oldest son is in pre-school, she works for a large retail chain in Massachusetts and is paid $14.00/hour. Her schedule is consistent at 30 hours/week — making her weekly pay $420. Olivia gives birth to her baby and doesn’t experience any complications from the birth. Because of the Massachusetts paid family and medical leave, she is guaranteed 12 weeks of paid family leave. Because Olivia makes less than 50% of the state average weekly wage, she receives 80% of her average weekly wage, which is $336/week for a total of 12 weeks.
For more information please refer to the Massachusetts Department of Family and Medical Leave (DFML)
https://www.mass.gov/guides/prepare-for-paid-family-and-medical-leave
Information in this letter is courtesy of Principal Life Insurance Company

 

Auto Post Accident To Do Suggestions

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Presented by Christopher F. Hawthorne, CPCU, CIC

It is frustrating to see a client’s auto carrier pay a claim to a third party based on false information.

An example being a client who had a car, with four people in it, pull in front of him and slam on their brakes. He stopped his vehicle but he did touch the other car. There was no visible damage to either car and no one was injured.  He exchanged information but did not call the police. He then filed the report of the accident in case a claim was made against him.

Soon after we received notice that five people were claiming to be injured and that the other car was totaled. The carrier paid $190,000 and stated without evidence and due to the fact it was a rear-end, they had to make the payment.   We see variations on this all too often.

To help avoid this situation, doing the following will put your insurance carrier in a better position to defend you and not pay false or inflated claims.

Once you have made sure you are safe, we suggest you:

  1. Do not admit fault, apologize or offer unsolicited information such as you were rushing or that you are very busy.
  2. Call the police with goal of having an official report filed to support your information. Request officer’s name and badge number.
  3. Obtain name and contact information of driver and the auto’s owner.
  4. Obtain the name of the other autos insurance carrier and policy number if possible.
  5. Get the name of all passengers in the other auto and note where they were sitting in the car.
  6. Obtain the names of any witnesses and their contact information.
  7. Ask police to ask each person if they are injured or if anything was damaged (EX; Musical Instruments).
  8. Get the year, make, model and license plate number of the other auto/s.
  9. Take pictures of your auto, the other auto, as well as, any surrounding aspects that might be useful such as a traffic sign that is shrouded by trees.
  10. If the weather is a factor, try to capture with picture and print out the weather report for that day.
  11. Record name and contact information of anyone in your auto.
  12. Complete an accident report and submit to Cleary Insurance as soon as possible.

If police are not called, do not leave until the other party had driven away.  We have seen situations where both parties agree that the police are not needed, one party departs and the other party then calls the police.

If police are called, do not leave the scene of the accident until the police arrive.  If you can no longer wait, do not leave without calling the police and getting permission. If you leave and the other party stays, you could be charged with leaving the scene of an accident.

If you would like an accident form to keep in your auto, please contact your Cleary representative.

By obtaining and recording the above information, you can put your insurance carrier is a stronger position to defend you and reduce or eliminate claim payments. As always, it takes a team effort!

Should Parents “Go for Broke” on Youth Sports?

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Many parents encourage their kids to play sports in middle school and high school because they truly believe it’s good for their children’s physical and mental well-being. Athletic participation also provides an opportunity to instill discipline and develop social skills that could have a positive impact on their children’s futures.
But lofty hopes and dreams may inspire some parents to overspend on youth sports. The costs can really add up at more competitive levels, when payments for professional instruction, specialty equipment, and travel kick into high gear. On average, families with children who competed on elite teams spent an average of $3,167 per player in 2018, up from $1,976 in 2013.

Surveys suggest that many parents are willing to make big financial sacrifices to cover these costs, possibly even taking on credit-card debt or delaying retirement. Unfortunately, some parents may have unrealistic expectations, such as those who are confident their children will become professional athletes, despite the very long odds against it. That doesn’t mean parents should give up hope on their kids, instead of spending money themselves, they can discuss the team fundraiser ideas with the school administration. Schools can contact the organizations that could help in acquiring team sponsorships and funds. Those funds can help yours and other children in sports without parents having to take up financial responsibility for it.

Parents who assume that investing in competitive athletics will pay off in the form of college scholarships are also likely to end up disappointed. Only about 2% of high school athletes benefit from athletic awards, and few of them are “full rides.” College coaches often have more roster spots to fill than available scholarships, so many athletes receive partial awards that may cover only a small fraction of tuition costs.
Although most parents have good intentions, there may be some unhealthy side effects. According to a 2016 research study, young athletes whose families invested a large portion of their household income to sports felt more pressure to succeed and were less likely to enjoy the experience. And even if their kids love to play, parents should attempt to keep the costs in an affordable range so that other important financial goals (such as saving for college and retirement) are not neglected.
Sources: The Wall Street Journal, April 21, 2019;
Family Relations, April 2016

PCORI Filing Deadline Looming

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The Affordable Care Act imposes fees on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to help fund the Patient-Centered Outcomes Research Institute (PCORI). PCORI is responsible for conducting research to evaluate and compare the health outcomes and clinical effectiveness, risks, and benefits of medical treatments, services, procedures, and drugs.
Plan sponsors must pay the PCORI fee by July 31 of the calendar year immediately following the last day of that plan year.
  • Policy Or Plan Ending Date in the months of: Jan. 2018 – Sept. 2018
    File return no later than: 7/31/2019
    Applicable rate: $2.39
  • Policy Or Plan Ending Date in the months of: Oct. 2018 – Dec. 2018
    File return no later than: 7/31/2019
    Applicable rate: $2.45
  • Policy Or Plan Ending Date in the months of: Jan. 2019 – Sept. 2019
    File return no later than: 7/31/2020
    Applicable rate: $2.45
PCORI fees are reported annually on the 2nd quarter Form 720 and paid by its due date, July 31st. The fees are based on the average number of lives covered under the policy or plan.

The types of plans that must pay the PCORI Fees by July 31, 2019 include the following

  • Health/accident plans
  • HRAs with a plan year that began 1/1/2013 that are not an excepted benefit (Employer contribution is greater than $500)
  • Health FSAs with a plan year that began 1/1/2013 that are not an IRS excepted benefit (Plan has employer contributions with the maximum reimbursement greater than two times an employee’s salary reduction election or employer contribution is greater than $500)
  • Retiree plans

Please Note that the PCORI fee is nearing the end:

The PCORI fee will not be assessed for plan years ending after September 30, 2019. This means that for calendar year plans, the last year for assessment is the 2018 calendar year. For non-calendar year plans that end between January 1, 2019 and September 30, 2019, there were be one last PCORI payment due by July 31, 2020. There will not be any PCORI fee for plan years that end on October 1, 2019 or after.

Please click on the links below to access Form 720 and Form 720 instructions.

Employer Sponsored Wellness Programs

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Wellness Programs

Introduction

Employers may sponsor wellness programs as a means to promote better health and higher morale among employees, with the hope that helping employees to embrace a culture of health will lead to higher productivity with lower health-related costs.
Wellness plans may be included in health insurance programs, or they may stand alone. These plans may include, but are not limited to, the following:

  • Tobacco cessation, exercise, weight management, or other behavior modification programs.
  • Health risk assessments.
  • High blood pressure or cholesterol screenings.
  • Health education.
  • Subsidized health club memberships.

While participation in wellness programs is voluntary, employers may offer incentives for participation or even disincentives for nonparticipation.

Advantages

While employers are searching for definitive methods to establish return on investment (ROI) for dollars spent on wellness programs, development of financial measurement tools for wellness ROI is not yet mature. Still, it is logical for employers in the United States to seek financial advantages from promoting a culture of health in an environment where the onset of chronic disease is shifting to people of younger age who, prior to becoming eligible for Medicare, are most frequently covered under health plans paid for by employers. Advantages for both employers and employees arise when employers seize the opportunity to use their access to employees as an opportunity to provide education and facilitate changes leading to an increase in emotional well-being and reduced risk of illness.

According to the U.S. Centers for Disease Control and Prevention, chronic diseases are the leading causes of death and disability in the United States. Among the most common, manageable or preventable chronic diseases are diabetes, heart disease, stroke, arthritis, and cancer. Obesity is also an urgent health concern, affecting as many as one in three adults and one in five children. Rising rates of obesity are leading to more diabetes and heart disease. Reducing the prevalence or severity of these diseases and conditions can reduce the emotional stress experienced by individuals, empowering them to focus more on productive work-related activities. Additionally, preventing or delaying the onset of diseases will likely correlate to less demand for employers to pay for expensive hospitalization and fewer treatments with costly specialty pharmaceutical medications.

Financial Savings

To appreciate the potential financial savings possible through the prevention or delay in onset of disease, it is important for employers to understand how small percentages of high-utilization participants in health plans may drive much of the cost. In general, 20 percent of a health plan’s population drives 80 percent of cost for all medical and prescription claims paid in a plan year. Often, just 5 percent of a health plan’s population in a given year will be high-cost claimants accounting for approximately half of all paid claims. Such individual high-cost claimants increasingly include inpatient hospital treatment and pharmaceutical claims costing in excess of $500,000 for a single claimant’s course of care. For example, a claimant could cost more than $600,000 annually for treatment of diabetes that has advanced to end stage renal disease requiring kidney dialysis. Similar costs are associated with other diseases moving from chronic to acute stages. On the other hand, $600,000 could be more than it would cost in a year for an employer-sponsored plan with 1,000 enrolled employees to pay for all employees plus dependents to have annual preventative physical examinations performed by their primary care physicians. When average coverage for an employee plus family enrolled in a plan costs over $16,800 per year, it can be frustrating for the employer to realize that there will not be significant, immediate discounts in return for providing wellness benefits. However, it takes premium payments from a pool of many members to offset the claims paid for just one high-cost claimant.

The financial rewards associated with the successful movement of a pool of insured members into a culture of health are likely to be more prevalent over the long term. Efforts directly promoting healthy behaviors can change the trajectory of employees’ long term health. Employers with low turnover and high average tenure of employees may be in the best position to reap the financial benefits of effective wellness programs targeting reduction in illness risks. However, all employers have the potential to benefit from the coordination of wellness initiatives with existing workplace safety initiatives and performance improvement plans. Workers’ compensation, disability benefits, and paid sick leave expenses all have the potential to be reduced as employee performance increases in an improving culture of health.

If you would like more information please contact Cleary Insurance, Inc. at 617-723-0700.

Working for Yourself? Don’t Sacrifice Your Retirement

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Self-employment can be rewarding personally and financially, but it comes with some tough challenges including long hours, an uncertain income, and a lack of structured benefits such as health insurance and retirement plans.

But this is not the only reason it may be worthwhile to divert a sizable chunk of your earnings into tax-deferred retirement accounts. Doing so generally reduces your taxable income.

Anyone can set up an IRA, but contribution limits are relatively low — $5,500 in 2018, or $6,500 if you are 50 or older.

Here are two additional options that may allow larger contributions.

Solo 401(k). A solo 401(k) is a one-participant plan for business owners who have no other employees. Tax-deductible (or pre-tax) contributions to an individual 401(k) can be made in two ways.

As the employee, you can contribute as much as 100% of your annual compensation, up to the $18,500 annual maximum in 2018 ($24,500 if you are age 50 or older).

As the employer, you can also contribute an additional 20% of your earnings (25% if the business is incorporated) and deduct it as a business expense. Total contributions are capped at $55,000 in 2018 ($61,000 for those age 50 and older). A solo 401(k) plan may also allow plan loans and/or hardship withdrawals.

The deadline to establish an individual 401(k) and formally elect salary deferrals is December 31 of the year in which you want to receive the tax deduction (or before fiscal year-end for corporations). For businesses taxed as sole proprietors and partnerships, salary deferrals and profit-sharing contributions for 2018 must be deposited into the account by the April 2019 personal tax filing deadline.

SEP-IRA. You can make tax-deductible employer contributions of as much as 25% of net earnings, up to $55,000 in 2018. If you have eligible employees, you must contribute the same percentage to SEP-IRAs in their names; of course, the dollar amounts would be different for different salary levels. You are not required to contribute to a SEP-IRA every year.

In addition to any employer SEP-IRA contributions, you and your eligible workers can generally make pre-tax employee contributions up to the normal IRA contribution limits. You have until the April 2019 tax filing deadline to set up a SEP-IRA and make 2018 contributions.

Distributions from 401(k) plans and SEP-IRAs are taxed as ordinary income. Early withdrawals (prior to age 59) may be subject to a 10% federal income tax penalty.