Amendment to Regulation on “Grandfathered” Health Plans under Healthcare Reform

On June 17th, the Departments of Health and Human Services, Labor and the Treasury (the Departments) issued the “grandfather” regulation which, by addressing how health plans can retain a “grandfathered” exemption from certain new requirements, helps protect Americans’ ability to keep their current plan if they like it. At the same time, Americans in grandfathered plans will receive many of the added benefits that the new law provides. The regulation also minimizes market disruption and helps put us on a path toward the competitive, patient-centered market of the future.

The grandfather regulation includes a number of rules for determining when changes to a health plan cause the plan to lose its grandfathered status. For example, plans could lose their grandfathered status if they choose to make certain significant changes that reduce benefits or increase costs to consumers. This amendment modifies one aspect of the original regulation.

Previously, one of the ways an employer group health plan could lose its grandfathered status was if the employers changed issuers (carriers)-switching from one insurance company to another. The original regulation only allowed self-funded plans to change third-party administrators without necessarily losing their grandfathered status. This amendment allows all group health plans to switch insurance companies and shop for the same coverage at a lower cost while maintaining their grandfathered status, so long as the structure of the coverage doesn’t violate one of the other rules for maintaining grandfathered plan status.

Wayne Perkins

Commercial Risk Service

479-273-1376

Wayne@CommercialRiskService.com

Safety- A Matter of “Awareness”

Let me ask you a couple of questions about safety in your workplace:

---Do you have a safety manual, but you don’t know exactly where it is because there is so much dust on the manual you can’t see it?

---Does your Safety Committee consist of you and 3 other people that haven’t worked for you in 3 years?

The truth is, Safety manuals and Safety Committees are good to have, but they are not really effective tools in keeping your employees from having on-the-job injuries.

Twenty years ago (yes, that’s right- 20), I worked for a grocery chain, and we were having a lot of injuries to our employees. Our Worker’s Comp costs were going through the roof, and we couldn’t figure out how to stop them. We had about 300-400 employees, so we decided to put in a partially self-funded plan. Now each store and its manager was responsible for the claims frequency and severity of its own employees. Their store was charged for the claim. As a matter of fact, part of the Manager’s bonus was based on injuries during the year. GUESS WHAT HAPPENED TO OUR FREQUENCY OF EMPLOYEE INJURIES- We had a 75% reduction in frequency and a 50% reduction in severity!!!

I tell you that not to suggest you go to a partially self-funded plan, but to help you understand what really matters in safety on the job. One thing changed- there was accountability for actions, and the managers made sure every employee knew how important it was for them to be safe! Voila- a Safety Program that works!

So, in conclusion, if you really want to reduce on-the-job injuries, there are two things I can recommend that I KNOW will help:

  1) CARE about keeping your employees safe
  2) Let the employees know safety is important to you- make them aware

Sounds pretty simple, doesn’t it? In reality, its hard work, but I can assure you it is easier than making your employees read the safety manual!!!

Does anyone have any experiences about safety they would like to share?

Commercial Insurance Rate Increases and What Causes Them

Many business owners ask me what causes their insurance rates to increase. There are often multiple causes for rate increases. A business’ loss history can affect insurance rates. If a business has multiple property or liability claims in a three or four year period, company underwriters will start taking a sharper look at that business to determine the risk of similar future claims. If the underwriters view the risk as higher than other similar businesses, they will factor that into their proposal. If claims are frequent or severe enough, some of the more conservative companies will simply decline to quote which will reduce the number of companies in the marketplace. When this happens, there is upward pressure on insurance rates.

Another factor in increasing insurance rates is the overall economy and the stock market. When the stock market is doing well, many insurance companies invest heavily, which is a major source of their profitability. During these times, insurance companies are looking to increase their market share and are willing to insure higher risk companies. Generally, the more competition among insurance companies in the marketplace, the lower the insurance rates for individual businesses.

Finally, regional factors can affect insurance rates for individual businesses. If a particular region of the country suffers an above average claim increase, insurance companies serving that region may decide rate increases are warranted. An example would be recent property rate increases in the marina industry in Arkansas, Missouri, Oklahoma, and Texas. This region suffered very high property losses in 2008 and 2009. In addition to the property losses, the stock market was also struggling during this time. Insurance companies started increasing rates in order to protect their profitability and the ability to serve the marine industry in the future.

How can a business improve their attractiveness to the insurance industry? A good risk reduction program is essential! Any steps that can be taken to reduce the likelihood of future property or liability claims should be taken. Be sure and share this information with your insurance agent. Your agent should be able to help you design a risk reduction program. A good program will help to lower your long-term insurance costs and help insurance company underwriters to provide the best premium rates available.

For more information on risk reduction opportunities, please contact Commercial Risk Service.

Doug Timmons, CIC, CMIP

Marine and Resort Insurance Specialist

Commercial Risk Service

dougt@commercialriskservice.com

Local 479-273-1376 x-25

Toll-free 888-636-0886 x-25

Employee Risk Management: Reduce Your Workers' Compensation Costs

As work environments become safer, the number of workers' compensation claims continues to decline. At the same time, the cost per claim has continued to rise along with the rising cost of health care in general, making the business costs substantial. Along with death and taxes, workers' compensation is something every small business owner with employees must deal with.

As of September 2008, figures from the U.S. Department of Labor's Bureau of Labor Statistics show that businesses spend an average of $28.87 per hour for each employee. This includes salary, as well as benefit expenses such as health insurance, vacation time, and workers' compensation benefits. Overall, 69.7 percent (or $20.13) of the hourly compensation given to employees goes toward salary, and 30.3 percent ($8.74) goes toward benefits, with 1.6 percent ($0.47) of that benefit percentage making its way to workers' compensation. Although 47 cents an hour doesn't sound like much, it adds up over time and can severely impact your business expenses, particularly if this per-hour amount increases.

Job classification is the main factor determining the cost of your premiums. Roofers and construction people, who work around heavy equipment, have the highest risks, whereas office workers have the lowest risk. The basic rates for each job classification are set by each individual state, but there are more guidelines for insurance carriers to follow than there are rules.

By working with your risk management insurance carrier, you can implement both pre- and post-claims programs that will reduce your workers' compensation costs overall. Besides implementing procedures that make your business a more desirable client in terms of insurance rates, you can save even more on your risk management costs by implementing the following practices:

When paying an employee time and a half for overtime, you may only have to report the regular wages, decreasing the amount of payroll that determines your insurance premiums.

Implement programs that bring workers back into the workforce at a faster rate, even if it means bringing them back part time or in a limited capacity. Rising workers' compensation costs are primarily due to increased use of benefits and longer duration of disability. The more time an employee spends on disability, the more wage replacement and medical services increase in cost.

Look for a pattern to claims. Do some locations or areas in your business have fewer claims than others? Determine the reason why. Reducing the number of workers' compensation claims gives your business a better safety record. This makes you a much better risk to an insurance company, making it more likely they will give you better rates in the long run. Overall, this is the best way to reduce your risk management expenses.

Judge Rules Healthcare Challenge Can Go to Trial

On Thursday, in Pensacola, Florida, U.S district Judge Roger Vinson said that crucial pieces of a lawsuit challenging the Obama administration’s health-care overhaul can go to trial. The judge stated that he wants to hear more arguments over whether it’s constitutional to force citizens to buy health insurance.

The ruling also stated that it needs to be decided whether it’s constitutional to penalize, with taxes, people who do not buy insurance and to require states to expand their Medicaid programs. Judge Vinson set a hearing date for December 16th. The lawsuit will likely wind up before the U.S. Supreme Court.

In his 65 page ruling, Vinson largely agreed with the 20 states and the National Federation of Independent Business, saying Congress was intentionally unclear when it created penalties in the legislation. The states have argued that Congress is overstepping its constitutional authority by penalizing people for not doing something-not buying health insurance.

Drug use “snapshot” reports on current levels in Workplace

According to the Substance Abuse and Mental Health Administration, an agency withing the U.S. Department of Health and Human Services, 1 in 10 (10%) of the employees nationwide admit to illegal drug use within the last month- most of them full time employees.

Some of the highest rates of illegal drug users among business types are:

---Restaurants 19.2%

---Construction workers 17.8%
---Truck Drivers 14.7%

Most of the drug use involved marijuana or cocaine.

How effective is your current drug policy within your company? Do you know if any of you employees are operating machinery or driving your company vehicles while under the influence of illegal drugs? How about heavy prescription drugs? This is also a large problem.

Make sure you have a RANDOM drug testing policy that every employee has signed off on. In addition, make it MANDATORY that all employees that have an accident on the job are drug tested within 8 hours of the injury. You are putting your business at a very high risk if you’re not doing both of these things!

In addition, more than 18% of employees were found to be on heavy prescription medication, mostly anti-depressants or barbiturates, while they are at work. Scary, isn’t it?

The Principal to Exit Medical Insurance Business

After careful consideration, The Principal has decided to exit the medical insurance business (insured and self-insured) and has entered into an agreement with United Healthcare to renew medical insurance coverage for customers of The Principal as the business transitions within the next 36 months.
We will be contacting all of our Principal clients to set a time to meet with you personally and review your situation. If you have any questions, feel free to contact Wayne Perkins at 479-273-1376 or wayne@commercialriskservice.com.