Is self-insuring your company’s medical plan the best way to slay the traditional fully-insured medical carrier dragon?

Yes, self-insured plans can potentially reduce an employer’s overall healthcare costs and lead to lower annual premium rate increases. Before discussing the positive aspects of self-insured medical plans, let’s determine if you can stomach some of the insurance nuances that make it all work.

Self-Insuring is exactly as represented – you are underwriting the majority of the risk. Can your entity take on the financial risk that is assumed with a self-insured plan? When a large individual claim occurs or when the group has an overall high claim year, you as the employer must have the cash on hand to fund up to the “stop loss limit“ on those claims. The “stop loss limit” is the claims loss insurance limit you will purchase through a private carrier that would act as the corporation’s re-insurer. Over a 10-year period, the average employer with 100 employees or more will typically see 2-3 years of above average claims.

As an employer, are you willing to take on an in-depth and ongoing role in plan management? Knowing the details of your employee and family member’s health is critical to determining plan costs, care, and design.

Many employers cannot and do not want to take on certain roles and responsibilities. However, for those employers who have the bandwidth to do so, self-insured medical plans are an excellent way for the employer to potentially reduce overall medical costs and annual rate increases, keep employees healthier, improve cash flow, and eliminate fully-funded carrier plan state taxes and margins.

Fully-funded carrier plan rates follow trends. They hurt those employers who are managing a healthy workforce and help those who are not. With rates increasing significantly over the past 5 years it is no surprise that 3 out of 5 workers are insured by self-insured plans. With the uncertainty in the healthcare market, carriers are currently conservatively pricing new rates. This means higher premiums to consumers which can provide a larger cushion to the carriers.

Since employers with self-funded plans monitor and manage their own claims, they have direct knowledge of their employees’ health. This allows the employer to beef-up their focus on wellness and preventative care programs that help educate employees in areas of concern due to claim results.

Most employers with self-funded medical plans see lower premium rates than fully-funded carrier plans due to a healthier employee population and claims knowledge. They also do not have to pay state taxes and carrier margins that are imbedded within fully-funded plan premiums.

It is important to have the right broker and TPA to partner with, but here’s what an employer can typically anticipate when they move forward with a self-funded medical plan:

1. The medical plans have national provider networks
2. Stop-loss insurance will protect the employer from large individual claims and high aggregate claim years
3. Custom plan and coverage designs
4. National pharmacy networks
5. Plan designs are identical for out of state employees
6. Proactive care management
7. Disease and wellness management
8. Detailed experience reports

These plans best fit employers with 100 or more employees, but may make sense for even those with 50 or more.

Give your employees an instant raise, while you save $$$

Someone told me I can pay my personal cell phone, and home internet bills pre-tax through my paycheck, what do they mean?

This is true. In fact, employees can use certain programs through IRS code 132(d), which allows the employee to pay for a portion of their personal cell phone bills, home internet bills, association or union dues, tools, supplies, certifications, etc., all on a pre-tax basis. Why does the IRS allow this? It’s simple, here’s a couple of examples. When you call in sick to work, you’re probably using your personal cell phone. When you send a work email from your home computer, you’re probably using your home internet. There are many other examples of everyday expenses that might be converted to legitimate tax-deductible business expenses.

Paying for these types of expenses on a pre-tax basis can add more money to your paycheck. Take an average $100/mo. cell phone plan. You can save 30% or more in taxes, which means your monthly income goes up by $30/mo. When adding these various expenses up and paying them pre-tax then you can generate some extra spendable cash.

This is also great news for your employers. Even though your net paycheck is higher than usual, your employer will also save. They save on things like payroll taxes and worker’s comp insurance due to their employees having lower taxable income. When adding these savings over multiple employees, your employer can save a significant amounts. Bringing this program to your employer’s attention will potentially save you money, and will make you an instant office hero to both your employer and your colleagues.

Added note: We have found that the average employee has $217/month in bills they can pre-tax. This saves them over $60/month in taxes. The employer will save about 9% on average if we include FICA and worker’s comp savings. That’s almost $20/month for each employer enrolled in this program.

A simple win/win solution to potentially reduce your fraudulent worker’s comp claims

Although my firm does not implement worker’s comp policies, I am often asked about ways to reduce premiums.  I should note, more claims = higher future premiums.  Reducing real claims may just come down to work-site safety and employee morale.  This is something to bring a worker’s comp expert or work-site safety expert in on.  I work closely with many worker’s comp professionals that actually have proven records for reducing real claims.

Real claims will happen from time to time and hopefully not at the fault of a dangerous work environment, but due to a pure accident.

Then you have the other side of the claims world, the fraudulent side.  Often it is cheaper for the insurance carrier to settle a claim that may look fraudulent in the eyes of the employer then to fight it, especially in my State of California.  This really pisses employers off for two huge reasons.  One, the claim will significantly affect their future insurance premiums and two, the employee got paid for lying (supposedly.)

In my opinion, humans tend to be good and want to do the right thing.  With that being said, when an employee is living paycheck to paycheck and needs to provide for their family they will do anything they can to keep dinner on the table.  You may have heard a version of this example before: Your employee in this scenario is at an annual family reunion.  Every year the family is divided into two softball teams.  Your employee is looking to make up for last year’s loss and smacks a ground ball to left field, sliding into second base.  Where he fractures, cracks, & tears parts of his body he never knew existed.  He manages to suck up the pain until Monday morning where he marches into work without any sign of distress.  While at the office, whom ever used the water-cooler before this employee managed to drip a bit of water on the laminate flooring which is now more like an ice-skating rink (plaintiff attorney’s words.)  Boom, crash, bang and here comes your worker’s comp claim.

This employee’s only option for keeping his income was to make sure his accident occurred while on-duty.

Like I said before, humans tend to be good and want to do the right thing.  If your employee had another option to replace their income without having to create a worker’s comp claim which could be risky and may take several months to see any money, wouldn’t they use that option.  As an employer, wouldn’t you want your employee to use the alternative option if their accident occurred outside of work?

Easy fix in 3, 2, 1…

Probably the second lowest cost insurance policy behind group life is group disability insurance.  Group disability insurance will replace a good portion of your employee’s income if they become sick or disabled and are not able to work.  In fact, they could start receiving income in as little as 7 calendar days and be paid out up to normal retirement age.  And again yes, these plans are very inexpensive.

Your broker should be bringing this insurance product up to you.  If they haven’t then ask them about it the next time you meet with them.  If they have and you have not opted in then maybe the product has not been explained to you in this way.  One fraudulent worker’s comp claim will cost you significantly more than a simple group disability insurance policy.  Plus, you will look like a hero to your employees for offering such a plan, especially if it is ever needed.

Written by: Bijan Noori is the Principal of Baypoint Insurance Services based in Long Beach, CA.  Bijan provides insurance benefit plans for groups ranging from 2 to 500 employees.

bnoori@baypointgroupllc.com

www.baypointgroupllc.com

Dir. 562.216.7846

Mob. 949.306.6746

Using technology with your health benefits

Reduce Errors

I have found that over the years technology can be quite helpful when enrolling new groups.  It is helpful for all involved the broker, employer, employees and group administrators.  One of the main reasons is that when you are having employees use online platforms, you can avoid typical paper errors.

Typical paper errors most often include missing information.  Insurance carriers don’t just want certain employee information, but need certain information.  Software is usually designed to not allow employees to move forward without filling out required information.

Other “paper” errors occur out of non-legible writing.   Although most of us can read our own handwriting to others our penmanship can look like chicken scratch.

Hesitation

There is always some hesitation from groups who have always used paper enrollments in the past, but after our first round of online enrollments the groups are much happier with the end results.  Many administrators or human resource professionals do not give their older employees enough credit.  For the most part, every employee will have internet access, email addresses, and basic computer skills.  The only one of these required when an employee is doing an online enrollment on their own is the basic computer skills.

But, even those who have zero computer skills should not worry.  Your broker should bring in their team of enrollers to help every employee walk through the enrollment process.  The enrollment process typically only takes 5-10 minutes depending on the plan designs and the employee’s decision making capabilities.

Once the enrollment is complete the employees will now have online and mobile access to all their selected plans which should include their ID numbers, virtual cards, summary of benefits, etc.  The broker should also make sure employees receive physical cards and booklets, this stuff is still appreciated by the old-school employees.

Happy Medium

Occasionally, groups do a complete 180 from no-tech to high-tech.  I would suggest a slower approach.  Maybe start with online enrollments and then gradually add other tech pieces.  For example, some groups move over to 100% online resources.  Groups will submit proposals online and have very little interaction with their broker.  When issues occur calling an 800 number or searching an FAQ page can be a real pain.  Even 24 hour chat or message boards can get frustrating.  I find that most plan administrators want and need to speak to their broker directly.  Someone who knows everything there is to know about the specifics of their clients without needing a refresher from the employer.

It is nice to use the best of both worlds.  Use the technology side for your insurance benefits to make information more accessible, and enrollments easier.  Use the human broker to help your group out with any billing issues, client specific problems, or when a new quote is needed.

Tech Bonus Items

Not all programs offer more than online enrollments, but some do.  Check with your broker to find out what extras are included in their software program.  For example, we offer at no-charge a ton of online HR resources like help with employee on-boarding.  With our system, if employers choose to use this feature, new employees will register to the platform we build for the employer.   Once logged in the employee will be prompted to complete their W-4, I-9, etc.  The system will allow HR or the employer to upload employee handbooks, employment contracts, and other documents.  We will even customize each document to pdf format, and add-in any required e-signatures or e-initials.  Employees can upload any certificates, training hours, ID’s, etc. if needed or wanted.

Additionally, employers can use our platform to send out surveys, memos, enrollment reminders, etc.

Still Debating the Switch

From my experience, employers do not like to rock the boat or change the status quo.  Of all the changes an organization can make, upgrading their medical benefits technology should be very easy and modest.  “Should” is the key-word.  Make sure your broker has experience in making switch.  A lot of brokers are also stuck in their ways and do not want to accept these changes to enhanced technology as the new norm.  What they need to remember is that upgrading their benefits platform will reduce the number of common mistakes, and will create more time for the broker to find out what is truly most important for to their clients.  9 times out of 10 employers want their broker to be more accessible and respond to inquiries quicker.

Now, I bit the bullet and pay for all these services for my clients.  Not all brokers and firms will do this and many times try to pass off the costs to the employers/clients.  What these brokers are failing to see is that the investment in their clients will allow them to be more accessible and more responsive.  These will in-turn create a better, longer lasting relationship and may even create referral opportunities.

Written by:

Bijan Noori is the Principal of Baypoint Insurance Services based in Long Beach, CA.  Bijan provides insurance benefit plans for groups ranging from 2 to 500 employees.

bnoori@baypointgroupllc.com

www.baypointgroupllc.com

Dir. 562.216.7846

Mob. 949.306.6746

How to pass your life insurance medical exam with flying colors

I give my clients these tips every time they are preparing for a paramed exam

  1. Take your medical exam early in the morning before breakfast
  2. Do not drink caffeine or workout before your exam
  3. Do not drink alcohol the day of or the day before
  4. Stop taking any kind of workout supplement at least five days before your medical exam including protein powder (unless your physician has you on a regiment)
  5. Try to keep your carb intake low for a few days before your exam
  6. Stay away from trans fat and anything that is high in bad cholesterol

I hope this helps you or your client get the best insurance rating possible.

Young Money

Young Money

We all know how important it is to put away money for retirement purposes. Well maybe not all of us, but it is time to start thinking about it. When mentoring young professionals are you also coaching them on different avenues of putting money away for their futures? And if you are, what kind of advice is it? Here is something that works for all ages, but it can be supercharged for those young professionals who are making too much money and not putting enough of it away.

This might shock you a bit.

Here is an example of a 10 Pay Whole Life Policy done for a 28 year old male in great health and financial standing.

$30,000 premium for 10 Years. Easy math will tell us the total premium paid into the policy is $300,000.

By the way this can be done both in smaller and larger amounts.

Now at age 38, the young gentleman lets the money ride and continues to grow his cash value without paying long term capital gains taxes.

By age 50, he has over $700,000 he can access, but refrains and lets the cash build up even higher. P.S. he has a death benefit of $1.8mm at this point.

At age 60 he finally decides it is time to retire and wants to use some of his cash value. He has just over $1,200,000 of cash value he can access. He wants to continue being responsible about his money and instead of taking the lump sum, he and his broker calculate he can take a tax-free income of about $65,000 per year. If you add in taxes this is equivalent to taking about $92,000 out of a qualified retirement account.

So how long will he be able to take that tax-free $65,000 out for? 25 years.

Yes, 25 years multiplied by $65,000 is equal to $1,625,000. This is a taxable equivalent of over $2,300,000.

How much did he put in again? $300,000. That sounds like a pretty good deal to me.

Oh and one last thing, even after he has taken all that money out, at age 86 he still has a death benefit to leave for his family of about $1,900,000 which will be paid out non-taxable to the beneficiaries.

No Brainer!!!

Grandparents and Parents, remember that you can easily do this for your grandchildren or children.

Business owners, this may be the best pair of golden handcuffs currently on the market for your movers and shakers.

Long Beach Register

I was shocked when I heard that the Long Beach Register was set to publish their first edition in mid August. It seems as though all other major newspapers have decided to pull back on paper publishing due to the easy instant access the internet has provided the papers’ former subscribers over recent years. As well as that, the higher costs of printing and declining sponsor interest would make any publisher hesitant to start a brand new newspaper. On the other hand the OC Register seems fairly successful and is widely distributed in Orange County. What are your thoughts on Long Beach’s first Register? Do you think it will be a hit or destined for failure?

http://www.lbbusinessjournal.com/long-beach-business-journal-newswatch/1728-long-beach-register-set-to-publish-first-edition-august-19.html