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A recent study exploring trends in corporate wellness underscores the value of initiatives aimed at reducing chronic illness, but found no net savings at all from lifestyle management programs—those aimed at reducing health risks through initiatives focused on weight loss or stress management.+

465448405The study, conducted by RAND researchers and executives of PepsiCo, praised programs aimed at helping the chronically ill to stay healthy through education and reminders to take their medication. These programs resulted in significant cost savings, but the same could not be said of lifestyle management programs.

The study examined more than 67,000 people eligible to participate in PepsiCo’s “Healthy Living” wellness program, which includes both disease management and lifestyle components for employees and their families. (PepsiCo provided funding for the study.) Researchers found that seven years of continuous participation in the program — whether in its disease management component, its lifestyle component, or both — resulted in an average monthly reduction of $30 in health care costs per member. But when researchers looked at each component separately, they found the savings was largely attributable to disease management.”

Cost Savings from Chronic Disease Management

“Yes, it’s not surprising that the majority of the savings were due to improved management of chronic disease conditions,” says Lockton’s Director of Health Risk Management Kate Hansum.

“At Lockton, we stratify an employer’s workforce membership by risk, noncompliance, cost and condition in order to prioritize actionable targets to assist an employer’s health plan in closing gaps in care. In a sample population, non-compliant high-risk members cost almost $300 per member per year more than compliant high-risk members,” says Hansum.

“The study noted that the decrease in costs was primarily due to a 29 percent reduction in hospital admissions. In addition, improved management of chronic disease often reduces emergency room visits, which, according to Lockton’s InfoLock data warehouse, costs an average of 9.24 times more than a physician office visit. These decreases in admissions and emergency room utilization represent low hanging fruit opportunities for shorter-term cost reduction.”

Commenting on PepsiCo’s “Healthy Living” program, which resulted in improved management of disease and related cost savings, Hansum notes that all disease management programs are not created equal.

“There can be significant variation in program performance due to lack of employer-specific member identification, poor member engagement and/or the level of comprehensive care gap and improved clinical outcome strategies and interventions,” she says.

The Bottom Line for Lifestyle Programs

Researchers acknowledged that lifestyle programs like smoking cessation or weight loss may indeed save organizations money, but over a longer period of time. But the study concludes that employers and policy makers “should not take for granted that lifestyle management components can reduce health care costs or even lead to net savings.”

“I agree with the study’s conclusion that lifestyle management programs should not be implemented for the sole purpose of attaining reduced health care costs or a net savings. However, researchers noted that the greatest savings achieved resulted from those participating in both the disease management and the lifestyle management programs, including a 66% drop in hospital admissions. The improved financial performance may be due to better targeting of participants, the study suggests, and I agree: Targeting members with disease management opportunities and additional lifestyle issues replicates the right approach to risk reduction,” adds Hansum.

Hansum says Lockton’s strategic model is built on the concept that claims follow risk, where risk reduction becomes an outcome of disease and lifestyle management programs. While highly compliant workers cost less than those who are non-compliant, both categories need to reduce risks to slow the progression of disease and reduce costs.

“At one client, moderate risk members cost $5,105 per member per year compared to low risk members whose costs were $1,413 per member per year, which is 360% higher. High-risk workers cost $12,514 per member per year, which equates to an increase of 245% compared to moderate risk members, so the opportunity can be quite significant,” says Hansum.

Elimination of Lifestyle Programs Unlikely

Researchers stopped short of suggesting the elimination of lifestyle management programs that didn’t demonstrate big cost savings:

“That would be unlikely,” said Helen Darling, president of the National Business Group on Health, who is quoted in the article. “Keeping workers healthy can prevent them from developing high-cost diseases, like diabetes, and these programs aren’t just there to save money per se,” she said, alluding to the value of recruiting talented workers at companies who’ve demonstrated a strong commitment to health. It sends a message that the company cares about people, and attracts workers who want to work at a company that demonstrates a culture of health, Darling said.

Hansum concurs, concluding: “Improving or eliminating lifestyle risks is the first line of defense to keep workers healthy and to mitigate the progression of disease. It seems unlikely that incentives or focus on lifestyle risks will be eliminated at any employer who is serious about health strategies to improve the health, well-being and productivity of their workforce. Comprehensive wellness models employ multi-layer strategies that target the healthy, as well as those most at risk and non-compliant, including the high cost/complex cases. Employers who use them are typically committed to transforming to a healthy culture and environment, including financial health, work-life balance and human capital investment.”

If you have any questions about wellness initiatives at your organization please reach out to me by email at RRuotolo@Lockton.com.

+ http://www.nytimes.com/2014/01/07/your-money/study-raises-questions-for-employer-wellness-programs.html?_r=1

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Mid-sized companies continue to voice concerns about potential penalties and administrative hassles despite recent implementation delays to the Obamacare rules for employers.480315619

Smaller companies employing between 50 and 100 full-time workers will now be exempt from the mandate to offer affordable health insurance to employees until 2016, the government announced in February. This followed on the heels of last summer’s delay, where Obama administration officials moved the compliance deadline from 2014 to 2015 for companies with more than 50 full-timers. Companies with less than 50 full-timers were always exempt from the health reform mandate to offer health insurance to workers.

Mid-sized companies with 100 or more full-time workers—those working more than 30 hours per week—must comply with the mandate to offer health insurance coverage in 2015 or face the so-called nuclear penalty—fines of at least $2,000 and up to $3,000 per employee.

In what was perceived to be good news for mid-sized employers, the Treasury Department weakened compliance regulations in February by saying that companies with 100 or more workers would need to offer affordable insurance coverage to 70 percent of their full-time workers or incur penalties—down from the original 95 percent requirement. But these employers would need to increase to the 95 percent threshold by 2016, according to the February guidance.

Affordability Penalty Concerns

But mid-sized companies are particularly concerned with the $3,000-per-employee penalty, where employers are required to offer qualified and affordable coverage to their full-time employees, according to Lockton Senior Vice President and Director of Compliance Services Mark Holloway.

To be deemed “qualified and affordable,” an employer health-care plan‘s share of the total allowed costs of benefits must be at least 60 percent (actuarial value), and the employee’s premium contribution can’t be more than 9.5 percent of her W-2 pay for single coverage. If an employer plan fails to meet these criteria, and a full-time employee chooses to purchase taxpayer-subsidized coverage on the health-insurance exchange, the employer will pay a penalty of $3,000 per employee.

“From my consultations with clients, it’s this affordability requirement and the effect it may have on lower income employees that’s particularly troubling to a number of mid-sized employers. Workers on Medicaid aren’t eligible to buy insurance on the health exchanges, but lower income workers (e.g., those with household incomes less than four times the federal poverty level) could be adversely affected. The federal poverty level changes each year, and the government applies one number to the 48 contiguous United States and another for Alaska and Hawaii,” adds Holloway.

Administrative Hassles

Administrative hassles also top the list of concerns raised at mid-sized companies—human resources departments whom Holloway says are stretched beyond their limited resources, and who may now be forced to offer proof against employee health reform challenges.

“The administrative burden relates to workforce management, where employers must be able to track and readily prove that a particular employee worked less than 30 hours, and so would be considered outside the requirements of Obamacare rules for full-time workers. Many employers don’t have an administrative system set up to support this, and their activities will also be subject to federal guidelines,” he says.

For example, in the case of the February announcement, federal officials required each employer with fewer than 100 workers to pledge, under penalty of perjury, that they hadn’t cut back on their workforce simply to qualify for the one-year delay exemption.

Holloway concludes: “It’s best for employers to be discreet and avoid big noticeable shifts in this area, as we learned from some highly-publicized employer missteps in this area. Other large organizations have taken the tact of moving to a ‘more flexible work force’ and eliminated an entire middle layer of management. This can only mean one thing in light of health reform exemptions, but it’s at least a bit more subtle.”

Questions? Comments? Please feel free to weigh in below or reach out to me if we can of further assistance at RRuotolo@Lockton.com.


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A new study from Unum once again confirms the important correlation between effective benefits communication and heightened employee engagement levels.

The study, Beyond the Usual Benefits, which builds upon five years of research, offers useful guidance to employers 104714482engaged in communications planning for 2014 benefits open enrollment and confirms previous third party research, which recognized heightened job performance levels found at companies with engaged employees.*

A number of key findings from an annual survey of working adults are included in the booklet, including the following guidance:

  • How to implement an employee education program that will influence workforce satisfaction
  • How to craft an effective “3 + 3” communications strategy that gives employees sufficient time and information to make good decisions at enrollment time
  • How to increase opportunities to help your company stand out

Importance of Voluntary Benefits Communication

The study also touched on the importance of voluntary benefits education and communication, underscoring the increasing importance of the financial protection they provide to employees.

“The gap in workplace satisfaction between those who have access to voluntary benefits and those who do not continues to widen,” the study found.

Lockton’s Voluntary Benefits Northeast Practice Leader Steven Eisenberg says the study helps to confirm the real reason why voluntary benefit program growth is on the rise; namely, the significant supplementary role of voluntary benefits to an employer’s global benefit strategy.

“We are seeing growth in voluntary benefits participation at Lockton because we advocate for a more successful communication platform—a well-articulated employee educational process that intentionally clarifies the range and value of voluntary benefits for employees as they relate to consumer driven health plans—and because our approach always includes an empirical gap analysis of what an employee needs or doesn’t need,” says Eisenberg.

“When an employer offers a benefit program to an employee, especially voluntary benefits, the employer demonstrates goodwill, particularly when the benefit offering covers one’s spouse and family. This increases employee morale, and a happier employee is more likely to stay and be more productive—that’s what’s in it for employers,” Eisenberg adds.

Tapping Lockton’s Communication Resources

Employers should understand the vital importance of effective communications in support of employee benefits and health reform, and this is an area of special expertise at Lockton. Please feel free to reach out via email if you’d like to know more at RRuotolo@Lockton.com.

Click to download your copy of Unum’s Beyond the Usual Benefits: The Power of Employee Education to Influence Workforce Satisfaction

* Gallup, State of the American Workplace: Employee Engagement Insights for U.S. Business Leaders (2013).

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The IRS issued final regulations on health reform’s play or pay mandate, the employer shared responsibility provisions of the Patient Protection and Affordable Care Act (ACA).

180767525Lockton’s Health Reform Advisory Practice hosted a webinar in response to the news, providing strategic insights and actionable takeaways for those wrestling with the complexities of the law’s employer shared responsibility provisions.

Employer Mandate

In general, the pay-or-play mandate requires employers to provide health insurance for their employees or pay a penalty to offset costs the government incurs to provide health care for the uninsured.  There is an exception for employers who averaged fewer than 50 full-time employees or full-time equivalents during business days of the prior calendar year. By definition, full time employees are those working 30 hours per week for each month. Seasonal employees can be disregarded if an employer exceeded 50 FTE/FTEq employees for 120 days/four months or less. (Note: The IRS reserved guidance on application of controlled group rules to governmental employers and church groups.)

The effective date for the mandate is start of the 2015 plan year, but some exceptions apply, including transition relief. But the final regulations postpone for another year, until 2016, the application of the employer shared responsibility provisions to employers with at least 50, but less than 100, full-time employees (including full-time equivalents).

To determine if the manadate applies to an employer in 2015, employers can use a period of at least six consecutive months in 2014, instead of full calendar year. For these transitioning employers, who then become subject to the mandate, there will be no penalties applied from January through March if they offer minimum value coverage to full time employees by April 1, Lockton Health Reform Advisory Practice leaders explained.

Transition Rule #1

Employers with calendar year plans must offer coverage by the first day of payroll beginning in 2015, but several transition rules may delay the effective date of the play or pay regulations for employers with non-calendar year plans.

The first transition rule for employers requires that the non-calendar year plan was maintained as of Dec 27, 2012, and did not change to a later plan year. The plan’s eligibility terms as of Feb 9, 2014 are applicable here, and there will be no penalty with respect to an employee who is offered qualifying (i.e., minimum value) and affordable coverage by the first day of 2015-16 plan year, under eligibility rules in effect on Feb 9, 2014.

It’s worth noting that employers must also offer minimum essential coverage to the requisite percentage of full time employees and children by the first day of 2015-16 plan year, or they may suffer the nuclear penalty for the portion of 2015 preceding the 2015-16 plan year—a $2,000-per-employee fine levied across a company’s entire workforce, after adjustments. A non-calendar year plan that until the first day of the 2015-16 plan year offered coverage to all full time employees, but it wasn’t minimum value or affordable until then to some of the FTEs may benefit in such a case.

Transition Rule #2

The second transition rule applies to employers who attained one or more non-calendar year plans with the same plan year as of Dec 27, 2012, and did not change to a later plan year. In this case the non-calendar year plan(s) would have to have covered at least 25 percent of the employees, not just full time employees, on Feb 9, 2014 (or on any date in the preceding 12 months) or who had offered coverage to at least one third of the employees during the open enrollment period ending before Feb 9, 2014. There would be no penalty with respect to an employee who is offered minimum value and affordable coverage by first day of 2015-16 plan year but again, an employer must also offer minimum essential coverage to requisite percentage of full time employees and children by first day of 2015-16 plan year or suffer the nuclear penalty for portion of 2015 preceding the 2015-16 plan year.

“But it would still leave in place a second, lesser penalty if workers at the company obtain subsidized insurance under the law,” says Lockton Senior Vice President and Director of Compliance Services Mark Holloway.

A non-calendar year plan that needs to expand its eligibility rules to cover some full time employees who were not eligible before the 2015-16 plan year could benefit in such a case. But this won’t work if an employer has a large ineligible population,  he adds.

Transition Rule #3

The last exception applied to employers who maintained one or more non-calendar plans with same plan year as of Dec. 27, 2012, and did not change to a later plan year, as in the previous scenarios, but the non-calendar year plan(s) would have to have covered at least one third of the organization’s full time employees on Feb 9, 2014 (or on any date in the preceding 12 months) or where coverage would have to have been offered to at least 50 percent of full time employees during the open enrollment period ending before Feb 9, 2014. No penalty would apply with respect to an employee who is offered minimum value and affordable coverage by the first day of the 2015-16 plan year. It should be noted that an employer must also offer minimum essential coverage to the requisite percentage of full time employees and children by the first day of 2015-16 plan year, or they may suffer the nuclear penalty for portion of 2015 preceding the 2015-16 plan year. An employer with a non-calendar year plan that can’t meet transition rule #2 due to large numbers of ineligible part-time or seasonal employees might benefit in such a case.

Help Available For Employers

“I would say it’s good news, but it’s not a panacea for companies,” said Holloway.

“I think people have realized the law is here to stay and we are going to have to live with it,” he added. “This is fairly good transition relief that pushed some things off, but employers are still going to have to figure out how to navigate this stuff.”

Need help? Reach out to me at RobRuotolo.com.

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The onset of health care reform has caused many employers to think about the long-term effects of continuing to offer health coverage. Will they offer health coverage in the future and, if so, for how long?  Which workers will continue to receive coverage?159302282

Workers Have More Options for Health Coverage

Previous findings from Paul Fronstin, Ph.D., of the Employee Benefit Research Institute (EBRI) and others have indicated that workers will have an array of options for health coverage beyond their employer once health insurance exchanges are fully operational and insurance-market reforms like guaranteed issues, modified community rates and subsidies are fully implemented. Research from the Urban Institute and others  indicates that we shouldn’t expect many changes in the short-term, but there’s less research and a great deal of uncertainty surrounding the long-term effects of employment-based health coverage.

Employers: Change in Short-Term Unlikely

In a related study on employment-based health benefits* EBRI reveals that the Congressional Budget Office has studied a number of scenarios, one of which concluded that there could be 20 million fewer people with employment-based coverage by 2019. But the report also indicates that health coverage continues to be prized as the most important benefit among workers. What’s more, its importance to the job hiring process remains high and employers seem to understand this, and have indicated that they have no immediate plans to discontinue coverage.

But a kind of domino effect could ensue if large employers begin to drop coverage: “Others could follow and it could have a ‘me too’ effect.”

Trend Toward Empowering Workers to Choose Benefits

Employers can take heart from the fact that most workers were satisfied with their current health benefits and didn’t wish to change their current mix of benefits and wages. What’s more, the report indicates that workers expressed confidence that their employers and unions will choose the best health plan available on the market, but less confidence in their own ability to choose the best available plan if their employers and unions chose to stop offering coverage. This last point is evidence of a trend away from defined benefit health coverage toward defined contribution health plans, similar to 401(k) plans where the responsibility is placed on the worker to choose the best financial coverage with the employer’s match contribution.

Strategic Assistance Available

How do you feel about the shift toward defined contributions for health coverage? What findings have you discovered at your organization? Have you gauged how your workforce feels about it at a Town Hall meeting? Have you initiated an employee pulse survey?

Weigh in below and reach out if you would like a free consultation. Lockton can help you to formulate a strategic plan and find the best approach for your organization. Contact me at RRuotolo@Lockton.com.

*Views on Employment-Based Health Benefits: Findings from the 2013 Health and Voluntary Workplace Benefits Survey


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Employers can expect the value of voluntary benefits to increase with the advent of health care reform in 2014, says Lockton’s Voluntary Benefits Northeast Practice Leader Steven Eisenberg.

153626054While health reform law aims to limit private insurance plan cost-sharing charges, employees in employer-sponsored plans will still be responsible for deductibles, co-payments, and co-insurance with in network maximum out-of-pocket limits of $6,350 for individuals and $12,700 for families in 2014, as the non profit Center on Budget and Policy Priorities and others have pointed out.

Eisenberg sees this is an opportunity for employers to round out their plans with voluntary benefit offerings like critical illness and accident insurance, which reduce exposure to out-of-pocket expenses while providing a more personal approach to addressing the unique healthcare needs of employees and their families.

Critical Illness Insurance Policies

“Cancer studies estimate that Americans are surviving cancer and other critical illnesses at a rate of 67 percent, placing a renewed emphasis on surviving cancer in addition to preventing it in the first place. This, then, becomes a matter of reducing an employee’s financial exposure to this type of extreme health hardship, which continues to be the leading cause of bankruptcy in the United States,” says Eisenberg.

“Employees will max out their medical plan in such instances, facing up to $12,000 or more in out-of-pocket medical expenses, and there are three ways they can pay the bill: They can pay all at once, in which case they’ll destroy the capital as well as its potential investment value; they can take out a loan, in which case they’ll pay interest on top of the principal; or they can invest in voluntary benefits insurance, which makes the most financial sense, especially for employees with a family history of cancer, heart attacks, stroke, organ failure and Alzheimer’s,” Eisenberg explains.

“Critical illness insurance is designed to make a lump sum of $5,000 to $20,000 immediately available in such situations. It requires only a minimal investment each week from employees in employer-sponsored plans, can be made available on a guaranteed basis and is usually administered through the convenience of payroll deductions,” he adds.

Accident Insurance Policies

Accident insurance is another way employers might look to mitigate employee out-of-pocket expenses, especially in the case of high deductible plans. Eisenberg cites the hypothetical case of an injured teenager during a soccer game to illustrate the point:

“If an employee has a $2,500 deductible, he may be looking at $400 for the ambulance or $1,500 in the case of an air ambulance; then $75 for the emergency room; $75 for the doctor’s diagnosis; $1,000 if an overnight stay is required and $200 per night thereafter. But accident insurance—again, for a modest investment each month—can reduce or eliminate this out-of-pocket expense. What’s more, the employee in this scenario would be paid even if he had already satisfied his deductible, since accident insurance is an individual voluntary policy.”

Eisenberg concludes: “Financial hardship has a direct impact on the productivity and engagement levels of employees, but proactive employers will find many ways to mitigate such instances with a strategic mix of voluntary benefits offerings.”

What are your thoughts? Do you agree? Feel free to reach out with any questions or if you need assistance at RRuotolo@Lockton.com.

For more on this topic you can read my related post on employee satisfaction level increases from voluntary benefits.

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Taking A Stand For Workplace Wellness

A year-long NIOSH study evaluating sit-stand workstations brings wellness to the proverbial seat of our sedentary lives; namely, our workstations, where most of us spend long hours each day sitting in front of a computer.

The findings from NIOSH, the National Institute for Occupational Safety and Health, supplement recent studies highlighting health problems caused or exacerbated by prolonged sitting and go beyond the bailiwick of most corporate wellness programs, which tend to focus on healthy lifestyles with support for smoking cessation and stress reduction.

Lockton Company’s Chief Medical Officer Eric P. Justin, MD, MPH, MBA extolls the virtues of sit-stand and treadmill workstations and recommends incorporating elements of exercise and movement into the workplace in addition to daily workouts at home of 30 minutes or more.

“Sitting all day behind a desk can put you at risk of major health problems, even if you work out for the recommended 30 minutes each day. A sedentary lifestyle contributes to obesity, high blood pressure, heart disease, diabetes, depression, back pain and other musculo-skeletal problems. What’s more, we’re now hearing reports that sitting for more than two to four hours a day seems to be a significant health risk factor, possibly negating many of the benefits of daily exercise sessions,” says Justin, referring to studies documented on the NIOSH Science blog.

Wellness Metrics

“I think employers can demonstrate some hard metrics with sit-stand workstations like weight loss and the physiological benefits of standing, in addition to anecdotal feedback that we often hear like ‘I feel better and have more energy,’” says Justin.

“But some of this seems like common sense: We’ve been told by our grandmothers and others not to be couch potatoes, sitting in front of the TV for long periods of time eating and drinking things that aren’t good for us. Stand-up desks address the equivalent sedentary behavior we engage in at work,” he adds.

Adapting Wellness To Our Work Environments

“I think employers do well to look at alternative to sitting because of the benefits to our core musculature, not to mention the long term opportunity of offsetting employer health plan risks. Quite a number of us have already switched to standing workstations here at Lockton headquarters,” says Justin, who is pictured above standing at his workstation.

“This idea of workplace wellness is an integral part of Lockton’s Health Risk Solutions practice, where we focus on measuring health risks with data to reduce risk, and then help employers find appropriate solutions.”

“We adapt to our work environments in unique ways. For example, in my previous radiology and nuclear medicine practice, I needed to physically stop what I was doing every 50 minutes to give my eyes a brief rest. I’d look out the window, fixing my eyes on the horizon for a minute or two. I also sought out ‘road trips’ to other sections of the hospital to discuss cases, but also to stretch my legs.”


“But there are structural blocks to adapting a wellness approach in many workplace environments, and I believe this remains one of the biggest obstacles to change. Here at Lockton we have sitting alternatives like balloon ball chairs, which are kept in our mini discussion lounge area and can be swapped out for our chairs during different intervals throughout the day to help our backs and postures,” he adds.

Justin concludes: “The more employers try to incorporate wellness options like this into the physical workplace environment, the more employees will experiment to discover what’s best for them.”

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Comparisons between health savings accounts and flexible spending accounts continue to befuddle a great number of employees, even as enrollment in HSAs continues to climb, according to a recent survey conducted by Fidelity Investments® of Americans who have the responsibility for making household health benefits decisions.187122442

The survey indicated that 65 percent of respondents have trouble understanding the features of HSAs while a full 73 percent believe an HSA is pretty much the same thing as the older Flexible Spending Accounts. This is significant because many employers have turned to high deductible plans in an effort to reign in the cost of health care and the results seem to fly in the face of employer educational efforts during the past 10 years positioning tax-advantaged HSAs as a way to reduce out-of-pocket expenses associated with high deductible plans.

Continued Growth of HSAs

In the face of this apparent lack of understanding HSAs continue to grow at a brisk pace: At the end of 2012 the total number of Americans enrolled in HSA-eligible health plans who chose HSAs reached 8.2 million, a number which is expected to climb to 14.2 million—a 73 percent rise— by the end of 2015.

The lack of awareness indicated by survey respondents could result in a failure to realize the long-term opportunities of HSAs; namely, to help fund the medical benefits of employees during their retirement years, not to mention short-term employee benefits related to reducing the amount of tax paid on income and, for employers, reducing the amount of corporate FICA paid.

FSA “Use-it-or-Lose-It” Provision Change

News of the HSA survey coincides with a decision made last week by the IRS and Treasury Department allowing employees with flexible spending accounts to rollover up to $500, summarily ending the 30-year use-it-or-lose-it provision. Interestingly, among the 73 percent who confused HSAs with FSAs, the FSA use-it-or-lose-it provision was cited as the most often confused factor between the accounts. The decision whether to allow the rollover is at the employer’s discretion, but the rollover opportunity could amount to little, in the last analysis, if most employees are unable to distinguish an HSA from an FSA, as the survey indicated.

For more on the FSA carryover rule change click here to receive free white paper guidance from Lockton Companies.

Employer Communication is Most Influential

“Health savings accounts provide a tremendous opportunity for American employees to take better control of their health care spending while also benefiting from the tax advantages afforded by the accounts,” said William Applegate, vice president, Fidelity Investments. “The special tax advantages of these accounts allow employees to accumulate funds over their working life and withdraw funds tax-free for qualified medical expenses in retirement. With many Americans uncertain of the savings feature of the HSA, employers are in an ideal position to provide educational guidance on the many benefits of the accounts.”

By a margin of nearly two-thirds (65 percent) respondents enrolled in their company’s HSA-eligible health plan who opened an HSA said they received the right amount of employer communication to help them make a decision but, more importantly, said their employer or their spouse’s employer was the most influential source used to guide that decision.

Indeed, clear and compelling multi-year educational messages about HSAs should be integral to the process of communicating workplace benefits so that employees are fully informed about the features and benefits of HSAs well in advance of making their year-long commitments during benefits open enrollment.

Companies like Lockton are committed to designing effective benefit communications programs to counter the growing confusion between HSAs and FSAs, helping your organization to navigate the increasing complexities of plan design and federal regulations—complexity that’s likely to increase with the advent of health reform.

If you, or a colleague you know, would like more information please feel free to reach out to me at RRuotolo@Lockton.com. Our Lockton Northeastern Communication Practice is available for consultation.

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4 Reasons Why Obamacare Won’t Kill COBRA

Many benefits experts believe the enactment of certain health-law provisions under Obamacare next year could help U.S. employers recoup billions of dollars in claim expenses currently paid 181553641out through COBRA to workers retaining medical coverage after leaving a company or organization.

Some have said state and federal health exchanges created under the Affordable Care Act will all but replace COBRA coverage, which enables former employees and their dependents to remain on the company plan as long as they pay the premiums.

This was summed up recently in Kaiser Health News by Steve Wojcik, vice president of public policy for the National Business Group on Health: “Offered a choice between heavily-subsidized coverage in the health act’s insurance exchanges or paying full price under COBRA,” he asserts, “most people are going to choose the exchange.”

COBRA, the Consolidated Omnibus Budget Reconciliation Act of 1985, has been a burden to employers and participants alike, where employees bear 102 percent of the premium costs and employer costs increase from COBRA participants, who tend to file more claims. But COBRA is still law—the Affordable Care Act hasn’t done away with it—and employers must continue to offer it to employees.

The elimination of discrimination based on pre-existing health conditions and medical underwriting is thought to be a primary driver of COBRA participants to the health exchanges, but four factors may delay this migration, says Lockton’s Senior Vice President and Director of Compliance Services Mark Holloway.

Lack of initiative from COBRA vendors

Employers could choose to be aggressive in light of the new health exchange offerings, viewing it as an opportunity to save money by moving former employees away from COBRA to the health exchanges. But Lockton recently initiated an informal poll to better understand the response of COBRA vendors and found out otherwise:

“We were stunned to find out that most COBRA vendors are sitting on their hands. If I were an employer I would at least be contacting the folks on COBRA to provide financial tools where they could compare the cost of the state and federal health exchanges to their current COBRA rates—afterall, the exchange could be cheaper for the former employee and that would be a win-win,” says Holloway.

Carrier choices vary from state to state

If there’s a state health exchange in the state where COBRA participants reside they must use it—they can not go and shop around for a better price on the federal exchange, for example, which is reserved for states which don’t have an exchange. But you’ll need to give up your current carrier if it’s not offered in the state where you reside, and this may slow migration from COBRA. Carrier choices vary widely from state: New Hampshire has one, Blue Cross; Georgia has five; and the number of carriers in New York depends on your county—in Putnam County residents may choose from Empire Blue Cross Blue Shield, Health Republic, MVP and United; Westchester residents can choose from seven plans, and Rockland residents have a choice of eight, for example, so it all depends.

What’s more, the federal health exchange portal is a confused mess, according to Holloway, who encountered technology problems and an appalling lack of user-friendliness when trying shop for healthcare a

What’s more the federal health exchange portal is a confused mess, according to Holloway, who encountered technology problems and an appalling lack of user-friendliness when trying shop for healthcare at healthcare.gov.

Network challenges

COBRA participants will also need to see if their current doctor is in-network before switching to the health exchange, and finding this information in the health portals could be challenging. New York has a list of links to individual plans, but the information is difficult to figure out, according to a recent investigative profile report filed in the Journal News, which detailed the experience of COBRA participant Anna Imperati. She had the following experience when comparison-shopping on the state exchange: “One plan provides a drop-down list to find a specialist — but the menu doesn’t appear to work. Another insurer has multiple plans—with no way of knowing which plan is the one featured on the exchange. Yet another provides a 2,000-page list of network doctors and specialists—not organized in any helpful way. It appears to show two in-network oncologists in Putnam—neither of them her current doctor.”

What’s more, the article details, retaining her current doctor was a must-have: “No way am I switching doctors. They have been so wonderful to me at Putnam Hospital. I’m not going anywhere else.”

Cost and income challenges

Acceptance into a health exchange is based on income, age, smoking status and geographical factors. But the subsidy makes the exchanges affordable and the income bar is set at or below four times the federal poverty level for qualification. In 2013, that amounts to $45,960 for a single person, and 94,200 for a family, and that’s the catch: Without a sizable subsidy to defray costs state and federal exchanges won’t be able to compete with COBRA.

In the Journal News story Imperati’s income was in the $40,000 range, which qualifies her for a subsidy of about $54 a month. They reached the following conclusions using an on-site estimator: “Imperati would pay $276 to $588 a month for a silver plan that would cover about 70 percent of her expenses or as much as $847 a month for a platinum plan that would pay 90 percent of her costs. ‘That doesn’t sound affordable to me,’ Imperati said.”

Imperati elected to stay on COBRA and if her experience is any indication, others may do so as well. While she was grateful to have another option and one that did not discriminate based on pre-existing health conditions (she has cancer), the state exchange was simply not competitive.

Share your comments and thoughts below and please feel free to reach out to me with questions or concerns at RRuotolo@Lockton.com.

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4 Tips to Boost 401(k) Participation & Compliance

Low or less-than-average employee contribution rates to employer-sponsored 401(k) retirement plans can be particularly troublesome during annual compliance testing. In this post my Lockton colleague, Tom Clark, Jr., provides four strategies that could boost participation levels and ensure plan compliance. Tom is the president of Lockton Investment Advisors LLC, an affiliate of Lockton Companies LLC.

Adding auto-enroll121103899ment

Clark recommends the addition of an auto-enrollment feature to bring new and existing employees into the company 401(k) plan automatically. This is a statistical no-brainer when it comes to boosting employee participation rates, he says, and works by placing the burden on employees to opt-out of the plan rather than asking them to opt-in.

“Getting the law of inertia on your side is valuable, but it’s equally important to couple auto-escalation with auto-enrollment because research demonstrates that auto enrollees will stay at the same deferral rate they enter in at more often than not. We generally look to implement an auto-escalation or auto deferral increase plan with graduated increases of one percent each year, topping out at 10 percent to help employees save for retirement,” says Clark.

Based on his experience, Clark says employees generally need to be saving 11 to 12 percent of their income if they expect to retire near the age of 67.

Offering a company match

Clark’s second recommendation is to add a company match to an employer-sponsored 401(k) plan, the benefits of which are two-fold: It will increase participation, statistics demonstrate, and it will help employees save money for retirement more effectively. When the company steps up to match employees’ saving efforts they are statistically more likely to remain in the plan at higher deferral rates as well.

But the process of adding a company match should be managed carefully: “You don’t want to get in trouble with the CFO,” Clark quips. “If you add the auto-enrollment and company match feature for all new employees that’s one thing, but if you add it for all existing employees effective January 1, that’s quite another. The vast majority of companies I work with have company matches of 50 percent—if the participant puts in six percent of their own money, the company will match three percent—so if you have a low participation rate and you add a company match to the balance of the population that amounts to a lot of match money.”

“Additionally, employers can boost employee contribution levels by asking employees to give more in order to realize the company match. In other words, the full company match would not become available until the employee contributes 10 percent of their own money, rather than the three or four percent that most of my clients require,” says Clark.

Evaluating Safe Harbor 401(k) plans

A Safe Harbor 401(k) plan can satisfy the non-discrimination rules for elective deferrals and employer matching contributions, but certain contribution, vesting, and notice requirements have to be met. Clark says employers must evaluate how many employees are putting money into the plan—if only a quarter of employees are contributing, for example, the ADP testing formula would limit the amount that a highly compensated individual could contribute to the plan. (For this year, highly compensated applies to those making $115,000.)

Whether a Safe Harbor plan is right depends on the employer’s strategy, Clark points out, and a thorough analysis is always recommended. If a company is looking to retain key employees, for example, a Safe Harbor may allow highly compensated individuals to maximize their contribution to the plan up to $17,500 maximum annually, but the employer must make a minimum contribution on behalf of employees, normally a dollar-for-dollar matching contribution for all participating employees on the first four percent of each employee’s compensation.

Making retirement more personal & accessible

In Clark’s experience, the lack of a company match is the most often-cited reason listed by employees who don’t enroll in a 401(k) plan. The second and third reasons are a lack of understanding or lack of affordability. So he encourages employers to make every resource available to employees, including goal-oriented savings tools like Total Rewards Statements, which deliver a more holistic and long-term view of employee compensation.

The Department of Labor may soon require employers to clearly express what employees’ 401(k) plan balance will look like in retirement based on their present contributions, so Total Rewards statements would help them to get ahead of the curve, he adds.

Clark concludes, “The more personal the statement, the more likely it will be read and the more likely employees will be to address the deficits in their projected monthly retirement income.”

For more information about Lockton’s Retirement Services, Tom Clark may be reached at Thomas.ClarkJr@lockton.com. Retirement Services are provided by Lockton Investment Advisors, LLC, a federally registered investment adviser. Tom Clark is an investment adviser representative for Lockton Investment Advisors, LLC.