add an expert to your team
Employers typically add an expert to their team in areas of critical importance to their business. These are areas that have:
High Complexity
Significant Cost
Liability that can hurt their business
Health and Welfare plans meet this criteria, for example:
They are regulated by both the States & Federal Government.
They have complex insurance company provisions, rules and contracts that require review.
There can be gaps in coverage if not designed properly.
There are financial, coverage and reporting requirements.
They require significant plan administration, testing and compliance.
They require compliant communications.
Expensive!
An expert will help you to address all of the aforementioned which will help you to meet your Fiduciary responsibilities as the plan sponsor. Fiduciary Responsibilities should be considered because:
You, as the employer are most likely considered the plan sponsor.
As the plan sponsor you are responsibility to for plan costs, coverage provided, plan communications and compliance with regulations.
As the plan sponsor you are responsible to the plan participants.
Why add an Independent advisor?
Independent advisors are accountable only to clients. They are not influenced by:
Incentives to place business with one carrier over another
Sales goals
Hidden bonuses or awards trips
Independent advisors are focused on one thing. Helping their clients to be successful through optimization of their health and welfare plans.
This requires being open to collaboration with any strategic partner in the entire market that provides better services, solutions, or costs that are in the best interests of their clients and plan participants.
Best Business Practice? Independent experts take time to listen and learn. To discover and understand their clients history, culture, wants, needs, internal concerns, external constraints. This helps them to build a strategy that meets clients goals and objectives for today and for the future.
The expert will provide you with the detailed information, clarity and insights you need to make the best informed business decisions.
Experts are focused on both short term results, and the long term sustainability of your plans. This includes making your health and benefits plans flexible and proactive. This approach enables you to anticipate and adjust to change as it takes place.
Lastly, the expert will document financial, coverage and compliance actions to demonstrate how and why plan coverage and financial decisions were made.
coverage and choice of plans
For Health and Benefits plan sponsors, determining which plans should be offered, and the choice of plan design offerings for each specific coverage category (such as Medical) is an important decision.
For example, if an employer offers Medical coverage to plan participants, how many coverage options should they provide?
Choices of coverage for Medical Include:
A catastrophic plan ($5000+ deductible)
A High Deductible Health Plan
An H.S.A. qualified High Deductible Health Plan
An HMO, PPO, or POS plan
A value based plan
A Reference Based Plan
Use of a singular High Deductible Health Plan and use of an HRA to provide other different value plans.
There are many questions to ask and factors to consider when establishing plan offerings and plan design including:
What are the currently plans being offered and why?
What is the difference between one plan and another. For example a HDHP and a PPO with co-pays?
What are the plan rates?
Are the rates set at actuarial value?
What is the value of the spread between plan to plan rates?
What are plan participant costs and how are they determined?
What is the goal for the health and benefits plans?
Does the client want to be below market, at market or above market?
Do the plans retain and attract talent?
Do you want health and wellbeing integrated into the plans?
Are the plans too complex?
Where can plan participants get help with the healthcare system? Is there an advocate?
Are the plans in compliance with Federal and State requirements?
Are the cost spreads (rate relativity) from plan to plan correct?
Are the rates themselves correct?
Do the contributions make sense for the value of plan to plan?
What about affordability? Does it meet ACA requirements?
In addition, there are several other financial factors to consider related to the plan offerings such as, what is the best financial methodology to use including:
Full Insured.
Insured and Experience Rated.
Minimum Premium Plans.
Level Funded Plans.
Self-Funded Plans and Stop-Loss.
Imbedded in the plan design there are other more granular, yet important considerations worth mention.
These include plan or contractual provisions that can eliminate gaps in coverage, make your plans more efficient and save money.
Two examples are:
Are deductibles an imbedded or aggregate? That is, how many family members must satisfy a singular deductible.
Will the stop-loss carrier honor the methodology the claims administrator paid a large claim? Is there a mirroring provision, shared fiduciary responsibility or documentation that makes sure the stop-loss will perform as expected.
There are new alternative approaches available in the market today, such as the Individual Coverage Healthcare Reimbursement Arrangement (ICHRA) or Reference Based Pricing.
Your advisor or consultant can help you to determine which plans, choices and provisions make the most sense for you.
technology and plan administration
Health and Benefits plans continue to integrate technology and cloud based administrative solutions in order to improve plan performance.
Technology and benefit administration can impact your health and benefits plans in the following areas:
Day-to-day administration of the plan, including coverage changes due to events such as adding a dependent or changing a beneficiary.
Communication of the plans offered and links to more detailed and required information such as required Summary Plan Descriptions, Summary Annual Reports or Contractual provisions.
Summary information, contacts and links to enable plan participants to get the information and resources they need quickly.
Open enrollment guides and employee self-service / decision support applications to help participants determine which plans make the most sense for them.
Open enrollment selection and confirmations.
Testing based upon selection and cost for ACA, ERISA etc.
Navigation assistance to get plan participants to the areas and links needed to get assistance with the plans.
Technology including plan administration and communication can be delivered for many sources including the employers payroll system, a separate “bolt on” enrollment and communications platform or even through your insurance carrier.
Many carriers provide this resource as an incentive to purchase their insurance products and provide a technology platform with preferred access and pricing.
Technology and benefits administration is a specialty area where expert advice is important. The platform must coordinate with many sources to run effectively.
The timing of data loading prior to each years open enrollment is an important area as well as the contractual terms, should the platform be provided by a carrier or a broker.
Before making a final decision on your technology or benefits administration system it might be wise to consult an expert.
The discovery process
The discovery process enables your advisor to learn about what you want, need and value. The willingness, patience and ability of your advisor to listen, learn, discover and understand before offering solutions is an attribute to look for in an advisor.
The discovery process enables the following:
Your advisor learns about your employer culture, history and benefits objectives.
Your advisor learns about your current state in the areas of: coverage, compliance, cost, communications and plan administration.
Your advisor shares information with you about what is:
The norm or typical in the market.
How your programs stack up or benchmark.
The market direction on coverage, cost and employee contributions.
What is considered best in class.
What is coming down the pike, or leading edge.
Your advisor should use a collaborative process and be working with you and for you.
The discovery process is critical and important first step to help clients optimize their benefits plans. This includes finding and implementing best business solutions in consideration of all the variables discovered in the collaborative process.
Your advisor should have both the expertise and background to provide you with market information, data and analysis you need to make informed decisions.
During this collaborative discovery process, employers will soon recognize that health and benefits are an ecosystem. In this Health and Benefits ecosystem, all critical program elements impact each other. Alternatively stated, there is cause and effect on changes made or required by new regulations. For example, changes in the ACA law impacts both plan design and employee contribution levels.
The discovery process is important because it identifies all critical elements and how they impact each other. Including:
Coverages & Choice of plans to be offered.
Financial cost and the impact of changes on those plans.
Fiduciary responsibility requirements, including documentation and transparency.
Wellness & Demand Management to bend the long term cost curve.
Compliance with Federal and State Requirements.
Communications of the plans.
Use of Technology for Administration, Enrollment, Communications and required testing.
Day to day assistance for the employer and employees.
The Discovery Process can be framed within 3 parameters:
Internal wants, needs and concerns, history & culture.
External elements including compliance, cost, administration and budget.
Solutions available in the traditional and non-traditional market.
Following the Discovery Process you and your advisor can refine objectives and then set strategy. This process is done in order to establish a blue print prior to moving to tactical execution.
Discovery should include the following:
Complete a financial review to make sure all costs associated with the plan are competitive, fair and reasonable.
Benchmark costs and coverages to determine where plans are compared to market.
Put the program out to competitive bidding if the current approach is not achieving desired results, or there is a better way.
Make better use of technology and administration to increase efficiency, access to plan participants and cost effectiveness.
The collaborative process of Discovery, Objective Setting and Strategy is the first step to plan optimization.
do wellbeing & demand management programs add value to your plans?
The theory behind health and wellbeing is illustrated in this financial equation:
If Plan participants practice healthy lifestyles.
Equals
Then, fewer plan participant will develop health conditions
Equals
Leads to, lower claims costs.
Equals
Results in, better health plan renewals.
The largest component or percentage of your health plan costs are for claims. Claims are defined as the discounted costs for healthcare services provided to plan participants by healthcare providers which are part of the carriers network.
Healthcare services can be positively impacted by both WELLBEING and DEMAND MANAGMENT. The proof for this statement is supported by the following:
Typically - 20% of most health plan participants can drives up to 80% of total claims costs
8 health conditions are contributing factors in many of those plan participants. Conditions include:
Hypertension
High Cholesterol
Coronary Artery Disease
Type 2 Diabetes
Chronic Obstructive Pulmonary Disease
Drug & Alcohol Use Disorder
Major Depression
Crohn’s Disease / Ulcerative Colitis
Personal Lifestyle can have a significant impact on many of the 8 health conditions. Specifically:
Diet
Exercise
Rest
Smoking
Avoid over use of Drugs | Alcohol
Demand Management: In addition to lifestyle there is a significant difference in cost and quality for the same healthcare service delivered at different settings.
In consideration of the aforementioned, most employers have determined that encouraging a better lifestyle will:
Positively impact health conditions.
Drive down long term health costs.
Lead to healthier more productive employees.
Help improve the cost of the health plan
In addition to wellbeing, another way to impact claims costs is Demand Management which is helping plan participants get high quality care, quickly and at a reasonable cost.
In a demand management program, plan participants are provided access to assistance from an expert with knowledge and data to navigate the complex healthcare system. This person or navigator makes it easier to find quality care, at the right time and at a fair cost.
The purpose of demand management is to provide assistance at point of demand for services which will drive up the quality of care and drive down the cost of service provided.
Wellbeing and Demand Management can be encouraged through an employer doing two things.
Creating incentives to be engaged in the wellness, wellbeing and demand management programs. (This encouragement can be financial, educational or any other incentive such as games.)
The employer defining the definition of what being “engaged” in the programs are. For example, the individual is required to see their primary care physician once a year and bring along their biometrics and document this and not be smoking or be in a smoking cessation program.
The next generation of innovation for Health Plans is in the areas of wellbeing and demand management.
In summary: The best wellbeing plans encourage or incentivize plan participants to be active or “engaged” participants in their own health wellbeing through various means including:
Knowing which health conditions are driving costs.
Knowing which changes in behavior will help to mitigate those health conditions over time.
Encouraging plan participants to engage and document participation in the wellbeing program.
Providing financial and non financial incentives to drive participation.
Provide assistance and navigation to make being engaged easy and high value for plan participants.
There are both insurance carrier and independent vendor solutions for wellbeing and demand management and your expert advisor will help to determine which plans and approaches makes the most sense for you.
fiduciary responsibility
Do health and benefits plan sponsors have a Fiduciary Responsibility under the Department of Labor (DOL) to monitor and preserve their plans?
In my opinion - Yes. In the area of Fiduciary Standards for Health and Benefits plans under ERISA, the plan Fiduciary is responsible for determining fair and reasonable health plan expenses.
The Department of Labor (DOL) has also taken the position that plan sponsors and administrators should know the costs of the services they procure on behalf of the plan and apply due diligence to minimize the costs relative to the level of services desired.
This is particularly true if you, as the plan administrator, can request and access financial information including expenses, claims and demographic data from your carrier or third-party administrator. This includes information that insurance carriers use to calculate annual renewal terms or pricing for your self-funded plan.
As the plan fiduciary you should consider:
Fiduciary requirements apply when selecting a plan service carrier or third-party administrator.
The person responsible for the selection must engage in a “prudent selection process” (as determined based on what a knowledgeable fiduciary would do).
Failure to do so could cause the plan to be discriminatory and therefore not be entitled to a tax deduction.
Plan sponsors and administrators must know the costs of the services they procure on behalf of the plan and apply due diligence to minimize the costs relative to the level of services provided.
ERISA requires plan sponsors to pay only “reasonable expenses” for the benefits offered.
If you do not have the background or skills to conduct an analysis, you can find an advisor to do so.
A certified independent consultant can
advise you as follows:
Determine If plan information and data are available or should be available based upon your size.
If plan and data is available, the advisor will ask for this source information including, claims and demographic information in order to conduct a detailed review.
If any specific costs are higher than reasonable, the advisor will request an explanation in writing
If costs can be reduced based upon market data, the advisor will request a reduction in those costs or go to the competitive market.
The advisor will also review your rates and employee contributions to make sure they are accurate. This includes the relative value of plans and the approach used to develop employee contributions.
The review will provide transparency, including any fees paid to third parties such as bonuses, sharing of overrides and commissions paid.
The advisor will determine the basis and methodology for claims paid including pooling levels.
This approach should provide you with the documentation you need to demonstrate you have met Fiduciary responsibilities with respect to the financial elements of your plans.
In summary, as plan fiduciaries, employers should know what their carriers and/or TPA are paid for the services rendered to the plan, and how much they are paying to the health care providers offering services under the plan. Alternatively stated, ERISA requires plan sponsors to pay only “reasonable expenses” for the benefits offered through a health plan.
why does health insurance cost so much!
To merely state that Health and Benefits are a significant employer and employee cost would be an understatement.
For most employers, health plans are now their second highest business cost following pay. What can be exasperating is when there is not financial and coverage transparency to illustrate what’s driving the costs.
What are the financial elements that make up the cost of a health plan?
On insured plans, costs may be imbedded in complex formulas. These formulas have many factors which all seem to be designed to demonstrate why the carrier needs more money year over year.
Elements that may determine the cost of the plan are include:
Coverages offered
Fixed costs for:
Administration
Premium Taxes
Pooling or Risk Charges
Capitation for services
Broker Commissions & Bonus
Other service fees
Variable Costs for:
Paid Claims
Reserves or change in reserves
Carrier formulas including:
Private Medical Inflation (trend)
Credibility
All of these elements, plus others can be included in carriers prospective rate setting. It is important to ask about these formulas to drive transparency on your renewal.
Other expenses associated with health plans include costs for:
Plan Administration
Compliance with State & Federal Laws
Due to the cost of healthcare, its complexity and importance for attraction and retention of staff, it should be actively managed.
Having a financial expert on your team can make a big difference. If possible, use of dynamic scoring will provide transparency all employers to see what’s driving the costs.
Schloss Health and Benefits has developed proprietary models to complete financial modeling to provide real time impact for changes made or anticipated. This includes:
Setting rates for self-funded plans
Checking rates for insured plans
Line by line review of all cost components
Budget and contribution modeling
Cost impact for changes being considered
The models are “evergreen” which means we can look at real time results based upon current data modified by variables as part of the financial tool.
This approach is very accurate and popular with Financial Executives who want to understand the probable impact of changes prior to making decisions.
We are happy to provide you with a demonstration of how this works.
compliance & communications
Health and Benefits plans must be in compliance with Federal and State regulations. This includes plan design, pricing, contributions and plan communications. A few examples of compliance requirements include:
HIPPA
ADEA
COBRA
ACA
ERISA
DOL
These laws and regulations impact:
Coverage offered
Employee costs relative to their earnings
Cutbacks in coverage based upon age
Testing for:
Taxes purposes
Discrimination
Other Federal & State requirements
All of the aforementioned must all be considered as part of plans offered, at what cost and how they are communicated to employees.
This requires a significant amount of knowledge and coordination with your carriers, administrators and Legal / ERISA council.
Communications must strike the balance between keeping the approach simple enough for employees to understand and also meet all compliance requirements.
This must be considered on the following documents:
Enrollment Materials
Summary Plan Descriptions
Summary Annual Reports
Notification Letters
On-Line Communications
Contractual Materials available to employees
DOL Fiduciary Requirements
It is clear that communications and compliance impacts how plans are designed, selected, priced and communicated.
individual coverage healthcare reimbursement arrangement | ICHRA
On January 1, 2020 (enabled by Presidential executive order), this new law expands available and permitted use of Health Reimbursement Arrangements to purchase Individual Health Policies as a replacement for a group plan.
This is an interesting alternative for many employers who find their group plans have become too expensive and lack flexibility of choice. The objective of the Individual Coverage Healthcare Reimbursement Arrangement (ICHRA) is to expand employers’ ability to offer HRAs to their employees and to allow HRAs to be used in conjunction with nongroup | Individual Health coverage. Any size employer can use an ICHRA and there is no limit to the amount that an employer can reimburse employees that purchase qualified private individual coverage.
This new approach will be attractive to certain employers
who have seen their group health insurance cost skyrocket based upon:
Low participation in the employer sponsored plan
Poor claims experience
Anything else that has driven rates above community rates.
How does it work?
The employer determines how much HRA money is available by class of employee (single, family etc.).
The HRA contribution can be modified based upon location or age (for higher ages).
If the employee purchases qualified individual coverage they can use the HRA funds deposited by the employer to pay for this plan.
If the cost of the plan is above the HRA funding, the employee contribute pre-tax under a section 125 plan.
The employer can set up an HRA account to deposit employer and employee money.
The cost of the individual coverage can be adjudicated (justified) by an administrator.
There are no participation requirements under the ICHRA.
If someone decides not to purchase individual coverage, they do not get ICHRA reimbursement money.
If the plan is unaffordable (the employer contribution compared to their income) a person can get access to advance premium credits under the State Exchange.
If the employer contributions meet affordability requirements, plan participants are not eligible for the State Exchange credits.
ICHRA complies with the Affordable Care Act (if designed properly)
ICHRA can be used in conjunction with a HSA (for people who select a High Deductible Health Plan).
In summary: The employer determines how much money will be available to reimburse employees for Individual Health coverage purchased based upon the employee’s classification and eligibility status.
What’s the value?
The ICHRA plan is Simple – just determine the reimbursement level and provide access to the exchange or other individual coverage.
It is cost effective – The ICHRA only makes an expenditure if an employee purchases Individual Coverage.
Efficient (only pays if an individual purchases individual / non ACA subsidize health insurance.
Compliant (designed properly, meets ACA standards)
Stated alternatively, the employee can access an ICHRA reimbursement to purchase non-subsidized (ACA) coverage in the Individual Market or on a private individual exchange. If the cost of healthcare (after the employer reimbursement) is considered unaffordable, the employee can access the subsidy and purchase insurance though the public exchange. If an employee is covered as a dependent or is covered under Medicaid, Medicare (if actively working and over age 65) or has insurance through any other source and therefore does not purchase Individual Insurance through the ICHRA there is no employer cost. Again, the ICHRA only reimburses if an employee purchase non ACA subsidized individual coverage.
Why should you care about this?
The US Government estimates that many employers will take advantage of the ICHRA in the future.
Individual health products are all community rated.
The individual market has many plans to choose from, more flexibility.
If an employee purchases an individual policy that qualifies for an H.S.A. they can get it on their own.
There are new administrators | technology companies available to make access easier - The administrative cost for the ICHRA is reasonable running about 10 per employee per month.
Next Steps: Have a conversation with you professional adviser.
Summary / Highlights:
The new law goes into effect based upon a Presidential order.
It enables the use of an HRA to all reimbursement for the purchase of individual coverage.
For many employers it is a viable alternative to traditional group insurance.
The ICHRA has more flexibility, it is less complex and can save money.
If only pays if an employee purchases qualified private health insurance.
If it is more advantageous for an employee to be covered under another plan it does not penalize the rates.
If an employee prefers to be covered under a spouse’s plan, Medicaid, or Medicare (if active over 65) they can.
If the plan is unaffordable for some employees, they can use the Public Exchange and get a subsidy vs the ICHRA.
If the employee selects an H.S.A. eligible plan they can use a Health Savings Account as well.