Transcript Venture Capital Asset Protection (VCAP)

Employee Benefits and Beyond:
Trends Affecting your Employee
Benefit Plans
Presented By:
Christopher J. DeLorey
President
Telamon Insurance & Financial Network
[email protected]
617-614-1215
James F. Sampson, AIF®
Director of Retirement Services
617-614-1257
[email protected]
Telamon Insurance & Financial Network:
Our Mission Statement
We are an independent insurance agency dedicated to
steady growth in niche markets, acting as a singlesource partner for a wide range of insurance solutions.
Our organization provides exemplary service with
innovative specialty and traditional insurance to
businesses, individuals, and brokers.
Telamon Insurance & Financial Network has recently
been recognized by The Boston Business Journal as
one of the Areas Largest Insurance Agencies for
three consecutive years.
Factors and Trends
The Most Important Benefits to Offer
Parental leave-unpaid
Parental leave-paid
Employee Leave
Telecommuting/ work at home
Paid sick leave
Most Important
Benefits
Dental Insurance
Bonus
Flex-hours
Pension plan/ 401 (k)/SIMPLE Plan/SEP
Paid vacation
Health/medical insurance
0%
20%
40%
60%
80%
100%
Source: Public Opinion Strategies for the National Small Business Association, May 2007
Why Are Costs Rising:
General
Inflation
27%
30%
43%
Increase
Utilization
Healthcare
Price Increases
in Excess of
Inflation
Source: Pricewaterhouse Coopers, January 2006
Estimated Breakdown of Insurance
Premiums:
Outpatient (freestanding & hospital)
Prescription Drugs
18%
19%
Other Medical
16%
22%
5%
11%
6%
Costs of Liability &
Defensive Medicine
Other
Technology
Physician Services
3%
Hospital Inpatient
Source: Pricewaterhouse Coopers, January 2006
Quality and Cost Factors
Spending per Medicare beneficiary with severe disease
(Last 2 years of Life, 2000-2003)
Cedars-Sinal (LA)
UCLA Medical Center
New York – Presbyterian
Johns Hopkins
UCSF Medical Center
Univ. of Washington
Mass General
Barnes - Jewish
Duke University Hosp.
Mayo Clinic (St Mary’s)
Cleveland Clinic
76,934
72,793
69,962
60,653
56,859
50,716
47,880
44,463
37,765
37,271
35,455
How can the best medical care in the world cost twice as much as the best medical care in the world?
Source: Uwe Reinhardt Presentation, Elliott Fisher, MD, MPH www.dartmouthatlas.org
Increases in Health Insurance Premiums
Annual Health Care Cost Increases
2007-2008 Trends
Medical (Actives & Retirees < 65)
With RX
HMO
10.90%
POS
10.80%
PPO
11.20%
Indemnity
10.70%
CDH
10.70%
**MA Trend: 11.5% - 13.5%
Medical (Retirees Age 65+)
Medicare Supplement
Medicare Advantage
11.20%
9.20%
Dental
DHMO
4.50%
PPO
6.10%
Indemnity
7.10%
Pharmacy
General
Source: Aon Consulting, June 2007
Specialty
9.50%
15.10%
New Plan Designs & Concepts
Consumer Engagement and Education
Wellness and Prevention
High Deductible Health Plans
Self-Funding
Tiered and Limited Networks
Comparison of HSA, HRA, FSA:
Account Overview
High Deductible
Health Plan? (HDHP)
Who can fund the
account? High
Deductible Health
Plan?
Are there any
contribution limits?
Who owns account?
HSA
(Health Saving Account)
HRA
(Health Reimbursement
Arrangement)
Tax Exempt trust or custodial
account created to pay for
the qualified medical
expenses of the account
holder and his/her spouse or
dependents.
An employer funded account
used to reimburse employees for
qualified medical care expenses.
Required
Customary
Not Required
Employee and/or Employer
Employer Only
Typically only the Employee.
However, Employer can also
contribute
$2,900 | $5,800 F **
Catch-up contributions:
$900/yr – age 55 by end of
tax year. Reduced by MSA
contributions in same year
Participant
There are no limits to the amount
an employer can contribute.
Employer
FSA
(Health Flexible Spending
Account)
A cafeteria plan authorized
under Section 125 of the
IRC. FSAs can be created
to reimburse for qualified
medical expenses, health
insurance premiums for
Premium-only account, or
dependent care expenses.
There are no limits to
contributions for a health
care FSA. However,
employers typically set a
limit.
Employer
Comparison of Tax-Advantaged Accounts:
HSA
Can unused funds be
rolled over from year to
year?
FSA
Yes, subject to COBRA
No, but in some cases employee
may elect COBRA through end of
plan year.
Section 213 (d) medical
expenses
Section 213 (d) medical
expenses
Section 213 (d) medical expenses
-COBRA premiums
-QLTC premiums
-Health premiums while receiving
unemployment benefits
-If Medicare eligible due to age,
health insurance premiums
except medical supplement
policies.
Health Insurance premiums
for current employees,
retirees, and qualified
beneficiaries, and QLTC
premiums. Employer can
define “eligible medical
expenses”
Must claims submitted for
reimbursement be
substantiated?
No
Yes
Yes
May account reimburse
non-medical expenses?
Yes, but taxed as income
and 10% penalty (no
penalty if distributed after
death, disability, or eligible
for Medicare)
No
No
What expenses are
eligible for
reimbursement?
Is interest earned on taxadvantaged account?
Yes
HRA
Yes, accrues tax-free
Yes, paid to the employer
Expenses for Insurance premiums
are not reimbursable
Employer can define “eligible medical
expenses”
No
Comparison of HSA, HRA, FSA
Continued…
HSA
(Health Savings
Account)
HRA
(Health Reimbursement
Arrangement)
FSA
(Flexible Spending Account)
Is plan Year Carry
Over Allowed?
Yes
Employer Choice
Employer
Is fund portable?
Yes
Employer Choice
No
Substantiate claims
to withdraw money?
No
No
No
How are Allowable
Medical Expenses
Determined?
Medical IRC 213 (d),
Some premiums, non
medical
Medical IRC 213 (d),
Some Premiums, non
medical
Medical IRC 213 )d)
Uniform Coverage
No
Employer Choice
Required
Applicable IRC
Section 223
Section 105
Section 125
How Does a High Deductible Plan Work?
Partial Self-Funding
Traditional
Funding
• Premium tax collected and
paid by insurer
Alternative Funding
Expense & Premium Taxes
• Premium tax substantially
reduced or eliminated
• Held by insurer
Reserves
• Held by Insurer
Margin
• Eliminated
• Paid monthly as part of level
monthly premium
Claims
• Paid for only when claims
are paid
• Subject to all state benefit
mandates
• Held by Clients
• State benefit mandates
provided at client’s discretion
• Protected by stop-loss
arrangements
Self-Funded Terms
Administration:
◦
An administrative fee is charged for claims adjudication, billing,
eligibility, customer service, plan document maintenance, Access
fees, and Managed Care Fees.
Set-up Fees:
◦
The set-up fee is a one-time charge for inputting eligibility and
benefits so the plan can be administered.
Expected Claim:
◦
Total claims the underwriter expects you to have in one policy
year. This is actuarially determined from your past claims
experience.
Self-Funded Terms
Specific Stop Loss:
◦
Specific Stop Loss Insurance is purchased to protect you when
eligible claims during the policy year on any one individual
exceed the specific liability limit. If eligible claims for an individual
do exceed the specific liability limit, you will be reimbursed for
those claims by the insurance company.
Maximum:
◦
This is 125% above your expected claims level. Claims that
exceed this level are reimbursed by the Stop Loss carrier. The
125% is called the Aggregate Attachment Factor. While it can
vary, 125% is most common.
Self-Funded Terms
Aggregate Stop Loss:
◦
Aggregate Stop Loss Insurance protects you from eligible claims
for the entire group that exceed the annual aggregate liability
limit. If the eligible claims for the entire group exceed the
aggregate liability limit, the insurance company will reimburse
you for those claims at the end of the policy year. It is important
to note that many insurance companies offer an “accommodation
agreement” for a monthly fee. This special contract provision
provides monthly reimbursement of aggregate claims.
Navigator
Co-payments
For Inpatient
Hospital
Admissions
Wellness Incentive Programs
Use your health plan!
Create incentives for:
- Personal care and assessment
- Weight Loss
- Smoking Cessation
- Stress Management
- Chronic Disease Management
- Screenings
Healthcare Consumer Resources
www.leapfroggroup.org
www.mywebmd.com
www.pharmacychecker.com
www.healthsmart.org
www.healthfinder.com
www.mhqp.org
http://profiles.massmedboard.org
www.mass.gov/healthcareqc.com
www.urac.org/consumers/
www.kidshealth.org
www.healthgrades.com
MA Health Care Reform Highlights
Health Insurance Mandate on eligible individuals –
- Effective 7/1/07
- Employee HIRD Form
$295 Employer Assessment for employees not covered by
health insurance
- Groups of 10+ only
- Fair Share Testing
- New! – Proposed Employer HIRD regulation
Establishment of the Commonwealth Care Health Insurance
Exchange Authority
- Multiple carrier options
- Can be list billed to employer.
Retirement Plans
Fiduciary Responsibility
Your Responsibilities as a Plan
Sponsor:
Evaluation and Selection of a Suitable Provider
Design and Review of an Investment Portfolio
Plan Design and Compliance
Participant Education Programs
Plan Administration Capabilities
Legislative Review (Keeping Plan in Compliance)
On-going Periodic Plan Review
7 Habits of Highly Successful
Retirement Plans:
High participation rates
High average deferral percentages
Appropriate asset allocation
Following an Investment Policy Statement
Regular monitoring of investment choices
Offer investment education to employees
Independent annual review of plan features and
operations
How Successful Is Your Plan?
What percentage of your employees contribute?
What is your average deferral percentage?
Are your employees properly invested?
Do you have an Investment Policy Statement?
How often do you review or replace your funds?
How often do you offer employee education?
Do you independently review your plan annually?
It’s About How You Play The Game:
You cannot guarantee investment
performance, but you can
guarantee a process
Retirement Plans
Plan Design Options
Plan Design Options: Auto-Pilot Features
Automatic Enrollment
◦
Targets “procrastinators” to increase participation
Automatic Deferral Increase
◦
Helps employees to save more each year in small increments
Automatic Default Investment Options
◦
Better alternative than cash equivalent, ensures proper asset
allocation for those who do not choose investments
Employees always have the option to “opt-out”
Changing the default eases administration, helps
sponsor to cover fiduciary responsibility
Plan Design Options: Roth 401(k)/403(b)
After-tax contributions, tax-free growth of account
Tax-free distribution at retirement (10% penalty if
before Age 59 ½)
No income limitations (Roth IRA limits higher income
earners)
Employees may contribute up to $15,500 in 2007
(Roth IRA limit - $4,000)
Roth contributions subject to discrimination testing
Roth contributions not in addition to Traditional
Roth must be active 5 years for tax-free withdrawal
Plan Design Options: Safe-Harbor 401(k)
Allows for Average Deferral Percentage (ADP), TopHeavy testing to be WAIVED
Employees may make maximum contributions
◦
$15,500 in 2007, $20,500 for employees Age 50+
Mandatory Employer Contributions:
◦
◦
3% Non-Elective contribution to all eligible employees, OR
4% Matching contribution to contributing employees
Employee Notice required 30-60 days prior to plan
year
Plan Design Options: Cross-Tested
Profit-Sharing
Discretionary Contribution
Ability to separate employees by class/job title
Allows higher contributions for Key Employees
◦
Up to $45,000 in 2007, $50,000 for employees Age 50+
Allows different contributions for different classes
Based on contributions projected to Age 65
Requires additional year-end discrimination testing