Millerwood Communications

More Benefits, No Added Cost

Question:  How can employers improve benefit plans in spite of increasing health care costs?

Answer: Voluntary benefits.

Often overlooked by many employees, voluntary benefits may help improve their financial security, especially in these economic times.

Voluntary plans, such as disability, life, accident and long-term care benefits, can be offered to employees as part of their benefit options. Typically, employees pay 100% of the premium through payroll deductions, but they get the cost benefit of being part of a group plan.

Some employers offer voluntary benefits, but miss an opportunity to communicate the value of the plan to their employees. If plans are currently offered, employers should market plan benefits to employees so they understand how these plans can contribute to their overall financial health.

Enrollment can usually happen at any time of the year, so communications can happen outside of the typical annual enrollment cycle. This can give employers the opportunity get the message out without the "clutter" of annual enrollment activities.  

If not currently offered, employers should consider adding voluntary benefits to their program. It's an opportunity to increase benefit offerings, while other health care cost-containment decisions may be increasing employee medical costs and decreasing benefits.

In addition, employees may not have the savings they once had to cover them through a life-changing event, such as a long-term illness. Adding short- and/or long-term disability options go a long way in giving employees peace of mind should they become ill and are unable to work for a period of time.

Voluntary benefits are portable. Employees can continue coverage if they lose or change jobs. Critical illness and hospital confinement coverage, for example, can provide benefits in the event there is a lapse in health care coverage. Long-term care coverage can save an employee from the very high cost of long-term care facilities for themselves and family members.

Employers need to get creative in how they view and offer benefits. Many employees are used to robust, reasonably priced benefit plans. But the landscape for employer-sponsored health insurance is changing.

Costs continue to rise and employers should look to take steps to improve benefit programs with other plans and benefits.

Top 10 Employee Benefits Omissions

Once a year many employees have the opportunity to elect their benefit plans for next year. How benefits communications are handled can be found all over the communication spectrum.

Some employers provide pre- and post-communications, as well as detailed personalized enrollment materials. Employers less communication-savvy send an email reminding employees that they have until the deadline to make any changes.

But most employers land somewhere in between.

No matter how the annual benefits enrollment is communicated, there are key details that often get overlooked but can be critical to a smooth transition into the new benefits year.

Here is my top 10 list of most missed items:

1. When to elect a PCP. If you are changing to a new HMO Health Plan, you must elect a Primary Care Physician (PCP). Many times, employees check to see if their doctor is on the new plan, but they don't officially select them with the new health plan. Doctor's visits are not covered by the new plan until the PCP has been selected.

2. Major coverage changes for health plans. Employees need to be aware of any major changes to covered services so they can make an informed decision for themselves and their family.

3. Coverage tier rules for life insurance changes. Many plans only allow you to move up one tier at a time when increasing life insurance coverage. If the new election skips a tier, the employee may be contacted at a later date to drop their coverage down.

4. Dental coverage election rules. Many plans do not allow employees to drop dental coverage for less than two years. For example, an employee cannot elect to have dental every other year. Once they opt out of dental, they have to be out of the plan for two years until they can elect to get back in. Someone who has opted out for one year may be surprised when they go to enroll the following year.

5. Maximums for FSAs. Although there are federal guidelines, each employer can set their own maximum for dependent care and health care flexible spending accounts, as long as it does not exceed the federal maximum.

6. Rates for benefit plans by pay period. Employers communicate new annual rates, the cost the employer and employee pay together, and percentage increases. To be the most clear, the new employee cost should be indicated in dollars by pay period.

7. The cost savings associated with pre-tax benefits.Many employee-paid costs are pre-tax including health care plans, dental plans and FSAs. Employees can really benefit from knowing how they can save in taxes by making appropriate benefit elections.

8. When you can change coverage other than annual enrollment. Many plans do not allow changes during the year unless there is a qualified change in family status. Usually an employee has 30 days after the event to make the change. Annual enrollment is a good time to reinforce this regulation.

9. Which benefits require an enrollment. If no election defaults to current benefits, clearly state that "if no action is taken, benefits will continue." If flexible spending accounts require re-enrollment, that must be communicated also.

10. Who to contact with questions. In all annual enrollment communications, there should be a phone number or email for someone to address questions.

Actions Now Can Hurt Later

More and more I am hearing disconcerting stories of how employers are handling the tough topics that need to be communicated these days.

One friend of mine opened a company email on a Friday afternoon to learn that overtime for his employees will be eliminated as of Monday (please let them know before Monday), the 401(k) match has been discontinued and there will be a salary cut effective immediately.

Another friend was blind-sighted by a 200-person layoff one week after the company communicated that they were financially in good shape.

I've also heard stories of benefit cuts going out in email with no other communications and health plan benefits changed retroactively with no prior messaging. 

Businesses are doing what they can to survive, but steps like this will not only create a disgruntled workforce; it will make it difficult to attract new candidates when the hiring starts again. 

Employers should always be thinking of the best way to alleviate stress and worry among employees when the news is bad.

Advance notice should be given to any type of change to wages or benefits so employees can plan. And, no matter how bad the news, it should be disseminated by a human voice, either in a group or individually.

This gives employees the opportunity to ask questions and it gives the messenger the opportunity to express their reason(s) for the changes and their general concern for the employees.

At some point, the tides will shift again and employees will be pick and choose their employers. Employers need to do their best to keep morale up now, so they don't get left in the cold later.    

New Employer IRA Legislation

There is proposed legislation that would require any business with more than 10 workers to provide an employer-sponsored IRA (Individual Retirement Account) to employees.

The legislation also includes an automatic deduction of wages to go into the plan. Employees can then opt to increase or decrease the amount that is deducted. When a certain amount is accumulated, the funds are rolled over into a target fund, based on retirement date.

The theory behind the requirement is that many employees do not plan appropriately for their retirement and fall very short in their savings when they retire. 

While I agree we need measures to get people to save wisely for retirement, I'm concerned of the burden this will place on small businesses that do not currently offer a plan.

If companies are currently using an outside vendor for payroll, this will probably only be a small additional administrative expense. 

But the communications necessary to accompany a 401(k) offering can be substantial.

If an employer is going to be the plan sponsor, it has the responsibility to provide training and education on how best to save and invest. There are enrollment materials to be produced and there has to be some kind of internal administration for new hires, terminations, etc.

My experience with automatic deductions is that many employees do not understand that a 2 or 3 percent automatic deduction will not keep up with the rate of inflation and will not help them reach an appropriate savings retirement goal.

Employees need to understand how much to save. Without the communication, employees can be lulled into thinking this is all they need to do to be prepared.

This expense could outweigh the employer tax benefits, if applicable with this type of plan.

Maybe a mandate is not the way to go on this.

Perhaps more business incentives to encourage employers to offer a savings plan would be the more responsible approach.

Healthcare Reform Misses Mark

What I keep hearing from Washington is that we need to overhaul the system to insure the uninsured and improve the quality of healthcare for everyone. What happened to cost-containment? Wasn't that the primary objective?

If legislation is passed whose sole goal is to insure the unemployed and manage the quality of care,  we are not only going to see increased costs for businesses and individuals, but we may even see the quality and timliness of care decrease. Here is what the healthcare reform should do: 

#1 - Take measures to reduce the overall cost of healthcare in the U.S. Reform how litigation is handled to reduce the cost of malpractice insurance for those in the healthcare profession.

#2 - Build on the healthcare system we have today, instead of dismantling the foundation of private healthcare.

#3 - Focus on prevention communications on a national level.

#4 - Leave Medicare benefits alone, and not cut services to the elderly to fund a government plan.

#5 - Do not increase costs for businesses and individuals by taxing benefits on those who wish to elect private insurance. Wasn't the point to reduce the cost of healthcare?

#6 - Offer government health plans to qualified low-income U.S. citizens, especially children, at a subsidized cost through private insurers, similar to what is being offered in Massachusetts.

#7 - Do not discourage employers from continuing to provide healthcare benefits so that individual citizens can continue to provide their own healthcare.

The path that is being proposed is going to eliminate competition for private insurers, which will drive them out of business. The only option will be go to a public, government funded plan. The choices and quality that we currently have today in the best healthcare system in the world will be gone. 

Originally, I thought healthcare reform meant that everyone could enjoy the same care with contained expenses. I am disappointed in the direction this is taking.