Millerwood Communications

Healthcare Reform: Start Employee Communications Now

Despite what many of my readers have thought, the senate health care reform bill was signed into law. 

Many parts of the bill do not take effect for several years; for example, in 2018, a 40 percent excise tax would be imposed on health insurance premiums exceeding $10,200 for single coverage and $27,500 for family coverage. This tax will apply to the insurers but will, most likely, get passed onto employers and subsequently, employees.

There is so much to learn about what other future provisions are in the bill, but there are few things that take effect soon, and should be communicated to employees. 

Flexible Spending Accounts.Starting in 2011, employees no longer will be able to be reimbursed from their FSAs for over-the-counter drug expenses. Then, in 2013, a $2,500 cap on contributions to flexible spending accounts will go into effect.

In succeeding years, the cap would be increased to match the rise in the Consumer Price Index. There is no annual limit under current law, though employers typically impose limits of $4,000 to $5,000 a year.  

Health Savings Accounts. Beginning in 2011, the current 10 percent tax on health savings account withdrawals taken prior to age 65 that are not used for reimbursement of healthcare expenses would be raised to 20 percent. Employees need to be aware of the change in the event they are planning on an early withdrawal.

Coverage up to age 26. Within six months after enactment of the legislation, group plans have to extend coverage to employees’ adult children up to age 26 if the adult child is not eligible to enroll in another group plan. Employees need to be aware of this new option and the additional cost they will incur if they elect to cover additional dependents. 

In addition, group plans will no have lifetime dollar limits and no restrictive annual limits as defined by regulations. In 2014, waiting periods exceeding 90 days would be banned, as would annual dollar limits on benefits.

Possible changes in retiree prescription coverage. Not immediately, but starting in 2013, employers will not be able to take a tax deduction for retiree prescription drug expenses for amounts equal to the subsidy.

This will be an huge expense for larger employers, and it may cause them to re-evaluate retiree health coverage plans. As employers make decisions on how they will handle these additional costs, plan changes should be communicated to retirees as soon as possible so they can prepare to review their options to enroll in Medicare Part D, if necessary.  

As we go forward, I'm certain we will learn more and more how this new legislation will change employer-provided healthcare plans. As with all employee communication, in addition to explaining the changes, employees need to understand why their plan design and costs are changing to avoid a negative backlash on the employer.

Back to the Future on Health Care Reform

As Washington assesses their next steps on health care reform, it may be time to return to the original issues people were concerned about before the bill was started. Yesterday, I was organizing my files on health care communication and came across a piece published by BlueCross Blue Shield of Tennessee in 2005. It was interesting to see how, five years ago, they thought we could control costs. Their five key factors for controlling costs in Tennessee were:

1. Tennessee is No.1 in prescription drug use. New high-priced drugs are hitting the market faster. TV and magazine ads are effective, powerful persuaders and encourage use. Consumers are paying less of the total drug cost. Ten years ago, consumers paid 60 percent of the cost of their drugs. Today, it's only 29%. In Tennessee, insurance companies and government programs cover 83% of all drug costs. People are largely unaware of what's actually being spent on the drugs they take.
2. People are seeking more care, more often.Tennessee residents are spending more money faster on health care. Yet Tennessee is 42nd in overall health — making it one of the top 10 unhealthiest states, with lower life expectancy than the U.S. average. Across the nation, consumers are using more health care services, seeking care more often as the population ages. And as medical technology has advanced, so have associated costs.
3. Unhealthy lifestyle choices are driving costs up. The greatest impact is personal health behaviors — the very thing that can be fixed and controlled —status by 50%.
4. Mandates and legislation add to increasing costs.No matter the intent, federal and state mandates and legislation add costs to your health care premium, Government mandates have increased 25-fold in the past generation. Experts estimate that regulations-including the new HIPAA Administrative Simplification requirements-represent about 15% overall medical cost increases nationwide, roughly $10 billion for the current year.
5. Insurance fraud and abuse takes its toll.Like shoplifting, insurance fraud and abuse ends up costing everyone more. The American Medical Association and others estimate the annual cost of health care fraud to be between 3 and 14% of benefits paid. In 2002, BlueCross BlueShield of Tennessee paid $13.6 billion in health care benefits--so the potential impact is enormous.

So from this list of why health care costs are increasing the solutions are:

1. People take accountability and responsibility to maintain and manage own health.
2. Patients develop relationship with their doctors to manage health and control costs to reduce unneeded medical expenses.
3. More consumer-driven health care plans to make consumers of health care aware of costs so they can manage their utilization and expenses.
4. Insurance companies work with federal and state legislators to make sure practical considerations are made whenever health care issues are concerned.
5. Tort reform to manage litigation and damage to help control fraud and abuse activity.

So that was 2005. I wonder what has changed in five years and how far the new Health Care Reform Bill goes to address these problems? I guess we'll know soon.

Timing Key for Rewards Programs

We've all heard of or have been part of one.

Rewards programs that offer prizes, gift certificates, cash or time off to employees who have met some set of criteria are popular.

But when is the right time to start a rewards program?

Common sense would say that the time to strike is when morale is low and needs a good boost. But that could be the worst time.

Introducing a rewards program into a toxic work environment can create jealousy among workers or foster a "too little too late" response. The same can be said for holding a company outing or holiday party when employees are overworked, underpaid and frustrated.

Rewards programs and company events are best when used to enhance a healthy business environment. If there is need to improve morale, the first questions to ask include:

1. Are business goals clearly defined and shared with employees?
2. Do employees feel they are contributing to business goals?
3. Is the compensation plan fair and well-communicated?
4. Are under-performing employees being managed through a performance plan to improve?
5. Do the current employees fit in the desired company culture?

So before you break out the CEO bobble-head dolls and gift cards to distribute to high performers at the next summer outing, take a look at the company's foundation.

If the answer is "no" to any of the above basic questions, hold off. Instead, put efforts toward getting to a healthy work environment.

Small Businesses in Benefits Crunch

In a recent insurance survey of small businesses, almost half of the respondents say they plan to cut back on employee benefits in the future.

That puts small businesses at a big hiring disadvantage from larger employers who can afford to offer more robust benefits.

Combined with other benefits larger employers are more likely to offer like job sharing, telecommuting and flextime, small businesses are going to be increasingly challenged to offer employees a plan that offers good benefits, but also keep costs in check.

When trying to adapt to our changing economy, employers need to remember what employees value.

In addition to health care, employees also appreciate a 401(k) plan, vision insurance and time off. Plans that offer personal financial security, such as life and disability insurance, go a long way in easing employees' concerns in the event of sickness or death.  

Small companies, as well as medium to large organizations, will need to continue to evaluate costs for the company and for employees. This may mean getting creative with the benefits that are offered and who pays for them.

Group benefits plans can offer employees reasonable rates, while the employer incurs no direct costs. Some analysis is required for time off policies, flex time and telecommuting. These policies have no direct costs, but there is an indirect cost that needs to be considered. 

Looking at a total benefits plan, employers can keep up with the changes by implementing plans that are attractive to employees, and don't break the bank for employers.   

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.