Small Business Insurance Options: Fully Insured Vs. Self-Insured Vs. Level Funding Plans

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For those of you who haven’t heard, level funding is the next big thing in small business insurance options.  But how do you know if it’s right for your company?  And if you decide it’s a good solution, what is your next step?

Fully Insured Vs. Self-Insured Vs. Level Funding Plans

First, let’s start with a basic review of how most companies purchase insurance.  Traditionally there are two ways of doing things:

Fully Insured

A fully insured plan means that you are passing all of the risk onto your insurance carrier who charges you a flat monthly fee based on how they gauge the risk of insuring your employees.

If covered employees experience health issues and use the plan more, you will probably face a hefty increase in the monthly premium your business pays when your plan renews.  Conversely, if your employees rarely use the insurance, you’re stuck playing a flat monthly rate no matter what.  This model decreases the risk of month-to-month fluctuations but doesn’t provide any meaningful incentive for having healthy employees.

Self-Insured

A self-insured plan is one in which the business pays the actual claims and essentially assumes the role of the insurance carrier in terms of managing risk. Many large companies offer at least one plan that is fully self-insured because they have a large pool of covered employees and also have the cash reserves to protect against a spike in claims volume or amount.

Historically, self-insurance has been perceived as far too risky in the small business market for a number of reasons.  Small businesses typically have less cash on hand and can’t weather a dramatic increase in costs as easily.  Also, claims data is very hard to come by in small business so it’s difficult to judge if self-insuring is worth the risk because you don’t even know the risk!  Most small businesses also lack the manpower in-house to actually review and process claims so they still pay an insurance company to act as a Third Party Administrator (TPA).  Though the business is paying the claim, the insurance company will actually process it accordance with the plan documents and ensure that all protocol is followed.

Level Funding

Today, level funding is emerging as a third option somewhere in between fully insured and self-insured.  Proponents of level funding argue that it offers the benefits of both insurance models with none of the risks.  So how does it work?

The “level” in level funding refers to the fact that you self-insure, but pay a level or steady fee each month as determined by your TPA.  Level-funded plans also come fully integrated with individual and aggregate stop-loss insurance.  Individual stop-loss insurance will kick in if a covered employee or dependent exceeds a certain dollar amount in claims.  Aggregate stop-loss will be activated above a certain dollar amount for all claims.  After you pay your level monthly fee for a year, your TPA will compare what you’ve paid with the actual claims and refund you any difference if you’ve paid more than you’ve spent.  In summary, you get the regular and predictable cost of a fully insured plan, but because you’re actually self-insured, you only end up paying for the healthcare costs actually incurred by your employees.

Benefits of Level-Funding for Small Business

Level-funding is becoming popular because plans following this model are not subject to several key regulations of the Affordable Care Act.  For example, they don’t have to offer a package of mandated benefits.  Because plans are self-insured, they can be written to the specifications of the business owner.  Also because level funded plans are technically self-insured, business owners also avoid paying the Health Insurance Tax (HIT) levied as part of the Affordable Care Act.  Furthermore, self-insuring your plan gives you more control and discretion as a business owner to approve claims outside of the contract.  If you have a tenured employee whose medical treatment would be denied under a fully insured plan, a level-funded approach would let you choose if you wanted to cover it anyway as a gesture of goodwill.

Level-funding is surely the wave of the future in the small business market.  If you think it might be a good strategy for your business, contact Benefit Administration Group for more information.  Many large insurance carriers are offering a level-funded option and your broker can help you choose a plan that’s right for you.  The Helios team are considered experts in this innovative new model and can help your business evaluate options and decide if level-funding can save your company money.

Summer Interns Could Be Subject to Minimum Wage and Overtime Requirements

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Internships Most Often Considered “Employment” by DOL

Employers planning to hire interns this summer should keep in mind that the U.S. Department of Labor (DOL) has stated that private sector internships are most often considered “employment” subject to the federal Fair Labor Standards Act’s (FLSA) minimum wage and overtime rules.

The Test for Unpaid Interns
There are some circumstances under which individuals who participate in for-profit private sector internships or training programs may do so without compensation. The determination of whether an internship or training program meets this exclusion depends upon all of the facts and circumstances. The DOL uses the following six criteria which must be applied when making this determination:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of the factors listed above are met, an employment relationship likely does not exist under federal law, and the FLSA’s minimum wage and overtime provisions do not apply to the intern. This exclusion is narrow, because the FLSA’s definition of “employ” is very broad.

Note: Be sure to check your state wage and hour laws for applicable requirements. When both the FLSA and a state law apply, the employee is entitled to the most favorable provisions of each law.

How to Keep Your Employees Motivated This Summer

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The warm weather and eagerly anticipated outdoor activities of summer may take a toll on your workers’ concentration. If you’re noticing a lack of focus among your employees during this time of year, consider the following ideas to help keep them motivated:

  1. Encourage your employees to step outside for at least 15 minutes each day. Exposure to natural sunlight can prevent workers from feeling confined to the office during the warm summer months. Holding business meetings outside may also help to boost workers’ morale.
  2. Change things up! Employees may become more motivated when their jobs are more challenging and interesting. Consider lateral moves to build your workers’ skill levels and knowledge base.
  3. Create opportunities for casual interaction. A company sports team, a family day or an outdoor after-hours social event can keep your employees engaged and interested in each other and in their workplace.
  4. Consider flexible working arrangements. Arrangements such as flextime or staggered work hours may allow employees to enjoy summer activities and attend to family obligations, while coming to work refreshed. It’s a good idea for employers to work with a knowledgeable employment law attorney when creating policies on flexible working arrangements, to ensure policies and practices are in compliance with the law and do not unlawfully discriminate against certain employees.

Inclement Weather: ‘Do I Have to Pay Employees if We Close?’

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As Tropical Storm Cindy churns in the Gulf of Mexico, many of us are wondering how do we compensate our employees during this crisis. To help you understand the rules governing pay during weather-related emergencies, we compiled responses to frequently asked questions:

Please understand that our services provide general HR guidance and should not be interpreted as legal advice. For legal advice on this matter, please consult with legal counsel who specializes in employment law.

Non-Exempt Employees:

Louisiana law does not require employers to pay employees for reporting or showing up to work if no work is performed. An employer is also not required to pay an employee a minimum number of hours if the employer dismisses the employee from work prior to completing their scheduled shift. Employers are only required to pay employees for hours actually worked.

Exempt Employees:

An employer can require employees to use PTO if sent early due to inclement weather, as long as the employee is guaranteed their salary per pay period. However, if the employee has no PTO available, the employer may not be able to reduce wages unless it is permissible by law.  See more information below.

The federal Department of Labor Wage and Hour Division (WHD) regulates an employer’s abilities to take deductions from an exempt employee’s salary. According to the WHD, there are limited situations in which an employer may deduct from an exempt employee’s salary.

The following deductions are permitted to be made from an exempt employee’s salary.

  • When an employee is absent from work for one or more full days for personal reasons other than sickness or disability;
  • For absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness;
  • To offset amounts employees receive as jury or witness fees, or for temporary military duty pay;
  • For penalties imposed in good faith for infractions of safety rules of major significance;
  • For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions; An employer may impose in good faith an unpaid suspension for infractions of workplace conduct rules, such as rules prohibiting sexual harassment, workplace violence or drug or alcohol use or for violations of state or Federal laws. This provision refers to serious misconduct, not performance or attendance issues. The suspension must be imposed pursuant to a written policy applicable to all employees.
  • In the employee’s initial or terminal week of employment if the employee does not work the full week, or
  • For unpaid leave taken by the employee under the federal Family and Medical Leave Act.

During office closures due to inclement weather or other disasters, may a private employer direct exempt staff to take vacation (or leave bank deductions) or leave without pay without jeopardizing the employees’ exempt status?

The FLSA does not require employer-provided vacation time. Where an employer has proposed a bona fide benefits plan, it is permissible to substitute or reduce the accrued leave in the plan for the time an employee is absent from work, even if it is less than a full day, without affecting the salary basis of payment, if the employee still receives in payment an amount equal to the employee’s guaranteed salary. See Opinion Letters dated April 15, 1994; March 30, 1994; and April 14, 1992. However, an employee will not be considered to be paid “on a salary basis” if deductions from the predetermined compensation are made for absences occasioned by the employer or by the operating requirements of the business. See 29 C.F.R. §541.602(a). Thus, if the employer closes the office due to inclement weather or other disasters for less than a full workweek, the employer must pay the employee’s full salary even if:

  1. the employer does not have a bona fide benefits plan;
  2. the employee has no accrued benefits in the leave bank;
  3. the employee has limited accrued leave benefits and reducing that accrued leave will result in a negative balance; or
  4. the employee already has a negative balance in the accrued leave bank.

Since employers are not required under the FLSA to provide any vacation time to employees, there is no prohibition on an employer giving vacation time and later requiring that such vacation time be taken on a specific day(s). Therefore, a private employer may direct exempt staff to take vacation or debit their leave bank account in the situation presented above, whether for a full or partial day’s absence, provided the employees receive in payment an amount equal to their guaranteed salary. In the same scenario, an exempt employee who has no accrued benefits in the leave bank account or has a negative balance in the leave bank account still must receive the employee’s guaranteed salary for any absence(s) occasioned by the employer or the operating requirements of the business.

Source: https://www.dol.gov/whd/opinion/FLSA/2005/2005_10_24_41_FLSA.htm

Additional Resource:

http://cbspulse.com/2016/11/16/winter-extreme-weather-natural-disasters/

SPD, Plan Document, Certificate of Insurance – Do You Have What You Need?

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A summary plan description (SPD) is the primary vehicle for informing participants and beneficiaries about their plan and how it operates. It must:

  • Be written for the average participant and be sufficiently comprehensive to apprise covered persons of their benefits, rights, and obligations under the plan; and
  • Accurately reflect the plan’s contents as of the date not earlier than 120 days prior to the date the SPD is disclosed.

SPDs are to be distributed automatically to participants within 90 days of becoming covered by the plan and to pension plan beneficiaries within 90 days after first receiving benefits. However, a plan has 120 days after becoming subject to the Employee Retirement Income Security Act (ERISA) to distribute the SPD. An updated SPD must be furnished every five years if changes are made to SPD information or the plan is amended — otherwise the SPD must be furnished every 10 years.

Plan documents are all documents related to plan, including the SPD. The plan administrator must furnish copies of certain documents upon written request and must have copies available for examination. These documents include the latest updated SPD, latest Form 5500, trust agreement, and other instruments under which the plan is established or operated. Copies must be furnished no later than 30 days after a written request. The plan administrator must make copies available at its principal office and certain other locations.

Evidence of coverage (EOC) is further information regarding the plan that details coverage for the plan period. Each insurance carrier will have an EOC booklet, also called a schedule of benefits. These documents are often called certificates of insurance. This EOC/schedule of benefits does not meet the SPD requirements under ERISA. The EOC explains the health benefits participants and their dependents have under the plan. It details the services that will and will not be covered and the actions employees must to take to receive the health benefits — such as paying a co-pay, meeting a deductible, or using particular health care providers. The EOC can also refer to a certificate or contract provided to a health plan member that contains information about coverage and other rights.

ERISA requires the plan sponsor (employer) to provide an SPD to all plan participants. The SPD may incorporate the carrier’s EOC by reference, which generally provides sufficient description of the plan’s benefits. However, the SPD also must include specific content, such as ERISA plan number, Employer Identification Number (EIN), plan financing method, and other information that would not be found in a carrier EOC. Many employers choose to do an SPD wrap, which incorporates all benefits in one document instead of having a separate one for each line of coverage.

According to the Department of Labor’s Final Rules Relating to Use of Electronic Communication and Recordkeeping Technologies by Employee Pension and Welfare Benefit Plans; Final Rule, you can distribute insurance certificates and various ERISA required plan documents electronically via a company website. The department allows electronic notification and distribution of documents by email, attachment to an email, or by posting documents on a company website. However, just placing the documents on a company website does not, by itself, satisfy ERISA’s disclosure requirements.

Under ERISA, the rules allow for electronic delivery of all documents that must be furnished or made available to participant and beneficiaries. This includes SPDs, summary annual reports, individual benefit statements, and investment-related information for participant-directed accounts. These rules are limited to disclosures that plans are required to make to participants and beneficiaries under ERISA.

Prior to implementing, a plan administrator must notify all participants and beneficiaries of the availability of the particular disclosure document by sending written or electronic notice that directs them to the document on the website.

Top Questions on Form 5500 Preparation

Reprinted from ThinkHR

Man with Note Pad and FAQs ConceptsAt this time of year, many employers and benefit advisors begin preparing Form 5500, the annual report required for most employee benefit plans. Form 5500 must be filed with the federal government within seven months of the end of the plan year. For calendar-year plans, that means the plan’s 2016 Form 5500 is due July 31, 2017.

The following are frequently asked questions about Form 5500 for employer-sponsored health and welfare plans.

Frequently Asked Questions

Is Form 5500 required for our plan?

Under the Employee Retirement Income Security Act of 1974 (ERISA), Form 5500 must be filed annually for employer-sponsored welfare plans with 100 or more participants as of the beginning of the plan year. To count the number of participants, include covered employees, retirees, and primary COBRA beneficiaries, but do not include dependents.

Welfare plans include plans for medical, dental, vision, life, accident, and disability benefits, as well as health flexible spending accounts (HFSAs) and health reimbursement arrangements (HRAs). If the plan includes group insurance coverage, information about the insurance policy must be reported on Schedule A as part of the Form 5500 filing.

Most welfare plans are unfunded, which means all benefits are paid through group insurance contracts, or directly from the employer’s general assets, or a combination of both. In that case, the filing will be comprised of the three-page Form 5500 only, or the Form 5500 with one or more Schedules A if the plan includes group insurance coverages. No other schedules apply.

On the other hand, if the plan is funded (e.g., a benefits trust), or part of a multiple employer welfare arrangement (MEWA), Form 5500 may be required whether or not there are at least 100 participants. Additional schedules also may be required. Funded plans and MEWAs are uncommon and outside the scope of this article.

The following plans are exempt from ERISA; therefore, Form 5500 does not apply:

  • Plans sponsored by governmental employers and certain church plans;
  • Most voluntary plans (e.g., employee-pay-all after-tax insurance plans without any employer sponsorship or contribution);
  • Payroll practices (e.g., unfunded vacation and sick pay); and
  • Plans maintained solely to comply with state workers’ compensation, unemployment, and weekly disability insurance laws, without providing additional benefits.

When is Form 5500 due and how is it filed?

Form 5500 and any required schedules must be filed electronically using the Department of Labor (DOL) EFAST2 electronic filing system. Paper filings are no longer accepted. To prepare and file the form and any schedules, you may use approved third-party vendor software or the DOL’s web-based filing system IFILE.

Filing is due within seven months after the end of the plan year. For instance, for calendar-year plans, the due date is July 31 of the following year (or the next business day if July 31 falls on Saturday or Sunday).

The due date can be extended by two and one-half months if the employer mails a simple Form 5558 Application for Extension of Time, no later than the original due date. (Instructions for U.S. mail or overnight delivery are included with the form.) In very rare cases, the IRS denies the request. Normally, the IRS does not respond which means the extension is automatically granted. Later on, when filing Form 5500, be sure to check the appropriate box in Part I, D, to indicate that the due date was extended by filing Form 5558.

We have one plan covering employees at our parent company and two subsidiaries. In Part I, A, of Form 5500, do we check the box as a “single” or “multiple” employer?

A plan sponsored by multiple entities that belong to the same controlled group is deemed a single-employer plan. A controlled group means two or more related employers that are under some degree of common ownership or control, such as parent and subsidiary companies, or brother-sister companies. (The IRS definition of controlled group is used for a variety of business and tax purposes, so the group’s tax advisor or financial officer will be familiar with the definition and can confirm the group’s status.) Use the Employer Identification Number (EIN) as shown in the plan document and SPD; this usually is the parent company’s EIN.

For reference, here are quick definitions for the boxes in Part I, A, of Form 5500 (check one):

  • A “single employer plan” is an ERISA plan that is sponsored by a single employer, or by multiple entities that belong to the same controlled group and, therefore, are deemed a single employer.
  • A “multiemployer plan” is an ERISA plan that is sponsored by unrelated employers and a labor union (e.g., Taft-Hartley plan or union trust plan).
  • A “multiple-employer plan” is an ERISA plan that is sponsored by unrelated employers (that is, the entities do not belong to the same controlled group). If the plan is a welfare plan, it also is called a multiple employer welfare arrangement (MEWA). This is uncommon. In some states, state insurance laws prohibit MEWAs.
  • A “direct filing entity” or DFE is usually a bank or trust that files a Form 5500 listing all the plans that are invested in the master trust (e.g., pension plan investments).

Employers and benefit advisors that prepare Forms 5500 for welfare plans usually are reporting a “single employer plan.” Employers are unlikely to handle any of the other three types of plans shown above; those plans and forms generally are handled by trustees.

Part II of Form 5500 asks for basic plan information. Where do we find this information?

Although Form 5500 is prepared and filed many months after the end of the plan year, the plan’s name, plan number, and plan year were designated by the employer when the plan was first established.

ERISA requires that the plan sponsor (employer) set forth the plan in writing and provide a summary plan description (SPD) to plan participants. Those materials must specify the ERISA plan name, plan number, and plan year, along with the plan sponsor’s EIN and other required information. Therefore, the information needed to complete Part II of Form 5500 will be found in the plan document and SPD.

Part II asks for information about who prepared the form. Is this required?

No. Do not provide information about the preparer. Although the IRS added space for the preparer’s information, officials later announced that it should not be provided. Specifically, the IRS issued the following instruction: “The IRS has decided not to require plan sponsors to enter the “Preparer’s information” at the bottom of the first page of Form 5500 for the 2016 plan year and plan sponsors should skip these questions when completing the form.”

Part III, line 8, asks for codes. What are the correct codes?

For a welfare plan, do not enter any codes on line 8a. Refer to page 20 in Instructions for 2016 Form 5500 for the index of Plan Characteristic Codes, then enter the appropriate code(s) on line 8b. Codes for welfare benefits, including health plans and group life and disability insurance, begin with “4.”

For instance, if Form 5500 is for a welfare plan comprised solely of two medical plans (PPO and HMO), an HFSA, and an HRA, the appropriate code would be 4A (health, other than vision or dental). If the plan also included dental, life insurance, and AD&D, the appropriate codes would be 4A, 4B, 4D and 4L.

Part III, lines 9a and 9b, ask about funding arrangements and benefit arrangements. Please explain.

On both lines, check the box for “Insurance” if the plan includes coverages provided through one or more group insurance policies (e.g., group life, medical, STD, LTD). Check the box for “General assets of the sponsor” if the plan includes any self-funded or uninsured coverages (e.g., HFSA, HRA, or other self-funded health plan). Many employers offer insured plans along with an HFSA, in which case both boxes will be checked.
Do not check the boxes for 412(e)(3) contracts or trusts; these are uncommon arrangements requiring tax professionals or plan trustees to prepare the form.

When is Schedule A required?

Schedule A must be filed with Form 5500 if any plan coverages are provided through group insurance contracts. In that case, the insurance company will provide the employer with information about the policy, and information about any commissions or fees, for use in preparing the schedule. Carriers are required to provide this information within 120 days after the end of the plan year. If the plan includes multiple group policies, such as separate policies for group life, PPO medical, HMO medical, dental, and vision, there will be a separate Schedule A for each one.

The group policy year usually is the same as the ERISA plan year, although that is not required so different dates may apply. Include Schedule A with policy information for the policy year that ends within the plan year. For instance, if the ERISA plan year is January 1 and the group policy year and renewal date is July 1, the 2016 Form 5500 will be filed for period January 1, 2016 through December 31, 2016 and include Schedule(s) A for the policy year July 1, 2015 through June 30, 2016.

Is Schedule C required?

Schedule C does not apply to unfunded welfare plans, which are the vast majority of welfare plans. Unfunded means that all plan benefits are paid through group insurance contracts, or directly from the employer’s general assets, or a combination of both. Self-funded health plans are unfunded plans, despite the somewhat confusing terms, as long as benefits are paid from general assets, which usually is the case. Although fees may be paid to consultants, advisors, and other service providers, expenses paid from general assets or in connection with a § 125 plan are not reported on Schedule C.

Schedule C is required only for certain large welfare plans that are funded through benefit trusts (e.g., a voluntary employees’ beneficiary association (VEBA) or union trust), which is uncommon. In that case, Form 5500 and all required schedules should be prepared by tax professionals or plan trustees.

More Information
See the following links for a sample Form 5500 for plan year 2016, instructions for completing the form, and helpful tips from the DOL:

Remember, the actual filing must be completed electronically using the DOL’s EFAST system. Paper filings are not accepted. Lastly, if you are unable to file Form 5500 on time, complete, print, and mail Form 5558, Application for Extension of Time, for an automatic two and one-half month extension. Form 5558 must be mailed no later than the original due date for Form 5500.

Find and share New Orleans area health care prices with PriceCheck tool

Originally published by NOLA.com | The Times-Picayune
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on April 05, 2017 at 5:40 AM, updated April 06, 2017 at 12:06 PM
Going to a doctor or a hospital in metro New Orleans is like shopping blind: most consumers never know the price in advance. By collecting information from you and others, we can help change that.

 

NOLA.com | The Times-Picayune and WVUE Fox 8 News have partnered with ClearHealthCosts, a New York journalism startup, to set up the PriceCheck tool, listing hundreds of prices from health care providers in our region. Check it out, and use your insurer’s Explanation of Benefits, or EOB, form to add your prices. (Information on how to read your EOB form can be found here.)

This is part of our project “Cracking the Code: The real cost of health insurance.” Read our coverage here.