5 Potential Pitfalls of Voluntary Benefits & How to Avoid Them

You already read that Voluntary Benefits Are No Longer Voluntary for Employers. Now it’s time to dig deeper into Voluntary Benefits best practices- program design, what constitutes success when it comes to voluntary benefits and outline tips to prevent an ineffective voluntary program.

The term voluntary benefits was coined long ago when employers fully funded (or significantly subsidized) core benefits and voluntary benefits were an add-on, paid for by the employee through payroll deductions.  As the landscape changed, core benefits evolved to be partially funded by employers and partially funded through payroll deductions. As a result, many benefits became voluntary.

For today’s employees, it’s not as simple as core and voluntary; it’s about choice.  Employees need to balance what limited disposable income they have for all benefits, regardless of what they are labeled. Even still, the concept of core and voluntary resonates with employers as an industry norm, so it’s important to identify ways to avoid common pitfalls of voluntary program implementation:

  1. Think holistically
  2. Don’t forget about ERISA
  3. Consider enrollment options as a critical component in overall design
  4. Remember that education is key
  5. Help employees get the most from their plan

Think Holistically About Voluntary BenefitsVoluntary Benefits Tips

Many employers think offering voluntary benefits is like checking a box – something that can be done quickly and without much deliberation. However, programs without thoughtful preparation are rarely successful in terms of education, enrollment and satisfaction.  Voluntary benefits should be considered an integral part of the overall benefits package.  A strong offering should take into account various factors, including but not limited to:

Current population:

Although a one-size-fits-all approach does not and should not exist, employee demographics can help you pinpoint which products would be most sensible for your collective audience.  Generally speaking,                  those that are starting out in their careers have different priorities than those nearing retirement, and employees falling somewhere in the middle of the spectrum will have their own set of benefits needs as                well.  For example, accident insurance is more popular for families than for singles or empty nesters, while student loan repayment is more relevant for those in their 20’s and 30’s than for older employees.

Current benefit offering:

When considered in tandem, voluntary benefits can serve to protect employees and reduce their risk or perceived risk for various physical or financial troubles.  For example, introducing a high deductible                   health plan offering complementary voluntary products (i.e. hospital indemnity, critical illness, accident insurance) can help decrease the financial burden on employees.

Don’t Forget About ERISA Considerations for Voluntary Benefits

Voluntary Benefits Best PracticesVoluntary benefit programs may or may not be subject to the Employee Retirement Income Security Act of 1974 (ERISA), depending on how they are structured and supported by the employer.  ERISA provides important protections but can also pose constraints for employers and employees.  Assuming you do not want your voluntary programs to be covered under ERISA, you must be careful to manage enrollment and administration separately from your core benefit programs.  If you would like your voluntary plans to be subject to ERISA, then coordinating administration and enrollment will not be problematic; however, understand the potential impacts.  ERISA compliance and your potential fiduciary duties should never be an afterthought.

Consider Enrollment Options as a Critical Component in Overall Design

Our research affirms that employees better understand the offering and have higher enrollment when they participate in group meetings or individual meetings.  In addition, vendor partners are often willing to offer more competitive pricing and waive enrollment requirements if they can meet with employees directly or send them some type of material in the mail.

While some employers welcome the “free” education and enrollment, others are concerned about aggressive selling or having employees using work hours to meet with potential vendors.  If you think of voluntary benefits as part of your holistic offering, then leveraging work hours will be less of an apprehension when voluntary is an element of your complete attraction and retention tool.

The key is to think about the enrollment process as an essential design component of your voluntary program.  Ensure that decisions surrounding enrollment fit with the overall program strategy and make sense for your population.  Providing comprehensive enrollment with core and voluntary may be a best practice for your group.  This allows employees to make coordinated decisions regarding their contributions and programs.  It also enables you to offer complementary plans for optimal plan selection.  While that structure works for some, other employers feel employees have too many decisions to make during annual enrollment and prefer to stagger voluntary enrollment to allow more time for thoughtful decision making. There’s no right or wrong answer – each company and population is different.

Remember that Education is Important

Decision support tools have continued to evolve, providing employees with strong advocacy for traditional plans and voluntary benefits alike.  Although voluntary benefits are designed to be less complex and easier to understand, for some employees the language is new.  Summarizing the program(s) and sharing scenarios to help employees understand the products is often the best way to introduce a new plan.Voluntary Benefits Enrollment

Regardless of who funds the program, as the employer it is important that you educate your employees on the available offering.  Employees should not elect a benefit they do not understand and employers should not offer benefits that are not valued by employees, or that employers themselves cannot explain effectively.  Every dollar spent on voluntary benefits is money your employees are not spending on other necessities like monthly bills, student debt, groceries, emergency savings, or even 401k contributions; make sure they are knowledgeable about what they are buying and ensure that it’s a competitive product in the market.

Education can be facilitated in many ways including traditional employee meetings, brochures, benefit fairs, and onsite sessions with vendors.  At Spring we have also assisted clients with quick videos that provide the highlights of a program and generate interest.  These videos have been well received and employees are able to retain the information from a creative video more easily than a detailed presentation.  Videos are also shareable and can be viewed by family members who may be a critical part of the decision-making process.

Help Employees Make the Most of the Plan

Voluntary Benefits Vendors

After you have implemented a voluntary program and educated your membership it’s important that you continue to monitor the program and assist your employees in optimization.  Sometimes employees forget about the benefits they have available to them and continue to make monthly contributions to plans but they neglect to file claims because they don’t remember what they have elected.  A few simple actions can help your employees make the most of the plan:

  • Send a quarterly newsletter to all employees, or just those enrolled in voluntary benefits. This will give you the opportunity to remind them of the program benefits.  It can also help facilitate changes (i.e. enrolling spouses, children) and provide an opportunity to ask questions.
  • Partner with your vendors. For example, if you have a purchase program in place, they often run specials and send postcard reminders.  Take advantage of those specials!  Perhaps you could run a joint wellness campaign linked to specials on health equipment.  Ask if they would be willing to raffle off something like a treadmill or vacation to align with your wellness strategy.
  • Remind your employees to file claims. Even if you cannot leverage actual data, you can send a reminder at the midpoint of every year for wellness visits with a link to the claim form.  For example, most critical illness and accident plans offer a wellness rider – find out how many employees use that benefit and try to increase that percentage.
  • Ensure the program remains competitive from a pricing and design standpoint. Employees should feel assured that the benefit they’re purchasing through their employer remains is top tier.

Taking the above factors into account will help you establish a voluntary benefit offering that is accessible and relevant to your employees and that is well worth the effort on your part. Today’s workforce has come to expect more than just the basics when it comes to benefits, and voluntary products allow you to diversify your benefits package, keeping you competitive with market standards without any significant cost increase.

However, it is not enough merely to offer voluntary products and services – they need to be the right ones for your population, they need to be communicated effectively, they need to be readily understood, they need to account for regulations like ERISA, they need to be fully utilized and they need to be rolled out in a way that makes sense for your organization. By covering these bases you’ll be able to avoid the most common pitfalls and successfully offer a valued voluntary benefits programs.

New Limitations on Short-Term Healthcare Policies: What You Need to Know

Short-Term Healthcare

Image credit: Michael Havens via flickr

On October 31st, the US Departments of Labor, Health and Human Services and Treasury (the Departments) issued a Final Rule pertaining to short-term healthcare policies. Here are the details:

Short-term health policies are exactly as they sound: healthcare policies, limited in duration, that are meant to function to fill a gap in coverage some individuals may face during their lives if they transition between jobs or group health plans. They are currently limited to twelve months of coverage.

What the Departments have found is there is a growing practice of individuals purchasing short-term policies (which are generally cheaper than exchange policies) and then paying the IRS penalty (short-term policies are not considered Minimum Essential Coverage), which has become a cheaper option. In some cases, individuals are even allowed to renew their short-term policy past the twelve month period, further solidifying the policy as their primary coverage.

It is speculated those opting to go this route are healthier individuals that just want to ensure they have some coverage. These healthier individuals are exactly what the Affordable Care Act needs in the exchange risk pool to balance things out. This is why there was such a concerted effort to close the door on this practice and push these individuals to the exchanges.

To combat this practice and further diversify the exchange risk pool, the Departments have issues a Final Rule, which changes the twelve month maximum for short-term policy coverage to three months. This will be effective for any policies with policy years beginning January 1, 2017. It should be noted that the limit will not be enforced on any 2017 policies, sold before April 1, 2017, in states with existing approved 12 month limits providing the policy expires in the 2017 calendar year.

The full ruling can be found here.

This change won’t cause a seismic shift in the exchange risk pool, but with some of the projected rate increases being reported for 2017 and beyond, even small steps certainly help in chipping away.

Of course, in light of last night’s election results, much of the Affordable Care Act will be under a cloud of uncertainty for the foreseeable future, so stay tuned…

Supreme Court Legalizes Same-Sex Marriage Nationwide: The Employer Impact

supreme court same sex marriage fmla

As you are likely aware, a short time ago, the United States Supreme Court ruled that same-sex couples have the right to marry anywhere across the United States. Prior to the ruling, 36 states and Washington D.C. allowed same-sex marriages. Now, the 14 states that have bans will be forced to lift them.

You can read the full Obergefell v. Hodges decision here.

This ruling is game-changing on a number of different levels socially and politically, but we’d like to point out that many employers will be impacted by this decision as well and should be prepared.

The most notable change will be evaluating your spousal eligibility in all areas of employee benefits. In addition, leave policies including but not limited to FMLA compliance will need to be reviewed. Dust off those policies and start re-reading them to pinpoint what changes need to be made.

Photo by tedeytan

Should You be Considering Self Funding Your Health Insurance Premiums?

For many businesses, health insurance is, after salaries, the most expensive component of employee costs. With the myriad of changes in health insurance including absorbing the cost of the fees and taxes associated with the health care reform law, employers are concerned with how to provide benefit plans that attract and retain employees while balancing the ever increasing cost issue. There has been an erosion of health insurance plans in particular to higher deductible options as one tool used to cut the premium cost. Creative premium financing and health savings accounts is another tactic used. However, there is another vehicle that may help to curb premiums while potentially increasing benefits – self funding.

See Also: Self-Funding Health Insurance and the Management of Risk (Free White Paper)

Self funding health insurance allows employers to gain a greater control of their health care expenses, and lower their company’s insurance costs now and for years to come. Self funding is when an employer directly funds its group/businesses own health insurance claims and therefore only pays for the health care services the company actually uses. If a group’s claims expenses are relatively low, the overall savings can be significant. Furthermore, certain groups begin with much lower premium costs than a comparable fully insured plan based on the health make up of the population. Each group’s maximum self-funding cost for the plan year is determined up front and it’s guaranteed not to change (subject to enrollment and benefit changes) which results in a stable monthly health care payment similar to that of a fully insured plan.

There are three major components to a self funded healthcare plan:

The Health Benefit and Claims Fund

This fund allows an employer to fund its group’s claims. The plan and the fund are owned by the employer and the employer selects the features and options of the plan. The monthly payment for the plan includes a contribution to the claims fund which allows an employer to build the reserves to fund its group’s claims. If there is ever a shortfall in the claims fund (which sometimes may happen early in the plan year) an advance is made from the stop-loss insurance policy to cover any required amount due. This advance is later reimbursed through the claims fund portion of the subsequent monthly payments. If the claims are lower than expected and there is money left in the claims fund at the end of the year, it is refunded to the employer.

Stop Loss Insurance

Stop Loss insurance protects businesses from paying larger than expected claims by making direct payments into the claim fund if claims for a plan year exceed pre-determined levels. There are two types of stop loss insurance – the aggregate and the specific. The aggregate stop-loss benefit protects an employer against higher-than-expected claims incurred by the group as a whole. This policy is based on the total expected claims for the plan year for all group members. If the group’s overall claims for the plan year exceed the aggregate limit, the stop loss insurance pays the cost of the group’s claims for the remainder of the plan year. The specific stop-loss benefit protects against higher-than-expected claims by an individual group member. If an individual group member’s claims exceed a preselected level called the specific limit, the stop-loss insurance pays for the remaining portion of that member’s claims for the plan year. It is possible to still receive a refund for the plan year even if the specific limit stop loss insurance is triggered if the total claims are still below the aggregate limit. Both of these insurance policies are funded by a portion of the employer’s monthly payment.

Plan Administration

Self funded health insurance plans are managed by a Third Party Administrator (TPA). The TPA manages the claims payments, accounting and customer service. All of the plan administration is handled by the TPA so there is no added administrative burden with a self funded plan. The predetermined flat monthly payment that is taken by the TPA each month includes the contributions for the claims fund, the stop loss insurance and the administrative services. TPA’s can be stand alone entities or components of health insurance companies.

Self funding can be done at an individual group / business basis, or can be structured as part of a larger buying opportunity where multiple, like industry or profession businesses can structure a collaborative self funded structure. The size of the business can determine the appropriateness of self funding. In the past, self funding would not be considered advantageous for businesses fewer than 100 enrollees in size. However, there has been a proliferation of products and structures from insurance carriers working with consultative insurance brokers to bring the concept of self funding to businesses much smaller in size. Keep in mind that even though self funding may make sense conceptually size wise, there are a host of other factors such as risk tolerance, health assessment of the business, plan structure among others that need to be factored into a self funded analysis.

With a growing number of players, the possibility of short and long-term premium savings and benefit creativity, the self funding option is one to be at the least, investigated for your employee benefit program. Looking for more information on self funding? Contact us using the form below and a member of our team will be in touch shortly.

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Paid Sick Leave Compliance and Employer Best Practices

sick leave photo

Photo by umjanedoan

Across the United States, a legislative movement to mandate paid sick leave time for all employees has picked up significant momentum over the past couple of years. With a number of states, municipalities and even the President advocating for these new mandates, it is important that employers know how these changes impact them.

At a recent Disability Management Employer Coalition event, Spring partner Teri Weber gave the presentation below on paid sick leave laws with fellow industry experts Geoffrey Simpson from Presagia and Mike Soltis from jackson lewis.

We hope you find this slidedeck helpful and please don’t hesitate to reach out to contact us with any questions about paid sick leave laws or anything related to leave management.

Employer Alert: Important Change to FMLA Forms

paperwork photo

The Department of Labor (DOL) Family and Medical Leave Act (FMLA) certification forms originally expired in February and the DOL was very slow to respond…but it seems as I was eating my first hotdog of the season the DOL was making a minor but critical change to the FMLA certification forms.

The new forms, which will not expire until May 2018, now include the following language

Do not provide information about genetic tests, as defined in 29 C.F.R. § 1635.3(f), genetic services, as defined in 29 C.F.R. § 1635.3(e), or the manifestation of disease or disorder in the employee’s family members, 29 C.F.R. § 1635.3(b).

This new wording is related to the Genetic Information Nondiscrimination Act (GINA) and is an important addition for most employers.

You can download the new forms here.

Don’t forget to update your printed forms and those on your websites!  Also, talk to your vendors to ensure they are up to date with regards to GINA and other important nondiscrimination regulations.

Of course, if you have any questions about FMLA, please feel free to contact Spring. You may also be interested in a helpful eGuide I recently authored about FMLA compliance.

Photo by Cast a Line

Same Gender Marriages and the FMLA- Considerations for HR Professionals

same gender marriage fmla

Today is a good day for same gender spouses under the U.S. Family and Medical Leave Act (FMLA).  Although it’s taken a while for the FMLA to catch up on the 2012 changes related to the Defense of Marriage Act (DOMA) being overturned based on the details of the United States vs. Windsor that day finally arrived on Friday, March 27, 2015.

With this change a spouse is now defined based on the state of celebration.  Therefore even if your state does not recognize same-sex marriage your policy related to the FMLA will need to recognize it, assuming it occurred legally in another jurisdiction.

Most human resource professionals have been preparing for this change for months…maybe years but here are two key reminders:

  • Although you may have known about this was coming since 2012, most supervisors have not!  Take an opportunity to remind your supervisors of this change.
  • Ensure you do not treat documentation requirements differently for same-sex marriage.  Therefore if a marriage certificate is not needed for opposite sex spouses, do not require it for same-sex spouses.

Take this opportunity to review your policy and documentation.  If the DOL comes knocking you will only have 72 hours to respond to their inquiry so look into it before they arrive at your door.

Photo by Mark Fischer

ACA Update: What You Need to Know About the Cadillac Tax (VIDEO)

Here is our heath care reform update for the week of October 19-25, 2014.

This week, Spring Insurance Group’s CEO, George Gonser, discusses the Cadillac Tax and what it means to employers. As always, if you have any questions at all about the Cadillac Tax, or anything related to healthcare reform, please do not hesitate to contact us.