9 Areas of Focus for HR Right Now – Parts 8 and 9

We are wrapping up our thoughts on key issues industry professionals are still up against as a result of the pandemic. We appreciate you taking the time to tune in, and we hope you numbers 1-7 provided some useful insights, or at least reassured you that you’re not alone. Here are our final thoughts (for now), numbers 8 and 9.Remote Corporate Culture

 

  1. Benefits & Culture

No matter where you work, things looked markedly different this year. HR professionals have been tasked with maintaining a culture virtually. Benefits professionals are wondering if what they offer is what is needed. Employees are facing so many challenges that engaging with their organization might be the last thing on their mind – they just want to do their jobs and get by. Some employers are implementing outside-the-box ideas for fringe benefits, such as:

  • Childcare assistance
  • Caregiver benefits
  • Paying for Netflix or other streaming services
  • Money toward grocery delivery
  • Fitness app subscriptions
  • Virtual classes on meditation, cooking, or language learning
  • Sharing recipes
  • Start a virtual book club
  • Anything that can boost mental, physical, social and financial health

In addition, telehealth services are obviously more pertinent than ever, and employers need to be sure they have some sort of telehealth option. If you have employees that aren’t wild about the idea of telehealth, have conversations about why, or share your own experiences.

Another new trend we noticed popping up was that some organizations have taken “flexibility pledges”, where meetings are prohibited during certain hours, employees are encouraged to decline meetings they truly don’t need to attend, etc.

Something that has stuck with me and should stick with employers is that employees will remember what kind of support they received from their company during this time. When the dust settles, that will impact their loyalty. So, whatever you do, do something. Don’t pretend that nothing has changed.

When it comes to leadership, executives and managers need to be talking the talk. If you want to encourage work-life balance, maybe avoid sending emails at 9PM. Schedule calls that all parties take while on a walk outside. Say thank you on a regular basis for all of the hard work being put in.

  1. Beyond COVID

As employers and employees alike get more comfortable with what is more like the “normal” now, versus the “new normal”, it’s important for us to look to the future, one that hopefully does not involve COVID-19. Regardless of any changes made by the Biden administration, the consensus seems to be that we’ve all seen the value and importance of having paid leave options, and we expect this to be more than passing trend. We are starting to see a movement for caregiver leave specifically, and there was discussion around possible changes to the Fair Labor Standards Act (FLSA) to accommodate more flexible work schedules. We definitely expect state leave laws to continue to develop at an increasing rate and to encompass a gamut of areas: sick leave, caregiver leave, paid family and medical leave, parental leave, etc.

While we are still in the thick of the pandemic, there are positive signs ahead – treatments are improving, vaccines being administered, and we’ve figured out to some degree what safe behavior looks like. Once COVID-19 passes, testing and treatment of other viruses, like the flu or strep throat, might change when it comes to the workplace, and you can bet employees will think twice before showing up to work when sick.

 

At the end of the day, employers should remember that, above all else, we need to be extra human right now. This may manifest in different ways depending on the organization, but I hope these reflections on COVID challenges have given you some food for thought, and some ideas to take back to your company.

Understanding the Impacts of Massachusetts’ New Healthcare Law

Massachusetts has long been a leader in the provision of quality, affordable and accessible healthcare. At the beginning of this year, Governor Charlie Baker signed off on ‘Laura’s Law’ which addresses a range of healthcare issues highlighted as a result of the COVID-19 pandemic.Massachusetts Healthcare Law

  • Telehealth: the law mandates equal coverage for virtual visits, including for behavioral health. It also provides a short-term model for how these services should paid. This should provide Massachusetts residents to expanded access to safe, virtual healthcare.
  • COVID-19: Laura’s Law states that treatment and testing for COVID-19 must be covered by insurance companies, including MassHealth. This applies to all inpatient, emergency and cognitive rehab services as well as necessary outpatient services related to the virus. Testing for the asymptomatic is also covered in this provision.
  • Surprise Billing: the new law states that providers must tell patients in advance of anything out-of-network, and Massachusetts plans to recommend a default rate for out-of-network billing later this year.
  • Expansion of Care for MassHealth Members: Laura’s Law eliminates referral requirements so that MassHealth subscribers can access urgent care facilities more easily.
  • Medicaid: under the new legislation, community hospitals will receive two years of enhanced Medicaid reimbursements, a 5% bump in the average monthly Medicaid payment at a collective cost of up to $35 million per year.
  • Scope of Practice: the pandemic necessitated an increase in scope of service for certain healthcare workers to meet the surging demand for care. Under Laura’s Law, this increase in scope will remain permanent for Advanced Practice Nurses and Optometrists.

Lastly, the state is calling for the undergoing of a study to examine the impact of COVID-19 on the healthcare system, especially in Massachusetts.

Governor Baker referenced a silver lining upon rollout of this law, wherein the pandemic garnered the momentum needed for policymakers to support changes, and the collective healthcare experience of Massachusetts residents in 2020 informed the legislation, so it should be effective in addressing the gaps in healthcare that became obvious. We won’t be surprised if other states being to issue similar policies.

Legal Alert: EEOC Issues Notice of Proposed Rulemaking Related to Wellness Programs

This alert is of interest to all employers that sponsor workplace wellness programs. 

Since 2019, employers faced uncertainty regarding the status of wellness program incentives under the ADA and GINA. On January 7, 2021, the EEOC issued a Notice of Proposed Rulemaking on Wellness Programs Under the ADA and GINA that addresses this issue. The proposed rules deviate somewhat from prior EEOC guidance and positions.

COVID-19 law

Specifically, the proposed rules apply the ADA’s insurance “safe harbor” to health contingent wellness programs offered as part of, or qualified as, an employer-sponsored group health plan, thereby segregating them from health contingent wellness programs offered to all employees, regardless of their participation in the employer’s health plan.  Instead, the latter are lumped in with non-health contingent wellness programs (i.e., wellness programs that involve a disability-related inquiry or medical exam but are not activity-based or outcome-based) and subject to the ADA wellness rules.

Consistent with the EEOC’s announcement in the summer of 2020, the proposed rules require any incentives provided for participatory wellness programs and/or wellness programs not offered as part of a group health plan to be “de minimis.”  If the rules are finalized as proposed, employers may no longer rely upon the 30% (or 50% for smoking cessation) limit on incentives for these types of programs.

Finally, the proposed rules amend the GINA regulations by, among other things, limiting wellness program incentives for employees who complete health risk assessments that contain information about their spouse or dependents’ family medical history or other genetic information to a similar de minimis amount.

The proposed rules are described in more detail below.

Background

As background, under the ADA, wellness programs that involve a disability-related inquiry or a medical examination must be “voluntary.”  Similar requirements exist under GINA when there are requests for an employee’s family medical history (typically as part of a health risk assessment).  For years, the EEOC had declined to provide specific guidance on the level of incentive that may be provided under the ADA, and their informal guidance suggested that any incentive could render a program “involuntary.”  In 2016, after years of uncertainty on the issue, the agency released rules on wellness incentives that resembled, but did not mirror, the 30% limit established under U.S. Department of Labor (DOL) regulations applicable to health-contingent employer-sponsored wellness programs.

While the regulations appeared to be a departure from the EEOC’s previous position on incentives, they were welcomed by employers as providing a level of certainty.

However, the rules were subsequently challenged by the AARP, which alleged that the final regulations were inconsistent with the meaning of “voluntary” as that term was used in ADA and GINA.  After much back and forth in the lawsuit, in December 2017, the court vacated, effective January 1, 2019, the portions of the final regulations that the EEOC issued in 2016 under the ADA and GINA addressing wellness program incentives.  This was, in most part, due to the timing proposed by the EEOC to develop new regulations.

Accordingly, since January 1, 2019, employers have been operating with little guidance or clarity regarding whether incentives provided for participatory wellness programs would be agreeable to the EEOC.

EEOC Proposed Wellness Regulations

ADA Proposed Wellness Regulations

The EEOC’s proposed rule seeks to amend two sections of the ADA regulations, related medical examinations and inquiries and the insurance safe harbor.  In the preamble to the proposed rule, the EEOC recognizes that the meaning of “voluntary” is in the eye of the beholder but takes the position that if incentives are too high, then employees may feel coerced to disclose protected medical information in order to be rewarded or avoid a penalty.  Accordingly, participatory wellness programs that include a disability related inquiry and/or a medical examination or health contingent programs that are not part of, or do not qualify as, a group health plan must not impose terms that would adversely affect the terms, conditions, or privileges of employment for employees who do not participate and, therefore, must limit incentives to a de minimis amount.

While “de minimis” is not specifically defined, the EEOC provides some examples to help guide employers, including:

  • Providing a water bottle
  • Providing a gift card of “modest” value

Items the EEOC indicates would not be de minimis include:

  • Providing a $50 a month premium reduction for completing a health risk assessment
  • Paid airline tickets
  • Annual gym memberships

The EEOC requested comments on the types of incentives that should/should not be considered de minimis.

The proposed rules list four factors that can be used to determine whether a wellness program is “part of” a group health plan:

  1. the program is only offered to employees who are enrolled in an employer-sponsored health plan;
  2. any incentive offered is tied to cost-sharing or premium reductions (or increases) under the group health plan;
  3. the program is offered by a vendor that has contracted with the group health plan or issuer; and
  4. the program is a term of coverage under the group health plan.

The proposed rules included other protections for employees.  Specifically, they (1) prohibit employers from retaliating, interfering with, coercing, intimidating, or threatening employees, such as coercing them to participate in the program or threatening disciplinary action if they don’t participate, (2) protect employee confidential information obtained by a participatory wellness program or a health-contingent wellness program that is not part of the group health plan by requiring information collected to be aggregated in a form that does not disclose, and is not reasonably likely to disclose, the identity of specific individuals, (3) with limited exceptions specific to carrying out wellness program functions, prohibit the employer from requiring the employee to agree to the sale or disclosure of medical information or waive confidentiality protections under the ADA to participate in the program; and (4) clarify that employers must still comply with other federal civil rights laws.

Finally, because the EEOC is now proposing a de minimis incentive standard for most wellness programs, it no longer believes that it is necessary to require employers to issue a unique ADA notice that describes, among other things, the type of medical information that will be obtained and the purposes for which the information will be used.

GINA Proposed Wellness Regulations

Under the proposed GINA rules, employers may provide de minimis incentives to employees who complete health risk assessments that contain information about their spouse or dependents’ family medical history or other genetic information.  The EEOC uses the same examples of what would be de minimis under the ADA for purposes of GINA, such as providing a water bottle or a modest gift card.

The proposed rule does not prohibit an employer from offering a greater incentive (i.e., a non-de minimis incentive) to employees who provide their own genetic information as long as the employer makes it voluntary for the employee to complete the questions regarding genetic information (and the instructions clearly indicate which questions are voluntary), or to an employee who completes a health risk assessment that includes genetic information, if the employee participates in a disease management program, other program that promotes a healthy lifestyle, and/or meet a particular health goal, as long as the programs are also offered to individuals with current health conditions or health risks.

The EEOC uses an example of an employer who offers $150 for completion of a health risk assessment which requests information about family medical history or other genetic information but makes it clear that the incentive is available regardless of whether the employee completes any questions related to genetic information.  The assessment identifies which questions are related to genetic information.  Employees can earn $150 if they disclose family medical history and participate in a program designed to encourage weight loss or a healthy lifestyle; however, if the employee does not want to complete the questions related to genetic information, they can still earn the $150 if they attain a certain health outcome by participating in other activities.  The incentive complies with GINA.

What’s Next for Employers?

The wellness regulations are proposed at this time and it is uncertain when they will be finalized; however, if history is any indication, any final regulations will be challenged in court.  While employers are not required to make any changes to their wellness programs at this time, they should continue to monitor developments and work with employee benefits counsel when designing their wellness programs.  The release of final regulations may be further delayed if the Biden administration freezes new rules pending further review.

11 Essential Pieces of the Stimulus Bill for Employers

The $900 billion COVID-19 relief bill passed by Congress at the end of 2020 is robust and nuanced. It covers a lot of ground, and can be confusing to navigate. As professionals in the insurance and benefits field, we went ahead and summarized the key points most relevant to our clients and colleagues.

 

  1. FFCRA Paid Leave

The COVID-19 pandemic continues and the vaccine is unlikely to be available on a wide-scale basis in the next several months. In light of this, the refundable payroll tax credits for emergency paid sick leave (EPSL) and extended family and medical leave (E-FMLA), which were enacted pursuant to the Families First Coronavirus Response Act, are extended through March 31, 2021.  Notably, only the tax credits are extended, which means compliance with the EPSL or E-FMLA requirements is voluntary for employers after December 31, 2020.

COVID Relief Bill

 

The policy behind this may have been to incentivize employers to continue allowing employees in the middle of FFCRA leave as of January 1, 2021 to finish out, and be paid for, any remaining leave to which they would have otherwise been entitled.  The tax credit is only available for leave that would otherwise satisfy the FFCRA, had it remained in effect, i.e., if employees for whom the employer provides paid leave would otherwise meet the eligibility requirements under the FFCRA and did not use the full amount of EPSL or E-FMLA leave between April 1, 2020 and December 31, 2020.

  1. FSAs and DCAPs

  • Employers offering a Dependent Care Assistance Program (DCAP) or health FSA may allow participants to carry over all unused DCAP and health FSA contributions or benefits remaining at the end of the 2020 plan year to the 2021 plan year.
  • Employers offering a DCAP or health FSA may extend the grace period for using any benefits or contributions remaining at the end of a plan year ending in 202
    0 or 2021 to 12 months after the end of the applicable plan year.
  • Similar to DCAPs, employers offering a health FSA may allow participants who cease participation during the 2020 or 2021 plan year to continue to be
  • reimbursed from any unused benefits through the end of the plan year (and applicable grace period) in which participation ceased.  This is often referred to as a “spend down” provision when included in a traditional DCAP.
  • Employers offering DCAPs may reimburse employees for dependent care expenses for children who turned 13 during the pandemic.  The relief applies to plan years with open enrollments that ended on or before January 31, 2020 (e.g., calendar year 2020 plans).  It also applies for the subsequent plan year (e.g., calendar year 2021 plans
    ) to the extent the employee has a balance at the end of the 2020 plan year after any relief adopted by the employer, such as an extended grace period or carry over.  The relief allows the employer to substitute “age 14” for “age 13” for purposes of determining eligibility for reimbursement of a child’s expenses.  In general, DCAP eligibility ends at age 13, except in cases of mental or physical incapacity.
  • Employers offering a health FSA or DCAP may allow employees to make prospective election changes (subject to annual limitations) to their 2021 contributions without experiencing a change in status event.
  1. Surprise Billing

A hot topic of late, surprise billing will be banned starting in 2022. This includes a ban on the consideration of reimbursement rates by Medicare, Medicaid, CHIP, or TRICARE, as well as a ban on “usual and customary charges” which should prevent providers from suggesting higher rates.

 

More specifically, healthcare consumers won’t get balance bills when they seek emergency care, are transported by air ambulance, or upon receiving nonemergency care at an in-network facility but from an out-of-network physician or laboratory. Instead, they will pay the deductibles and copays outlines in their in-network plans, and the insurer and the provider will use arbitration to come to an agreement on acceptable payments, leaving the patient out of the process. For those without insurance, the secretary of the Department of Health and Human Services will create a provider-patient bill dispute resolution process.

 

  1. Direct Economic Relief

While not quite as generous as the last wave, this $286 billion portion of the latest stimulus bill allows for:

  • Direct payments of $600 for individuals making up to $75,000 per year, and $1,200 for couples making up to $150,000 per year, as well as a $600 payment for each dependent child
  • An additional $300 per week for all workers receiving unemployment benefits will be provided through March 14, 2021
  • An extension of the Pandemic Unemployment Assistance (PUA) program, with expanded coverage to the self-employed, gig workers, and others with nontraditional work engagements
  • The Pandemic Emergency Unemployment Compensation (PEUC) program, giving additional weeks of federally-funded unemployment benefits to individuals who exhaust their regular state benefits
  • An increase in the maximum number of weeks an individual can claim benefits through state employment, the PEUC program, or the PUA program, to 50 weeks

 

  1. Small Business Relief

As the Amazons of the world rake in revenue, small businesses have been left in a tough spot throughout the pandemic. The $325 billion piece of the bill includes the following relief for small businesses:

  • Over $284 billion for first and second forgivable Paycheck Protection Program (PPP) loans
  • Lending options
  • Expanded PPP eligibility for 501(c(6) nonprofits
  • $20 billion in grants for small businesses in low-income communities
  • $3.5 billion worth of continued small business administration (SBA) relief
  • Enhancements for SBA lending
  • $15 billion allocated toward live venues, independent movie theaters, and cultural institutions

 

  1. COVID-19 Testing, Treatment & Prevention

As the US grapples to keep up with the demand for testing and treatment as cases continue to surge, Congress has set aside $69 billion to address this dire situation. This section includes funding for the procurement of vaccines and therapeutics as well as for vaccine distribution. $300 million of this will be reserved for high risk and/or underserved areas. $22 billion will go to states for testing, tracing and mitigation programs. Mental health, support for healthcare providers, and COVID-19 research are all accounted for within this bucket.

  1. Schools

As schools of all types and levels struggle with remote learning and protection from the virus, the bill includes $82 billion to assist, including allowances for states, K-12 schools, and higher education institutions that have been significantly impacted.

  1. Child Care

Child care has become one of the biggest struggles for working parents throughout COVID-19. How can they mind their children at home while doing their jobs? Or, how can child care centers keep children and their families safe? As such, $10 billion has been allocated for the child care sector through the Child Care and Development Block Grant (CCDBG) program. The funds can be used to provide child care assistance to families, as well as to aid child care businesses with their new challenges. Of this, $250 million will be set aside for the Head Start providers for low-income children and families.

 

  1. Coronavirus Relief Fund Extension

The bill includes a provision that extends the availability of funds provided to states and localities by the Coronavirus Relief Fund in the CARES Act from 12/30/20 to 12/31/21.

 

  1. Employee Retention Tax Credit

The bill extends and expands the refundable Employee Retention Tax Credit (ERTC), part of the CARES Act, helping to keep more employees on payroll and more small businesses and nonprofits afloat.

  1. Student Loans

    The student loan provision of the original bill was been extended, so through the end of 2025, employers can make payments toward employees’ student loans – up to $2,500 annually – and have that amount be excluded from workers’ taxable income.

 

 

In addition, the bill expanded the lifetime learning credit, a tax break worth up to $2,000 per return can be used to offset the cost of undergrad, grad, or professional degrees.

There are also two important, miscellaneous tax issues we wanted to mention:

  • You are able to deduct qualifying expenses that exceed 7.5% of adjusted gross income on your federal income tax return, as long as you itemize your return. This is now permanent.
  • Workers whose payroll taxes have been deferred since September now have until 12/31/21 to pay back the government (extended from 4/30/21).

On top of our abbreviated list of must-knows, the bill also includes sections pertaining to Private Mortgage Insurance (PMI), environmental tax credits, broadband, transportation, farming and agriculture, and more. What the bill does not include is state and local aid funding, liability protection from COVID-19 lawsuits, and relief for the restaurant industry, among other areas.

 

If you have questions about what you’ve read or need help bringing your health, benefits, or leave programs up to speed, please get in touch (insight@springgroup.com).

Leveraging A Captive to Finance Your Employee Benefits Risk

For most companies today, its people are one of the largest investments its makes. COVID-19 accentuated this point and further showed us how the health of a company depends in large part on the health and wellbeing of its workforce. Providing competitive benefits is not just the right thing to do, but a sound business decision. Employee benefits usually account for one of the largest expense line items on an income statement for organizations. In a world where employee benefits consistently become both more important and more expensive, businesses of all types are looking for an affordable mechanism to finance these risks.  One solution that has become central to discussions about employee benefits has been captive insurance.

To provide some background, a captive is an insurance or reinsurance company – which can help insure or reinsure the risks of its owners, the parent company (or companies).

Employee Benefits & Captives

Over the past decade as healthcare and benefit costs have been rising, captives have become the go-to solution for organizations looking to bend the healthcare cost curve as well as create a more efficient employee benefits program.  More recently, however, organizations are recognizing the many qualitative advantages of a captive that can help attract and retain employees – a company’s most important asset. As we enter a new decade, these qualitative advantages or “soft costs” of human capital will drive the next iteration of captive insurance.

Traditionally, captives have been viewed as purely a funding mechanism for employee benefits that provides the following advantages:

  • Improved cost savings
    • Better control of premium costs
    • Reduce frictional costs (commissions, taxes, insurer profit, administration)
    • Capture underwriting savings
    • Earn investment returns
    • Improve cash flow for parent organizations
  • Improved risk management & increased control
    • Enhanced reporting – captive programs not only provide data transparency, but they also provide reporting in a more timely manner allowing stakeholders to make decisions regarding potential plan design changes for the upcoming year.
    • Centralized risk pool – from an organizational risk perspective, leveraging a captive allows risk managers to have a more complete understanding of the risks associated with the programs. Also, life and disability lines are usually considered to be third party risks and have a positive impact on the captive’s risk distribution.
    • Non-correlated risk – employee benefits usually add non-corelated risk for existing captive programs, thereby reducing the risk exposure to the captive.
    • Quantification of loss prevention programs and wellness initiatives – by utilizing a captive, the organization has the ability to implement data analytics programs, that provide actionable insights on the effectiveness of existing programs and the current cost drivers.
    • Design coverages and provisions for programs that are unique to the parent company – every organization has a unique set of risks and captives can be used to fill in gaps in the existing benefit programs.

While captives are a long-term financial strategy, in our view, the next generation of captive insurance will have a sharper focus on the soft costs of human capital, such as:

  • Attracting and retaining employees through innovative techniques and forward-thinking tools
    • While employee benefits account for large costs for employers, they are running a significant risk by not providing the right benefits. A comprehensive benefits package that’s meaningful to employees is consistently ranked at the top of the list when employees are deciding on a new position.
    • Owner vs. Passive buyer: A captive allows for customized benefits programs to meet the needs of your unique demographic. Employees at a technology company will have different priorities and expectations than, for example, those that work in manufacturing. With a captive you can understand those unique needs and meet them better than you could as a passive buyer with a commercial carrier, in a cost-effective manner. Addressing these specialized needs will go a long way in terms of retention and engagement.
    • By establishing a captive, employers can open doors to focus on human capital and the more qualitative aspects of a program
      • By creating a profit center, captives create cost savings that companies can then allocate towards preventative, wellness, or engagement programs.
    • A captive enables the parent organization enhanced data analytics. This data comes in months sooner than it would with a commercial carrier, meaning you can analyze your programs and make real-time decisions to yield better claims results. For example, if you know one of your biggest population health issues is diabetes, you can establish programs to address diabetes before your renewal is up. As a passive buyer with commercial carriers, the information typically comes in too late to make any relevant changes for that plan year.

Which Benefits Can I Fund Through a Captive?

A wide range of employee benefits may be funded through a captive – the most common coverages are Medical, Life, Disability, Retiree Medical and Voluntary Benefits.

Captives can be used to fund Employee Retirement Income Security Act (ERISA), or non-ERISA benefits. ERISA benefits are primarily the benefit plans sponsored by and contributed to by employers. Life and Disability plans are usually ERISA in nature. These plans are subject to federal oversight, under the auspices of the Department of Labor (DOL) and require express approval from the DOL to fund them in a captive. Approval from the DOL is subject to meeting certain criteria – using an A rated fronting carrier, not paying any more than market rates for the coverages, no direct commissions as part of the contract, requirement for an indemnity contract, to name a few.

Medical stop-loss is usually not considered to be subject to ERISA and has become an extremely popular benefit to add to a captive. The reason for this has been two-fold. Firstly, the rising cost of catastrophic claims. Self-insured organizations are increasingly concerned about the financial impact of high cost claims – unfortunately seeing $1M or $2M claims is becoming commonplace. One such large claim could have a material impact on the financial sustainability of the program. Second, the hardening insurance market is driving employers of all sizes towards a captive based stop-loss solution, as it reduces the opaqueness of the pricing process and helps employers get a much clearer understanding of their premiums and cost drivers. Usually a captive stop-loss program involves the employer creating an annual aggregate limit, and purchasing excess coverage from the commercial markets above the captive’s aggregate retention,, protecting the captive from most catastrophic claims.

Long-tail benefits such as group universal life insurance and long-term disability are ideal captive candidates. Benefits that pay out over multiple years (e.g. long-term disability and retiree medical), provide cash flow stability and loss predictability.

Using a captive for voluntary benefits has recently risen in popularity. This is a cost-efficient way of offering benefits that your employees can choose to participate in, or not. More and more employers are turning to this strategy as healthcare becomes more expensive, as a way to supplement benefits and lessen both their financial burden and the financial burden faced by their employees. One of the most attractive elements of writing voluntary benefits into your captive is that voluntary benefits typically have a very low loss ratio, which means they can generate a lot of savings within a captive. Those savings can then be leveraged to reduce premiums for employees or expand the coverage offered. An example of a prime voluntary benefit often offered in a captive structure is hospital indemnity, which can be critically helpful coverage, but one that is often otherwise too expensive to fund.

 

Retirement

How it Works

Unlike property and casualty lines of coverage, employee benefit lines have a unique value proposition. They allow organizations to recapture dollars that would have otherwise gone to an insurance carrier. Both life and disability coverages use a fronted carrier, i.e. a commercial carrier stands in front of the captive so that from an employee perspective there is no change in the way they interact with the insurance company. On the back end, the carrier cedes risk and premiums to the captive.

The illustration to the right shows how a typical fronted captive program works.Employee benefits captive

 

Under such an arrangement the fronting insurer continues to administer the program. The employer pays the fronting insurer an annual fee for its services, allowing the captive to retain underwriting profit (if any) from the program. Depending on the risk appetite of the organization and the results of the actuarial modeling, the employer may choose to buy reinsurance for the program.

 

In Closing

The typical steps involved in adding benefits to an existing captive or forming a new captive are a feasibility study which outlines qualitative and quantitative factors for consideration, such as potential savings, program structures, design alternatives, insurance considerations, and implementation requirements.

Today those in the insurance industry are facing difficult circumstances on a variety of fronts. The recent pandemic has led to hardening of markets. We are seeing substantial rate increases for clients. Captives offer a solution to mitigate these increasing costs in a sustainable manner. In addition, captives provide access to additional data and insights that can help organizations get a clearer understanding of claims drivers and therefore allow for implementation of solutions and tools that reduce claims costs. Further, captives provide organizations the ability to impact the soft costs of human capital by identifying and crafting unique solutions to meet their employees’ needs, more important now as the pandemic shed light on gaps in coverage many did not realize existed.

Captives are useful and versatile risk financing tools, especially for employee benefits. They provide significantly better cash management than can be provided through a trust and can produce impressive cost savings as compared to fully insured guaranteed cost plans.

9 Areas of Focus for HR Right Now – Part 7

Thanks for joining us on this nice little reflective exercise. There has been so much news to keep up with this year, that we thought it would be helpful to put pen to paper on our key COVID takeaways. We hope our numbers 1 through 6 provided some food for thought, and also some helpful advice. We are back this week with number 7, and it’s a big one.

 

  1. Leave & Accommodations

Leave laws are always front and center for us at Spring, but this year we had different considerations. While this topic interplays with many of the other themes on this list, I thought it important to reiterate some key legislative items we’ve been dealt this year.leave management covid

 

Currently there are very few legal parameters for supporting working parents during the pandemic, and no protections for employees worried about exposing people in their household. Any accommodations allowed here are largely based on the discretion of the employer. For working parents, consider flexible hours and different shifts. Further, companies should think about whether teleworking could work more permanently, you are likely to face some employee hesitancy to return to the office. This will be especially important depending on your office location and the case rates in that area.

 

As we think about traditional ADA accommodations processes and try to carry them out in a COVID world, we pose the following questions:

  • If an employee self-identifies themselves as high-risk, should an employer be asking for proof?
  • If an employee states they cannot wear a mask due to a disability, but cannot provide documentation, what does the employer do?
  • If an employee is asking for leave but is not eligible under ADA or FMLA, what other options are available?

I recently presented at DMEC where we suggested implementing short-term accommodations trials, especially when there is difficulty obtaining documentation, which there has been due to closing of medical offices to non-emergency patients and reluctance to visit medical offices out of fear. So if an employee asks for accommodation without documentation, try something that you find reasonable for 3 or 6 months without asking for medical information, and then revisit the trial at that point. Further, exhaust all return to work options (whether in-person or remote) first, and use leaves as a last resort.

With the expiration of the FFCRA, Emergency Paid Sick Leave (EPSL) and Emergency Family and Medical Leave (EFMLA) is no longer required, but the tax credit has been extended. Click here for more details on that. All of these complexities are making the case for federal leave law, in which we could avoid this patchwork of different leaves, but speakers remarked that while the desire is there, there are too many challenges to get it going during this economic climate.

Several states have implemented their own leave policies related to COVID: California, New York, New Jersey, Colorado, Washington D.C., with pending legislation in Massachusetts. Employers in these states will need to weave these into their programs.

Further, while there is no leave currently for those afraid to return to the workplace, employers should be cautious as it is possible for debilitating anxiety to occur in these cases, which could trigger a leave.

 

At the end of the day, while employers often worry about misuse of programs, research shows that less than 5% of individuals taking leave are abusing it. Further, as engrained in our culture, people are generally shamed of needing time of work to take care of themselves or others. To this end, we need to take a caring lens when it comes to leave and accommodations. Lastly, communicate your policies often, be proactive, make it easy for employees to find available resources, check in on  your colleagues, and be sure to have formal Stay and Work and Return to Work programs in place and updated.

 

Don’t miss our series wrap-up, numbers 8 and 9, coming to your inbox next week!

The Paid Leave Momentum

According to SHRM, paid leave may have been 2020’s biggest workplace news.  A number of U.S. companies (between 27% and 52% depending on the study) expanded their paid leave benefits, with paid parental leave growing at a faster pace than paid family care leave1. The states and jurisdictions of California, Colorado, Connecticut, Massachusetts, New Jersey, New York, Oregon, Rhode Island, Washington, and Washington DC have passed paid family and medical leave (PFML) laws to date and at least another ten states are considering them. In addition, numerous localities have passed paid sick and safe leave laws. These can vary across cities and counties, even within a given state.Paid leave in US

On a federal level, laws exist such as the Family and Medical Leave Act (FMLA), enacted in 1993, which affords unpaid job-protection, and programs such as the Fischer Tax Credit, the Federal Employee Paid Leave Act (FEPLA), and the Families First Coronavirus Response Act (FFCRA). Federal programs offer limited coverage as wage replacement and job protection may or may not be included in each law. A federal paid leave program is now seemingly supported by both democratic and republican parties, with the biggest difficulty being how to pay for it.

In addition, and to complement paid leave policies, more companies are offering and triggering EAP and wellness programs than they have in the past. About a fourth of companies say they provide a caregiver benefit, separate from EAP, that might include flexible work hours, personal time, counseling services, free programs for finding and managing care, employer subsidized online resources, child, or eldercare.2 You can read more about the landscape for caregiver benefits here.

This momentum has been a positive move towards bringing our country closer to the other 40 nations that mandate some degree of paid leave3, and to help employees balance time for work, family, and medical needs, but creating such programs is not without its challenges.  With no two state PFML jurisdictions sharing the same standards, the varying employer, state, and federal programs result in a “patchwork” of definitions and standards for companies to contend with.  They can also limit employer flexibility to address the unique needs of their workforce, expose employers to financial liability, and create inefficient administration processes4 that result in an increased HR/Benefits workload5.

To overcome these challenges, the time is now for employers to review their state and national employee base and consider how leave benefits can be provided in accordance with their culture, appetite for risk and desired employee experience.  Key questions to begin with include:

  • Where do the bulk of my employees work?
  • What corporate disability, paid family and medical leave and sick or safe leave policies are they subject to?
  • How are these plans being offered, administered, and paid for?
  • To what extent do they coordinate or integrate with other leave of absence, workers’ compensation and sick or PTO policies? Or with broader health and wellbeing programs?
  • To what degree can the process be centralized? Can current vendor partners be leveraged to streamline? Can tools be provided to simplify, educate, and personalize?

Taking these factors into account gives benefit professionals the opportunity to heighten the discussion with senior management, consider plan and policy design more holistically and determine administration that will minimize employee confusion, position managers for stronger engagement, and lead the organization towards better outcomes.

 

 

Sources

[1] Leave and Flexible Working Survey, SHRM Employee Benefits, 2019.  Paid Time Off Survey, WorldatWork and PTO Inc., 2019. Integrated Disability, Absence and Health Management Survey, Spring Consulting Group, 2020.

[2] Integrated Disability, Absence and Health Management Survey, Spring Consulting Group, 2020.

[3] Data compiled by the Organization for Economic Cooperation and Development (OECD), 2018.

[4] Paying the Way, Large Employers and the State Paid Leave Patchwork, The ERISA Industry Committee, 2020.

[5] Paid Leave: Exploring the Impacts to Other Benefits Programs, Spring Consulting Group and ClaimVantage, 2020