Danielle Mason of Benefit Innovations recently joined us for a discussion of the variety of topics pertinent to not-for-profit benefit strategy, including the variety of options for offering benefits as well as an overview of the Affordable Care Act and its implications to employers.
In case you missed it, you can watch a replay here:
Steven:All right, Danielle, is it already if I go ahead and kick us off officially?
Danielle:Yeah. Let’s do it.
Steven:All right. Well, good afternoon, everyone, if you are on the East Coast and good morning if you are on the West Coast or somewhere in between. Thanks for being here for today’s Bloomerang webinar: Everything Nonprofits Need to Know About Employee Benefits. And my name is Steven Shattuck and I’m the Chief Engagement Office here at Bloomerang and I’ll be moderating today’s discussion.
Just a couple of housekeeping items before we begin. I want to let everyone know that we are recording this presentation and we’ll be sharing that recording later this afternoon as well as the slides in case you didn’t already get those. So, if you have to leave early or perhaps you want to review the content later on, you’ll be able to do that. Have no fear, you’ll get that recording from us later on this afternoon.
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Just in case this is your first webinar with us, I want to say a special welcome to you folks. We do these webinars just about every Thursday. We bring on a super great expert speaker to give an educational presentation. We’d love to see you again on future webinars, for sure, but if you don’t know Bloomerang either, Bloomerang is a provider of donor management software. So, if you’re perhaps interested in that or maybe you’re going to be in the market for that sometime soon, you can check out our website. You can even watch a video demo of our software. You don’t even have to talk to a sales person if you don’t want to. So, I’d love for you to learn more about us if you are indeed interested.
But for now I’m really excited to introduce today’s guest. We have Danielle Mason joining us. Hey, Danielle, how’s it going?
Danielle:It’s going well. How are you, Steven?
Steven:Good. I’m great. This is exciting for me. Danielle actually did a workshop for me a few months ago at my nonprofit where we serve other nonprofits here and in the Indianapolis area. I thought the presentation was really good and really informative. So I asked her to do a Bloomerang webinar and she graciously said yes. So I’m really excited for her to share all of her knowledge with you folks listening today.
I just want to brag on her real quick before I turn things over. She is the VP of Client Strategy over at Benefit Innovations. Also joining us from Indianapolis, it’s nice to have a local friend speaking with us today. She is a specialist in group benefits for medium to large-size employers, including nonprofits. She focuses on cost containment, employee communication and specifically ACA compliance, and we’re going to talk about that a little bit as well today.
That’s kind of her specialty. She speaks a lot on the Affordable Care Act and its implication to lots of different audiences, not just nonprofits. But she’s got a really great nonprofit-focused presentation today and it really is everything you need to know. I’ve seen this presentation and I can vouch for it. I’m going to pipe down. I’ve already said too much. Danielle, why don’t you go ahead and take it away, my friend?
Danielle:All right. Fantastic. Thank you so much, Steven, and thanks for that wonderful introduction and again, thank you folks for being on the webinar with us today. I am going to probably speak in a little bit more detail than maybe some people would prefer. But I am what I call a self-proclaimed insurance nerd. I love helping employers figure out how to take care of what could be a really expensive part of their strategy as an employer and make sure that they’re doing it in a way that benefits their strategy long term, that benefits their employees long term, something I’m really passionate about.
I’ve been involved with not for profits on their benefit strategies since I became a part of this business. So it’s been a big part of the work that I do. I’ve also actually worked for several different not for profits, specifically not for profit educational organizations such as drum corps and indoor groups, so I have a very soft spot in my heart for not-for-profits and the very important work that they do.
So I’m going to go ahead and jump in right here with the first slide, Benefit Concerns for Not for Profits. There’s a handful of them, but the biggest one that seems to be a hot button these days is complying with the ACA Employer Mandate. The Employer Mandate was part of the Affordable Care Act that was rolled out about 2010.
The real implications of the mandate came around about 2013, but basically what that says is any business with 50 or more full-time equivalent employees is required to provide health insurance to at least 95% of their full-time employees and dependents up to age 26 or you’re required to pay a fee. I’m sure if you are in this category of a business with 50 or more full-time equivalent employees, you’ve probably already run into this at some juncture.
So I won’t pontificate about it too much further, but that is an important part of the law and again, I’m sure some questions like this will come up down the road in the presentation, but because of the outcome of the election and what we’re going to see happen in January, of course some of these things could very well change. But I’m going to speak about it as the status quo is currently.
A second important concern when it comes to benefits for not-for-profits is that you obviously want to attract and retain good employees. You want to have people working for you who enjoy their employment and who feel like the benefits are really helping them truly live a fuller, better life.
It’s important because it creates employee loyalty to offer benefits, so about 40% of employees say that a wide selection of benefits would make them feel more loyal to their employer, so of course we’re going to talk about the medical side today, but there are a ton of other benefits that you can offer your employees as an employer. And the more options you offer, that tends to trend to a little bit more employee loyalty, which generally means you have less people searching for jobs, searching for jobs on the clock even, that sort of thing. Employee loyalty is a big important part of maintaining their concerns.
And then obviously we want to keep administration simple. That’s something that I focused on quite a bit with my clients is that health insurance and insurance of all kinds is not really designed to be user-friendly. It is designed to benefit the consumer, but it’s not exactly designed to be as simple a thing for the employer, particularly when you’re offering an employer benefit plan. So, obviously, a goal for me always when working with my clients — and we’ll talk about this a little more — is to keep administration nice and simple for you as the employer.
And then most importantly, cost containment, really making sure that something so expensive like offering health and welfare benefits for your employees, that you’re keeping those costs as controlled as you can in this kind of environment that we’re experiencing now in the U.S. with the cost of major medical and other kinds of employee benefits.
So why should you offer benefits? There are a lot of employers out there of various sizes who just say, “To heck with it, I don’t have the time, the energy, anything like that to deal with this.” But there are a lot of reasons you should consider it. Those are listed here. Again, attracting and retaining good people, that’s super important to any company, but particularly for those not-for-profits, you want to retain people that are helping the mission of the company. And you want to reduce the cost through group coverage versus the individual market.
So, for example, I’m seeing this quarter particularly here in Indiana, and I know that Indiana is not special in what we’re seeing here, I know several states across the country are seeing this, but what we’re seeing is that when we run quotes on a group basis for an employer and we look at those individual rates and compare them to the plan design and rates of what we would find on the individual market, so for example an individual going to Anthem.com or UnitedHealthcare.com and getting themselves an individual quote, we’re seeing those individual market rates at on average 25% to 30% higher than what we can offer on a group platform through a group benefit plan.
So that is a great thing as an employer to have the power to do is to bring medical care and medical insurance to your employees at a rate that’s much less expensive than what they find out on the individual market. And then obviously if you’re offering benefits as an employer, you’re also probably offsetting part of that cost for them, which makes the insurance much more affordable as well.
So group coverage, even if you are looking at a group as small as 20 to 25, 30 people, that group coverage is going to be significantly less expensive. And like I said, right now it’s about 25% to 30% less to insurance an individual versus what they would find out on the market themselves or on the Healthcare.gov exchange.
The third thing again, increasing employee loyalty, we talked about that a minute ago and the other thing you can do when offering benefits that is important is to make options available, so not only the medical, I think that’s really what a lot of people go to when they think about employee benefits, but as an employer, you can also offer things like life insurance, dental, vision, access to disability, cancer, hospital policies, telemedicine and student loan consolidation at no cost to you.
It will cost your time and it will cost your time to administer, but that very wide range of benefits that are available on a group basis for employers does come at a zero dollar cost to you and it gives the employees access to a better product than again they might find out on the individual market.
So, for example, to speak to that, let’s look at dental, for example. If you go to DeltaDental.com and you’re interested in buying a dental policy on yourself, generally what’s going to happen is you can find the policy for a decent rate, but they’re probably going to include large waiting periods. So for example, you might be able to get your cleaning the first year you hold your dental insurance on an individual policy, but it might not pay for major work until 6 or 12 months after you’ve gotten the policy and that’s simply because they want to keep their risk down.
So, clearly, if someone’s out on the market shopping for dental insurance on their own, it’s probably not just because they woke up that morning and realized they needed it. It’s probably because they just went to a dentist and realized they’ve got some work in front of them, so now they want to purchase dental insurance to help cover the cost. Unfortunately, if everyone bought their dental insurance that way, the market would not sustain long term. So that’s why they install those waiting periods on coverage.
Now, if you as an employer are to offer dental to your employees, there are several carriers out there that will say, “Sure, you can offer your dental to everyone who wants to take it and we’re going to waive all of the waiting period,” so right on the first day that it’s effective, for example, if you set it up for January 1st and someone goes to their dentist and they need a cleaning and a filling and they have to repair a crown, they can use that dental coverage right then and there aren’t waiting periods included so they’re not able to get the coverage for the work that they need done. So, that’s just an example on the dental.
Student loan consolidation is a benefit that I’m really passionate about. I think there are a ton of workers in the workforce right now, particularly if you’re looking at your millennial workforce that is probably saddled with a little more student loan debt and maybe at a rate that’s not benefitting them long-term. So, as a large employer if you’re in that mid to large space – when I say large I’m referring to 150 to 200, that sort of range of employees – you do have the option to go through some carriers to offer student loan consolidation as a benefit to your employees with student loan debt and there’s often a cash incentive connected to it that you as the employer don’t have to fund.
So I know personally of a couple of carriers that do this in the Indiana market. I also have a relationship with one that does it out in Silicon Valley that is very successful with that benefit and that’s something newer on the market that’s really exciting that I know a lot of employees have benefitted from offering. I’m also going to go back and talk about telemedicine a little farther down the road here, but let’s keep moving on for the sake of keeping us on time.
So compliance with ACA employer mandate for applicable large employers. Again, an applicable large employer is an employer that averages 50 full-time equivalents over the course of a year. So it’s important to note here that a full-time equivalent is not synonymous with a full-time employee. There’s an example here of how a full-time equivalent is calculated. It’s a little bit more detailed than what I’m presenting here.
If you go back and look directly into the IRS code about how they’re defining this for the purposes of ACA. They have several methods. It’s very, very detailed and of course you’d want to get a broker or an expert to help you make this calculation. But the easiest way to really explain it that I prefer to use in this sort of learning forum, one full-time equivalent is one employee working an average of 30+ hours a week or a full-time equivalent could be two part-time employees working an average of 15 or more hours per week.
So this is where we run into some issues at times, especially here in the Indianapolis market where we have some of those smaller employers who maybe have two or three locations and they have ten full-timers at each location, so because they only have 30 full-time employees, they don’t believe themselves to be an applicable large employer. However, if you count up all the hours of their several part-time people, they might have 25 or 30 part-time people at each location.
Once you count their hours and you do the calculation, you could pretty quickly come to find that they actually do have more than 50 full-time equivalents, which means they are actually exposed to the employer mandate, which means they probably found out already if they’re not getting ready to find out in the first quarter of 2017 that they owe Uncle Sam a fine for not complying with the mandate.
So, if you are an employer who is in that range, you might have 30 to 35 full-timers and a slew of part-timers whose hours aren’t being carefully counted. You could find yourself in that position down the road, assuming that the employer mandate holds moving forward.
The other part of the employer mandate is that it requires that coverage is both sufficient and affordable to be wholly compliant. So sufficient requires that there is hospitalization involved, there’s an MLR out there that talks about the loss ratio, basically to make it digestible for today’s purposes, sufficient essentially and for major medical coverage. So limited medical, mini-meds, as they were called several years ago, those are not considered sufficient and affordable is another requirement that we’ll get a little bit more into the details about here.
So, like I said, sufficient, at least 60% actuarial value of the cost of healthcare. Affordable, this requires that the cost of coverage offered by an employer does not exceed 9.5% of the employee’s household income. So the big question that everyone had when this sort of came out was, “How do I figure out my employees’ household income, I don’t know anything about their spouse or their adult children, maybe they’re contributing to the home. How am I supposed to know about that?” And of course ACA had an answer built right in to the bill that was written.
There are some safe harbors that you can use. The safe harbor I prefer to use for the sake of simplicity is the W2 safe harbor. It means you can use your employee’s W2 wages to determine the compliant expense. That is obviously assuming that they are the only household earner, but if they have additional earnings within their household, that’s not going to affect their affordability threshold.
So, essentially in order to determine whether or not the coverage is compliant with the affordable part of the mandate, what you need to do as an employer is take their monthly cost of their health insurance and make sure that it does not exceed 9.5% of their monthly income. It’s a fairly straightforward calculation, but that’s definitely something you want to double check if you haven’t heard of this before or maybe if this isn’t the first time you’ve really been aware of it, that might be something to look into, again assuming that the employer mandate holds moving forward.
So right now, what does non-compliance cost? This was a big question everyone had on their mind, particularly business owners or human resource professionals when we were evaluating, “Should we go ahead and get health insurance, how much should we be worried about complying, what is the actual fee?”
Well, there two different kinds of tax. One is called the sledgehammer tax. It’s going to be a little bit more significant. That is the tax that an employer is exposed to and nothing is offered and any employee attains a PTC on the FFM. So PTC stands for premium tax credit and FFM stands for federally facilitated marketplace.
So, basically, the easiest way to talk about is a subsidy on the exchange. A PTC is a subsidy that someone’s able to attain for their health insurance that is applied to their monthly cost upfront, not a tax credit. It’s applied to their cost upfront per month and they purchase that coverage through the federally facilitated marketplace, Healthcare.gov.
So, if you have any employee that goes out and gets a premium tax credit on Healthcare.gov, you’re going to pay $2,000 per employee per year, but you’re going to get the first 30 for free. So, if you have 55 employees, for example, you’re only going to have to pay that $2,000 per employee on 25 employees because you’re going to get your first 30 for free.
The tack hammer tax, this is a tax that an employer is exposed to if they offer coverage, say they offer something, maybe it’s a mini net or maybe they only cover 50% so the actual cost for the employee is a little higher than what’s considered affordable, you’re still exposed as an employer, but it’s really only $3,000 per employee per year that received a subsidy on the exchange.
So, again, in the first situation with the sledgehammer tax, if you have one person go to the exchange and you as the employer offer nothing, that one person going to the exchange is going to kick off the sledgehammer tax, which is $2,000 per employee less the first 30.
However, if you offer something and you know it’s compliant but you’re doing the best you can’t and it’s an expensive thing to do, you’re offering something for your people, you’re trying to do the right thing but part of it’s not compliant with ACA, suddenly the tack hammer tax is really what’s going to apply to you and that’s not as significant as the sledgehammer tax because you’re paying per employee that actually received a subsidy, as opposed to paying the tax on every employee that you have under your employment.
You’ll see that there are some asterisks next to the $2k and the $3k. That’s because those amounts are going up and they’re expected to be adjusted in 2017. We don’t know what those adjustments are going to look like, but if I were to pontificate based on my gut, I would say we’d probably see something in the range of a 5-6% increase.
What if I have less than 50 full time equivalents? If you have less 50 full-time equivalents, it doesn’t matter. The Employer Mandate does not apply to you. You don’t have to comply with the different parts of the law and that sort of thing, so you’re sort of in that safe zone. However, it is still important to talk about employee benefits because it’s still an important strategic decision for the ownership and the stakeholders. That goes back to some of those non-ACA-type reasons to offer benefits that I was inferring earlier, the retention and the loyalty.
Those things are really important to any business, particularly in the sphere of not-for-profits. The individual mandate still applies to employees of a small employer. So I see employers like this quite frequently, where they have 25 or 30 employees, they’re not required to offer anything, but now they’re employees that they’re not offering anything for, they’re required to go out on the individual market and purchase something on their own. Again, as I mentioned earlier, here in the state of Indiana, that’s looking like a 25% to 30% increase from what could be offered on a group chassis and from what was offered on the individual exchange last year.
The other part of the individual mandate that is a little bit distressing for some employees is that there is a fee connected to the individual mandate as well that you may be aware of that they have to pay at tax time. So, if they’re guaranteed to get a certain amount of money and they’re used to seeing that tax return and then suddenly it’s being eaten up by a fee pertinent to the individual mandate, they might be a little frustrated the employer doesn’t offer anything in the way to help them with this.
So the individual mandate is another concern. And just to speak to that for another second as well, I know in the state of Indiana currently if you are interested in health insurance and your employer doesn’t offer it and if you don’t qualify for a subsidy on the Exchange as many people do, there are only two carriers in the state of Indiana that are going to write individual business for 2017. It makes the rates incredibly high and it makes the selection for people who are out shopping on their own very, very limited and makes their options quite small.
As an employer, even if they’re not required to, you have access to several different markets in our state here, which is a very stark comparison to the individual market. So, again, the group market with you as an employer have the control to engage in it and offer benefits to your employees through that group chassis buying power, you’re doing a big thing for them and it’s also kind of making you look like a rock star because you’re providing them that benefit.
Another thing to make sure to point out as well, it’s important to track hours and staff carefully to ensure awareness of the cutoff. So, if you are someone who’s getting up there and you suspect you’re getting close to 50 full-time equivalents, even if you only have maybe 25 or 30 full-timers, you have enough part-timers to start getting you close, my recommendation is always to make sure you connect with a really smart accounting firm or get some payroll software or inquire with your current payroll provider to see if they can help you ensure that your full-time equivalent count is sub-50. Typically payroll companies, accounting firms, those kinds of resources can help you with those accounts and of course any broker you engage with should be able to help you get pretty close as well.
So let’s talk about the medical plan options. These are the options that are out there for you as an employer that you can offer to your employees and there are several different options here and I’m going to try to keep this as high-level as I can. But the first option is that you could offer a comprehensive, major medical, sufficient and affordable coverage. This kind of coverage is what the goal of ACA was. The goal of ACA was let’s get everyone covered with good health insurance that will protect them if they’re in a hospital. They’ll protect them if they’re in an accident. This is good insurance.
So it’s fully insured, typically, through a carrier like Anthem or United Healthcare. Fully insured just means that you as the employer send a check off to Anthem, United Healthcare, Aetna, who have you. That insurance company, you send them a check once a month for the premium. They insure your employees in return and that’s that. It’s a pretty straightforward process and it’s the one that we’re probably most comfortable and familiar with.
There’s another option that’s called partially self-insured. It’s also called a level premium plan. It looks and acts like a fully insured policy in that you send money to a carrier once a month, it’s a set amount that does not change during your contract year and at the end of the contract year after a run out period, typically I see a six-month run out period where carriers could still be trying to file claims and the insurance companies could still be going back and forth about whether they could pay them that sort of thing. After that 12-month contract and 6-month run out, the insurance company in one of these partially self-insured plans, they look back at your claims year and if you had a particularly good claims year where you didn’t incur a whole lot of claims, they would issue you a percent of your premium back as a refund so then you can use this refund to fund your premiums for the next year, you can put them in an account to be used on some kind of health-based benefit for your employees down the road.
But that’s a really attractive option, particularly if you have a group that’s in that 50 to 100 range, a little bigger that continues to work pretty well too. Up to 150, I’d say, that’s relatively healthy, relatively young, have a lot of college graduates, those are great groups from a demography standpoint for that partially self-insured-type plan because you’re going to see pretty decent claims utilization across the board in that you don’t have a lot of people that are going to be sick. So that’s always a great option depending on the demography of the group, where you can save some money and then also maybe even see some of that money back in your pocket, which is not an option with fully insured coverage.
The third option is going completely self-insured. When you self-insure as an employer, typically you see this in employers that are at least 50, although you can go smaller with self-insurance these days. But typically you’ll see about 50 being the very smallest company that might self-insure, all the way up to your big 500 up to 5,000, 6,000 live cases, those are normally self-insured. Hopefully they should be because it’s really the most economical way to do it.
Self-insuring means that you as the employee are going to put money inside in an account to pay claims yourself. You’re going to pay your own claim and then you’ll also pay a TPA, which stands for third-party administrator. They’re the people that are going to process your claims for you. It’s where bills will get sent. They’re the people that go back and forth with the hospital about payment, that sort of thing. They’ll handle all of that on your behalf.
There will also be a reinsurance carrier. What they will do is make sure that you don’t lose your rear end on the whole deal. So, what they’ll say is say, “Okay, once you’ve paid Mr. Employer a half a million dollars in claims this year, we’ll take care of the rest of that if you hit half a million, we’ll take care of the rest for you.” That’s just to prevent self-insured plans from bankrupting the larger companies with a bad claims year.
So the other thing about a self-insured plan, number one the reason that’s beneficial is because you as the employer, you have that fiduciary responsibility and ability to create your own contract. So, your self-insurance contract is overseen by the Department of Labor instead of the Department of Insurance. So you’re allowed to do some things with those health plans that maybe you wouldn’t see on a fully insured plan.
So, for example, maybe you have quite a few employees who complain of back problems. So you want to write into your health insurance plan an extra 20 visits to the chiropractor in network every year. You can do those kinds of things. Maybe you want to add reflexology as a covered benefit for your people or maybe you want to add fertility treatment as a covered benefit for your employees because you want them to have that. You can do those sorts of things in a self-insured plan because you as the employer are responsible for that contract.
So, of course, the TPA will write the contract on your behalf or view it for you. Of course any good broker will help that TPA and help you review the contract to make sure it’s exactly what you want. But those plans are a little bit more flexible. Again, you see those utilized, as they should be, in those employers in the 50+ type space.
Another medical plan option we have here is the minimum essentially coverage. Minimum essentially coverage is coverage that covers 100% no cost share of the entire list of preventative care services as dictated by the CMS. So you could Google “minimum essential coverage” and you’ll see a list that’s very exhaustive. And it’s a list of preventative only care services. So, checkups, mammograms, colonoscopies, yearlies, immunizations, that kind of thing, all of those things. Same thing for women who are pregnant, children.
It has this huge list the CMS compiled after ACA was implemented of things that they considered preventative services. They’re required to be covered at 100% no cost share in any major medical plan currently. But you can purchase on a group chassis minimum essential coverage for your employees, which covers 100% of their preventative care only, and it’s relatively inexpensive.
I’ve seen MEC plans that you can put in for employers that cost around $70 a month per employee for individual only coverage and so it’s relatively inexpensive. However it’s important to know that because it’s preventative care only, it’s not comprehensive health insurance. So you as the employer wouldn’t be satisfying the employer mandate by offering minimum essential coverage, but what you are doing is offering a relatively inexpensive way to shelter the employer from the sledgehammer tax should they choose to offer nothing.
So, again, if you’re an employer that can’t afford to offer major medical but you’re interested in offering something and you want to lessen your exposure to those taxes implied by the ACA, minimum essential coverage is a great option for you because while it doesn’t comply completely, it’s better than offering nothing. Again, you offer nothing, you’re going to be exposed to the sledgehammer tax, which is that more expensive tax.
The other great thing about minimum essential coverage, like I said, its price tag is so low and it qualifies the employee to comply with the individual mandate. So, if an employee is paying half of that, say, $40 a month for their MEC coverage, granted they’re not going to get in doctors’ offices when they’re sick, they’re not going to have any coverage if they get hit by a truck.
That kind of stuff is what major medical is for. However, if they’re young, relatively healthy at any age really and relatively healthy and they’re not as concerned about carrying health insurance, the minimum essential coverage does allow them to comply with the mandate, which means they won’t see their tax check gains at the end of the plan year in April.
Another option that you can offer in tandem, I typically offer this in tandem with a MEC plan is a limited medical plan. These are plans that are, again, not sufficient. It’s not major medical, but you can offer it because it does offer some benefits because it can offer scheduled payments for certain visits such as physician visits, X-rays, emergency room visit, inpatient surgery, etc. It will offer a scheduled payouts for that.
So, for example, you typically see them in an indemnity style benefit. So say I have a limited medical plan and the scheduled payment for a hospital inpatient acceptance is $1,000. So, say I get accepted to the hospital on an inpatient basis, I don’t have major medical on there for two days. My bill ends up being $6,500 because that’s about what two days inpatient might run you these days. I’m going to get $1,000 from my limited medical plan to help cover part of that and the rest of that I’ll be responsible for for myself. So, it doesn’t work quite like a copay but if that image sort of helps you understand, that’s basically how it works.
Of course the payouts are often modest in comparison to the actual facility bills themselves, $1,000 anymore might get you the lights turned on in a hospital room, but it is better than nothing. It is less expensive than major medical, but it’s not, again, going to be sufficient because of what is covered.
There’s also a new strategy that’s sort of hit the market in the last six or seven years, I want to say, from a group health insurance perspective. It’s called a cost plus pricing strategy. Before we start talking about this, I will add the fine print here in that this strategy can be considered controversial by both employers as well as providers because it’s sort of . . . I call it a little bit of a cowboy way to run your employer benefit plan, but it also has the potential for incredible cost containment, which is why I think it’s notable to speak about in this forum particularly.
If you’re in a position as a not-for-profit where you might have to cut benefits or maybe offer nothing at all because you can’t afford the major medical anymore, the cost plus pricing strategy is one that I would definitely consider talking about because it does have the capacity for incredible savings.
So how this works is, number one, you have to be self-funded, so you need to have at least 50 people in your employer group, but you have to be self-funded for this to work. So, what happens is as soon as you are using a cost plus strategy, any time you incur a claim from a facility, they’re re-priced according to CMS-reported costs. So CMS reports the costs of different things that happen in a hospital every year. So they understand how much it costs to perform surgeries, materials, that sort of thing.
So the claims that come from those hospital facilities are evaluated by a third-party vendor that you engage with who is a specialist in the cost plus pricing strategy. So, for example, they might take a $10,000 bill for a knee replacement, go line by line on that bill and say, “This charge is double charged, you shouldn’t have charged twice for that. This charge you use one screw out of bag of screws. You can’t charge this for the whole bag of screws. You can only charge me for that one screw,” so there’s that line item.
And they might go down, etc., and find those line items that they can eliminate from the cost of the bill and then they also compare the cost that the facility is charging . . . you can also compare the charge of the cost of the charge that the facility is charging to those CMS-reported costs and then try to meet in the middle somewhere that’s a little bit more acceptable of an agreement for you as the employer because you’re self-funded, you’re technically your own insurance company right now. So you have a responsibility as a fiduciary to make sure that you are overseeing what you’re paying the facilities and that it’s fair and that it’s reasonable and that they’re getting an appropriate margin, but you as an employer are not overpaying for the price of care.
So 95% of the time in this kind of arrangement, what happens to go back to our knee surgery exercise, they bill the employer $10,000 for that surgery. The employer or the third-party cost plus pricing strategy partner looks through that bill, they send the hospital a check for $6,000 instead of the $10,000 and they say, “If you cash this check, you understand that you agree to our terms and to our discounting and to our methodology,” and 95% of the time the facilities will cash the check and off and go. So they’re not going to question normally.
A lot of the times a lot of these claims are auto-adjudicated. It’s happening so quickly in a facility that they don’t even notice what’s happened before they cash the check. And again, once they’ve cashed the check, they’ve kind of agreed to the terms. So, as you can see in that example of our knee surgery, you’ve saved 40% in that one situation.
What we typically see, what I’ve seen trend in the last couple of years using this strategy with some of our clients is that there’s a significant claims savings in the ballpark of 60 to 70% on what is paid to providers from a self-insured employer and that’s opposed to even the best PPO discounts, which for example you might hear Anthem talk about their PPO discount being 40%. Forty percent is a great discount, but the cost plus pricing strategy is talking about not discounting from the top, but taking the cost at the bottom of the care and then adding an appropriate margin for that and then giving that money to the facilities so that they’re getting their fair share with a fair margin but they’re not paying those really inflated costs that we quite frequently see coming out of hospital systems.
So to continue on that tangent about cost containment strategy . . . and again, I know some of that was really, really technical and I apologize if anyone phased out for a second, but come back to us and we’re going to talk about something a little simpler.
Telemedicine, this is one of my favorite cost containment strategies. What it is, it’s the option for employees to call a doctor 24 hours a day, seven days a week with a zero dollar consult fee for free and get diagnosed over the phone. It lowers the cost of the plan because it lowers the cost of the plan of the primary care visits, the ER visits, the urgent care, that kind of thing. Seventy percent or more of all office visits can be handled by phone or by video and 24/7 access helps redirect out of the emergency or urgent care situation.
So I always recommend employers regardless of what you have going on from a medical insurance perspective that you should be offering some kind of telemedicine offering to your employees as an employer-paid benefit. It’s very inexpensive. My personal favorite vendor starts at about $10 a month for the Teledoc and advocacy-type card. Teledoc is, I believe, the most established name and they are very, very good. They don’t have any malpractice on their track record, but there are lots of other telemedicine carriers out there as well that are pretty reputable that will do a great job.
So when I talk about redirecting care out of an emergency room or urgent care, one of the specific examples I like to use is if someone wakes up to their two-year old crying because their ear hurts in the middle of the night on a Saturday, generally as a parent, their instinct is going to be I’m going to get my kids to the emergency room because they’re in pain and I want that pain to stop. That’s a very, very normal kneejerk reaction.
Now, if you have access to call a doctor first and this doctor is going to call you back on average 22 minutes later, listen to the symptoms of the child, prescribe them a medication and maybe prescribe them a pain reliever so that they’re not in so much pain, then they’ll call that into the nearest pharmacy to the employee that’s called the doctor and then that employee can go and pick up the medication and the pain medication for their kid and they can have them medicated and healing and hopefully feeling a little bit better the next morning.
They did that for virtually no money and then they went and paid for what I assumed would be a generic prescription. It might have cost them $20 overall and a little bit of time. That is a huge savings not only for that employee, but also for the employer’s health plan because they didn’t utilize the emergency room in a situation where they otherwise might have. That’s one example of how telemedicine can bring a great benefit.
Another reason besides that is that it can people in your office healthy. So, a lot of the times you see people who are maybe under-insured, uninsured or they just work a lot and they don’t have a ton of time to get to a doctor, they might come in and out of work very, very ill for a number of days in a row. It’s not helping anyone else. It’s not helping them get any better and they’re just dragging their feet because they don’t want to take the time see a doctor.
Now you have an option to say, “Look, you have this benefit and now you can call a doctor, get a prescription and get better faster rather than just sort of lingering with this illness and spreading it to other people.” I think we can all appreciate that around this time of year, particularly when that sort of thing starts to pop up.
Another great cost containment strategy is a medical advocacy program. This is something that can help your employees navigate the system. It’s very complicated and I promise it’s not getting any easier down the pike. It helps direct care in network. So, that’s a big issue that we see with employees. Sometimes they have great employer sponsored coverage but they don’t understand how a network works or don’t know how to look someone up in network where an advocate can step in.
Employees are also able to get assistance finding the least expensive or highest efficiency care. An advocate can often see things like look up the cheapest MRI in a certain zip code or look up the most experienced surgeon who does this very complicated and sensitive surgery and then they’ve left. They can help find those things for employees depending on what their needs are.
And then also a billing advocacy program — this would be if you weren’t taking a cost plus perspective on your group plan, a bill advocacy program would be a great one for you to look into. What billing advocates do, they scour bills for mistakes or replications and then they negotiate discounts on behalf of the employee after those bills are looked at.
I think it’s notable too since we’ve talked about hospital bills a couple of times to know that I have spoken with several different billing advocates who have all told me the same thing and that’s that 100% of the bills that leave a hospital facility or freestanding surgical center, that kind of thing, have some kind of error on them. Maybe it’s a duplicate. It’s the wrong code, incorrectly coded gender, incorrectly coded this, that or the other.
Almost every bill, virtually every single bill will have a mistake on it. So these advocacy programs can really start to add up those nickels and dimes over time if you think about it and understand that from a billing perspective.
There’s also out there prescription funding programs. Those are programs that allow for those with really expensive medications, maybe specialty medication to seek assistance in affording that medication. Those programs work in tandem or with or without a major medical plan. So it’s best paired with major medical but if not, that’s a great benefit to offer too. Wellness initiatives, that’s always . . . wellness has been a hot button topic for cost containment for a really long time.
I think it’s probably been 15 years now that we’ve been talking about wellness because it keeps plan members healthier in the long term and in doing so, pushes medical claims down over time with consistent application. I think there are some employers who have seen enormous results from those wellness initiatives.
I will say professionally I don’t that necessarily will work for everyone, but I think it’s an important initiative to look at, particularly if you’re interested in at least trying to keep those unhealthy behaviors curbed, if not anywhere but inside the walls of your building, that can have some good positive residual effects over time.
And finally on site, near site shared clinics, this is another tactic that’s been kind of in place the last 10 to 15 years. This is where an employer generally of a larger size, I’d like to say 250+ provides access to care near the employees themselves by offering a clinic, lowers the cost of using a standard PCP, primary care physician office, and lowers the cost of using the clinic and urgent care, that kind of thing.
The great thing about clinics now is that what’s becoming a little more popular is the shared clinic idea. So, if you’re a relatively large employer but maybe the cost of building a clinic seems out of the way for you or it’s just not showing up on paper the way you’d like to, you can partner with a couple of other employers in your area and sort of pool your resources to open a shared clinic where all of those employees can go get that care at that one clinic and make sure it’s staffed appropriately for that number of people and that sort of thing. If you maybe aren’t big enough or you’re not ready to take that step because it’s a big funded investment to build a clinic, there are other options out there now.
So, in a nutshell, all those cost containment things, all those are things that we want to keep in mind that we’re creating responsible consumerism of healthcare and the employer plan. If you’re an employer that’s self-insuring or partially self-insuring, but even if you’re fully insured, these cost containment strategies are many different ways you can go at the same problem with a different tool to keep the costs of the plan down and to make sure the employees understand how to use it and understand that healthcare is still a very complicated system and that there are things that they can do to make their consumerism more responsible and more feasible for them long-term.
So, as I inferred kind of early on in the presentation here, there are other valuable benefits that you can offer to your employees — life insurance, dental, vision, disability. Disability is another one of those benefits that’s really hard to buy for if you’re an employer, particularly if you’re female because disability often is something that people take out before they have a child.
That can tend to be very expensive to acquire on an individual basis, so a group chassis benefit is obviously a better choice in that situation. Critical illness, that’s a benefit that will pay out a lump sum to anyone who has a heart attack, stroke, that kind of thing. Personal accident covers indemnity payments, sort of that limited medical payment strategy we were talking about a few minutes ago.
It will send you little cash payments if you’re involved in an accident or you have a child who plays team sports and they were involved in an accident. It’s a little bit of money to try and help get you to your deductible. Telemedicine, again, we talked about that.
This is an important thing to consider too, in many instances, as an employer you can offer a full panel of voluntary benefits — we’re not talking about medical — voluntary benefits at no cost to you, but still gives your employees benefits on a group basis rather than purchasing as an individual. It can be offered with or without medical. You don’t have to do medical to offer benefits.
Again, this is at no dollar cost to you. You’re going to have to spend some time setting it up. You’re going to have to spend some time administering it as an employer. But it is important to note that you can still offer these things to your employees and create that loyalty and create that retention that you want over time without breaking the bank. It’s just going to require some time and some strategy for you.
So pay or play, that was the big question everyone was asking themselves about 2012, 2013. Am I going to comply with the mandate as a large employer or am I not? Again, if you don’t have 50 full-time employees, this doesn’t apply to you, but if you do, for example if you have 100 full-time equivalents, you’re exposed to the employer mandate, and let’s say without offering anything 15 people will go to the Healthcare.gov Exchange and obtain a subsidy. So, your penalty at that point for doing nothing, offering nothing as an employer, is about $140,000 a year and that’s $117 per employee per month.
Now, to speak about this for just a second, I think we’re just now seeing some of those employer notices roll out to employers, informing them that they have an employee who achieved a subsidy on the Exchange and making them aware that they may be exposed to their tax penalties, but we have yet to see how that’s going to play out and I expect it to in the first quarter of 2017, but of course now we’ve got other moving parts, obviously with the new presidency coming up in January and that sort of thing. So, it’s important to keep in mind that some of these things could change quite quickly here down the road.
One thing that won’t change, I can be sure of that, is the cost of turnover in this country is very expensive. That’s why it’s important to defend the expensive benefits. While benefits are very, very expensive and it’s probably the second most expensive thing you might have next to your payroll, the average cost of turning over an employee is 16% to 20% of their annual salary. So, someone who’s only working $10 an hour will cost $3,300 to replace, while someone earning $50,000 would cost $10,000 to replace. That’s in time, training, materials, all of that. The cost of turnover is incredibly high.
So what kind of erosion to the bottom line does long-term high turnover do to your company? It could be very significant. That’s something I always want to bring up as well is that even if the ACA and a lot of this stuff goes away down the road, I don’t believe that the true loyalty created by offering benefits will ever diminish, not only for your employees but also for you as an employer, looking at the cost of a high turnover-type situation, over a long period of time, maybe had offering benefits made a difference in that in the long-term.
It looks to me right now that it’s about 1:48 and I think I’m going to throw it back over here to Steven to see if we have some good questions we wanted to investigate.
Steven:Yeah, we do. We’ve got probably about ten, seven or eight, maybe seven to ten minutes for questions. Wow, that was a lot of information, Danielle. This was great. I’m so impressed that you got through it in 40 minutes or so. That was a lot. So, I really appreciate it. I hope everyone who listened along got some nuggets. We’ve got a lot of questions. I think you’ve got people’s gears turning here. I’m just going to kind of roll through them as they came in.
Steven:Here’s one from Jamie. Jamie’s wondering, “For an organization with just one employee, can they get health insurance from the marketplace?” She’s getting conflicting info about whether they have to two or more employees to be eligible. So, can a one-person shop get on the marketplace?
Danielle:Yeah. Sure. A single employee, if you have one employee, your best bet is going to be to go through either the marketplace or an individual carrier. Most carriers for a group plan, they are going to need two employees. Sometimes people get confused with employees versus people. So sometimes you’ll have people who are self-employed and it’s them themselves and they want to put their spouse in the plan and say, “I have two people. Can this be a group plan?” No, it cannot. For it to be a group plan, you do need to have at least two full-time employees in order to put a group plan into place.
Steven:Two full-time employees, got it. All right. So here is a question from Joy. “What exactly does that mandate require for employers with less than 50 employees?” So, it looks like Joy has got an organization under 50. What do they have to worry about there?
Danielle:So for employers with less than 50 employees, you are not exposed to any tax penalty whatsoever. So, in that situation, you don’t have to comply for the purposes of complying so that you avoid a tax. At that point, you would want to determine whether or not offering employee benefits is something you just want to do to, like I said, bolster that loyalty and attract and retain good people in the long-term. I think that’s sort of where you start to think about doing benefits in that sub-50 thing.
So, if you’re under 50, the employer mandate doesn’t apply to you. However, the individual mandate applies to almost everyone. So, even if you are not offering benefits as a group because of the employer mandate, you want to consider the fact that your employees are also exposed to the individual mandate. If they’re working full-time, they’re probably exposed to that. So, that’s an important thing to think about as well.
Steven:What about seasonal employees? Rebecca is wondering do you include them in full-time employees? It looks like she’s got folks who worked full-time from maybe eight to ten weeks in sort of one section of the year. What do you do for those people? Any considerations there?
Danielle:Yeah. So that’s where you kind of get into a little bit more of that nuanced, very detailed calculation to get to the full-time equivalent number, but in a nutshell, what I would say to that, if you have seasonal employees, what you want to do is add up their total hours and then divide it by 12 to see how many hours those seasonal people are working on average per month and see what that number looks like. If it’s starting to creep up, if you have so many hours per month that you have effectively an extra five or six full-time equivalents, is that going to put you up over the threshold? It depends on how many full-timers you have.
So, really, for her specific situation and anyone who’s in a situation with seasonal employees, it’s one we deal with here pretty frequently, but it does get a little detailed. I would just make sure to get with someone who can help you calculate that and look at that specific situation. I mean, some people have seasonal folks for ten months out of the year. Some people have seasonal folks for three. It just boils down to the number of hours. That’s really what that comes down to.
Steven:Makes sense. Here’s one from Pam. Pam’s got an organization that has over 50 employees and it looks had offered holiday pay in previous years but they are going to move to not do that this year or in coming years. Anything she needs to consider there for cutting the holiday pay?
Danielle:I know you might not have the ability to answer this one, but I think it depends on whether the holiday pay was a bonus. I think it also depends on how much money these people are making because we also have to consider the FLSA issue with the new salary threshold, whether or not that goes through. So, again, there’s a couple things about her specific situation, but I can say if you have over 50 employees, you want to make sure you’re either complying or you’re comfortable with the risk of not complying from the health perspective.
So, from a pay perspective, if it was just a holiday bonus and you’re not doing that this year, I don’t think that there’s any impact you would probably have unless it’s maybe impacting some salaries that are in that threshold of maybe being applicable to those new rules. So, that’s just . . . that’s what I would say to that.
Steven:Well, Pam, why don’t you shoot Danielle an email and maybe fill in some of those details. She may be able to give you some better advice there, give you some more information. Here’s one from Kevin. Kevin’s got an organization 20 to 30 employees. What kind of cost containment measures would make sense for his organization at that size? Any ideas for Kevin there?
Danielle:Yeah. Kevin, I definitely recommend at 20 to 30, a partially self-funded or a level-funded plan might be advantageous for you. That was the one I was talking about if you have a relatively healthy workforce or a relatively young workforce, those are the kinds of risks that those companies really like, but that partially self-funded plan is the one that offers a possible rebate if you have good claims performance throughout the year. I’ve seen really good experiences with that kind of product in the 20 to 30 space.
The other cost containment thing that I would highly recommend is checking out a telemedicine thing, Teledoc.com. Again, you can email me. I’m happy to help you with that. But the telemedicine thing does have a big effect on the cost. It’s not something you’re going to see right away, but putting that practice into something that you’ll definitely yield the benefits of over time. So telemedicine would be huge for you and the partial funding too.
Steven:Cool. Danielle, any comments on the new overtime rule getting struck down? Any advice for nonprofits who were maybe about the boost the salaries for people so they would be over that threshold or maybe differentiating between exempt versus non-exempt?
Danielle:Yeah. So, my best advice always is you want to be ready to fire the gun as soon as something happens. It’s great that there are people out there with strategies already ready to comply. I would definitely take a couple things into consideration. One, you want to make sure you’re not doing something that may not even go through. So, obviously, I get the question a lot, pending what’s going to ACA, what should we do? My response is always play by the rules how they’re written right now. Play by the rules exactly as they’re written right now.
And the second thing you want to do besides that is make sure you’re communicating with your employees about it because one of the big things I’ve seen is some employers have already gone and told some of their hourly employees that now they’re going to be moved up to salary and they’re really excited about it. Maybe they’re getting a raise or vice versa. They might have gone and told some salary people, “Sorry, we’re going to have to move you to hourly.” You get some grumping and misery and that sort of thing.
They’re reading this kind of stuff too. They’re out on LinkedIn. They’re out on the news. They see this sort of thing happening and if it’s affecting them, they know about it. So I think as an employer, not only is it a) important to play as the rules are written right now, but b) it’s also important to communicate with them, “This is why we’re doing this. This is why we’re doing that. You’re important to us. You’re valuable. We’re going to keep you posted,” so that they’re not out there reading some of the things on the internet.
I’m sure we’ve all experienced it. But you want to make sure that you as the employer are communicating very clearly about what your plans are. If it were me, it would be to play by the rules until they change.
Steven:Yeah. I’m with you. Well, Danielle, this was awesome. It’s almost 2:00 and I want to be respectful of everyone’s time, especially yours. Thanks for doing this. I know we scheduled it before a lot of interesting things happened with the election and overtime stuff. So, I appreciate your flexibility and all the great information you shared. Thanks for taking time to share it all with us.
Danielle:Yeah. Absolutely. No problem. I’m happy to answer questions via email or what have you down the road and thanks everyone for your time today. I appreciate it.
Steven:Yes, please email her. Obviously, she’s a wealth of knowledge, check out her website. She’s absolutely willing to answer questions offline if we didn’t get to yours or if you weren’t willing to ask now. Please do that. Thanks to all of you for hanging out with us for an hour. I know it’s a busy time of year. We just had Thanksgiving, Giving Tuesday. You’re probably working on holiday appeals, perhaps. So, I really appreciate you hanging out with us as well.
We’ve got a few more webinars scheduled for the rest of the month. We’ve got a really great one coming up a week from tomorrow, a special Friday edition of our Bloomerang webinars. Rachel Muir is going to join us and she’s going to give you some tips on how to maintain and upgrade all those people that are going to be donating to you this month. So, you’ve probably worked really hard to get those donors and Rachel is going to show you some ways of how to hang on to them in 2017. Don’t miss that one. Very timely, obviously. It’s going to be a great presentation.
Check out our webinar page. There are lots of other webinars scheduled even into next year that you may enjoy or get some value out of. We’d love to see you again on another webinar with us. So thanks to all of you for hanging out. I’m going to be sending out the recording later on this afternoon. So you’ll get that, be on the lookout for it. Hopefully we’ll see you again next week or sometime after that. So have a great rest of your day. Have a great weekend and we will talk to you again soon.