March 28 by Leila Morris
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EMPLOYEE BENEFITS
• Five Effective Ways to Control Benefit Costs
• Research Shows the Importance of Dental Care for Diabetics
• How Stress Affects Employees
HEALTH REFORM UPDATE
• Americans Weigh in on Supreme Court Hearings
• Conservative Group Expects Mandate to be Overturned
• The Financial Impact of Health Reform
NEW PRODUCTS
• Life Insurance Calculator
• 401(k)
• Dental Plan
• Equity Income Solutions
• Online Retirement Plan Tools
RETIREMENT PLANNING
• Americans Miss IRA Contribution Opportunities
CAREER TRANSITIONS
• Mid life Career Changers Face Significant Financial Challenges
HEALTH INSURANCE RATES
• HHS Calls Rate Hikes Excessive
IN CALIFORNIA
• Silicon Valley Employee Benefits Index
• Discount Dental Program
Five Effective Ways to Control Benefit Costs
Focusing on five cost-saving measures could significantly lower benefit costs while minimizing the affect on employees, according to a white paper by Colonial Life. Colonial used in-house and industry-wide research as well as case studies to show the effectiveness of strategies to contain employee health benefit costs. The white paper finds the following strategies to be effective in controlling costs:
• Offering Wellness initiatives — Wellness initiatives were among the top cost-control strategies implemented by employers in a recent survey of government financial officers. Nearly 80% added wellness initiatives to their benefit programs and 90% of those would recommend them to others, according to a survey by the Government Finance Officers Association. A Society for Human Resource Management report reveals that 75% of employers offer wellness resources and information.
• Pre-taxing benefits/Section 125 participation – Seventy-seven percent of employers in the government financial officers survey offer pre-tax benefit plans and 86% of them recommend this option. It was the most enthusiastically endorsed strategy of the survey options.
• Providing Benefit communications and education — In the government financial officers survey, only 31% of employers were using an external service provider for benefit enrollment and 52% shifted benefit education and communication expense to suppliers. However, 78% of those who outsourced enrollment would recommend it and 84% recommended using a benefit carrier to handle benefit education and communication.
• Voluntary benefits — Only about a third of employers in the government financial officers study have moved non-core benefits to employee-paid voluntary coverage. However, 87% of employers that did so recommended this strategy.
• Dependent verification — Health plan audits can reveal a significant number of ineligible participants, including dependents who are over age or who aren’t a blood relative or a spouse, or former employees who haven’t been removed from the plan. The potential cost savings offered by dependent verification can be considerable and the service is sometimes available at no cost to the employer. Government employers who implemented these kinds of strategies report significant savings in their employee healthcare benefits. Fifty-five percent of participants in the government financial officers study saved at least 6% while 40% of them saved more than 10%. Other studies show an employer return on investment for wellness initiatives ranging from $3 to $6 for every dollar spent. The complete white paper is available in Colonial Life’s online newsroom at ColonialLife.com.
Research Shows the Importance of Dental Care for Diabetics
Diabetics who receive treatment for gum disease have lower medical costs than those who do not get treated for this condition, according to a study by Dr. Marjorie Jeffcoat of the University of Pennsylvania in collaboration with United Concordia Dental and Highmark.
Periodontal treatment and ongoing maintenance is associated with a significant decrease in the cost of medical care for people with diabetes – in the amount of $1,800 per year. Hospitalizations decreased 33% and physician visits decreased] 13% for diabetics whose gum disease was treated and managed afterward.
United Concordia has introduced UCWellness, which provides 100% coverage for maintenance following periodontal treatment and certain surgical procedures that treat gum disease and removal of plaque and tartar in patients with gum disease. For more information, visit www.UnitedConcordia.com.
How Stress Affects Employees
More than half of employees say that workplace stress makes it hard to focus on tasks, according to a survey by ComPsych Corporation. Another 21% say stress causes them to make mistakes and miss deadlines and more than 15% say stress leads to conflicts with coworkers and superiors. “Unchecked stress can result in a number of productivity-sapping outcomes, from diminished work quality to absenteeism to coworker clashes,” said Dr. Richard A. Chaifetz, Chairman and CEO of ComPsych. For more information, visit http://bit.ly/Hc0Ced.
The Financial Impact of Health Reform
Most employers say the financial impact of the Affordable Care Act (ACA) has not been as significant as they expected. Fewer U.S. employers plan to drop coverage due to the law’s mandate than was reported in 2010, according to a 2012 employer survey conducted by the Midwest Business Group on Health (MBGH) and co-sponsored by the National Business Coalition on Health (NBCH), Business Insurance, and Workforce Management.
Andrew Webber, NBCH president and CEO said, “Employers appear to be warming up to…ACA…prevention and wellness incentives, provider payment reform, medical homes, ACOs, and cost and quality transparency while expressing…frustration with the law’s slow pace towards cost containment. While employers seem to have less of an appetite for dropping coverage…, alternatives like defined contribution strategies are beginning to be considered and bear close monitoring in the years ahead.”
Many survey respondents support changes in paying providers, coordinating medical care, and providing medical cost and quality information to consumers. Employers are divided on whether they think that the Supreme Court will or should strike down the individual mandate or the entire Act.
Larry Boress, MBGH president and CEO said that, while employers are concerned about ACA’s administrative costs and reporting burdens, they show surprising support for many provisions. Most employers see value in continuing to offer health coverage to retain and recruit talent and ensure a productive workforce. Small employers fear the financial impact of future ACA changes while larger employers see the potential for cost and quality improvements.
The following are more key findings of the survey:
• Only 6% of all employers are likely to drop health coverage for employees in order to save money. This is down by more than half from the 2010 survey results.
• Less than 30% of employers that are likely to drop coverage will raise salaries to enable individuals to buy health coverage on their own.
• Fifty-seven percent of employers that offer retiree benefits are likely to continue to offer these benefits.
• Employers, particularly larger ones, expect the Supreme Court to uphold the ACA, but strike down the individual mandate. Forty-two percent of all employers, want the ACA to be struck down in its entirety.
• Employers favor repealing the following ACA provisions: having an excise tax on high cost plans, capping flexible savings account (FSA) contributions, prohibiting the use of FSA amounts for over the counter drugs with prescriptions, and reporting cash value of benefits on W-2 forms.
• Employers favor retaining the following ACA provisions: removing co-pays for preventive care, mandating coverage of preventive services, creating health insurance exchanges, eliminating annual and lifetime limits on essential benefits, and extending coverage to adult children.
• Employers are split on the value of some provisions, including requiring employers who drop coverage to offer vouchers to help people buy insurance, imposing penalties on employers that do not provide health benefits, mandating individuals to get health insurance, and defining minimum essential benefits.
For more information, visit www.crain.com
Americans Weigh in On Supreme Court Hearings
Only 25% of those surveyed by a CBS News Poll say the Supreme Court should
keep health reform intact. Thirty-eight percent say the entire law should be abolished, according the poll, conducted March 21 to 25. Another 29% want the high court to only strike down the requirement that nearly all Americans obtain health insurance. Fifty-one percent disapprove of the mandate while 45% approve.
When the Supreme Court issues a ruling this summer, it could uphold the law, strike down just the individual mandate, strike the mandate along with certain other provisions, or strike down the entire law. If the Supreme Court strikes down the individual mandate, the Administration has asked the court to also strike down the pre-existing conditions provision.
However, large percentages of Americans — even majorities of Republicans — support elements of the healthcare law. For instance, 85% support the requirement for insurance companies to cover those with pre-existing conditions.
Other popular provisions include reducing the Medicare donut hole for prescription drug coverage (77% approve) and allowing children up to 26 years old to stay on their parents’ healthcare plans (68% approve).
Half expect the cost of their healthcare to rise as a result of the law. Just 15% expect their costs to decrease, and 27% expect the healthcare law to have no affect on their healthcare costs. One third expect the quality of the care they receive to also get worse. Just 17% expect that will improve as a result of the 2010 law.
Conservative Group Expects Mandate to be Over-turned
The United States Supreme Court began three days of hearings on a challenge to the constitutionality of the Patient Protection and Affordable Care Act (PPACA).
Legal experts at the Heartland Institute expect the health reform mandate to be struck down. The following is a summary of their account of the Supreme Court Hearings:
I predict the Court will strike down the whole [health reform law] because the individual mandate is contrary to the fundamental federalism framework of the U.S. Constitution. Only the states have the police power that would authorize the individual mandate policy. Justice Kennedy himself has been the most zealous in protecting the power of the states against federal takeover.
The Supreme Court was uninterested in the argument that the penalties imposed on those who fail to purchase health insurance from private insurance providers – the individual mandate – amount to a tax. The Court had to cover this base, because several lower courts raised it. But its disinterest in this argument is a promising sign that the Court intends to reach the merits of the argument that the individual mandate is unconstitutional under the Commerce Clause of the U.S. Constitution.
One of the most interesting lines of questioning concerned the issue of whether someone who did not buy insurance and paid the penalty would be in violation of federal law. While president Obama’s Solicitor General said they would not, his answer was very unsure. Did the government not consider that by dodging the individual mandate, millions of Americans could technically become criminals, or that breaking this law could be considered a violation of parole or probation?
Moreover, even Obama’s lawyers have been arguing in federal courts across the country that without the mandate Obamacare is unworkable. With no severability clause in the legislation – due to overconfidence by the liberal/left, and under the legal standard that applies in the absence of such a clause – the Court will strike down the whole law as unworkable without the mandate.
For more information, visit www.heartland.org.
Life Insurance Calculator
Transamerica Brokerage has created TransamericaForLife.com to help consumers determine the amount of life insurance coverage they need based on their monthly income. The Income Protection Option calculator is designed to be interactive and easy to use. For more information, visit TransamericaForLife.com.
401(k)
ShareBuilder 401k is expanding its All-ETF 401(k) platform with the addition of five new funds aimed at helping investors diversify, preserve, and grow assets over time and through various market conditions. ShareBuilder has added the following funds to its All-ETF 401(k) lineup:
• iShares Gold Fund
• PowerShares General Commodities Fund
• iShares Socially Responsible Fund
• SPDR’s International Bond Fund
• PowerShares Emerging Market Bond Fund.
For more information, visit www.sharebuilder401k.com or call 800-943-6108 (extension1).
Dental Plan
Assurant’s new Dental Network Optimization Program is available to companies with a minimum of 100 employees. The program puts its local recruiting team to work on enlisting the dentists that employees designate as their current provider of choice. For more information, visit www.assurantemployeebenefits.com.
Equity Income Solutions
Manulife Mutual Funds launched seven funds in the trust and corporate classes. All have portfolio management provided by Manulife. Each new corporate class enables taxable investors to switch among corporate classes on a tax-deferred basis and benefit from tax-efficient distributions from these funds. For more information, visit www.manulifeam.com.
Online Retirement Plan Tools
The Standard enhanced two retirement plan websites by providing more streamlined online experiences for advisors, employers, and participants. Upgrades to PlanNet, a retirement plan management resource, include improved navigation that allows faster access to highly sought-out plan management tools. Enhancements to Personal Savings Center, a participant financial savings and management tool, include more prominent displays of key account information such as investment return and current balance.
Americans Miss IRA Contribution Opportunities
Only 22% of Americans polled said they contribue to an individual retirement account (IRA), according to a survey by TIAA-CREF. For the 2011 and 2012 tax years, investors can contribute up to $5,000 – or up to $6,000 for those age 50 or older — to a traditional IRA and/or a Roth IRA. Only 38% of Americans who own an IRA are contributing up to the annual limit and 55% are investing less than the maximum allowed amount each year, which means that hey are missing out on the opportunity to maximize their tax and savings benefits. An IRA can provide a tax-advantaged way to save for retirement.
Sixty-two percent of those polled are not aware of two noteworthy IRA features:
• Catch-up contributions that allow investors age 50 and older to contribute more than the annual maximum.
• Roth IRA withdrawal guidelines that allow contributors to withdraw money without paying taxes or penalties.
Among those who are contributing to an IRA, women (41%) are more likely than men (34%) to contribute up to the annual maximum. At 52%, Baby Boomers are most likely to fully fund their IRA each year and 45% of college graduates of all ages invest the maximum allowed amount each year.
Seventy-three percent of those age 18-34 are not aware of the maximum amount you can contribute to an IRA annually. Fifty-eight percent of those in this age range did not know that IRA contributions grow on a tax-deferred basis. Just 8% of Americans earning less than $35,000 a year contribute to an IRA and 13% of Americans earning $35,000 to $50,000 contribute to an IRA. For more information, visit www.tiaa-cref.org.
Mid life Career Changers Face Big Challenges
A MetLife Foundation/Civic Ventures study reveals that millions of people need tools to help them plan and finance the transition to a new career. In fact, during the career transition period, two in three experienced reduced income or no income.
“There’s a big payoff…but making the switch is hard. Employers, policymakers and all of us in our own lives need to think creatively about how to make the investments in transitions that lead to these new, more fulfilling careers,” said Marc Freedman, founder and CEO of Civic Ventures and author of The Big Shift: Navigating the New Stage Beyond Midlife.
The survey reveals the following:
Transitioning to a new career takes time:
• The 9 million people (ages 44 to 70) who are in new careers took about 18 months to make the transition.
• Many of those in their new careers took steps to prepare: Twenty-three percent participated in local volunteer programs; 20% enrolled in education or training courses; and 13% volunteered at their local places of worship.
• Forty percent say they don’t feel they have the financial security to make a career change in this economy; nearly 29% don’t know what kind of job or career to pursue; and 16% don’t have the time to explore a new career.
• Those interested in new careers identified a need for transitional support through grants and scholarships for training and education (44%), volunteer programs (40%), hands-on experience through community service programs (36%), and additional education through community colleges or other schools (34%).
Financial obstacles hinder transitions:
• Sixty-seven percent of those in new careers experienced gaps in their personal income during the transition period. They earned no money (24%) or they earned significantly less during the transition than they earned at their previous jobs (43%).
• Seventy-nine percent of those who had little to no income during a transition period, said the income gap lasted at least six months and 36% said their income gap lasted more than two years. Sixty-five percent relied on personal savings to make ends meet.
• Half of those who are interested in new careers expect the transition to be difficult and 59% of those expect the main obstacle to a career transition to be financial.
Just 14% of people interested who are interested in new careers plan to wait until 70 collect Social Security benefits. But once they learn that postponing their claims will result in larger monthly benefit checks for life, 62% said they will consider working longer.
The following recommendations are based on the suite of research:
• Advisers can help people compare their work and retirement options, assess their assets, and make plans that may include more years of work, perhaps on more flexible schedules. The return on investment in encore transitions depends on the length and the rewards of a new career.
• New saving options. Today, older adults can use 529 college savings accounts to save for their own education, not just for their children’s. Brokerages and insurance companies are creating flexible income planning and annuity products to bridge the transition income gap. Creating a dedicated vehicle – call it an Individual Purpose Account – to save for an encore transition can clarify assets and options. Proposed savings vehicles such as Lifelong Learning Accounts could also help finance encore transitions.
• Accelerated, accessible, and affordable training. People who are interested in new careers want fast-tracked courses with flexible schedules, online or combining online and in-classroom work. Fifty-four percent who are interested in new careers say they would not pay more than $500 for additional training or education.
• Encore education assistance. The short-term and part-time programs that new career seekers favor should be eligible for financial aid; right now, many are not. The Education for Public Service Act of 2007, which provides student loan forgiveness for those who pursue nonprofit or public sector work, should change to meet the needs of people who have returned to school.
• Service as a pathway for Baby Boomers, not just young people. Paid or stipend national and community service opportunities (for example, AmeriCorps, VISTA, Senior Corps programs) can cover out-of-pocket expenses and provide valuable career experience. AmeriCorps’ basic health coverage and education award transferable to a child or grandchild (for those 55 and older) make this widely available program a viable transition option.
• More Encore Fellowships. Short-term, part-time, and paid fellowships at nonprofits can open the door to new careers. A few corporations are beginning to offer new transition assistance in addition to retirement benefits: All Of Intel’s retirement-eligible in the United States can apply for Encore Fellowships of up to one year, which include a $25,000 stipend and health benefits for six months.
• Entrepreneurship support. Boomers and older adults have emerged as the country’s most entrepreneurial age group, creating jobs for themselves and others. Financing, coaching, and business planning can help these new ventures succeed and grow.
• Social Security flexibility. Streamlining, clarifying existing benefit options, and creating new flexibility in starting and stopping benefits could let individuals use Social Security as an income support for new career transitions while preserving and strengthening its role in providing late-life financial security. More people need to know that even relatively modest levels of continued income can allow them to delay their Social Security claims, allow their savings and investments to grow, and require those assets to cover fewer years, improving their lifetime financial security. For the full report, visit www.encore.org/research.
HHS Calls Rate Hikes Excessive
Health and Human Services (HHS) Secretary Kathleen Sebelius announced that health insurance premium increases in nine states are unreasonable under the rate review authority granted by the Affordable Care Act.
Insurance companies are now required to justify rate increases of 10% or higher. “It’s time for these companies to immediately rescind these unreasonable rate hikes, issue refunds to consumers or publicly explain their refusal to do so,” she said.
Secretary Sebelius released a report showing that consumers are already seeing results six months after HHS began reviewing proposed health insurance rate increases. Since the rate review program took effect in 2011, health insurers have proposed fewer double-digit rate increases and more states have taken an active role in reducing rate increases. As of March 10, 2012, HealthCare.gov has posted the justifications and analysis of 186 double-digit rate increases for plans covering 1.3 million people, resulting in a decline in rate increases. In the last quarter of 2011 alone, states reported that premium increases dropped by 4.5% and premiums actually declined in states like Nevada.
• HHS determined, after independent expert review, that two insurance companies have proposed unreasonable health insurance premium increases in Arizona, Idaho, Louisiana, Missouri, Montana, Nebraska, Virginia, Wisconsin, and Wyoming. In these states, insurers have requested rate increases as high as 24%. HHS determined that the rate increases were unreasonable because the insurer would be spending a low percentage of premium dollars on actual medical care and quality improvements and because the justifications were based on unreasonable assumptions. States like California, New York, Oregon, and many others, have lowered rate increases.
Since the passage of the healthcare law, the number of states with the authority to reject unreasonable rate increases grew from 30 to 37, with several states extending existing prior authority to new markets. For more information, visit http://companyprofiles.healthcare.gov.
Silicon Valley Employee Benefits Index
PPO premiums increased at an average rate approaching 9.5%, according to the Silicon Valley Employee Benefits Index. The index also reveals the following:
• Employee contributions increased while dependent contributions moderated.
• Average PPO (non-HSA) medical plan deductibles increased from $566 in 2011 per individual to $606 in 2012. For more information, visit www.svebi.com.
Discount Dental Program
Members of New Dental Choice, California’s first Knox-Keene licensed discount dental plan, can add discount vision, hearing and prescription drug services to their low-cost dental care program. Discount dental plans from New Dental Choice are available to individuals, families, and groups at dentists and specialists offices throughout California and across the United States. Discounts from VSP Vision Care, the EPIC Hearing Service Plan, and the CVS Caremark prescription Discount Card Program are now available to members through the New Dental Choice membership card. For more information, visit www.newdentalchoice.com or call 858-444-2604.
