Welcome

Taking a Strategic Approach

to Health Insurance Plans

in Light of Healthcare Reform…

…What You Need to Know and Do Now

3 Things You Need to Remember

about this Presentation

1. You CAN Fix and Control Your Benefit Plan Costs.

2. You CAN offer your employees customized

choices.

3. There IS a permanent & portable solution.

If nothing changes, then nothing changes.

Where are You Now?

If nothing changes – then nothing changes.

Health care laws are mandating certain new requirements

Regardless of what happens with the law - businesses with employees from 25 to 75 and up are at financial risk

You must select the “right” plan to avoid balance sheet liabilities created by having to cover employees health costs.

You must know how to properly implement benefits for their employees to avoid government fines

The McKinsey Report

What Will Health Care Reform look like for employers – are you ready?

Overall, 30% of employers will definitely or probably stop offering ESI in the years after 2014.

Among employers with a high awareness to reform, this proportion, increases to more than 50 percent.

The McKinsey Report

Employers have long offered Group Insurance as a key benefit to attract and retain employees

Contrary to what many employers assume, more than 85 percent of employees would remain at their jobs even if their employer stopped offering ESI, although about 60 percent would expect increased compensation.

The NFIB Report

What Will Health Care Reform look like for employers - will you be ready?

42% of small employers offer group health insurance today.

57% of those small employers are likely to drop health coverage by 2014.

The NFIB Report

Do small employers want to stop helping their employees? Of course not…

100% of the small employers that are likely to drop health coverage, also said they would continue to provide coverage to employees if a "tax-excluded contribution" solution existed today.

There must be a “real” answer…with “real” help, right???

Timeline: Key Provisions

2012

A new federal tax on fully insured and self-funded group plans, equal to $2 per enrollee, takes effect

The DOL will begin annual studies on self-insured plans using data from Form 5500

All employers must include the aggregate cost of employer-sponsored health benefits on W2s

2012

If employee receives health insurance under multiple plans, employer must disclose the aggregate value of all health coverage

Excludes contributions to HSAs, Archer MSAs and salary reduction contributions to FSAs and applies to benefits provided during taxable years after December 31, 2010

Timeline: Key Provisions

2012

All employers as well as group and individual health insurers will have to provide a summary of benefits and a coverage explanation that meets specified criteria to all enrollees in addition to SPDs

when they apply for coverage,

when they enroll or reenroll in coverage,

when the policy is delivered,

and identify any material modification is made to the terms of their coverage.

$1000 per enrollee fine for willful failure to provide the summary

Timeline: Key Provisions

Calculating Full-Time Employees

Special Note about Key Provisions

These financial penalties apply to employers with more than 35 full-time or full-time-equivalent employees who do not offer coverage to full time employees.

Your actual status could change in any given month in response to a surge in part-time hours or as your business grows.

The employer mandate penalties begin in 2014. But you need to understand and plan for it NOW.

Feeling a Bit

Overwhelmed?

You are Not Alone

What Are MOST Companies Doing?

We are seeing companies choosing one of

three options in an effort to move away from

traditional group coverage plans:

Offer Group Health Savings Account benefit plan (Group HSA’s)

Offer Group Health Reimbursement Arrangements (Group HRA’s)

Offer Individual Defined Contribution Plans (HRA’s)

Things Have Changed

Educate Employers; there are new

opportunities for Employers.

Defined Benefit Defined Contribution

Pension Plan 401(K)

Employer SponsoredInsurance

Personal, PortableInsurance

Individual

T H E N N O W

Option 1:

Group Health

Savings Accounts

Group HSA’s

Group HSA

Employers of any size who want to

Save money with lower premiums

Reduce long-term costs by maximizing employee engagement in health care decisions

Provide tax-advantaged savings for employees to help offset the burden of increased cost-sharing

Develop a long-term strategy for affordable retiree coverage

Group HSA

Market Trends in Group HSA’s

Premiums are lowest for high-deductible plans. Employers can expect premium savings of up to 30% when compared to PPO plan.

More than 70% of large employers contribute to their employees’ HSA fund with $500 – $1,000 being the most popular levels.

For smaller employers, the market is quickly moving toward higher deductibles, like a $2,700 single deductible and 100% coinsurance

Group HSA

What it means to your employees

Everyone is placed on the same plan – anything group is a “one size fits all”

Employees pay a greater portion of the total cost of their health care, but this cost-sharing can be offset by tax savings.

Employees save tax-free, earn interest tax-free

Employees who leave face Cobra and the fact they must reach a higher deductible on their own, without employer subsidies.

Option 2:

Group Health

Reimbursement

Arrangements

Group HRA’s

Group HRA’s

Employers who implement Group HRA’s can:

Reduce premiums by introducing a high-deductible PPO health plan

Introduce consumer-driven health but still choose to subsidize deductibles to lessen cost to employees

Gain a high level of control over budget and fund management options

Employers have more flexibility:

HRAs may be offered in conjunction with other employer-provided health benefits.

Group HRA’s remain with the employer and do not follow an employee to new employment.

Group HRA’s

Group HRA’s

How it Works

HRA pairs a PPO health plan with an employer-funded HRA for out-of-pocket expenses.

Employers determine how much employees share in the cost of their care

Employers determine how much they will contribute to the HRA.

Group HRA

Market Trends* in Group HRA’s

Around 10% of employers select 80% coinsurance after the deductible

Around 90% of employers select 100% coinsurance after the deductible.

More than 95% of employers contribute $500 to the fund per employee.

Most employers completely customize the plan, with 50% allowing a full rollover option of the fund.

*Figures from BCBS North Carolina

Group HRA’s

Sounds pretty good – but it is still a Group

Group HRA’s subject to annual rate increases – employer must choose to eat the increase, reduce benefits or pass along increase to employee

20% of employees will hit the deductible. Count on it.

For a company that funds a Group HRA for 20 employees to the tune of $7500 each, that’s $150K you know you have to set asidefor their health care expenses.

Option3:

Employer Defined

Contribution Plans

Using Individual HRA’s as an EDC:

A Common Sense Solution for Responsible Employers

Gets employers

“out of the Insurance Business”

NO MORE COBRA …no liability or administrative burdens/costs

Fixed Cost … employer controls & plans how much to spend versus being dictated to by insurance carrier every year

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Individual Defined Contribution Plans

WORKS for everyone…regardless of company size, or each employees health needs

How an EDC as anIndividualHRA works in 50 words or less

Implementation

And then there are

The Legal Requirements

Employers also must be careful

not to violate the:

Employee Retirement Income

Security Act (ERISA) and the

Health Insurance Portability and Accountability Act

If using 3rd Party Implementation

To stay compliant with the health benefit provisions in ERISA, employers who help offset the cost of an individual plan are responsible for overseeing the plan if they direct employees to enroll in it. The benefit would be subject to a long list of regulations.

In private exchanges, when a worker is choosing from any plan in the individual market, the employer should be "shielded" from knowing which plan the employee selects - or whether he or she has filed claims

Legal Requirements

If using 3rd Party Exchanges

A Private Exchange option is likely to be attractive to employers in a few categories:

Small businesses that do not offer health benefits.

Any business struggling with annual increases in premiums.

Large companies who want to stop spending so much on health benefits but don't want to lose workers or risk employees being sick and uninsured.

Legal Requirements

So…

Group Plans vs.

Individual Plans?

A critical decision which

must be made…

Group Plans vs. Individual Plans

It really boils down to this

With individual path you don’t force your employees into a box by the group choice - even in Group HRA and HSA there are still limitations that may bring premiums up

With Individual plans, there are no struggles to find the right benefit plan design to fit all employees … they choose the plan that works the best for them – in a group plan of any kind – it is one size fits all.

Easy to implement HRAs and HSA’s for the individual employee – lowers cost for company and workload for HR

So…

Group Plans vs.

Individual Plans?

Let’s look at the potential savings.

Standard HRA savings model

Group of 50

DefinedContribution

Analysis

Total Savings: $112,482.52

We want to take the burden off the employer.

We believe educating owners and employees is key.

When you empower your employees to make theirown choice,everyone wins.

Standard HRA savings model

We want to take the burden off the employer.

We believe educating owners and employees is key.

When you empower your employees to make theirown choice,everyone wins.

Self-Funded Group of 225

DefinedContribution

Analysis

Total Savings: $978,581.00

Other Options

Group Plan Design

Partial HRA Implementation

New Employee HRA

Former Employee & Retiree HRA

Wellness HRA

Supplemental HRA

Healthcare Reform Compliance

3 Things You Need to Remember

about this Presentation

1. You CAN Fix and Control Your Benefit Plan Costs.

2. You CAN offer your employees customized

choices.

3. There IS a permanent & portable solution.

If nothing changes, then nothing changes.

Questions ?

Rob FergusonPres iden tHeal th Benef i t s US, Inc .

(919) 794-8437

r ferguson@hbusinc.comwww.hbusinc.com