We have identified four top developments to watch in 2012. There is much opportunity and uncertainly ahead. We will keep you informed and recommend that you, in turn, make an Employee Communications Initiative a key priority. We are here to assist you.

#1 Health Reform Battle Will Be Decided:  No Prediction on Outcome

Look for 2012 to be a tumultuous and decisive year for health care reform. The US Supreme Court will rule on the constitutionality of the Affordable Care Act in June. (You may be able to watch the oral arguments in March on C-Span.) The Court’s decision will impact whether implementation moves forward in 2012. However, the actual outcome of the reform battle will be determined by the 2012 elections. If the Court does not overturn the law, the Republican campaigns will focus on repeal. If the Court does overturn all or part of the law, then Democrats will call for new legislation to protect key provisions of the ACA.

#2 Businesses and Individual Insurance Buyers Look for Rebates

The Affordable Care Act requires that insurers spend 80% of the premiums collected for individual and small business health plans on health care costs. You are guaranteed a refund when your insurer pays out less than 80%. This provision became effective for the 2011calendar year. We look forward to the calculation and payment of rebates due. Blue Shield members have already received rebates for 2010 and 2011 as CEO Bruce Bodaken pledged to refund to customers any earnings over 2% net income.

#3 Women’s Health Coverage Expands under ACA; Californians Receive New Maternity Protections

The Department of Health and Human Services issued new women’s preventive health coverage guidelines for all health plans as part of ACA implementation. Required covered services include well woman exams; FDA approved contraceptive methods, and breast feeding support and supplies. Coverage begins in plan years starting on or after August 1, 2012.

California passed new legislation in 2011 that requires insurance companies to include maternity coverage (effective July 1, 2012) and employers (5+ employees) to continue and pay for insurance for their employees on maternity leave for up to 4 months. Employers and employees will pay their customary premium share (effective January 1, 2012).

#4 Insurance Market Place Innovates:  Companies Launch New Products and Small Business Exchange Prepares for 2014.

As the Heath Saving Account market matures, insurers are looking for the next “big thing” to bring new business. We expect to see more innovative developments in self- funding for small and mid-sized businesses and plan designs with financial incentives for prevention and wellness activities. You will also see widespread reporting on the advantages of “Defined Contribution Benefit Plans.” The goal is to cap employers’ costs and place the buying decision in employees’ hands. We will be writing on the complexities of these plans.

If ACA is upheld, small business and individual health exchange planning will move forward for January, 2014. California’s exchange leadership is in place and the hard work of planning has begun. The California exchange is to be an “active purchaser” negotiating the best price for participants. Exchanges are the only marketplace which will provide tax credits for employers and premium subsidies for employees.

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We look forward to keeping you up to date on these developments in 2012 and discussing with you the opportunities for your business and employees.

Thank you for the confidence you have placed in our Shargel team. We wish you a healthy and joyous holiday season.

We’ve got a young, largely male, healthy work force. Our claims can’t be anywhere close to the premiums we pay.

Every year our premiums increase and we have to reduce our employees’ insurance benefits. My greatest frustration is that I have no idea whether these increases are justified.

We’re building a corporate culture that supports wellness and healthy choices. Most companies haven’t made this commitment but we’re all paying the same insurance premiums.

These are the legitimate complaints we hear from our clients. This year we recommend that you investigate the benefits of new modified self-funding options available to businesses with as few as 50 employees.

What are the benefits of this major shift in benefits strategy?

1. Custom Benefits Design

You design the benefits plan that’s right for your employees. You can include health risk appraisals, wellness rewards, or a high deductible health savings account option. It’s your decision.

2. Financial Transparency

You get the claims data every business person wants. Monthly reports show where your health care dollars are being spent.

3. Employee Engagement

You have a clear, compelling message to employees: “We’re all in this together.”

Cautious business people will ask, and should ask, “What about the potential risks? We’re not a large company. What if one of our people is diagnosed with cancer? We can’t afford to take on claims risk—that’s why we buy insurance.”

Traditionally it is the large companies that self-insure their benefits plans. Today we are seeing innovative modified self-funding products that protect smaller companies from financial risk and give you the opportunity to experience the financial rewards of low claims. You can build in wellness initiatives and disease management programs that can reduce costs now and into the future.

What company is not a good candidate for these plans? Businesses with large Kaiser enrollment, high COBRA participation, or known major health conditions will not find self-funding to be a viable option. Fifty employees is probably the smallest size to consider these new plans.

Over the many years I’ve worked as an insurance broker, my most satisfied clients have used self-insured plans. The first time one of my clients hit their maximum claims liability, the controller had no complaints. “I know where my money is going. We’re bound to have some bad years. We’ve had some good ones.”

Contact us today to learn more about self-funding options for your business.

As businesses struggle to reduce their health insurance premiums, they are susceptible to sales approaches that promise significant cost savings.  While we all know to beware of an offer that is too good to be true, insurance is so complicated that we have seen very smart business people make costly mistakes.

No small business can afford an in-house benefits expert.   That’s why our clients rely on us.  In the words of one client, “you cover my back so I don’t have to worry.”   

This post warns you of two costly mistakes.

    Mistake #1.  Not knowing your employees’ potential claims liability

    “What a nightmare!  The insurance rep never told us that we’d have to pay $5000 before our insurance started paying.  We agreed to a $2500 deductible—not $5000!

The owner of a San Francisco firm purchased her company’s health insurance.  A high deductible plan sounded like a good buy.  Then, her spouse was injured in a car accident.  She was shocked to find out that she was responsible for double the amount she had planned on. The plan required that she pay twice the deductible (once for herself and once for her spouse) before her insurance began paying the bills.  The use of these “family deductibles” is customary in high deductible HSA plans.

When this firm was referred to Shargel, the business owner found that we take care to inform our clients of the tradeoffs between reducing insurance premiums and increasing employees’ out of pocket health care expenses.  Then decision makers are confident that they are making informed choices.   We conduct enrollment meetings, employees receive accurate information, and everyone knows what to expect. We ensure that there will be no costly surprises.

     Mistake #2.  Cutting costs by using limited physician networks

     “I never heard of a ‘narrow’ network.  It was HealthNet and it saved us more than 5%!”

It seemed like a no brainer.  A representative of our client’s new insurance company called with a suggestion; by moving to a different provider network the organization could save money.  The recently hired Human Resources administrator knew that her non-profit was strapped for cash; here was a way to save more than 5% on their insurance costs. “Yes”, she said, “we’ll go with your recommendation for HealthNet’s silver network.” 

That one phone call, reported to no one, caused temporary havoc.  A few days after the new plan began, Shargel account manager Cecilia Paul received an urgent, upset phone call from an executive of the organization.  When she had called to make an appointment, she was told her doctor was not part of her new plan.  We were confused.  We knew that our client wanted access to certain doctors and presented only plans that included their employees’ physicians.  What had gone wrong?

It took some work for Cecilia to discover the network change.  Of course, we corrected the error and our clients can see the doctors they have come to trust. 

However, we anticipate much more confusion in the near future.  Many insurers are now putting together smaller networks of health care providers and hospitals.  These networks pay providers less.  Providers see more patients.  While more common in Southern California, “narrow” or “skinny” networks are heading north.  Another euphemism you may hear is “high performance networks”.

We urge you to consult us before making any carrier recommended changes.  As account manager Cecilia Paul says, “You don’t know what you don’t know.”  So always call or email.  We’re here to prevent problems.

Four hundred business people with conflicting priorities came to the recent San Francisco Business Times program on the future of health care.

Many were interested in the enormous business opportunities that the UCSF and California Pacific hospital construction projects would bring to their companies. Others wanted to know what was being done to control health care costs and their companies’ health insurance premiums.

That is the conflict. Health care facilities construction is one of the key economic drivers in San Francisco. We have seen many of our clients refocusing their business development efforts to the health care field. The companies who have won contracts are prospering.

However, these expensive new hospitals, designed for seismic safety and greater efficiency, will be paid for by our taxes and insurance premiums. It was all too apparent that neither Mark Laret (CEO, UCSF Medical Center) nor Warren Browner (CEO, California Pacific Medical Center) were focused on cost control. Laret described new robots which will prepare and deliver medications to hospital patients, thus eliminating human error.

In contrast, Blue Shield’s COO Paul Markovich declared, “We are obsessed with costs.” Bill Kramer, Executive Director for National Health Policy, Pacific Business Group on Health and Steve McDermott, CEO, Hill Physicians, also spoke convincingly of the need for major overhaul in our health care system.

What do they see as the future? Coordination of care seems to be the current buzzword. Markovich proudly described a collaboration with CalPERS, Mercy Hospital, and Hill Physicians designed to both reduce cost and improve quality of care. We are hopeful that the annual savings of $400 per person is just the beginning of the project’s impact.

During the question period, I asked how the Small Business Health Insurance Exchanges would deliver the much anticipated premium savings. The members of the panel shook their heads. Kramer said the exchanges have been “oversold.” The exchanges are likely to be the major source of insurance for lower income Californians, people with the most health problems and the least ability to pay. If the panel is correct, then the savings will come from tax credits for the smallest, lowest wage businesses and the subsidies to their employees—not from any reduction in insurance costs.

We are following the development of the California insurance exchanges, attending meetings and interviewing key people. Look for a summer blog post on the potential impact of the exchanges on your health insurance options and costs.

Last week, both Congress and the California legislature gave business some long awaited good news regarding tax reporting, tax relief, and the health reform law. We have put together the following list of the 5 most significant health reform tax related changes to date.

1. New 1099 Reporting Requirement Eliminated

The biggest news is what you don’t have to do this year. Congress eliminated the onerous new 1099 reporting requirement that would have required businesses to provide 1099’s for all products purchased over $600. President Obama’s signature is expected shortly.

Last July, I attended a meeting in Washington, D.C. called by the White House Director of Health Reform to discuss this provision of the Affordable Care Act. It was clear then that the administration would support repealing this requirement. Ten months later, it has finally been done.

2. No CA Income Tax due on Adult Child’s Health Insurance Premiums

Last week, California’s legislature passed and Governor Brown signed (AB) 36 which exempts employees from paying taxes on employer-paid health insurance for their young adult children’s coverage (until the year they turn 27). This law conforms California income tax law with the federal income tax law provision of the Affordable Care Act.

For information on what employers need to do to correct W-2’s and employees need to do to file for this adjustment, go to the Franchise Tax Board.

3. Self-Employed Receive One Time Tax Benefit

Self-employed individuals may receive the greatest tax benefit this year. They can deduct the amount of their insurance premiums from their adjusted gross income before calculating self-employment tax.

4. Small Business Health Insurance Tax Credit

Remember there are tax credits available to the smallest businesses and not-for-profits with low wage employees to help pay the cost of health insurance. Business owners’ salary is excluded from the calculation. Use the calculator on our website.

5. W-2 Reporting Requirement for Health Insurance Delayed until 2013

The ACA requirement that the amount a business pays for employer-sponsored health coverage be included on an employee’s W-2 has been postponed for businesses with less than 250 employees. See IRS Notice 2011-28.

We continue to urge employers to provide employees with a Total Compensation Report which shows salary plus the full cost of all the benefits you provide. Email Lyndsey@shargel.com for a template.

At Shargel, we’re committed to keeping our clients informed; from breaking news on insurance issues to opportunities for tax savings, you can count on us to keep you up to date. We encourage you to share our blog posts with your friends and business associates.