Many small employers are turning to self-funding to provide economical group health benefits to employees. A growing number now use reference-based pricing to lower costs.
Reference-based pricing is a way for employers who self-fund their benefits to limit costs by paying a fixed amount for health care. To understand this method of cost control, it helps to understand self-funding.
The Appeal of Self-Funding
Previously, only large corporations could afford to self-fund their employees’ group health benefit coverage. With self-funding, the employer pays for employees’ claims out of pocket instead of paying a pre-determined premium to an insurance company for a fully insured plan. The employer assumes all risk. Employers can customize a plan to meet the specific health care needs of their workforce. A third-party administrator (TPA) often processes the claims and
collects the premiums for the plan.
The biggest advantage of a self-funded plan is the potential for employers and employees to save money. Self-funded plans fall under ERISA (Employee Retirement Income Security Act) guidelines and are exempt from many of the Affordable Care Act regulations — especially those that caused premiums on fully insured plans to climb substantially. Employers also do not pay state health insurance premium taxes, which can run two to three percent of the premium.
There are risks. If employers truly self-fund their group health benefits, they assume the risk of paying the health care claims for employees. It’s imperative that the company has sufficient financial resources.
However, there is another, less risky option — level funding. Employers who level-fund their healthcare plans pay a regular monthly fee based on what the insurer thinks the company’s claims will be. They also buy stop-loss insurance premiums to cover claims above a specified dollar level.
The Appeal of Reference-Based Pricing
A provider’s bill does not necessarily indicate the service’s actual cost, nor is it always a true reflection of market value. Reference-based pricing is a way for employers to cap the amount they’ll pay to cover claims.
Many employers reimburse providers 150 percent of Medicare’s reimbursement. Medicare reimbursement is used as a guide because it is the only universally accepted payment rate. Medicare reimbursement is enough to cover the service with some extra for the doctor or hospital. By pricing reimbursement at 150 percent, providers generally react positively because they typically receive less from Medicare and about the same amount from most insurance carriers.
Some plans only cap the cost of certain medical procedures — procedures that vary greatly in price but not in outcome, such as hip or knee replacements. Employers usually work with a reference-based pricing vendor or third-party administrator to set fixed payment levels.
Employees who have this plan do not have to see doctors in network, since there is no network. They can go anywhere the reimbursement is accepted. Depending on the plan, employees might or might not have to pay a balance bill for the difference in price.
The main advantage of this payment system is that it adds transparency to health plan pricing and saves employers money. It also keeps premiums lower for employees.
On the downside, employees may have to search to find providers who accept the
reimbursement level. Employees also may be liable for balance billing if the care provider insists on more than the set price. This is most common with hospital stays. Some plans make it the employer’s responsibility to pay for any balance bills they cannot negotiate. A reference-based plan also requires more employee education so they know what to do if they are balance billed.
In general, providers accept the payment or a final negotiated price that is below the cost of traditional payments about 95 percent of the time.
If you are interested in self-funding and reference-based pricing, talk to your agent or broker to learn if these plans and pricing would be good for your workplace.
Smoke detectors and fire extinguishers are important but the best way to fight a fire is to prevent it from starting.
When it comes to fires, residential fires come to mind first. But commercial properties are also vulnerable. The National Fire Protection Agency reported 113,500 non-residential fires in 2015, the latest year available, resulting in 80 deaths, 1425 casualties and $3.1 billion in property loss (https://www.nfpa.org/News-and-Research/Fire-statistics-and-reports/Fire-statistics/Fires-in-theUS/Overall-fire-problem/Non-residential-structure-fires).
The following pointers can help prevent your business from becoming a statistic.
Fires need tinder or easily combustible materials, and oxygen to start. If a spark, electrical short, excess heat or other ignition source contacts tinder where oxygen is present, a fire will likely start. Whether it spreads depends on the amount of oxygen and fuel available. Preventing fires, therefore, requires ensuring that combustible materials do not come into contact with ignition sources. And to contain or slow the spread of fires, you need to minimize their contact with additional fuel sources and oxygen.
A fire can start inside or outside your structures. To begin a fire prevention program, check the perimeter of the building for the following:
• Flammable debris, such as paper, rags, wood, trash. If you must store these items near your structures, store them in solid containers, the more airtight the better.
• Flammable liquids. Make sure any flammable liquids stored outside your structures, including propane and other fuel tanks, are well-labeled and securely closed. In certain areas, you might need to store these in a fenced, locked area.
• Landscaping. Well-maintained landscaping can help prevent the spread of fires. Mature shrubbery is somewhat fire-resistant. Weeds, on the other hand, grow and burn quickly. If your property has overgrown areas, consider planting (and maintaining) these areas, or clearing them and replacing planted areas with hardscaping.
Fires can start inside a building as well. Potential fire starters you can find in your building include:
• “Ordinary” combustibles, such as paper, wood, cloth, rubber, building materials. Storing these materials in appropriate containers can minimize their potential to become fuel in a fire. Packing them tightly so air cannot circulate will also help retard the spread of flames.
• Flammable liquids, such as fuel oil, gasoline, cooking oils, solvents. Again, storing these liquids in properly sealed containers can prevent problems.
• Electrical equipment, such as wiring, fuse boxes, motors. Minimize your fire risk by having only qualified contractors install or repair wiring. Keep motorized equipment well-maintained and clear of any combustible debris. Use only extension cords appropriately rated for the appliance or fixture attached.
To contain a fire once it begins requires the proper equipment. Every business, no matter how small, needs at least one fire extinguisher per floor. One fire extinguisher will not work on all types of fires. For best results, match the type of extinguisher to the type of combustibles in the area:
• Class “A” — Ordinary combustibles (wood, paper, cloth, rubber, etc.)
• Class “B” — Flammable liquids (fuel oil, gasoline, cooking grease, solvents, etc.)
• Class “C” — Energized electrical equipment (wiring, fuse box, electric motors, etc.)
• Class “D” — Combustible metals (magnesium, sodium, zirconium, etc.)
Appoint someone to check smoke detectors and fire extinguishers regularly, at least twice a year. Sprinkler systems also need periodic professional inspections; check with your installer for information.
Learn how to use a fire extinguisher properly. Pull the pin, aim at the base of the fire, squeeze the handle and spray from side to side at the base of the fire. For safety, the operator should stand between the fire and the exit to allow a quick escape if the fire does not go out.
The standard business property policy or business owners policy (BOP) includes coverage for fire. Check your policy’s limits to ensure you have enough coverage to rebuild after a total loss — although your policy might have been adequate when written, the replacement cost of your building and/or its contents have likely increased if you’ve had the policy more than a couple of years.
You will also want to ensure you have coverage for debris removal and lost income if a fire or other insured loss causes a business closure or slowdown. For more information on managing the risk of loss due to fire or other catastrophes, please call us.
As with almost every other industry, the digital world is bringing changes to the insurance industry. The speed and convenience of digital transactions that shoppers and banking customers appreciate are now coming to insurance claims handling.
In a study by LexisNexis Risk Solutions, 24 insurance executives described their company’s current and future plans for implementing “touchless” claims processing.
Currently, claims processes can be divided into four categories:
Traditional: the adjuster goes out to personally inspect the car or home and prepares the estimate.
Fast Track: Claims are expedited with minimal insurance company involvement, as when, for example, a driver is instructed to take the damaged car directly to a repair center.
Virtual Claims Handling: The customer or a vendor photographs the damage and the adjuster assesses the damage remotely.
Touchless Claims Handling: The claim is reported electronically along with backup materials such as invoices and photos; the material is reviewed by humans or algorithms and paid electronically.
To assess where the insurance industry is headed in terms of implementing digital strategies, LexisNexis segmented insurance companies into three groups:
Traditional: Relies heavily on traditional field inspectors for even non-complex claims. May use fast track but not using or considering virtual claims handling
Semi-Forward Leaning: Uses traditional and fast track, along with using or considering virtual claims handling
Forward-Leaning: Uses fast track and virtual claims handling, and considering touchless claims handling.
Here’s how the companies surveyed ranked in terms of which claims-handling process they currently use:
• 100 Percent Traditional
• 83 Percent Fast Track
• 38 Percent Virtual
One of the most interesting things the survey reveals is that companies with a more advanced technological approach have shorter average claims cycle times. This is mainly because the claim needs to be handled or “touched” fewer times. And this can deliver big benefits to policyholders.
• Traditional – 10-15 days (3-4 average touches)
• Fast Track – 4-6 days (2 average touches)
• Virtual – 2-3 days (1-2 average touches)
The Bottom Line: Better Results, Happier Customers
Companies using fast-track processing report achieving 73 percent better results from their claims process. This results from reduced loss adjustment expenses, better efficiency because personnel can be reallocated to more complex claims and, most importantly, better customer experiences. For companies using virtual claims handling, even more (78 percent) report better results.
When fast-track approach companies were asked if they planned to also adopt touchless claims handling, 78 percent said no and only 27 percent said yes. However, when companies already using virtual handling were asked about moving to touchless claims handling, the “yes” response was 67 percent; the no’s were just 33 percent.
Clearly, the need to satisfy tech-savvy customers, especially millennials, will drive more companies to adopt digital processes in the next five years. But the savings from reduced loss adjustment expenses, better customer retention and competition from forward-leaning competitors will also mean you’ll be seeing more digital claims processing in the future, no matter which insurance company you buy your insurance from.
Please give us a call. We’ll give you an update on how the companies you’re insured with are handling claims these days.
Many employees rely heavily on the money they put into their employer-sponsored 401(k) account to pay for their retirement. The last thing they want is for the money to be stolen by cyber thieves.
Cybersecurity is a growing concern. When Equifax, a credit reporting agency, was hacked in September 2017, hackers stole information that may be used to steal money from Equifax’s clients. The information included Social Security numbers, birth dates, addresses and driver license and credit card numbers.
The good news is that investment accounts such as a 401(k) are relatively safe. There are enough safeguards and daily asset management measures in place that a major investment firm likely will not see its accounts drained. The biggest threat to retirement accounts comes from how individual employees handle those accounts.
There is insurance you can purchase that will reimburse individuals up to $500,000 if the brokerage firm fails, but it does not protect your employees against theft or fraud. An individual could be reimbursed if money from their account is stolen, but it depends on whether they did their due diligence to protect the account and if they notify the brokerage firm quickly.
In short, it pays to be careful. There are several steps each party to a retirement account needs to take to keep the money safe. Here are some important ones for you and your employees to consider:
A plan sponsor is an entity that implements a retirement plan, such as a 401(k), for employees.
If you are the plan sponsor, your responsibilities are to determine the benefit package, and, if necessary, amend or terminate the plan.
If your plan is cyber-attacked and funds are taken, you must replace the money if the breach can be traced back to your company and you did not take reasonable action to prevent the attack.
To protect your assets:
• Work with your chief data officer to prepare a written plan addressing cybersecurity weaknesses and ways to educate employees on avoiding 401(k) phishing. Phishing is an attempt to obtain sensitive information through electronic communications by disguising as a trustworthy entity. You also should have a plan to notify your employees if there is a breach.
• Report any account breaches immediately to the federal government. This will make it harder for the hackers to harm someone else’s business. You might think you’re opening your business to prosecution, but the Cybersecurity Information Sharing Act of 2015 gives companies more protection from liability when sharing information with the federal government about threats to their systems.
• Talk to your vendors about the security measures that they and their third-party vendors’ use to ensure they are complying with ISO 27001 and guidelines as recommended by the National Institute of Standards and Technology.
• Record the least amount of confidential information possible because the less you have, the less there is to be stolen. It’s not usual for employers to have employees’ Social Security, driver’s license or passport numbers; employees’ bank account information; legal name; and date of birth.
• Educate employees on avoiding phishing attempts and how to boost safeguards for their personal information. For instance, they should be wary of credit cards or loans they did not request. Employees also should check their financial accounts regularly for unfamiliar transactions. They also should request credit reports to make sure no unauthorized accounts have been started or loans made.
• Check if your vendor uses multifactor authentication, which requires account holders to present several pieces of information to prove their identity, as recommended by the U.S, Federal Financial Institutions Examination Council. This reduces the possibility that employees’ accounts will be hacked.
• Work with your financial planners to make sure they are watching employees’ accounts. They can spot problems, such as checking with employees about withdrawal requests. You can ask your advisor to verify any withdrawal requests over the phone before completing employees’ transactions.
• Your company’s 401(k) should only invest in traded securities, such as public funds, ETFs, stocks and bonds.
A plan participant contributes to a pension plan or receives benefit payments from the plan. For a cyber thief to get a plan participant’s money from a 401(k) through a plan administrator, they must have the employee’s account information and request the distribution. You would then have to approve the distribution. The likelihood of that happening is slim. However, once an
employee retires, the information becomes easier to access.
Many major providers will cover employees’ accounts, but only if the employee can prove they didn’t play a role in the hack. For example, one provider expects plan participants to check their account frequently, but the term “frequently” is not defined.
The Securities and Exchange Commission recommends that individuals:
• Choose long passwords that include numbers and symbols that are different from passwords
used on other sites; and change passwords frequently.
• Don’t write passwords down. Instead, use password management software.
• Don’t share information with anyone.
• Keep account contact information up to date.
• Don’t use public computers for account transactions.
• Monitor the account regularly and report problems immediately.
• Allow account alerts that send a notification each time a transaction is made.
• Be aware that thieves can get more information by telephone or email — so don’t share personal information with strangers.
For help minimizing your cybersecurity risk, please contact us.
Less than 37 percent of small business owners feel they have adequate cyber liability insurance protection, according to a new study conducted by The Hanover Insurance Group, Inc., and Forbes Insights.
The National Association of Insurance Commissioners (NAIC) has identified the main cyber risks as:
• Identity theft from security breaches of sensitive information when stolen by a hacker or
inadvertently disclosed, including Social Security numbers, credit card numbers, employee
identification numbers, drivers’ license numbers, birth dates and PIN numbers.
• Business interruption from a hacker shutting down a network.
• Damage to the firm’s reputation.
• Costs associated with damage to data records caused by a hacker.
• Theft of valuable digital assets, including customer lists, business trade secrets and other similar electronic business assets.
• Introduction of malware, worms and other malicious computer code.
• Human error leading to inadvertent disclosure of sensitive information, such as an email from an employee to unintended recipients containing sensitive business information or personal
• The cost of credit monitoring services for people impacted by a security breach.
• Lawsuits alleging trademark or copyright infringement.
Cyber Risk Management
The primary defense against cybersecurity loss is a well-designed and conscientiously maintained risk management program. The first step in such a program is to identify your firm’s vulnerabilities, including systems, procedures, programming and personnel. The next step is to control those vulnerabilities as much as possible.
Here is a short, practical checklist:
1. Make sure all company computers have the latest security software, web browsers and operating systems to protect against viruses, malware and other online threats.
2. Turn on automatic software updates, if that’s an option. Many updates specifically address known security risks.
3. Scan all new devices, including USB devices, before they are attached to the network.
4. Use a firewall to keep criminals out and sensitive data in.
5. Use spam filters. Spam can carry malicious software and phishing scams, some aimed directly at businesses.
7. Know what Personally Identifiable Information (PII) you’re storing on your customers, including where you store it, how you use it, who can access it, and how you protect it. Delete any unneeded information.
No matter what firewalls, software and authentication protocols you’ve installed, your cybersecurity system is vulnerable if you’re not educating your employees on avoiding risky behavior online. The Workplace Security Risk Calculator, available free at https://bit.ly/2JOFGgL, lets your employees gauge the level of risk their online behaviors pose. You can get more good advice from the National Cyber Security Alliance, a nonprofit public/private alliance that fosters cybersecurity and privacy for individuals and businesses. Check out their website at https://staysafeonline.org.
Cyber Liability Insurance Policies
Even with a cybersecurity plan in place, your business still needs a failsafe to protect it against cyber risk. Currently, most standard commercial lines policies do not provide coverage for cyber risks. You need a special cyber liability policy. Due to the lack of actuarial data, however, it’s difficult to price. Insurers deal with this by evaluating each insured according to its risk management procedures and risk culture. As a result, cyber risk coverages are more customized and, therefore, more costly.
The type and cost of cyber liability coverage offered by insurers is based on the type of business, its size and geographical scope, the number of customers it serves, its web presence, the type of data it collects and stores and other factors, including its risk management and disaster response plan.
Cyber liability policies might include one or more of the following types of coverage, according to the National Association of Insurance Commissioners:
• Liability for security or privacy breaches. This would include loss of confidential information by allowing, or failing to prevent, unauthorized access to computer systems.
• The costs associated with a privacy breach, such as consumer notification, customer support and costs of providing credit monitoring services to affected consumers.
• The costs associated with restoring, updating or replacing business assets stored electronically.
• Business interruption and extra expense related to a security or privacy breach.
• Liability associated with libel, slander, copyright infringement, product disparagement or reputational damage to others when the allegations involve a business website, social media or print media.
• Expenses related to cyber extortion or cyber terrorism.
For more information about cybersecurity insurance, please contact us.
DEERFIELD, IL (July 10, 2018) — Alera Group announced it has acquired a controlling interest in The Insurance Alliance of Central Pennsylvania (“The Alliance”), effective July 1. The Alliance provides support to 10 firms in Pennsylvania, including three firms that were previously acquired by Alera Group.
In acquiring The Alliance, Alera Group immediately expands its capabilities with respect to the integration of the P&C firms it has acquired to date and plans to acquire in the future. The Alliance will serve as an important component of Alera Group’s P&C platform, enabling access to multiple markets, improved technology and intellectual property.
“We join Alera Group with great expectations for what we will craft together in our growing synergistic relationship,” said Jane Koppenheffer, CEO and President of The Alliance. “Through Alera Group, The Alliance will continue to grow and include new firms, representing a wide variety of sizes, diversity and areas of expertise.”
“We are thrilled to be working even more closely with The Alliance. Jane and her team bring tremendous expertise and experience which will enable Alera Group to more quickly grow and integrate as we leverage our new capabilities. We have been and will continue to be proud members of The Alliance alongside firms that share similar values,” said Alan Levitz, CEO of Alera Group. “We believe that this transaction is a big step forward for Alera Group, our firms in The Alliance and the entire Alliance.”
Alera Group did not acquire any interest in the firms that are members of The Alliance beyond the previously existing Alera Group firms.
Formed in early 2017, Alera Group is one of the nation’s foremost independent insurance agencies and privately-held employee benefits firms. For more information on partnering with Alera Group, visit Partnership Opportunities at www.jmjwebconsulting.com.
About Alera Group
Based in Deerfield, IL, Alera Group’s over 1,000 employees serve thousands of clients nationally in employee benefits, property and casualty, risk management and wealth management. Alera Group is the 15th largest independent insurance agency and the 7th largest independent employee benefits firm in the country. For more information, visit www.jmjwebconsulting.com or follow Alera Group on Twitter: @AleraGroupUS
Rob Lieblein, Chief Development Officer
Jessica Tiller, Weiss PR
Enjoying the end of a holiday week with a day on the water?
The weather is beautiful, the family is excited, and you’re off for a day on the water.
At the local marina, you sign up for a day’s rental, fill out the rental agreement, waiver forms, and they copy your valid driver’s license and credit card. You take the necessary safety training course and, about an hour after you arrive at the marina, you are on the open water. Your family is excited, the wind is in your hair and everyone having a great time.
But all that is about to change. You weren’t the only one out there with the idea of spending the day on the water. Dozens of boats—some faster, some pulling people on water toys, some operated by real rookies and some weekend warriors—all make for a crowded and sometimes very confusing waterway. One small driving error or right of way error, or even the slightest hesitation or wrongful anticipation and WHAM-O!
You’ve gotten yourself into a property damage claim, or worse, an at-fault bodily injury claim.
Now, the waiver you signed makes you responsible for the first $2500 of property damage to the boat you are driving, because after that, the marina’s policy will kick in. But how about the other boat? And God forbid any bodily injuries!
You’re lucky, the 25’ recreational boat you rented with a 40Hp outboard engine are within the guidelines of your homeowner’s policy. You should be covered for property damage you caused, as well as any injuries to family or to others, and any lawsuits that may follow. However, here’s who isn’t so lucky …
• Anyone who rents an apartment and does not carry renter’s insurance
• Anyone who owns a condo/townhouse or home and does not carry liability insurance
• Anyone who does have insurance for the above, BUT rents a boat greater than 26’ in length
• Anyone who does have insurance for the above, BUT rents a boat with an engine greater than 50Hp
• And forget about wave runners, jet skis, or airboats
That’s right, your personal liability policy does not extend to you renting watercraft over 26’ in length nor boats with engines over 50Hp – regardless of the type of boat or size of the propeller the marina puts on to govern your speed on the water.
Four of the top five marina insurance carriers will not step in to protect you, the boat operator, if something happens with your rental boat. The marina and their insurance carrier will be looking to you for coverage for damaged property as well as defense costs and legal expenses lawsuits.
These eight steps will help you create an effective workers’
compensation claims management procedure. But getting the first step right is probably the most important thing you can do to ensure you get all the other steps right, too.
1. Support a workplace where there is trust and mutual respect. A negative work environment almost invites workers’ compensation losses and can inevitably make them worse. Injured workers can often lack motivation to get better because they don’t want to go back to a workplace environment they feel is unfriendly, unwelcoming or distrustful.
2. Inform employees of the injury reporting process. The process should be part of the employee rules of conduct and provide clear step-by-step rules for employees to follow in the event of an injury. Employees should know to inform their supervisor of an injury as soon as possible, get emergency help if needed or at least see a doctor if necessary. Employees also need to know where to find easily accessible information about how to fill out a claim form, benefits available and the importance of rehabilitation and returning to work.
3. Establish procedures to ensure that injured employees get prompt medical attention in the most appropriate ways. This should include establishing:
A. relationships with occupational medicine practitioners who understand your business operations
B. an early return-to-work program
C. a referral program to appropriate medical specialists
4. Maintain a policy of reporting claims to your workers’ compensation carrier the same day they occur. If a claims adjuster is able to quickly respond, this will minimize the sense of uncertainty that often results when someone is injured and confused about whether their claim will be handled promptly and equitably.
5. Investigate the accident thoroughly. This is essential not only to quickly resolve the immediate claim and mitigate the loss but to prevent future losses. Your accident investigation should include:
A. Written statements from the employee-claimant and any co-workers or witnesses at the accident site
B. Written statement from the supervisor
C. Supporting documentation such as photographs of the accident site, information
about similar incidents at the site or similar sites and relevant loss prevention
reports that may have been filed on this matter in the past.
D. A review of all documentation with recommendations about corrective actions.
6. Maintain clear communications with the injured employee throughout the claims process. Help them understand the process, what to expect in terms of medical treatment, payments for their medical treatment and status of their pay. Remind them that you support them and want to see them back on the job as soon as possible. Lack of communication and a thorough explanation of how the claims process works is the biggest reason why injured workers retain an attorney.
This process can be quite a challenge for everyone, including adjusters, so stay involved. Many states have instituted reforms that can be confusing to all parties. It’s crucial that all parties keep in close and honest communication.
Eddy Canavan, Orange, California-based vice president of the workers’ compensation practice and compliance for Sedgwick Claims Management Services Inc., said new regulations can be a starting point for litigation. “My experience is whenever there are changes that impact human beings, there is some litigation that will result from that,” Canavan told Business Insurance magazine. For example, California and many states are now limiting how healthcare providers prescribe opioid painkillers. An injured worker needs to
understand that state laws are in play here, not employer or workers’ compensation insurer cost-cutting. “There could definitely be challenges with the formulary, and applicants’ attorneys will test it,” said Canavan.
7. Have an early return-to-work program. These programs are win-win. They help employees recover faster by allowing them to quickly return to feeling like useful contributors. And they reduce the costs of temporary total disability payments and minimize the impact on your experience modification factor.
8. Reach out to your broker for help implementing your workers’ compensation claims management process. We’re here to help you.