Health Benefit Services News

: : Julie Seiden, Managing Director,
Health Benefits Services | 

631.923.1595 ext. 310

G.R. Reid Consulting Services, LLC

What Factors Determine Small Group Health Renewal Rates?

Determining renewal rates for small groups (2-50 employees) is not an arbitrary process. There is definitely a method to the madness. But what exactly comes into play in calculating the rates?  Despite the fact that there are various criteria to consider, generally insurers use the following factors to formulate your renewal rates:

Trends in General Healthcare
This is a baseline factor applied to all group health insurance renewals. The word "trend" refers to two things:  the change in cost of healthcare products and services, and how consumers utilize these products and services. New technologies, procedures, and even facilities encourage more people to seek advanced treatments.  And all these extra goods and services are not available for free.  They are expensive and increasing rapidly! The "prescription drug trend" is another factor that influences healthcare trends.  More and more drugs are being introduced, and the pharmaceutical companies market them aggressively.  The costs of research, development and advertising of these drugs are significant.  These rising expenditures, in combination with increasing utilization, all affect the baseline factor. Another factor in this "trend" has much to do with your group's geographic location.  Similar to housing costs, healthcare costs differ significantly upon location.  Healthcare premiums in some areas reflect the higher cost of more people using state-of-the-art, expensive, treatments and services.

Group-Specific Medical/Health Factor
A carrier may adjust renewal rates based on the overall health of the individuals covered under your health plan, depending on state regulations. The premiums can be adjusted to cover the cost of expected future claims. Based on your state regulations, some rate caps may exist that limit the amount an insurer can raise premiums based on your group's health status alone. More often than not, carriers use a "prospective" system where they look at medical conditions and diagnoses, which may affect the group's amount of claims in the coming year.  Under this system, resolved claims from the past year are not taken into account. The renewal adjustment can also be positively impacted by the overall good health of the group being evaluated.

Group-Specific Characteristic/Demographic Profile
This component includes:

1. Changes in age brackets (For example, an employee or spouse turns 50, moving them from the 45-49 bracket to the 50-54 bracket.)

2. Gender and coverage composition changes (This reflects changes in the percentage of females versus males; or changes in the mix of single and family contracts.)

3. Changes in the group's geographical location (Rates may change if the company moves to a new locale.)

Group-Specific Administrative Expenses
This factor involves the fixed costs that are necessary to administer the plan. The smaller the group, the higher the expense load. To clarify, a three-person group would have a larger expense load, as a percentage of premiums, than a 30-person group.

Given all of these factors, is there anything you can you do to reduce the costs?  
Consider adjusting your plan design and/or premium contribution to support the most efficient utilization of health care options. Also, encourage employees to become smarter healthcare consumers. Communicate with your employees so they understand their benefits, and spend some time promoting prevention and wellness programs.

Financial Services News

G.R. Reid Consulting Services, LLC

New Rules Are in The Cards

In 2010, the federal government issued a dizzying array of rules and reforms affecting the plastic you carry in your wallet. In case you had trouble keeping track, here are some of the important developments.

Credit Cards
Under the Credit Card Accountability, Responsibility and Disclosure Act of 2009, consumers must be given a 45-day notice before any significant changes affecting their account terms can take effect. Such changes include higher interest rates, fees, and finance charges. Consumers who exceed their credit limits cannot be charged an overlimit fee without their consent. Card issuers must send statements a minimum of 21 days before the due date, which must be the same date every month. 1

Debit Cards
Banks are required to have a debit-card user’s permission before they can charge overdraft fees on point-of-sale purchases and ATM withdrawals (overdrafts via paper checks and automatic payments
are exempt; banks can continue to cover them for a fee without the account holder’s permission). Card holders who agree to the fees will have their purchases authorized when their accounts don’t have
sufficient funds. Card holders who don’t accept the fees will likely see their over-limit purchases declined. 2

Gift Cards and Certificates
Issuers cannot charge inactivity fees on cards sold on or after August 22, 2010, unless the card or certificate has been inactive for at least one year. After one year, the issuer may levy inactivity fees,
but no more than once per month. The money stored in a gift card must be usable for at least five years from the date the card was issued. If a consumer adds money to the card, the amount added
must also retain its value for at least five years. 3


Inclined to Be Declined
A significant 74% of survey respondents said they weren’t planning to opt for overdraft protection (for a fee) on their debit-card transactions.
Source: National Foundation for Credit Counseling, 2010


The content above is derived from sources believed to be accurate. 
1. Bankrate.com, 2010
2. National Foundation for Credit Counseling, 2010
3. Federal Reserve, 2010

Life, Disability & Long Term Care Insurance Services

: : Roland A. Vitanza, J.D.
Specialist in Life, Disability and Long Term Care Insurance
631.923.1595 ext. 342  
G.R. Reid Consulting Services, LLC 

Living with Whole Life Insurance
A few weeks ago we published a post with an overview of Whole Life Insurance, briefly demonstrating how it works, what makes it an asset, and why it can be a powerful asset for any individual or family to own. In this post, the G.R.Reid Consulting Services Insurance team would like to expand on Whole Life Insurance as income replacement and how it plays an essential role in helping to create a retirement strategy with less stress.


Whole Life insurance has a permanent guaranteed death benefit. This is the most
important aspect of the product. There are major two reasons for acquiring the proper
permanent death benefit: (I) income replacement and (II) estate replacement.

I. Income Replacement:
A bread winner should have the correct amount of insurance to protect against his/ her death so as to prevent their heirs from having to deal with a financial devastation.

The following is an example situation:
If a breadwinner makes a salary of 120,000 dollars yearly, their death benefit amount should be 3 million dollars or more. Now we can explain why. After the death of the insured the beneficiary receives a lump some payment and in this case, 3 million dollars. Investing the death benefit conservatively in a vehicle that provides a 4% rate of return, the beneficiary will be able to draw 120,000 dollars from that investment yearly as income, without touching the principle of the benefit. In this case, the breadwinner’s income has been fully replaced. At G.R.Reid Consulting Services, we believe that it is financially irresponsible to not have the proper protection in place for our clients’ family members. Furthermore, by adding permanent insurance to our client’s financial portfolio we help prepare them for maximum asset distribution when it is time to retire.

II. Estate Planning:
Whole Life Insurance can truly change the way that our clients view their retirement. By purchasing the correct amount of permanent Insurance our clients will be able to live comfortably, while still leaving their heirs with a sizable estate.

The following example demonstrates that fact:
Client A plans to retire at 65 years of age. By that time his estate will be worth 3 million dollars and they will have two children who are college graduated. He has always planned to leave his children with a large inheritance, but still would like to enjoy retirement. Client A’s investment accounts are generating a four percent rate of return leaving an annual taxable amount of 120,000 to live on in retirement, plus social security. Client A has grown accustom to living life with at least an income of 250,000 yearly. How will he and his wife be able live with about half of that amount and not invade principle? Statistically retirees use just as much income in retirement as they did while they were part of the working force. Not to mention, the biggest unforeseen asset depletion in retirement, extended elder care when in most cases Medicaid will not assist; families can be bankrupted by out of pocket costs of Long Term Care.

By owning Whole Life Insurance and by having a permanent death benefit of 3 million dollars to replace their estate they do not have to worry about living off of the interest of their assets. Client A can cut into his principle in order to generate much more than 120,000 a year from which to live. Furthermore, the cash value of the whole life insurance policy will be growing all the while, creating even more disposable income in retirement and if Long Term Care costs eventually did deplete the estate, the permanent benefit will always remain to replace it entirely.

The Insurance team of G.R. Reid Consulting Services has the goal of making sure that our clients have the best insurance coverage now and far into the future.

Commercial Insurance Services

: : Louis Santelli, CPCU, CIC, Managing Director, Commercial Insurance Services
631.923.1595 ext. 330
G.R. Reid Insurance Services, LLC

Don't Forget Insurance for Your Organization's Cyber Risks
 
The Federal Internet Crime Complaint Center received over 330,000 complaints in 2009, and more than a third of them ended up in the hands of law enforcement. The damages from those referred to the authorities totaled more than a half billion dollars. The Government Accountability Office estimated that cyber crime cost U.S. organizations $67.2 billion in 2005; that number has likely increased since then. With so much of business today done electronically, organizations of all types are highly vulnerable to theft and corruption of their data. It is important for them to identify their loss exposures, possible loss scenarios, and prepare for them. 

Some important questions to ask include:
What types of property are vulnerable? 
The organization should consider property it owns, leases, or property of others it has in its custody. 

Some examples:
•  Money – both the organization's own funds and those it holds as a fiduciary for someone else 
•  Customer or member lists containing personally identifiable information, account numbers, cell phone numbers, and other non-public information 
•  Personnel records 
•  Medical insurance records 
•  Bank account information 
•  Confidential memos and spreadsheets 
•  E-mail 
•  Software stored on web servers

Different types of property will be susceptible to various threats, such as embezzlement, extortion, viruses, and theft.

What loss scenarios could occur? 
The organization needs to prepare for events such as:
• A fire destroys large portions of the computer network, including the servers. Operations cease until the servers can be replaced and reloaded with data.
• A computer virus infects a workstation. The user of that computer unknowingly spreads it to everyone in his workgroup, crippling the department during one of the year's peak periods.
• The accounting department discovers a pattern of irregular small funds transfers to an account no one has ever heard of. The transfers, which have been occurring for almost three months, were small enough to avoid attracting attention. They total more than $10,000.
• A vendor's employee strikes up a casual conversation at a worker's cubicle and stays long enough to memorize the worker's computer password, written on a post-it note stuck to her monitor. Two weeks later, technology staff discover that an offsite computer has accessed the human resources database and viewed Social Security numbers, driver's license numbers, and other personal information.

In addition to taking steps to prevent these things from happening, the organization should consider buying a cyber insurance policy. 

Several insurance companies now offer this coverage; while no standard policy exists yet, the policies share some common features. They usually cover property or data damage or destruction, data protection and recovery, loss of income when a business must suspend operations due to data loss, extra expenses necessary to maintain operations following a data event, data theft, and extortion. However, each company may define these coverages differently, so reviewing the terms and conditions of a particular policy is crucial. Choosing an appropriate amount of insurance is difficult because there is no easy way to measure the exposure in advance. Consultation with the organization's technology department, insurance agent and insurance company may be helpful. Finally, all policies will carry a deductible; the organization should select a deductible level that it can afford to pay and that will provide it with a meaningful discount on the premium. Once management has a thorough understanding of the coverages various policies provide in relation to the organization's exposures, it can fairly compare the costs of the policies and make an informed choice.
 
Computer networks are a necessary part of any organization's environment today. Loss prevention and reduction techniques, coupled with sound insurance protection at a reasonable cost, will enable an organization to get through a cyber loss event.

Human Resource Services

:: Deidre Siegel
Director, Human Resource Services
G. R. Reid Consulting Services, LLC
Read about G.R. Reid Human Resource Management Tools

Are You Classifying Your Employees Correctly?

The IRS has launched a three year program that will randomly examine 6,000 companies to identify permanent workers that are being misclassified as freelancers (1099s). They are seeking violators of the Tax Code and most of this activity is being targeted to SMALL BUSINESS OWNERS. Why? The IRS believes that small businesses are more likely to evade taxes – but the truth is that it is much easier and faster for the IRS to audit smaller businesses. The U.S Department of Labor estimates indicate that almost 30% of companies allegedly misclassify at least some of their employees. As Human Resource professionals, we know that most of the time that is not being done intentionally! Let us come in and educate you, and verify that you are classifying your employees correctly!

Human Resource Services

: : Karen Randle, Director, Human Resource Services
631.923.1595 ext. 334
G.R. Reid Consulting Services, LLC

Upcoming Effective Dates That May Apply to Your Company:

May 5, 2011  / FLSA Tip Credit

 The final rule provides that to use the tip credit, an employer must inform a tipped employee about several aspects of using the tip credit, including the direct cash wage the employer is paying the tipped employee. The rule also clarifies, though does not amend, certain issues related to the meal credit, compensatory time provisions and the fluctuating workweek method of computing overtime.


May 16, 2011 / I-9 Final Rule: Acceptable Documents

U.S. Citizenship and Immigration Services announced a final rule that prohibits employers from accepting expired documents and revises the list of acceptable documents. While the final rule makes no changes to the interim rule that has been in effect since April 2009, employers are encouraged to ensure they have the most up-to-date resources on this issue.


May 24, 2011 / ADA Amendments Act Final Rule

The long-awaited final regulations updating the Americans with Disabilities Act (ADA) scale back the proposed rule in several respects, including the definition of "disability." Instead of listing impairments consistently considered disabilities under federal law, the regulations provide guidelines for employers to use in identifying disabilities.

Health Benefit Services News

: : Julie Seiden, Managing Director,
Health Benefits Services | 

631.923.1595 ext. 310

G.R. Reid Consulting Services, LLC
 

Health Care Reform Brings About First-Dollar Preventive Care

 

The Patient Protection and Affordable Care Act, signed into law in 2011, is beginning to bring about changes to the nation's health care system. Last July, a summit between the U.S. Departments of Labor, the Treasury, and Health and Human Services came together to issue new Preventive Regulations, in accordance with the President's health care reform bill.

The new regulations require non-grandfathered health care plans to provide complete coverage of many preventive services for newborns, children, and adults, regardless if deductible costs are met. These regulations apply for the first plan year on or after September 23, 2010.

The government has put these regulations in place in order to increase patients' access to numerous services, such as diabetes and cholesterol tests, prostate and other cancer screenings, child/adult vaccinations, pre-natal services, and routine checkups for children and infants. In the past, many patients were required to cover deductible costs or share the cost of these services, but now preventive care will be covered on a full first-dollar basis. The new regulations only apply to in-network providers.

The Department of Health and Humans Services, or HHS, hopes that the increased access to high-quality preventive care will lead to earlier detection of disease and improve Americans' overall health, essentially lowering health care costs. In the United States, 7 out of every 10 deaths are caused by chronic diseases, like cancer, diabetes, and heart disease. HHS estimates that 75% of the country's health care dollars are spent on fighting diseases and illnesses that can be prevented. Additionally, the HHS states that Americans receive preventive services about half as much as they need to.

Increased Coverage
Here are a few health care services that will be covered under the new regulations:

• Preventive Care

The U.S. Preventive Services Task Force selected a variety of services to be covered, including screenings for colon and breast cancer, screenings for high blood pressure and cholesterol, checkups during pregnancy, help for smokers trying to quit, and other high-priority preventive care services.

• Vaccinations

Routine vaccinations selected by the Advisory Committee on Immunization Practices for children and adults are fully covered by the new regulations. These vaccines include Hepatitis A and B, MMR, Meningococcal, Tetanus, flu shots, and others.

• Care for Children

All new plans will now cover the preventive services recommended by the American Academy of Pediatrics in their "Bright Futures" guidelines. Services include access to pediatricians until the age of 21, regular wellness checkups, hearing and vision screenings, developmental assessments, vaccines, and care that addresses childhood obesity.

• Women's Care

Health screenings for anemia and other risk factors in pregnant women are covered, along with screenings for breast cancer and osteoporosis in older women, as well as other preventive measures. An independent council of doctors and medical experts are currently working on new preventive care guidelines for women. Prescription contraceptives are not currently listed as a covered preventive service, but officials from the Planned Parenthood Federation of America hope that contraceptives will begin to receive first-dollar coverage within the next year or two.

Information on all of the covered services can be found on the government's www.healthcare.gov website.