Tag Archives: Texas Associates

Workplace Wellness Programs – Are They For You?

wellnessOne of the many provisions buried in the Affordable Care Act is the ability for employers to set up workplace wellness programs that incentivize employees to take better care of themselves. A healthier workforce doesn’t just reduce insurance premiums. It’s also a workforce that is more productive when it’s at work and that takes fewer days off when ill.

There are two different types of workplace wellness programs. A participatory wellness program is a program that provides a reward to employees that perform an action. Some examples of participatory programs include when a company provides access to a fitness center for anyone who chooses to use it, provides a bonus for taking a diagnostic test or incentivizes employees to attend health-related educational programs.

A workplace wellness plan can also be structured as a health-contingent program. These programs are more specifically based on employees’ individual health issues and can also come in two types:

  1. Activity-Based Health-Contingent Programs
  2. Outcome-Based Health-Contingent Programs

If a company chooses to implement a health-contingent program, it can offer a reward equivalent to up to 30 percent of an employee’s cost of health coverage. A program that is tied to stopping smoking can have a reward of up to 50 percent of a worker’s insurance coverage cost.

Activity-Based Workplace Wellness

An activity-based program is a program that focuses on getting an employee to take a certain activity towards improving their health. While a participatory program might include company support towards the cost of a gym membership, an activity-based program would require that worker to go to the gym on a predefined basis to earn the reward. Another example would be a reward tied to successfully completing a dieting program or committing to walk a certain number of times per week for a certain number of minutes per session.

Outcome-Based Workplace Wellness

Outcome-based programs focus on what a worker achieves rather than on what he does. An outcome-based plan starts with measuring a worker’s health. It can then set a goal for the measured standard. These programs can be tied to lowering cholesterol, lowering blood pressure or to reducing body-mass index. In these programs, the result is more important than the inputs that go into achieving it.

Calculating Rewards

Whether a company chooses an activity- or an outcome-based program, the rewards are calculated the same way. Rewards are based on the total cost of coverage, spanning both the employer’s and the employee’s payment .For instance, if an employee’s coverage costs $4,800 per year and the employer offers a 30 percent rebate, the employee would receive a bonus of $1,440. She would receive the bonus regardless of whether she pays $1,200, $2,400 or more of her total healthcare cost.

Alternate Routes to Rewards

Workplace wellness programs must comply with other federal laws, including the Americans with Disabilities Act. This means that they must have an alternate path for employees to earn a reward if they are unable to comply with the initial terms of a reward. For instance, an employee in a wheelchair won’t be able to participate in a program that incentivizes walking, so some other type of incentive must be put in place for them.

The rules underlying both activity- and outcome-based workplace wellness programs are complicated. Adding in the additional risks of legal exposure that come with creating incentives that are meaningful but also available to every employee makes the process even more challenging. However, the benefits to be reaped from a healthier workforce are also well worth it in the long run.

Dana Rostro is the Director of Employee Benefits Sales and Operations at Texas Associates Insurors. Dana is ACA certified and has helped clients develop the best strategies for their operations within the new healthcare legislation.

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Traveling? Renting a Car? Should You Buy the Insurance? So Many Questions!

Car_Rental_Insurance_JusRenting a car can be a confusing process. The additional fees and services offered by car rental companies are often tacked on the bill followed by paragraphs of legalese. Supplemental liability insurance is one of these extra fees. While the name implies importance, it may be an unnecessary fee when renting a car. To determine whether you need supplemental liability insurance on your next car rental, start by assessing your current coverage.

What is Supplemental Liability Insurance (SLP)? 

Most states require that rental car companies provide drivers with minimum levels of liability insurance during the rental period. Supplemental insurance provides additional coverage above the state minimums, up to $1 million in liability protection.

For some drivers, this additional coverage is a great deal that can cover additional costs associated with an accident. For other drivers, this coverage is already included in other areas and duplicating this service through the rental company is a waste of money.

Using a Credit Card? 

Many credit card companies offer bonuses that customers are not using. Charge backs and reward points are often scrutinized and compared when searching for a new credit card but many cards also offer secondary rental insurance which consumers fail to use.

The best way to determine whether your credit cards offer rental insurance is to read the terms of use or speak to customer service. Determine how long after an accident you have to file the claim. Most credit card companies offer drivers a 45 day window. If your credit card offers SLP, buying coverage from the rental car company is unnecessary.

Did You Call Your Insurer? 

Most drivers do not need supplemental liability insurance for the simple reason that they already have coverage under their current auto insurance. In addition to covering the driver while driving other people’s cars, rental cars are covered by basic auto insurance for the same deductible.

Don’t Want to File a Claim?

Even drivers who have primary automobile insurance may opt to use SLP to prevent their insurance rates from rising in the event of a rental car accident. Rental cars are notorious for being driven recklessly and drivers with a lead foot or those that are particularly harsh on rentals may not want rising rates over a couple of scratches. In this case, SLP is a good way to prevent extravagant bills for car damage without effecting insurance rates.

Don’t Own a Car? 

While insured drivers may already carry supplemental liability insurance, drivers who do not own a car may find value in getting additional coverage during their rental period. Without the secondary coverage available from auto insurance, customers with expensive rental cars or valuable assets can protect their money by accepting the nominal daily charge for supplemental liability insurance.

If you’re a non-car owner that travels frequently, the fees associated with SLP can add up fast. Consider contacting an auto insurance company to ask about liability coverage for drivers who do not own a car. Most policies cost less than $300 a year and will provide adequate coverage in case of accident without the additional cost of supplemental liability insurance.

Supplemental liability insurance may not be a great deal, but for drivers with the right prerequisites, it can be a valuable addition to rental insurance. Being underinsured in an accident can have serious consequences. Make sure you understand your coverage before turning down supplemental insurance while renting a car.

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Making Sense of Bonds

In the world of insurance and financial products, surety bonds play a crucial role in helping you avoid a financial loss. Since the 19th century when bonds were first introduced, thousands of Contract-Surety-Bond1bond types have emerged. Like insurance, bonds are a legal contract which binds parties together and guarantee compensation if the purchaser fails in their duties.

The Principal (Obligor)

The individual or business that purchases the bond is known as the principal (also known as the obligor). You may be required to buy a bond for several reasons. If you’re a general contractor, you may need to provide a bid bond to a client, assuring them that your bid was placed in good faith. Or, a janitorial company may ask for an employee theft bond as a condition of hiring.

The Obligee

The obligee is the third party to whom the money is owed. For example, you may hire a contractor to complete work on your home and require that they provide a performance bond to ensure the contract is completed in accordance with the agreed terms. If the contractor fails to meet the terms, the bond would pay your loss up to the limit of the bond.

The Surety

The surety is the entity who promises to pay the obligee should the principal fail to meet their obligations. While the surety is usually an insurance company, it may be a bond company or a bank. Because bonds are meant to prevent a loss, the underwriting process is different than a traditional insurance policy and in lieu of a premium, a fee is collected.

Licensed, Bonded, and Insured

In advertisements, you’ve probably heard the phrase “licensed, bonded, and insured”. Professionals like contractors, tax collectors and notaries are licensed to show that they have passed required exams or met special requirements which provide a level of professional trust. These professionals, while their intentions may be honest, may default on a promise to provide a service. For this reason most states require that they are licensed, carry a bond and are insured as conditions for obtaining a business license.

 

Promises Made Daily

For every promise made, for every doubt you may have about a business relationship, there is a surety bond. With thousands of bonds to choose from, many are completely unique to the situation. An electrician may need a permit bond, ensuring that work will comply with local codes or a public official bond guaranteeing that the tax collector will perform their duties to the public. You may even be required to purchase a bond as part of your rental agreement on a home or apartment in lieu of a cleaning deposit. For any situation that requires a promise from one party to another, there is a type of bond to fit that need.

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James Russell is a risk advisor for NewFIrst Insurors, specializing in the development of risk management strategies for the oil and gas industry, construction operations, and offshore risks.

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Transition Policies for Cancelled Healthcare Plans?

cancelled-greeceThe Affordable Care Act (ACA) includes key reforms that create new coverage standards for health insurance policies, beginning in 2014. For example, effective for 2014 plan years, the ACA imposes new modified community rating standards and requires individual and small group policies to cover a comprehensive set of benefits.

Over the last few months, millions of Americans have received notices informing them that that their health insurance plans are being canceled because they do not comply with the ACA’s reforms. President Obama has received criticism that these cancelations go against his assurances that if consumers have a plan that they like, they can keep it. Both Republican and Democrat members of Congress have been advocating changes to the ACA to resolve the cancelation issue.

Responding to pressure from consumers and Congress, on Nov. 14, 2013, President Obama announced a new transition policy for 2014. Under the new policy, individuals and small businesses whose coverage has been canceled (or would be canceled) because it does not meet the ACA’s standards may be able to re-enroll or stay on their coverage for an additional year.

However, this one-year reprieve may not be available to all consumers. Because the insurance market is primarily regulated at the state level, state governors or insurance commissioners will have to allow for the transition relief. Also, health insurance issuers are not required to follow the transition relief and renew plans, and have expressed concern that the change could disrupt the new risk pool under the federal and state Health Insurance Marketplaces.

Transition Relief Policy

The Department of Health and Human Services (HHS) outlined the transition policy in a letter to state insurance commissioners.

For 2014, health insurance issuers may choose to continue coverage that would otherwise be terminated or canceled due to the ACA’s reforms, and affected individuals and small business may choose to re-enroll in the coverage.

Under this transitional policy, health insurance coverage in the individual or small group market that is renewed for a policy year starting between Jan. 1, 2014, and Oct. 1, 2014 (and associated group health plans of small businesses), will not be considered to be out of compliance with specified ACA reforms if certain conditions are met.

According to HHS, it will consider the impact of the transition relief in assessing whether to extend it beyond the specified timeframe.

The transitional relief is not available to grandfathered plans because these plans are not subject to most of the ACA’s market reforms. According to President Obama, the transition relief is an extension of the grandfathered plan rules to additional health insurance policies.

Specified ACA Reforms

The specified ACA reforms subject to the transition relief are the following reforms that are scheduled to take effect for plan years starting on or after Jan. 1, 2014:

  • Modified community rating standards;
  • Guaranteed availability and renewability of coverage;
  • Prohibition of pre-existing condition exclusions or other discrimination based on health status, except with respect to group coverage;
  • Nondiscrimination in health care;
  • Coverage for clinical trial participants; and
  • Coverage of the essential health benefits package.

Requirements for Transition Relief

The transition relief only applies with respect to individuals and small businesses with coverage that was in effect on Oct. 1, 2013. It does not apply with respect to individuals and small businesses that obtain new coverage after Oct. 1, 2013. All new plans must comply with the full set of ACA reforms.

Also, the health insurance issuer must send a notice to all individuals and small businesses that received a cancelation or termination notice with respect to the coverage (or to all individuals and small businesses that would otherwise receive a cancelation or termination notice with respect to the coverage).

Notice Requirements

The notice to individuals and small businesses must provide the following information:

  • Any changes in the options that are available to them;
  • Which of the specified ACA reforms would not be reflected in any coverage that continues;
  • Their potential right to enroll in a qualified health plan offered through a Marketplace and possibly qualify for financial assistance;
  • How to access such coverage through a Marketplace; and
  • Their right to enroll in health insurance coverage outside of a Marketplace that complies with the specified market reforms.

Where individuals or small businesses have already received a cancelation or termination notice, the issuer must send this notice as soon as reasonably possible.

Where individuals or small business would otherwise receive a cancelation or termination notice, the issuer must send this notice by the time that it would otherwise send the cancelation or termination notice.

Dana Rostro is the Director of Employee Benefits Sales and Operations at Texas Associates Insurors. Dana is ACA certified and has helped clients develop the best strategies for their operations within the new healthcare legislation.

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How Long Do I Have to Purchase Car Insurance After Buying a Car?

Car insurance can be complicated if a person does not have a good agent to help them through the process. How much do you need?  When do you need to buy it?   Can it be added to an existing policy? This article won’t answer all your questions.  It will, however, help answer the question of how soon you need to buy insurance after you purchase a car.  The answer can depend on where you purchase your car, your state laws and the existence of any other car insurance policies you may have.

Driving off the lot
Many car lots will not even allow you to drive off the lot with a car until you have insurance.  This is more to protect them than protect you. They want to make sure the car is covered until it is paid in full. There is also likely to be a requirement as to how much insurance you need.

From a private owner
A private owner will most likely not care whether you have insurance or not since you will be taking title of the car right away.  In this case, you may have two weeks or so, depending on when the temporary tags expire.  It is then likely that you will be required to show proof of insurance before you will be issued permanent tags. This is definitely the case in states that require all drivers be covered under some kind of car insurance.

Existing policies
Car owners who have existing insurance policies will need to talk to their insurance agent. Some policies have a grace period during which the new car is covered under the existing policy. These grace periods vary in terms of their duration, so it is important to carefully review your policy. Other policies do not allow this at all. Your insurance agent can help you determine whether you are covered or not and how long you have before you need to get the additional car covered.

State laws
Most states have some type of car insurance regulations in place and they may differ from the requirements of the dealer where you purchase your car. In all cases, it is better to check in advance with your state Department of Motor Vehicles to find out their requirements. Once you know the State’s requirements, you will be in a better position to comply with them. Unless the dealer requires insurance before allowing you to take possession, state law is the standard, and that will likely mean you need to secure car insurance before you can be issued permanent tags for your car.

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Business Insurance Policies are the Total package

A Business Owner’s Policy (also known as a BOP policy) is a package policy, providing both property and liability coverage geared toward small to mid-size businesses. They are worthwhile because, unlike separate property and liability policies, they are bundled to contain extra coverage at a low price. Many companies now offer specialized BOP policies for home based businesses or specific classes of business, like retail stores and small restaurants. These policies offer more comprehensive coverage to business owners who may not be able to afford purchasing coverage a la carte.

Property Coverage

The property section of a typical BOP policy will include but is not limited to office equipment, furniture, leased or rented equipment, and property belonging to someone else damaged while in your care. This also includes additions to your building and premises that you rent. When deciding on your limit of property insurance, don’t forget to include the cost of your build-out and improvements, equipment used to maintain the building, and permanently attached fixtures. Always consult your lease agreement, if applicable, so you can include any items you are responsible for and confirm that these items are covered.

Liability

Liability coverage under the BOP policy covers Bodily Injury and Property Damage claims that you are liable for. A claim can be filed against you for medical bills and expenses resulting from injury, sickness or death caused when you act negligently. If not covered correctly, these situations can drain your financial resources and can result in thousands of dollars out of your pocket.

The most common example is a slip-and-fall accident. These can result from something as simple as spilled liquids, uneven flooring, or narrow stairs. These accidents account for around 17,000 deaths in the United States each year. They are among the most frequently filed claims against small businesses, making it important to carry liability coverage in the event of such unfortunate accidents.

What’s Not Covered by BOP

Several key coverages are not included in the basic policy but may be added to the policy by endorsement. A few of these coverages are Automobile, Disability, Health, Worker’s Compensation and Professional Liability. Each business has different needs, meaning not all of these coverages may apply to you. When buying a BOP policy, carefully review what coverages are included and what are not.
Worker’s Compensation is required by most states for businesses with more than one employee and you may need to purchase a separate policy for this coverage. Talk to your insurance representative about the Worker’s Compensation laws in your state.

Running a Business is Inherently Risky

Buying the right Business Owner’s Policy is a first step in protecting you from the risks inherent to running a business. Carrying this policy may also be a requirement of your rental agreement or leased equipment agreements. By not carrying the right BOP policy, you may be vulnerable to lawsuits or uncovered damages. It is a low cost alternative to out-of-pocket expenses and is packed with coverages which may otherwise be costly.

Ryan Niles is an insurance advisor for NewFirst Insurors, specializing in the development and implementation of risk management strategies for small- to mid-sized businesses in the Texas Coastal region.

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The Unintended Consequences of the Affordable Care Act

For better or for worse, the Affordable Care Act is upon us. As more and more of its details get released and as businesses like yours start to make adjustments to deal with its requirements, some unintended consequences are arising. Here are some of the problems that businesses are dealing with or will soon have to deal with.

Avoiding Applicable Large Employer Status

Not every business is subject to the Affordable Care Act and its provisions. As written for 2014, it only applies to companies with an average of 50 full-time equivalent employees. Furthermore, it defines full-time as an employee that works an average of 30 hours per week. This is leading to two consequences as businesses attempt to skirt its requirements:

  1. Companies are cutting full-time employee hours back, turning them into part-time employees that aren’t counted towards the Affordable Care Act’s 50 employee threshold.
  2. Part-time workers are having their hours cut back to ensure that they stay under the 30 hour limit.

It’s not clear yet what the long term consequences are of these cut backs, but this certainly stands out as a trend to watch in the coming year.

Potential Premium Increases Due to Adverse Selection

The nature of the individual insurance provisions and mandates of the Affordable Care Act create an incentive for healthy people to stay uninsured. First, the penalty for being uninsured is in many cases much less than the cost of insurance. Second, the requirement that exchange plans accept anyone at any time means that an uninsured person would only need to sign up at the instant that they need care. This process leads to the phenomenon of adverse selection, which refers to when only people that are bad risks choose to be insured. Since insurers will have a higher proportion of claims to premiums from their private business, they may have to compensate for the additional expenditures by raising premiums on their employer clients who pay all of the time.

Changes in Family and Spousal Coverage

As a result of the costs of complying with the Affordable Care Act, many companies are dropping coverage for spouses. While this, in and of itself, was an unintended consequence, it brings up a second set of challenges. If you employ one of the newly-uninsured spouses, you could find them coming to you, asking to be added to your workplace plan, if you offer one. This could generate more expense for you as an employer to pay the cost of their coverage.

Cancellation of State Small Business Insurance Assistance

Some states offer special plans that help their citizens or small businesses either defray the cost of health insurance or provide a basic level of insurance. If these programs aren’t compatible with the Affordable Care Act’s provisions, they can be cancelled. One example of this is Tennessee’s CoverTN plan, whose $25,000 annual benefit cap made it a perfect adjunct for businesses that offer low-cost, high deductible plans. It will be cancelled effective January 1, 2014.

Given that insurance from the Affordable Care Act exchanges hasn’t come into effect yet and that the mandates that apply to individuals and employers also aren’t fully operational, the true impacts of the bill remain to be seen. As of now, many unintended consequences for business have already been identified but if history is any indicator, more may be coming down the line as the law’s implementation grows.

 

Dana Rostro is the Director of Employee Benefits Sales and Operations at Texas Associates Insurors. Dana is ACA certified and has helped clients develop the best strategies for their operations within the new healthcare legislation.

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Teen Driving: How to Keep Your Teen Safe Behind the Wheel

Parenting teenagers has never been more challenging. In addition to raising your teen to become a good person and a responsible adult, parents today need to help their teens navigate a variety of risks including drinking and drugs, social media, and the complexities inherent in friendships and romantic relationships. With all of these factors to worry about, it can be easy to forget that the biggest risk facing your teen is parked right outside of your house. Incredibly, traffic crashes are the number one cause of death for teenagers in America. Teen Driving GraphicAccording to the National Highway Traffic Safety Administration (NHTSA), motor vehicle accidents are the cause of 35% of teen deaths every year, and mile for mile, teens are involved in three times as many fatal crashes as all other drivers.

There are a number of factors that contribute to teen driving fatalities:

  • Inexperience and immaturity
  • Excessive speed
  • Drinking and driving
  • Not wearing seat belts
  • Distracted driving (cell phone use, loud music, other teen passengers, etc.)
  • Drowsy driving
  • Nighttime driving
  • Drug use

Parent Involvement Is Critical

The good news is that many teen driving accidents are preventable, and parents have a key role to play in keeping their teens safe behind the wheel. A recent National Young Driver Survey found that teens with authoritative parents (defined as those who are highly supportive and involved, set rules, and monitor) engaged in fewer risky driving behaviors and had half the crash risk as compared to other teens. In addition teens with involved parents are:

  • Twice as likely to wear seat belts
  • 70% less likely to drink and drive
  • Half as likely to speed
  • 30% less likely to use a cell phone while driving

The takeaway? Make sure you are talking with your teen and setting expectations for their driving.

How You Can Help

There are a number of specific things parents can do to reduce the chances that their teens will be involved in auto accidents:

  1. Set Clear Rules: Make sure to let your teen know what your expectations are and explain the rationale behind them.
  2. Focus on Safety: Let them know that you are setting these rules to keep them safe and not simply to control them.
  3. Reward Good Behavior: If your teen follows your rules and maintains a good driving record, introduce new privileges (such as driving after dark).
  4. Be Supportive: Peer pressure is tough, and your teen may find themself getting pressured to engage in behavior that violates your rules. As a parent, you can make things easier by letting your teen’s friends know what the rules are and then acting as a scapegoat (“I can’t do that, my parents would ground me!”), or by establishing a code word with your teen (if they call and mention the word, come and pick them up right away and with no questions asked).
  5. Communicate: Communication is critical. Talk to your teen and make sure you know where they are going and why, how they plan to get there, and how they will get home. If you (or they) don’t feel confident that they have a plan in place to get safely there and back, offer a ride.
  6. Lead by Example: Even though teens might not admit it, parents really are important role models. Make sure that you practice safe driving. Don’t talk on your cell phone or text while driving, obey the speed limit, don’t drive if you’ve been drinking, and don’t drive aggressively.

One of the best ways to clearly establish and communicate expectations is through the use of a Parent-Teen Driving Agreement. Use this template provided by the Centers for Disease Control or create your own. Either way, make sure your expectations are set out in writing, and then both you and your teen should sign the agreement. Having a clear set of expectations and communicating often about them are the best ways to keep your teen safe on the road.

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4 Risk Management Challenges for Small Businesses

Risk events can come in many different shapes and sizes, but regardless of your profession, risk management is something that can give you the edge over potentially damaging risks. For Small Businesses, there are several reasons why Enterprise Risk Management should be implemented. These reasons range from legal obligations to budgetary requirements and below, we highlight four of the foremost reasons for introducing Enterprise Risk Management to your Business.Risk management flow chart on paper

Market Risks

In large companies, market risk covers the risk that the value of the company’s assets will decrease due to a change in the value of external factors. Changes in interest rates, foreign exchange rates and commodity prices can all negatively impact on a company’s assets. Similarly, changing economic and environmental factors can negatively impact on the productivity of small businesses.

By monitoring market influences and assessing other external influences that could impinge on the company’s market presence, you can protect against market risks and ensure the productivity of the business. For small businesses, accounting for market risks can help ensure projected growth patterns and prosperity. By formulating an enterprise risk management plan, employers can effectively address and mitigate unfavourable market forces.

Operational Risks

Operational risk represents the risk of loss from failed internal processes. These risks can arise out of everything from poor or inadequate employee practices to hardware malfunction.  While operational risk is relevant to all categories of profession, many small businesses often overlook or underestimate the possibility of operational risk-related events damaging their business. Operational risks such as internal and external fraud, employment practices, business continuity processes can all negatively affect the overall business process of a small enterprise.

Through in-depth analysis, the identification, measurement, monitoring and managing of operational risk, small businesses can ensure the security and efficiency of the operating process. This involves having well-defined and organized roles, segregating duties and responsibilities, and implementing management review mechanisms that will allow employers to account for operational risks and ensure they don’t threaten the business.

Reputational Risks

Reputation is one of a business’ most important assets, particularly if they operate globally. That said, reputation is everything for small enterprises and start-ups as it represents the extent to which the company is meeting the expectations of its stakeholders, and this can often prove a determining factor in whether or not a small business can take off. While reputation is one of the most important assets of the business, reputational risks are indelibly difficult to protect against. Factors such as negative publicity, whether accurate or not, can compromise the business’ reputation capital while marketing channels such as social media can carry a lot of risk potential.

By defining how you want your business to be perceived, you can begin to clearly identify what risks could negatively impact on the company’s public image. Outlining an enterprise risk management strategy can greatly help a small business to actively monitor the effects of operational incidents on reputation capital and the public perception of the business. This involves an assessment of relationships with consumers, partners and the media as well as assessing the functionality of the business in terms of commitment and quality processes.

Emerging Risks

Emerging risk accounts for any new risk that is in the process of being quantified and understood. Emerging risks have the potential to substantially impact on a business or insurance policy and significantly damage the company’s reputation, reach and overall process. Emerging risks can infiltrate any part of your business or personal life and have a huge impact, and unfortunately, as there tends not to be any resolute method of predicting and protecting against emerging risks, they are considered some of the most potentially damaging risks that businesses face.

Typical emerging risks include Cyber Risks and Social Media Risks, both of which can be reduced greatly through a comprehensive risk management plan, but other emerging risks such as changing economic factors and wholly unpredictable risks like natural disasters can have devastating consequences for unprepared businesses.

Enterprise Risk Management is all about predicting, preparing for and protecting against the occurrence of a risk event. Each of the risks discussed in this post carry the potential to inflict serious damage on a company’s reputation and overall business process. However, if a small business incorporates each of the aforementioned risks into their overall Enterprise Risk Management plan, they can significantly protect themselves against the possibility of a risk event occurring and devastating the business.

Ensure your Risk Management Strategy is up to scratch with a free risk assessment.

 

Lonnie Meadows is a risk advisor for NewFirst Insurors. Lonnie specializes in developing commercial risk management plans for small to mid-sized businesses and focuses on leadership and management relationships to improve his clients’ overall operations.

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Reinsurance Fees—Possible Exemption for Certain Self-insured Plans

The Affordable Care Act (ACA) creates a transitional reinsurance program to help stabilize premiums in the individual market for the first three years of Exchange operation (2014-2016) when individuals with higher-cost medical needs gain insurance coverage. The program imposes a fee on health insurance issuers and self-funded group health plans.

On Oct. 24, 2013, the Department of Health and Human Services (HHS) released an advance copy of a final rule  under the ACA. In the final rule’s preamble, HHS states that it intends to issue a proposed rule that would make the following changes to the reinsurance program:

  • Exempt certain self-insured, self-administered plans from the reinsurance fees for 2015 and 2016; and
  • Modify the collection deadlines for the fees to reduce the upfront burden to plans and issuers.

Reinsurance Fees

Contributions to the reinsurance program are required for health plans (fully insured and self-insured) that provide major medical coverage. Certain types of plans are exempt from the requirement to pay reinsurance fees, such as health flexible spending accounts (FSAs), health reimbursement arrangements (HRAs) that are integrated with major medical coverage, health savings accounts (HSAs) and coverage that consists solely of excepted benefits under HIPAA (for example, limited-scope dental and vision plans).

For insured health plans, the issuer of the health insurance policy is required to pay the reinsurance fees. For self-insured health plans, the plan sponsor is liable for paying the reinsurance fees, although a third-party administrator (TPA) or administrative-services only (ASO) contractor may be used to make the fee payment at the plan’s direction.

The reinsurance program’s fees are based on a national contribution rate. The reinsurance fee mainly consists of amounts collected to cover reinsurance payments and administrative costs, but it also includes funds that must be deposited into the general fund of the U.S. Treasury.

For 2014, the national contribution rate is $5.25 per month ($63 per year). The national contribution rates for 2015 and 2016 have not been established yet. The reinsurance fee is calculated by multiplying the number of covered lives (employees and their dependents) during the benefit year for all of the entity’s plans and coverage that must pay contributions, by the national contribution rate for the benefit year.

HHS has indicated that issuers and plan sponsors will be required to submit an annual enrollment count to HHS no later than Nov. 15 of 2014, 2015 and 2016 based on enrollment data from the first nine months of the year. Within 30 days of this submission or by Dec. 15, whichever is later, HHS will notify each issuer or plan sponsor of the amount of its required reinsurance contribution. The issuer or plan sponsor would be required to remit this amount to HHS within 30 days after the date of HHS’ notification.

Possible Changes

In the preamble to the final rule, HHS states that it intends to propose in future rulemaking to exempt certain self-insured, self-administered plans from the requirement to make reinsurance contributions for the 2015 and 2016 benefit years. At this point, it is not clear which self-insured plans will be covered by the proposed exemption. However, it appears that self-insured plans will be required to pay the reinsurance fees for the 2014 benefit year.

HHS also intends to issue a proposed rule that would change the collection method for the reinsurance fees. Under the revised collection method, the fees would be collected in two installments to reduce the upfront burden to plans and issuers. The fee for reinsurance payments and administrative expenses would be collected at the beginning of the year and the fee for payments to the U.S. Treasury would be collected at the end of the year. Under this payment schedule, a larger payment would be due in January 2015 and a smaller one would be due in December 2015 for the 2014 reinsurance fee.

These changes will not become effective until HHS issues additional guidance.

More Information

Contact your Texas Associates Insurors representative for more information on the ACA’s reinsurance fees.

 

 

Dana Rostro is the Director of Employee Benefits Sales and Operations at Texas Associates Insurors. Dana is ACA certified and has helped clients develop the best strategies for their operations within the new healthcare legislation.

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