Summary of Benefits and Coverage

With health care reform being upheld by the Supreme Court Justices, there will be numerous new health care regulations that will be established over the coming years.  One particular regulation that will be required for all health insurance carriers is to provide employers with a Summary of Benefits and Coverage.  Health insurance carriers will be responsible to distribute these documents to each employer who offers a health insurance plan.  This regulation will take effect on September 23, 2012 for all health insurance plans that will be renewing on or after this date.

This Summary of Benefits and Coverage document will explain each provision of the plan in detail and the plan costs associated with each service.  The document will also highlight any procedures that may not be covered under the plan.  The reason for this summary is to inform all employees and participants of the plan about the services and plan costs associated with the health insurance plan.  It will also highlight any plan changes that may have taken place during the plan policy year.  It is up to the employer to distribute these documents to the employees once they have received them from the insurance carrier.

The Summary of Benefits and Coverage will be distributed either through e-mail to the plan administrator or via direct mail.  The health insurance carriers will be distributing these documents within a reasonable amount of time before the health insurance plan renews.  If the employer decides to switch health insurance plan designs, the health insurance carrier will provide an updated summary once the change has been processed.  To get employees started on understanding their health plan, we have included a link that will bring you to a sample glossary of terms document. (http://cciio.cms.gov/resources/files/Files2/02102012/uniform-glossary-final.pdf).  For more information about the Summary of Benefits and Coverage please contact our office at (978)-777-6554.

Thank You.

2012 Employer Health Care Trends

Over the past decade, how individuals receive and pay for their healthcare is changing. As the Supreme Court prepares to decide on the constitutionality of the Patient Protection and Affordable Care Act (PPACA), employers recognize the ruling will have a significant impact on health care in the years to come. Confused by the pending legislation, employers are also fearful of rising insurance costs and are hesitant to make any significant changes to their current plans. However, despite this uncertainty, there are a few strategies employers can employ to manage the changing tide.

2012 Health Care Trends

According to the 2011 annual survey of medical cost trends by PriceWaterhouseCoopers (PwC), on average US employers can expect health care cost to rise 8.5 percent in 2012. This is 1.5 percent below the Aon Hewitt 2011 Health Care Trend survey which estimated national medical care costs will increase by 10 percent. These figures are lower than 2010 and 2011figures which were between 12 percent – 14 percent. Much of the slowdown is due to the recession and thus not unexpected health experts say. But some of it seems to be attributable to changing behavior by consumers and providers of health care — meaning the lower rates of growth might persist even as the economy picks up.

Since Medicare and Medicaid are two of the largest contributors to the country’s long-term debts, slower growth in health costs could reduce the pressure for enormous spending cuts or tax increases. In 2009 and 2010, total nationwide health care spending grew less than 4 percent per year.  This was the slowest annual pace in more than five decades, according to the latest numbers from the Centers for Medicaid and Medicare Services. After years of taking up a growing share of economic activity, health spending held steady in 2010, at 17.9 percent of the gross domestic product.

The growth rate has also slowed as millions of Americans lost insurance coverage along with their jobs. Worried about job security, employees may have feared taking time off work for doctor’s visits or surgical procedures, or skipped non-urgent care when money was tight. Still, the slowdown was sharper than health economists expected.  A broad bipartisan range of academics, hospital administrators and policy experts have started to wonder— if doctors and patients have begun to change their behavior in ways that bend the so-called cost curve.  If so, it was happening just as the new health care law was coming into force and before the Supreme Court could weigh in on it or the voters could pronounce their own verdict at the polls.

While health cost growth may have slowed, the premiums for insurance still need to catch up.  Confirming this, actuarial firm Milliman released its 2011 Milliman Medical index in May 2011. The report shows health care cost for a typical U.S. family of four covered by a preferred provider organization (PPO) in 2011 was $19,393. This reflects an increase of 7.3 percent over 2010. Even though the percentage of increase was the lowest in recent years, the increase in total dollars—$1,319 in 2011—was the highest in the history of the study. Of this $1,319, employers covered about 40% of the increase ($641) while employees shouldered the rest—$403 in payroll contributions and $275 in additional cost sharing.

Employers React to Rising Costs & Health Care Reform

Here are four strategies that have been growing in popularity over the past several years.  These strategies have been successful in containing insurance premiums and overall costs:

1.    Consumer Directed Health Plans

2.    Accountable Care Organizations

3.    Micro Market Networks

4.    Employee Wellness Programs

Consumer Directed Health Plans

Employers continue to explore consumer‐directed health care plans (CDHC). These plans are structured to give employees greater control over their personal health care costs, thereby promoting caution before they utilize expensive procedures or request unnecessary treatments.

CDHC plans offer higher deductible plan options, coupled with a Health Savings Account (HSA) or Health Reimbursement Account (HRA).  Employees will pay for out‐of-pocket medical costs with their self‐funded plans.

Accountable Care Organizations

An Accountable Care Organization (ACO) is a network of health care organizations, hospitals and doctors that unite in order to provide coordinated medical care to patients. Until recently, health care in America has mostly been fragmented. Hospitals, pharmacies, skilled nurses, primary care and specialty doctors operated as separate entities across the health spectrum. ACOs were created as a result of the Health Care Reform and are meant to integrate, coordinate and be held accountable for an individual’s health car.  This will generate better medical outcomes at a lower cost. Studies performed on current ACOs including Mayo Clinic, Cleveland Clinic and Intermountain indicate by delivering efficient health care this will help reduce health care costs by as much as 50%. By driving out inefficiencies, reducing unnecessary hospital admissions and applying the best approaches to clinical care, ACOs provide a promising picture of affordable health care.

In Massachusetts, the Massachusetts Health Care Cost Trends - Premiums and Expenditures study released in May 2012 also concluded health care costs growth has slowed in Massachusetts and is consistent with the national slowing trend due primarily to ACOs.

Micro Market Networks

Micro Market Networks operate in a similar vein to ACOs, without being quite as integrated. Many insurance companies, including Blue Cross, Harvard, Tufts and Fallon, are working on the initial phases of Micro Market Networks.  These carriers are offering a variety of options including the purchase of an independent plan that only includes access to a particular group of self-contained health providers. The expectation over the coming two years is many regional networks of this sort will develop. The hope is these Micro Market Networks will operate in a similar fashion to ACOs.  These networks will improve efficiencies and drive costs down.  Currently in MA, these Micro networks are seeing from a 3 percent to 12 percent reduction in premiums.

Employee Wellness Programs

As premiums continue to increase, employers are looking to promote employee wellness programs to offset costs. Well documented research indicates a balanced lifestyle – including a proper diet, exercise and leisure time – leads to healthier and more productive employees. In turn, the employees’ medical utilization is reduced and health premiums drop. Additionally, a healthy workforce will have fewer sick days, be on time more often, and remain focused throughout the day. In contrast, other studies conducted on workplace stress indicate a stressful unbalanced lifestyle can lead to health risks and impact insurance premiums.

A major source of rising workplace health costs is the declining health of employees.  A new Gallup poll reports an astonishing six of every seven full-time employees in the US are overweight or suffer from a chronic health condition.  This is a terrible waste of human capital and an enormous burden on the bottom line, costing employers more than $153 billion a year in absenteeism alone.  We already know wellness programs can reduce costs.  A study last year by Harvard health economist Katherine Baicker found medical costs fell by $3.27 for every dollar spent on wellness programs.

Conclusion

While the future of health care reform remains uncertain and the cost of insurance will remain a large financial responsibility for employers, employers can take action to help reign in costs.  We have outlined a few strategies employers can explore to help manage these cost increases.  If you would like to learn more about how these strategies can work for your organization, please contact our office at 978.777.6554.

Survey finds optimism at record highs among U.S. manufacturing and service executives

Optimism for higher revenues, profits and new business in the coming 12 months hit record levels among U.S. manufacturing- and service-industry executives polled in KPMG International's latest Global Business Outlook survey. Expectations for increased business activity hit the highest level among U.S. service executives and second highest among their manufacturing counterparts since the tri-annual poll began measuring U.S. business sentiment in October 2009.

"A positive economic mood has clearly taken hold among the nation's manufacturing- and service-sector leaders," said Lynne M. Doughtie, vice chair – Advisory for KPMG LLP, the U.S. audit, tax and advisory firm. "U.S. manufacturing executives are more upbeat than their global counterparts, while overall optimism for increased business activity among U.S. service providers is second only to Brazil."

Globally, nearly 84 percent of manufacturing respondents to the February 2012 survey said business activity would rise or remain the same in the coming 12 months, while 89 percent of service-sector respondents said activity would be higher or remain the same. By comparison, 94 percent of U.S. respondents the same or higher levels of activity, while more than 99 percent of U.S. service-sector executives expected the same or higher business activity.

Doughtie pointed to a significant increase in U.S. executives' expectations for higher revenues in the coming 12 months, with 70 percent of manufacturing executives and 71 percent of services executives in February saying that they expect increases in revenues, compared with 49 percent and 52 percent, respectively, when the survey was last taken in October 2011. Globally, 52 percent of both manufacturing and service-sector respondents expect higher revenues, both still relatively strong.

Similar jumps occurred when looking at profitability, with 69 percent of manufacturing executives and 62 percent of services executives expecting to see higher profits, compared with only 43 percent and 47 percent, respectively, in October. By comparison, 46 percent of manufacturing sector respondents expect higher profits in the coming 12 months, and 45 percent of service executives expect higher net in the coming year.

Hiring expectations trending positive. Doughtie said the survey also shows that the rosier outlook may spur hiring. More than 92 percent of U.S. manufacturing executives said they expect hiring demand to increase or remain the same in the next 12 months, up from 89 percent in October. This includes 37 percent who expect hiring to increase, up from 30 percent.

Service sector executives are similarly positive, with more than 96 percent expecting hiring to increase or remain the same, up from 92 percent in October. This includes 33 percent predicting hiring will increase, up from 27 percent.

Adopting a U.S. growth agenda. "Our interaction with U.S. executives in the market confirms the expectation of better times ahead," said Doughtie. "But while we are seeing many companies taking a deliberate path toward a growth agenda, they remain cautious and have maintained a great deal of focus on achieving compliance in this increasingly complex regulatory environment."

Among U.S. manufacturing executives, more than 32 percent expect higher levels of capital spending in the coming 12 months, compared with just 19 percent in October and 22 percent in June. The survey's record high (35 percent) for those expecting an increase in capital spending came in June 2010. Significantly, the number who expected continued levels of capital spending was 52 percent in February, compared with 60 percent in October and 56 percent last June. Just 8 percent of manufacturing executives anticipate lower capital spending in the coming 12 months.

"We have seen a distinct uptick in capital spending, as companies set their sights on growth," said Doughtie. "Companies are upgrading IT, investing in transforming their organizations to seize new opportunities, improving regulatory compliance, and finding new ways to analyze their customer and market data to generate innovations that may mean anything from new product lines to new delivery models or even serving a new or different type of customer. Interestingly, in the services sector, which can be an early warning of a downturn and a lagging indicator of improved market conditions, none of the U.S. respondents expects lower profits this year, the first time any of the 12 countries analyzed in the Services Sector portion of the survey were confident enough that none expected net income to slip. That certainly speaks to the potential direction of the marketplace."

Overall findings from the February poll of manufacturing executives from 17 countries and service sector executives from 12 countries in more than 11,000 companies found that U.S. sentiment up across the board and outpaced generally mild increases in executive optimism seen globally.

U.S. Manufacturing Sector Executive Sentiment — Overview

• Business Activity: In the February 2012 poll, 72 percent of the executives expected business activity to rise, compared with 71 percent in October and 71 percent last June. Globally, expectations for higher business activity also were up, with 53 percent of manufacturing executives expressing positive sentiment, compared with 55 percent of respondents in October and 55 percent in June.

• Revenue: Expectations for higher business revenues rose dramatically, from 49 percent in October to a record-tying 70 percent in February. About 5 percent predict lower revenue for the period. In addition, manufacturing executives scored the highest levels of optimism for higher revenues (70 percent), new business (70 percent), and profits (69 percent) since the Global Outlook Survey began measuring U.S. sentiment in 2009.

• Profits: Sixty-nine percent of executives expect higher profits in the next year, while just 43 percent of those executives polled in October thought profits would be higher in the coming 12-month period.

• Employment: Thirty-seven percent of executives polled said they would increase hiring more workers in the coming 12 months, compared with 36 percent of those polled in October who expected bigger payrolls.

• New Business: Those U.S. executives who expect higher (70 percent) or the same (24 percent) levels of new business in the coming 12 months reached a record-tying 94 percent, up from 90 percent in October. Globally 86 percent of executives expect higher (54 percent) or the same (32 percent) new business in the coming 12 months.

• R&D: The number of survey respondents expecting R&D spending in the coming year to be higher (26 percent) or remain the same (60 percent) remained unchanged from October at a record 86 percent. Just 2 percent of U.S. executives expect R&D spending to decline in the coming 12 months, a record low.

• Capital Expenditure: The number of executives who said they expect higher (32 percent) or the same (52 percent) spending levels added up to 84 percent, also a record, compared with a strong 79 percent in October. Globally, 83 percent of respondents said they higher (30 percent) or the same (53 percent) capital expenditures in the coming period.

U.S. Service Sector Executive Sentiment — Overview

• Business Activity: Expectations among service executives found 71 percent of them polled in February expected improved business activity over the next 12 months, compared with almost 55 percent in October and 58 percent in June. Globally, just 53 percent expected improved activity, compared with 44 percent in October, and 48 percent in June among those surveyed.

• Revenue: More than 71 percent of Service sector leaders expect higher revenue in the coming 12 months, up dramatically from 52 percent in October.

• Profits: Expectations for higher profits also rose sharply to 62 percent of respondents, compared with 47 percent in October.

• Employment: Expectations for payroll also rose, from 27 percent of executives in October anticipating an increase in hiring to 33 percent in February 2012.

• New Business: Seventy percent of executives polled expect to attract a larger number of new customers during the coming period, another dramatic rise considering just 52 percent of respondents took this view in October. Globally, just 50 percent of respondents expect to attract new customers.

• Capital Expenditure: Spending will continue relatively unchanged in the coming 12 months, according to survey respondents. Twenty-four percent of service sector executives expect higher spending, up 1 percent since October, while 64 percent expect the same level of investment, up marginally from 61 percent in October. Globally, the numbers are similar to the U.S. responses, at 23 percent expecting higher capital expenditure, and 63 percent expecting the same level looking out 12 months.

The current KPMG Global Business Outlook Survey, conducted in February 2012, is based on responses from 11,000 companies representing manufacturing providers in 17 countries and service providers in 12 countries. Participants included 250 U.S. manufacturing executives and 122 U.S. service-industry executives. See tables below for additional information.

Source: KPMG; www.kpmg.com.

Exploring an Evolving Benefits Landscape

The ongoing economic turmoil has created a complex web of business challenges for employers – including a multi-generational workforce that is now looking more than ever to their employer for help with their financial security. According to MetLife’s 10^th Annual Study of Employee Benefits Trends, nearly half (49%) of all employees – and 66% of Gen Y employees – say they are counting on their employer for help.

The age of an individual at the time of the 2008 recession, and where they were in their career, was a defining moment in employees’ lives. About one in three Boomers now say they plan to postpone retirement and one in four older Boomers say they are significantly behind in saving for retirement. At the same time, for younger generations, the recession fueled a focus on workplace benefits in an effort to achieve financial security at an earlier point in their life.

As employees struggle to make ends meet and plan for their future, the potential for benefits to help employers meet their benefits objectives of attracting and retaining key talent and moving the needle on employee productivity is stronger than ever.

Explore "What a Difference a Decade Makes" with this Interactive Fact Wheel to see what employees are saying today.

ERISA Sect. 408(b)(2) The Employer’s “Perfect Storm”

Just when you thought it was safe to put your 401(k) plan in the file cabinet, the Department of Labor (DOL) and ERISA have created a whole new set of obligations for you to manage! As a plan sponsor for a 401(k) Plan, it is important to take note about the impending “Perfect Storm” in 401(k) compliance, ERISA Sect. 408(b)(2).

This new legislation takes effect for plan years beginning January 1, 2012 and employers are required to be in compliance by August 31, 2012. Under this onerous law, plan sponsors and fiduciaries have 3 primary requirements relative to understanding and communicating plan costs to employees. This obligation as well as other plan design requirements under the law will be ongoing throughout the life of the plan. The burden for compliance is placed squarely on the back of employers. Simultaneously, the DOL has redoubled their efforts to audit 401k plans in the hunt for violations and sanctions.

In addition to a number of more subtle plan design and compliance requirements, the essence of this new law is that plan sponsors will be responsible for the following functions on a periodic basis:

ü Plan Sponsors/Fiduciaries must identify all plan costs and investment expenses as well as establish a clear understanding of what services each cost represents.

ü Plan Sponsors/Fiduciaries must assure that all the plan costs are reasonable and competitive in the marketplace.

ü Plan Sponsors/Fiduciaries must communicate all plan costs and investment expenses to their plan participants.

To learn more, our firm will be hosting a Webinar on March 15, 2012. We have invited an expert from the Department of Labor to share with employers the issues they will face regarding compliance and disclosure requirements. Information about the Webinar can be found on our website under the Events sections at www.ipswichfinancial.com. Or contact our office at 978.777.6554 to register.

Summary of Benefits and Coverage Final Rules

The Departments of Health and Human Services, Labor, and the Treasury (the Departments) have released the final rule and glossary implementing the Summary of Benefits and Coverage (SBC) requirements of the Patient Protection and Affordable Care Act (ACA). The final rule and related materials will be published in the February 14 Federal Register. As provided in the final rule, starting on September 23, 2012 with health plans upcoming open enrollment, health insurers and group health plans will be required to provide the SBC and the uniform glossary to consumers.

The SBC must be a concise summary (limited to four pages) of the key benefits and coverages provided through the health plan, the costs to the participant, lists of excluded services, and other significant conditions or limitations. These documents also must be prepared in a standardized format, type style, font size, and terminology so that comparisons can readily be made between different coverage offerings. The SBCs must be distributed in connection with any initial, special, or open enrollments, and any new plan coverages.

Specifically, the final rules ensure consumers receive two key forms that will help them understand and evaluate their health insurance choices:

• A short, easy-to-understand SBC; and

• A list of definitions (called the “Uniform Glossary”) that explains terms commonly used in health insurance coverage such as “deductible” and “copayment”

The final rules require that the SBC be provided to consumers as follows:

• when they are shopping for coverage;

• when coverage is renewed, before each new plan or policy year;

• when there are coverage changes, to enrollees 60 days before the effective date of the changes, and

• upon the consumer's request for information, within seven business days of the request (including the Glossary of terms).

The glossary and sample SBC is available at http://www.dol.gov/ebsa/

The forms, SBC, and glossary were developed by the Departments based primarily on model forms created through a public process led by the National Association of Insurance Commissioners (NAIC) and a working group including representatives of health insurance-related consumer advocacy organizations, health insurers, health care professionals, patient advocates including those representing individuals with limited English proficiency, and other qualified individuals. The forms also reflect comments that the Departments sought directly from the public.

The SBC will include a new, standardized health plan comparison tool for consumers known as “coverage examples” — using a format modeled on the Nutrition Facts label required for packaged foods. The coverage examples will illustrate, for comparison purposes, what proportion of the cost of care a health insurance policy or plan would cover for a sample patient for two common medical situations — having a baby and managing type 2 diabetes. Additional scenarios will be added in the future as feedback is gathered from consumers. These examples will help consumers understand and compare a sample patient’s share of the costs of care under a particular plan and have a better idea of how valuable the health plan will be at times when they may need the coverage.

The SBC can be provided electronically, allowing a plan or issuer to post the SBC on its website or provide it by email. Electronic disclosure is expected to reduce costs while consumer safeguards are designed to ensure actual receipt by individuals. Additionally, the final rule provides flexibility in the instructions for completing the SBC in recognition of unique plan designs, the Departments asserted.

The SBC will make it easier for health insurance consumers to find the best coverage for themselves and their families — and for employers to find the best coverage for their business and their employees, the Departments said. The new rules also will make it easier for people and employers to directly compare one plan to another. The next step is to hear from the insurance carriers about their proposed delivery of the SBC.