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Tips for small Businesses
1. Work with your agent
to set appropriate liability deductibles. This rule also applies to
personal insurance such as automobile coverage. If you set your deductible
quite low, your premium will go up disproportionately to the decreased
size of the deductible, because the insurance company will be responding
to practically everything that happens with your property or liability
losses. If you set the deductible higher, you avoid a lot of those costs
and therefore the premiums are lower.
2. One rule of thumb is
to set deductibles at an amount that the company can afford as a
"stretch." In other words, you can afford the deductible out of regular
operating funds or short-term savings, even if it hurts a little. But you
should never risk a threat to your operations by making a deductible high
enough that paying it will disrupt scheduled payments to suppliers or to
employees. One note of caution, though: Work with your agent to find out
how premiums change with different levels of deductibles before making any
decisions.
3. Firms need to develop
a "safety culture," meaning that managers "walk the talk" in terms of
being safe in how operations are conducted. In leading by example,
managers and owners can be very clear and direct with employees that
safety is a primary concern and that all employees are expected to
incorporate safety into every aspect of their work. Sometimes employees
(and sometimes even owners and managers) will claim that unsafe practices
are necessary "to get the job done." That is not true. Careful thinking
and planning can develop methods to work quickly and efficiently without
compromising safety.
4. Be a pack rat when it
comes to keeping documents that could be useful in the event of a loss --
keep every policy, every bill, and all communications about insurance in a
place where you can easily access it in the event of a loss. And OF
COURSE, keep a copy of all these documents in a location where they will
be safe in the event of a loss. It can be a real pain to reconstruct lists
of values of equipment and inventory that were burned in the same fire
that burned the equipment and inventory itself.
5. Insurance is really
designed for very serious losses -- the kind that can ruin a business.
It's not fun, but you should think through a worst-case scenario of the
kinds of losses that your firm could incur. This is especially true in
cases where large-scale harm could occur, such as with company vehicles on
public roadways, in the product liability area, or with coverage for a
premises that is used by the public. Once you have done your best to think
"the worst that could happen," work with your agent to select appropriate
coverage limits. These limits may not be set to cover your worst-case
scenario, but they will help you and your agent to think through the
correct limits for your policies.
Common Mistakes- Group
Benefits
1. Making company
decisions on employee benefits based solely on bottom line cost.
Companies have to take
bottom line costs into consideration as benefits edge up towards 15-18% of
human capital operating costs. At the same time the intent of the employee
benefit package needs to be evaluated. The wrong benefit program may end
up alienating key employees, who may leave to get better benefits
elsewhere. It can also make the hiring of good future employees more
difficult.
2. Failure to budget for
benefit plan increases.
The way that many small
employers are dealing with double digit increases in health insurance
costs is by passing on the increases in costs on to employees. This means
increased monthly employee costs, or decreased benefits, sometimes both.
The problem that many workers face is that their pay increases don’t keep
up with the increases in medical plan costs.
3. Delaying the new plan
decision or renewal until the very last minute.
Mistakes are common and
employee satisfaction low if the group health plan is put into place at
the last minute. A lot of decision making and data processing has to
occur at all levels, and if a plan is put in late- inevitably members get
penalized by having inaccurate data at the system level, or worse, they
aren’t loaded in the system, This can result in a member arriving at a
doctor’s office or hospital with no health coverage information loaded in
their system, and the member has to pay charges out of pocket.
3. Employer does not
understand the benefits offered.
Particularly with smaller
firms who do not have a full time HR resource, the final benefit decision
is often made by a officer of the company without full benefit
understanding. The health plans being offered now have a large number of
variables from plan to plan, carrier to carrier. A good agent will
interpret the plan and carrier information, so that the decision maker has
a comprehensive understanding of what they have purchased for their
employees.
4. Employees do not know
what benefits they have.
All the polls on health
insurance employee status, state that good employee communication is the
key to employee satisfaction with their benefit plan. Additionally most
employees do not realize how much the insurance really costs, and the
value that their employer is providing them by subsidizing some of the
costs.
5. Employers don’t
contribute enough towards the cost of their employee’s health plan.
Most group insurance
carriers only require that employers contribute 50% of the employee
monthly cost. However these same carriers also require a 70-75% employee
participation level to keep the plan viable. If an employer contributes
the minimum amount, over time his group health plan may become
compromised. Lower wage employees will not be able to afford their
portion of the cost, and drop out. Typically the lower wage employees are
the younger ones. The unwanted effect is to drive the average age or bad
medical experience of the group up, which in turn drives up the average
premium per employee. As the cost of the plan increases, healthy
employees drop off, being unable to justify the increased monthly cost.
Eventually, if participation by employees drops too low, the carrier will
drop the coverage. This is known as adverse selection.
Tips for Small
Employers
1. Have your agent
evaluate and fully explain the new cost cutting health plan options
available.
Florida, particularly Polk
County, does not have a lot of companies writing health insurance at this
time. The available companies however, have a multitude of plans to
choose from. The plan designs are hard to comprehend, and it takes an
expert to explain the differences between them all. The HSA (Health
Savings Account) compatible plans are the cutting edge product- coupling a
high deductible health plan with the HSA. There are a lot of properties
to these plans , that employers and employees need to be aware of prior to
implementation.
2. Offer employees
options in their coverage choices.
Most carriers allow
employers of around 8-10 employees to offer more than one health plan.
This allows the employer to fund a lower cost plan (with lower benefits),
while allowing employees, who so desire, to buy up to a more expensive
plan with richer benefits. Additionally employers can offer optional
benefits- such as dental, life insurance, medial gap insurance to
employees at no cost to the employer. The employee pays the full cost,
but benefits from favorable underwriting and rates through payroll
deductions.
3. Adjust your new
Employee Waiting period.
Employee waiting period is
the length of time a new employee must be employed before they become
eligible for benefits. Employers may not know they have the option of
setting that timeframe. A company that has a lot of turnover in employees
would ideally choose a longer waiting period, such as three months, to
avoid the excessive paperwork and potential COBRA liability of employees
unlikely to stay. Employers who only hire employees with a long term
contract might decide to offer employees benefits the day they are hired.
4. Educate and communicate
with Employees through out the year.
Most health carriers now
have wonderful web based services available at both the employer and
employee levels. Educated employees can handle and monitor much of their
claims activity themselves, freeing up the employer benefits manager. A
good agent, and or company representative will be able to provide
communication pieces and educational meetings for you.
5. Start the new or
renewal process as early as possible.
Florida law requires
health insurance carriers to provide renewal rates 45 days in advance of
your plan effective date. Prior to that, employers should be meeting with
their agent to decide what information is needed to obtain competitive
quotes. Many carriers would like to have all their new group applications
in a full 30 days in advance- plan changes within a carrier should be
completed by the 15th of the prior month. Problems can arise
if employees are in the middle of treatment when a carrier change is
made. Some providers can be with one carrier and not another.
Accommodations can be made if arranged in advance.
What’s new:
AHPs- Association Health
Plan legislation is still being addressed in Congress. These plans would
allow small employers of a particular associated industry or some
commonality to offer an association plan regardless of state lines. The
concept is that economies of scale would occur, allowing small employers
the costs savings of larger employers.
HSAs- (Health Savings
Accounts) A Health Savings Account is an account that can be set with a
qualified high deductible health plan. The HSA account belongs to the
employee- and operates similar to a bank account. Employers can
contribute to the account on behalf of their employees, or have the
employees fully contribute. Contributions are made tax free, and
deductions from the account if used for medical costs, are tax free. The
account balance carries from one year to the next. The balance
accumulates interest- some carriers have a guaranteed level.
Contributions are based on the employee’s annual deduction associated with
a high deductible health plan.
Final Note
Just remember that, while
insurance can be both boring and expensive, it is an absolute necessity.
Most commerce would stop without it, because most businesses (especially
small ones) cannot handle the very large risks involved on their own. Only
with pooling of risk are we able to truly engage in free enterprise!!
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