Smart Business October Insight 2012

15 October 2012 Posted by Danone Simpson Press No Comments

Batten Down the Hatches as the P&C Market Hardens … or Not? – Danone Simpson

On the heels of the Affordable Care Act and health care reform, business owners are going to deal with the shakeout of more costs or potential fines, exchanges and other uncertainties. All the while, the sleeping giant of the commercial Property & Casualty (P&C) industry is awakening with wide speculation of a potential hardening market in workers’ compensation and property casualty. Frankly, it seems to have arrived here in California and other states, as workers’ compensation renewals are causing sheer exasperation.

Gloria Lam of Risk Placement Services lets us know that the market is gyrating; low-price carriers have started high and the clients are demanding quote revisions up to three times for price reductions. It is our job as brokers to persist on behalf of clients by presenting high-deductible plans and other options. Professional Employer Organizations (PEOs) and captives may not be the best shelter, and the repercussions can be costly and can be felt for years to come. It feels as though CEOs are in the eye of the storm that is circling around them, taking bits and pieces, as CFOs are boarding up the windows trying to hold on to what they have.

Ken A. Crerar, president and CEO of the Council of Insurance Agents and Brokers (CIAB), said the P&C market has officially achieved hard-market status. With price increases in the last two quarters and tightening in underwriting, the market has made a hard turn. He goes on to say, “It is hard to predict the length and severity, but the market has turned.”

Mark Lyons, CEO of Arch World Wide Insurance Group said, “Overcapitalization is hiding losses on business. We have had $12 billion in reserves released in the 2011 calendar year alone. … It has been three loss-ratio points of reserve releases over the past three to four years on average. … This sheltering losses on current-year business and masking how unprofitable current business is because of releases in this year for accidents which occurred prior.” The soft-market pricing is catching up and the longer-tails in commercial lines are causing depleting cushions in reserves. Acts of God and other disasters have an aftermath effect and there has been frequency internationally.
Market Scout says workers’ compensation and commercial property rates both rose 4 percent in April, which was the highest of the product lines. Richard Kerr, CEO of Market Scout, notices admitted and nonadmitted insurers are showing similar pricing models. This is against historical approaches to underwriting which, in the past, showed considerable differences. These similar pricing strategies could lead to more business for the nonadmitted insurers. The admitted insurers may begin to restrict their risk appetite and begin to decline tougher risks.

The last 10 quarters have generated negative cash reserves, which are beginning to impact companies. Business leaders are looking for leadership that will re-energize local economies and lower the cost of doing business. Brian Allen in National Underwriter goes on to state how these business leaders are demanding improvements in state’s business climates. “These changes include reforms to workers’ comp laws that deal with how medical treatment and benefits are delivered to injured workers and the costs that are ultimately passed on to local businesses.”

California is beginning to see double-digit increases in workers’ compensation and some businesses are responding by closing their doors in the state. U.S. Legislators, State Department of Industrial Relations and Governors are demanding more than piecemeal reform and taking a hard look at the delivery of care, prescriptions and costs. The broker’s role is to go to the insured and make sure they know what is happening. The only safety net is to be prepared for the storm as it continues to pass through.

Smart Business September Insight

1 September 2012 Posted by Danone Simpson Press No Comments

Smart Business Insight. Advice. Strategy – September Issue

Wellness Credits, What Are They Really?
The Department of Health and Human Services (HHS) awarded $372 million to 44 various communities to help with the efforts of reducing obesity, smoking, increase physical activity and improve nutrition (HHS.gov, 3/19/10). It is uncertain if this American Recovery and Reinvestment Act of 2009 has impacted the communities; and when the government grants were researched these amounts were earmarked for senior citizens. Today another award was released for 2012.

Employer groups are hearing from various sources the importance of wellness, says Danone Simpson, founder and CEO of Montage Insurance Solutions. Carriers are offering to assist with wellness efforts and many add as much as $44 in cost per year to the premiums. For larger employers Kaiser will send a bus to park outside workplaces testing employees for high cholesterol or strokes for a fee. “High cholesterol is one of the major risk factors leading to heart disease, heart attack and stroke. 2,200 Americans die of cardiovascular disease each day” (American Heart Association, http://www.heart.org).

Lifestyle changes are needed and yet Americans are sitting in front of computers all day urged to be more physically active. The balance is falling on the employers’ shoulders who know if they have more than 50 employees they are now required to pay for medical insurance or be fined $2,000 per employee per year. So the Human Resources Departments are asked to create wellness programs to keep premium costs down. Pooled groups will have to have a community effort in order to accomplish this goal unless they are planning to grow into a larger employer who has control over their premium costs.

Yet, the buzz on the street is wellness. Today, August 29, 2012, the Obama administration announced, “The Public Health Training Centers (PHTC) is to improve the Nation’s public health system by strengthening the technical, scientific, managerial, and leadership competence of the current future public health workforce” (http://bhpr.hrsa.gov/grants/publichealth/phtc.html). Approximately 36 U.S. Government Universities have been given a grant worth an average of $650,106 in financial assistance to promote public health training for the third year in a row.

So what does this mean for employers? We are not sure yet. “Employer wellness incentive programs take a variety of forms, ranging from employer-provided direct incentives, such as pedometers or discounted health club memberships (participation only programs) to group health plan incentives that link healthcare discounts to meeting certain health targets, such as cholesterol or blood pressure standards (standard-based programs). The codified support for employer wellness programs in the PPACA demonstrates Congress’s intent to encourage these programs and, thus, enhance and encourage public wellness. However, whether offered as part of a health plan program subject to HIPAA or the PPACA extension, or as a separate employer program or policy not subject to HIPAA or the PPACA, wellness programs are still generally bound by federal, state and local nondiscrimination and privacy laws, such as the Americans with Disabilities Act (“ADA”); Genetic Information Nondiscrimination Act of 2008 (“GINA”); Title VII of the Civil Rights Act of 1964, as amended (“Title VII”); and the Age Discrimination in Employment Act. Employers contemplating penalty or reward wellness programs should consider that few, if any, cases have addressed the application of these nondiscrimination laws to the wellness program penalty and reward provisions” (Hall, 2012, gshllp.com).

The only reimbursements are from employers to employees who participate in the employer sponsored programs. Today the employer is allowed to reimburse the employee a portion of their premium dollars by up to 20% of the cost of employee-only coverage and in 2014 that amount goes up to 30%; however this costs the employer more, while many are struggling to pay their portion of the premiums.

So what can an employer do? Employers need to make sure their broker is providing some of these services to their employees in a compliant way on a volunteer basis. And make sure their program is compliant or it can be deemed discriminatory in a court of law, “Despite PPACA’s clear legislative support for wellness efforts, employers fashioning penalty and reward wellness programs must consider nondiscrimination and privacy implications of such provisions” (Hall, 2012, gshllp.com).

Unraveling the Patient Protection and Affordable Care Act (“PPACA”) is a full time job and the penalties and compliance landmines are plenty. Overtaxed HR departments need brokers who are working 24/7 to guard the employees and employer from tax burdens and who offer employee wellness incentives, since the government is not.

Danone Simpson is the founder and CEO at Montage Insurance Solutions. Reach her at 1 (888) 839-2147 or [email protected].
Insights Business Insurance brought to you by Montage Insurance Solutions.

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Smart Business August Insight

1 August 2012 Posted by Danone Simpson Press No Comments

Smart Business August Insight. Advice. Strategy

How Insurance Carriers Are Dealing with Health Care Problems and What Employers Can Do to Help

Productivity losses related to personal and family health problems cost U.S. employers $1,685 per employee per year and $225.8 billion annually, according to the U.S. Centers for Disease Control and Prevention. So what is creating these problems with health care claims and insurance, which ultimately lead to poor health and lower productivity?

“It is the delivery system, administration and billing,” says Danone Simpson, founder and CEO at Montage Insurance Solutions. “I have no doubt about this, as our firm battles away at claims that take hours, weeks, months and sometimes years to sort through.”

Smart Business spoke with Simpson about what she sees as the problems with health care, how carriers are coping and what employers can do about it.

What is the problem with health care today?
From wait times for approvals to multiple bills being sent to carriers, carriers are denying needed PET scans, MRIs and other tests so doctors can determine care — partially because of what they deem as ‘abuse’ from doctors who overtreat or analyze treatment. Approvals can sometimes take two months when patients need major surgery to remove cancer.

The real issue with health care is not only who is paying what premiums, fines or co-payments, it’s more about the overall cost of health care and billing complications. Doctors desperate to earn more may overbill, even though they know the contracted amount they agreed to. However, that may be a different amount with each carrier, which makes the administrator’s job a nightmare.

How will private exchanges and mandated health care impact the system?
It’s likely that health care insurance exchanges won’t necessarily lead to better health care pricing. In addition, private health insurance carriers will be forced to offer coverage on the exchanges and compete with themselves.
Surveys prove that employers are angry about being forced to pay for coverage, even if they already cover 100 percent. They expect employees to ask for more coverage of dependents, and some employers who stretch to pay a portion of dependent coverage are feeling backed into a corner. It’s not required to cover dependents, but most plans today do.

What are carriers doing to help with costs?
With expensive fines that can account for more than the actual premium amounts, carriers are helping form Accountable Care Organizations (ACOs) to hold doctors and hospitals responsible. These organizations use incentives to cause providers to work together when treating a patient across care settings such as doctors’ offices, hospitals and long-term care facilities, according to HealthCare.gov. For example, the Medicare Shared Savings Program rewards ACOs that slow health care cost increases while meeting performance standards on quality of care and putting patients first. Patient and provider participation in an ACO is purely voluntary.

What can employers do to lower health insurance costs?
Offering a wellness program is one way to truly impact the heart of the problem of the country’s health care costs. An unhealthy work force is a major issue for businesses large and small. For example, 20 million Americans — 7 percent of the population — have diabetes and 30 percent of this population remains undiagnosed, according to Katz. Moreover, a recent Newsweek article states that two-thirds of adults and one-third of children and adolescents are overweight or obese.

The law might require an employer to buy an insurance policy for employees, but it causes anger and rebellion on the part of many employers. The more proactive approach is to dive down into the parts of the reform that assist in either lowering premium costs or aiding in the retention and well being of your employees.

There are a number of tax credits available to help you with this proactive approach, if they are available to companies of your size.

The Patient Protection and Affordable Care Act includes a variety of provisions aimed at encouraging wellness and disease prevention. As shrm.org reports, effective Jan. 1, the ‘law will permit rewards or penalties such as premium discounts of up to 30 percent of the cost or coverage. Existing wellness regulations permit incentives of up to 20 percent of the total premium, provided that the program meets certain conditions. The law increases the amount of the potential reward/penalty to 30 percent of the premium.’ There is also the possibility of an even higher amount after national studies are performed.

Another option is the Small Employer Health Insurance Tax Credit. The U.S. GAO states, ‘Fewer small employers claimed the Small Employer Health Insurance tax credit in tax year 2010 than were estimated to be eligible.’ Calculators are available on the National Federation of Independent Business, http://www.nfib.com and many other websites.

Employers also can ask their carriers about the Medical Loss Ratio reimbursement, which was just issued for the first time.

Take care to avoid fines and earn tax credits on wellness incentives. Many employers are starting to offer a carrot approach to motivate employees, and then a stick with some sort of penalty for not participating to truly see employees take advantage of a wellness-based plan.

Danone Simpson is the founder and CEO at Montage Insurance Solutions. Reach her at 1 (888) 839-2147 or [email protected].
Insights Business Insurance brought to you by Montage Insurance Solutions

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Smart Business July 2012 issue

19 July 2012 Posted by Danone Simpson Press No Comments

Montage was on the back cover of the July 2012 issue of Smart Business. Danone was also an honored guest at the Ernst & Young Entrepreneur of the Year awards. Below are some photos of the event!

Check out Danone’s article in Smart Business Insights – “The CEO Decision; Benefits or Fines” Read more

Ernst & Young Entrepreneur of the Year Event