This is a presentation that I made recently to members of the Building Industry Association of Lancaster County to help them to understand options that could save them money on their group programs.

1. Strategies for Controlling Benefit Costs in Hard Economic Times – Part 1 Presented by: Barbara Hostetler Hostetler Insurance Associates, Inc. March 31, 2009

3. HOW MUCH? What is a reasonable amount of money to pay for our healthcare?

4. HOW MUCH? How much do we pay for: A Television? A Vacation? A Vehicle?

5. HOW MUCH? Is our HEALTH worth less than those items?

6. WHAT FOR? What is insurance for? Auto Insurance? Homeowners Insurance?

7. WHAT FOR? We insure our homes and our cars for LARGE losses – why is health insurance expected to cover SMALL claims?

8. WHY? Why do employers provide health insurance?

9. WHY? Health insurance started as an inexpensive benefit to attract and reward employees.

10. WHEN? WHY? HOW? When did that change? Why did it change? How do we go back?

11. PLAN DESIGN What if we thought that our good health was of utmost importance to the point that it is worth spending our own money to have it?

12. PLAN DESIGN How much would we expect to pay for good health?

13. PLAN DESIGN Think about those things as your design your health plan.

14. PLAN DESIGN Look at your health plan design based on how much it will pay and save on LARGE claims.

15. PLAN DESIGN If there is a $1 Million claim, what will insurance pay? What will the patient pay?

16. PLAN DESIGN If there is a $10,000 claim, what will insurance pay? What will the patient pay?

17. PLAN DESIGN If you were in terrible pain, what copay would you pay to see a doctor who would relieve that pain?

18. PLAN DESIGN So, what exactly is my point?

19. PLAN DESIGN If we would pay… $1000 for a TV $2500 for a Vacation $20,000 for a Vehicle

20. PLAN DESIGN Shouldn’t we be willing to pay at least that much for our good health?

21. PLAN DESIGN The #1 driver in health plan cost increases is… UTILIZATION

22. UTILIZATION “ Utilization” is the everyday use of your health plan, and it is the main reason that prices are rising so fast

23. UTILIZATION “ Utilization” is driven by the ease of accessing health care for everyday health issues

24. UTILIZATION If your copayment is only $20, why not see the doctor for care on a whim?

25. UTILIZATION How quickly do we see the doctor now as compared to our parents and grandparents?

26. UTILIZATION Why do you think that is? Cost / Copayment? Society / Expectations? Comfort / Ease of Access?

27. UTILIZATION How do we fix utilization? The insurance industry created this beast – what are they doing to fix it?

28. UTILIZATION Plan designs including: No or Higher Copayments Higher Deductibles Improved Preventive Benefits

29. COPAYMENTS Higher / No Copayments will encourage everyone to think more carefully before they go to the doctor on a “whim” or take a drug “just because” it is prescribed.

30. DEDUCTIBLES Why should your health plan deductible be less than what you would spend to maintain your lifestyle?

32. USE TAX ADVANTAGES To encourage employers to make these changes, the government is offering amazing tax incentives

33. HEALTH SAVINGS ACCOUNTS To get the tax advantages of an H S A, you must have a Qualified High Deductible Health Plan (QHDHP)

34. QHDHP A QHDHP must have: No Copayments for Office Visits or Rx EXCEPT for Preventive Care and/or After the Deductible

35. QHDHP A QHDHP must have: A Deductible HIGHER than $1150 / $2300 for 2009

36. QHDHP A QHDHP must have: A FAMILY Deductible that is NOT aggregate

37. QHDHP A QHDHP must have: An out-of-pocket MAXIMUM of $5,800 / $11,600 that includes ALL out-of-pocket expenses.

38. H S A REWARDS Three Tax Advantages: 1. Deduction for Money contributed to the H S A up to an annual maximum of $3000 / $5950 for 2009

39. H S A REWARDS Three Tax Advantages: 2. Money that is earned in the H S A is earned tax-free or tax-deferred, depending on how it is used

40. H S A REWARDS Three Tax Advantages: 3. Money that is used properly from the H S A is NEVER taxed.

41. H S A REWARDS H S As are the ONLY funds with these three tax advantages.

42. H S A REWARDS H S A funds are NOT “use it or lose it” – they carry over from year to year

43. H S A REWARDS H S As offer the best tax advantages available in employee benefits

44. OTHER INFO ABOUT H S A Individually owned accounts – no employer responsibility for the use of the money in an H S A

45. OTHER INFO ABOUT H S A Once given, the employer cannot get their money back from an H S A

46. OTHER INFO ABOUT H S A Employers and Employees may fund the account, but employers may not discriminate on contribution amounts

47. OTHER INFO ABOUT H S A An H S A is NOT required with a QHDHP and the employer is not required to contribute money to the H S A

48. OTHER INFO ABOUT H S A H S As are a great vehicle for building a strategy to control costs

49. H S A STRATEGY - DESIGN $1500 / $2500 QHDHP 5 Employees – 2 Single / 1 Spouse / 2 Families Actual Case 2% $34,999 $0 $34,999 5 0% $34,372 $1,965 $32,407 4 0% $34,372 $4,366 $30,006 3 0% $34,372 $6,588 $27,784 2 N/A $34,372 $13,000 $21,372 1 % Change Total H S A Premium Year

50. H S A STRATEGY - ACTUAL $1500 / $2500 QHDHP 5 Employees – 2 Single / 1 Spouse / 2 Families Actual Case 0% $37,809 $2,810 $34,999 5 0% $37,809 $5,402 $32,407 4 0% $37,809 $7,803 $30,006 3 10% $37,809 $10,026 $27,784 2 N/A $34,372 $13,000 $21,372 1 % Change Total H S A Premium Year

51. BREAK Take a 5-Minute Break…

52. COBRA SUBSIDY COBRA applies to groups with 20+ employees

53. COBRA SUBSIDY Small groups have a problem: No COBRA Sick Employees Won’t Qualify for Affordable Individual Health Insurance

54. COBRA SUBSIDY Sick Employees CAN get coverage from Highmark Blue Shield – VERY EXPENSIVE

55. COBRA SUBSIDY The COBRA Subsidy is the best option for Employees who qualify…

56. PURPOSE To assist former workers in maintaining affordable healthcare coverage during these difficult economic times

58. COBRA SUBSIDY The COBRA Subsidy pays for 65% of the total COBRA Premium (102% of what is billed to the employer)

59. COBRA SUBSIDY The Employee is billed for and pays 35% of the COBRA premium – that 35% will be considered “full payment”

60. COBRA SUBSIDY Example: If the employer is billed $350 / Month for Health Coverage, the COBRA premium would be $357 / Month ($350 + 2%) The COBRA Subsidy would pay $232.05 / Month (65% of COBRA Premium) The COBRA Beneficiary would pay $124.95 / Month (35% of COBRA Premium)

61. COBRA SUBSIDY The Employer fronts 65% of the COBRA premium until it is reimbursed through a payroll tax credit

62. COBRA SUBSIDY Applies to all COBRA-eligible health plans, i.e. medical, dental, vision, etc. EXCEPT Health FSA

63. COBRA SUBSIDY Some will qualify for a “second chance” COBRA election and current COBRA participants may qualify

64. COBRA SUBSIDY The COBRA Subsidy does NOT extend the COBRA end date and is not retroactive

65. COBRA SUBSIDY The COBRA Subsidy lasts for up to 9 months

66. COBRA SUBSIDY COBRA Administration is the responsibility of the employer – if you have not hired a COBRA Administrator before, you might want to consider it now.

67. COBRA SUBSIDY If the Employer pays a portion of the COBRA Premium, that portion is NOT eligible for the 65% Subsidy

68. COBRA SUBSIDY Individuals denied the Subsidy by their Employer may appeal that decision to the Department of Labor

70. SPECIAL ELECTION Eligible if job was involuntarily lost after 9/1/08 and COBRA was not elected or was dropped later

71. SPECIAL ELECTION May elect COBRA on 3/1/09 and receive Subsidy for 9 months, but may NOT extend the original COBRA benefit period, calculated from the original eligibility date

72. SPECIAL ELECTION No Pre-Existing Condition limitation for break in coverage between COBRA periods

73. NOTICES By 4/18/09 New Notices must be sent to all eligible beneficiaries, retroactive to 9/1/08, explaining the Subsidy

74. NOTICES Model Notices are available at: http://www.dol.gov/ebsa/ COBRAmodelnotice.html

75. ELIGIBILITY One of the most overlooked ways to reduce your health premium is to perform an eligibility audit once / year, before your renewal

76. ELIGIBILITY Review your employee census for: Hours Worked Dependent Age Spousal Status

77. ELIGIBILITY Review your eligibility rules for hours worked and make sure that all enrolled employees meet them

78. ELIGIBILITY Request a copy of the letter from the Registrar’s Office for dependent students to verify that they are attending college fulltime

79. ELIGIBILITY Request a copy of a valid birth certificate or family court order for each dependent child to be sure that they are an eligible dependent of your employee

80. ELIGIBILITY Consider including a “Working Spouse Rule” to your dependent eligibility guidelines

81. ELIGIBILITY Make sure that all covered employees are “actively at work” or terminate them from your insurance plan, according to your company policies

82. ELIGIBILITY Make sure that all covered employees are “actively at work” or terminate them from your insurance plan, according to your company policies

83. ELIGIBILITY Review your eligibility rules and be sure that you meet your insurance company’s underwriting requirements to avoid non-renewal following an eligiblity audit

84. ELIGIBILITY Do 75% of your “eligible” employees participate on your plan? If you have “spousal waivers” do at least 50% or your “eligible” employees participate?

85. ELIGIBILITY Are you paying enough of the premium to meet your insurance company’s underwriting requirements – generally 75% of the single rate or 50% of all tiers?

86. ELIGIBILITY If you have employees who waive coverage, do you have signed waivers on file for them?

87. ELIGIBILITY Are you properly administering your new hire waiting period? Is your new hire waiting period adequate to discourage employees from joining your company just for COBRA benefits?

88. ELIGIBILITY Does your benefit eligibility policy match your company’s strategy for benefits administration and/or your goals for hiring and retention?

89. ELIGIBILITY Do you have an overall strategy and/or belief system regarding your employee benefits plan?

90. QUESTIONS?

91. IN TWO WEEKS… 4/14/2009 at 8:00 am We will discuss: Strategies for Controlling FUTURE Costs Fringe Benefit Planning for Prevailing Wage Contractors Individual Health Plans Mini-Med / Limited Health Insurance Plans Disability Insurance

92. THANK YOU! Have a great day!

93. Strategies for Controlling Benefit Costs in Hard Economic Times - Part 2 Presented by: Barbara Hostetler Hostetler Insurance Associates, Inc. April 14, 2009

95. CONTROL How can you work with your employees to control future costs?

96. CONTROL How do you work with your employees on benefits now?

97. COMMUNICATION! Communication is the most effective tool for working to control benefit costs.

98. COMMUNICATION… Communication does not require that you institute a democracy for benefit decisions.

99. COMMUNICATION… Why do employers want to keep benefit costs a secret?

100. COMMUNICATION… Instead of keeping costs a secret, you need to SHARE them!

101. COMMUNICATION… Consider shifting your focus from “Salary & Benefits” to “Total Compensation”

102. TOTAL COMPENSATION Total Compensation = Cash Health & Welfare Benefits Other Benefits

103. TOTAL COMPENSATION Explaining “Total Compensation” allows the employee to see the true cost of his compensation package.

104. TOTAL COMPENSATION Explaining “Total Compensation” will help employees to appreciate their benefits.

105. TOTAL COMPENSATION Explaining “Total Compensation” will allow you to show how increasing one benefit may reduce another.

106. TOTAL COMPENSATION Excel Template for Small Groups

107. TOTAL COMPENSATION Software / Services Available for Large Groups

108. RESOURCES http://www.freetotalcompstatements.com/ws/Home.php http://www.charltonconsulting.com http://www.compackage.com/

109. COMMUNICATION… Think about who would best-present your benefits information…

110. COMMUNICATION… Consider holding your annual benefits meeting AFTER hours and inviting spouses…

111. WELLNESS Tap into your plan’s built-in wellness benefits

112. WELLNESS Encourage healthy practices by example – eat well and exercise

113. WELLNESS Encourage healthy practices by rewarding good behaviors

114. WELLNESS Consider basing your employee contributions on unhealthy practices, i.e. charging more for smoking or obesity.

115. WELLNESS Know what wellness benefits your health plan provides and explain them to your employees

116. WELLNESS Wellness will NOT impact your rates immediately, but they will lead to lower premiums in the long-run.

117. INDIVIDUAL HEALTH PLANS When rates go so far out of control that you cannot continue your group health plan…

118. INDIVIDUAL HEALTH PLANS the last option will be to cancel your group plan and allow your employees to purchase health plans on their own.

119. INDIVIDUAL HEALTH PLANS There are many things that you need to know before moving toward individual insurance…

120. INDIVIDUAL HEALTH PLANS Individual health insurance is AVAILABLE to everyone, but not necessarily AFFORDABLE for everyone.

121. INDIVIDUAL HEALTH PLANS Individuals / Families in excellent health have many options that are less expensive than group health plans.

124. INDIVIDUAL HEALTH PLANS If your individual health plan rate is more than $581 / month today, you may want to consider moving to individual health plans that are partially employer-paid.

125. INDIVIDUAL HEALTH PLANS Highmark Blue Shield offers a health plan of “last resort” in the state of Pennsylvania – available to all Pennsylvanians who do not have access to other health insurance.

126. INDIVIDUAL HEALTH PLANS Under many circumstances, full coverage for pre-existing conditions is available – regardless of the condition

127. INDIVIDUAL HEALTH PLANS $750 Deductible Comprehensive Plan 80/20 Coinsurance $3,750 Annual Maximum Out-of-Pocket

128. INDIVIDUAL HEALTH PLANS No Office Visit Copayments Separate Rx Deductible and 50% Rx Copay

129. INDIVIDUAL HEALTH PLANS No agent representation or commissions Direct relationship with Highmark

130. INDIVIDUAL HEALTH PLANS Pennsylvania requires that group health plans offer a conversion option when coverage is lost.

131. INDIVIDUAL HEALTH PLANS In some cases, the conversion option is less expensive than the Highmark guaranteed program.

132. INDIVIDUAL HEALTH PLANS Employees should pay the premium for an individual health plan, and any employer contribution should be run through payroll and be taxed.

133. INDIVIDUAL HEALTH PLANS Employees over age 65 should seriously consider moving to the Medicare system for their benefits.

134. INDIVIDUAL HEALTH PLANS Employers may not discriminate based on age, and therefore cannot force employees to move out of the group health plan into a Medicare plan.

135. INDIVIDUAL HEALTH PLANS Replacing your group health plan with cash toward individual benefits may hurt your ability to hire and retain employees.

136. INDIVIDUAL HEALTH PLANS Employees may not know where to turn – help them by recommending a broker who can provide multiple options.

137. BREAK Take a 5-Minute Break…

138. MINI-MED PLANS Limited health plans that provide up-front benefits and max-out at a low benefit level.

139. MINI-MED PLANS Available on a group basis – either partially employer-paid or entirely voluntary through payroll deduction

140. MINI-MED PLANS Provides benefits for: Several Office Visits / Year Preventive Visits / Tests Daily Hospital / ICU Care Accidents

141. MINI-MED PLANS Additional benefits may sometimes be purchased: Vision Dental Short-term Disability

142. MINI-MED PLANS Backwards Insurance – covering the front end instead of the catastrophic claims.

143. MINI-MED PLANS Not “Insurance” – will not prevent the patient from getting Medicaid benefits.

144. MINI-MED PLANS Often guaranteed-issue / no medical underwriting required.

145. MINI-MED PLANS Often used for part-time employees as a retention tool.

146. MINI-MED PLANS Better than “nothing” but not a good replacement for group or individual health insurance.

147. DISABILITY INSURANCE When money is tight you may be tempted to eliminate disability benefits

148. DISABILITY INSURANCE If you are going to eliminate disability benefits – eliminate the short-term disability benefit and/or exchange it for a long-term disability benefit.

149. DISABILITY INSURANCE Consider a change to a Paid Time Off (PTO) benefit with accumulating unused days in lieu of a short-term disability benefit.

150. DISABILITY INSURANCE Short-term disability is a much-used and much-abused benefit, making it very expensive for the very limited protection it provides.

151. DISABILITY INSURANCE Short-term disability provides benefits for lost wages due to a disability, often starting immediately and lasting up to 6-months.

152. DISABILITY INSURANCE Short-term disability is much-used to allow for a short-term recovery following an illness or injury.

153. DISABILITY INSURANCE Short-term disability insurance does help to reduce your workers comp claims by allowing for benefits without “faking” a work-related injury.

154. DISABILITY INSURANCE Short-term disability insurance will NOT help your employee much in the event of a total disability.

155. DISABILITY INSURANCE Long-term disability insurance will make the difference in allowing your employee to live a comfortable life while totally disabled – pay the mortgage, buy groceries, pay the bills, etc.

156. DISABILITY INSURANCE Long-term disability insurance is hardly ever used, but when needed, it will be a true benefit to your employee and their family.

157. DISABILITY INSURANCE Long-term disability costs much less premium because it is used so infrequently.

158. DISABILITY INSURANCE Consider adding long-term disability benefits in lieu of low-deductible health insurance.

159. BREAK Take a 5-Minute Break…

160. PREVAILING WAGE Contractors who do State or Federal work need to plan their Fringe Benefits carefully to bid competitively.

161. PREVAILING WAGE Base Wage = $30 / Hour Fringe = $10 / Hour Total = $40 / Hour

162. PREVAILING WAGE Paying the Fringe portion in cash means that you must pay payroll taxes on those “wages” – that adds substantially to your labor cost.

163. PREVAILING WAGE Paying the Fringe portion in benefits allows you to avoid those taxes – that is how the Fringe was meant to be used.

164. PREVAILING WAGE You may take credit against the Fringes for “bona fide” benefits only – such benefits must be communicated in writing with premiums paid to a third party.

165. PREVAILING WAGE Examples of “bona fide” benefits are: Medical Insurance Dental / Vision Insurance Disability Insurance Life Insurance Retirement Benefits

166. PREVAILING WAGE Retirement benefits may be used for the balance of the fringes that are not used for other benefits.

167. PREVAILING WAGE Retirement plans must be specifically written to be able to accept the fringe money legally.

168. PREVAILING WAGE Fringe Benefit retirement plans may be administered along-side of your existing retirement plan.

169. PREVAILING WAGE Fringe Benefit retirement plans may not have a vesting schedule – the fringes must be used for the immediate benefit of the employee who earns them.

170. PREVAILING WAGE For additional information, go to www.fibi.com .

171. QUESTIONS?

172. THANK YOU! Have a great day!