Scott a Robinson - Part 3 Draft[1] | Employee Benefits | United States Government

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Design & Strategy Considerations For Offering Employee Benefits Berkshire Associates Incorporated has a common goal in offering benefits to their employees. However, difficult market conditions caused by a number of factors have made offering these benefits nearly impossible from a financial standpoint. Lisa Stone, the director of HR at Berkshire, has the duty of implementing a competitive, cost-effective benefits plan and shares some of her insight on the philosophy of offering benefits to thei
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  Part III| Plan Design Analysis Page 1 Design & Strategy Considerations For Offering Employee Benefits Berkshire Associates Incorporated has a common goal in offering benefits to theiremployees. However, difficult market conditions caused by a number of factors have madeoffering these benefits nearly impossible from a financial standpoint. Lisa Stone, the director of HR at Berkshire, has the duty of implementing a competitive, cost-effective benefits plan andshares some of her insight on the philosophy of offering benefits to their employees. Ms. Stonehas identified their ideology behind offering benefits by stating that “ BAI offers employeebenefits to attract new valuable talent and retain old employees who understand their system butmostly to create a culture at work where employees feel more valued than a traditional business setting which can boost morale and productivity”. This philosophy in offering benefits is a nobleone but Ms. Stone also states that BAI must “ also be cognizant of the increasing costs of not onlyoffering these benefits to employees, but offering them in the climate that healthcare is in rightnow ”. BAI has been able to do this by adding new, more flexible work-life benefits; in particulartheir telecommuting and tuition reimbursement benefits. Their telecommuting benefit givesemployees the choice to work from home if they supply specific levels of productivity.Employees love this benefit since they can avoid traveling expenses incurred by coming intowork. Tuition reimbursement has been a big benefit for BAI since their demographics are “majority female, trending to a younger age group”. Their young population at work naturally leaves more potential candidates to be in an undergraduate or graduate position. So the issue athand with the design considerations of offering benefits next year will be to offer the mostcompetitive benefit plan while keeping the increase in costs to a minimum. This obstacle is evenmore difficult considering the size of Berkshire Associates. Berkshire Associates has 85employees that are eligible for benefits and about 40 dependants on the plan. With participationin healthcare benefits slightly over 70%, Berkshire must consider their size and what reform hasdone for their classified size of business. Berkshire Associates Inc. (BAI) began their planning process by, “creating a basic benefit [plan] to be competitive” in the HR consulting industry, says Lisa Stone, BAIs’ HR consultant and founder. The “basic” benefit op tions were health insurance, dental insurance,401(k), life insurance and disability. Since BAI is a small company of 85 employees, it uses Third Party Administrators (TPAs) regarding, “anything with external vendor[s]”, she said. BAI  Part III| Plan Design Analysis Page 2 benefits from the administrative relief from TPA outsourcing and the cost and time associatedwith administrating the plan. Strategically, BAI join forces with brokers for dental, life and disability insurances, “to see which is most rich”. Stone describes much of the benefi t design to  be “dictated” by the staffing industry and competition therein.  BAI strives to “meet employee need s ” by research and cooperation. Given BAI’s corporate culture, employees often volunteer their feedback regarding benefits. In particular,employees commonly request products from AFLAC, the supplemental benefit provider. Tellingly, AFLAC appeals to BAI employees because, “[its] policies are slightly different than regular life and disability because of additional, specific coverage and they have a lump sum dollar amount indemnification based on the situation”.  BAI will focus on mitigating the inflation of prices since reversing the trend is impossiblewhile offering the same or even more comprehensive benefits. Since there seems to be everincreasing costs associated with offering healthcare coverage, Berkshire Associates will need toreduce costs in offering these and  other benefits. However, BAI cannot just cut benefits at allcosts in an attempt to reduce premium price. If they want to remain competitive, BAI mustalways offer at least  the same benefits as its competitors. Lisa described some of the benefits as “set in stone” meaning that the offering of these benefits will probably never change since thecost and importance of these benefits w on’t change either. Some examples of these benefits are life and disability insurance, and retirement benefits such as the 401(k) plan. There is a lot of room in the Berkshire Associates benefit plan to reduce cost without reducing thecomprehensiveness of their program in place. The Maryland Small Group Reform helpsBerkshire Associates in the meantime before the full changes implemented in health reform takeplace in 2014.A significant consideration in the design and strategy in offering employee benefits willhave to be the impact of the new Maryland small group reform. The Maryland small groupreform law encompasses a few provisions to ensure the protection of the small group marketplace through protecting price inflation and changing criteria that deem candidates eligible forcoverage. These provisions include guaranteed issuance, modified community ratings and nopre-existing condition limitations. This new mandate can help or hurt a small groups given thecourse of action taken. This reform was created to protect the small group market place asemployee participation has dropped significantly since 1999. According to the Maryland  Part III| Plan Design Analysis Page 3 Healthcare Commission, employer participation had declined by 9% before the reform over a tenyear period. More notably, employee participation had declined over 14% before the reform 1 .These numbers indicate how needed the reform was and according to Lisa Stone the reform “has actually enriched our benefits and helped to keep the price inflation manageable. ”  Healthcare is the primary cost driver in most benefit plans. It is extremely important thatBAI work with brokers to find cost-effective alternatives to their current options as increasing costs won’t be protected by the Maryland small group reform beyond 2013. Many employers areopting for consumer directed health plans 2 (CDHPs) to reduce the cost that they are responsiblefor. CDHPs offer coverage with a high deductable (>$2,400) leaving the employee with theburden of more out-of-pocket expenses and also forces the consumer/employee to take moreresponsibility in the use of their healthcare benefits. CDHPs are often coupled with an HRA,FSA or HSA. These types of plans are very cost-effective but some employees opt out forspecific reasons such as domestic partnerships. Domestic partnerships do not receive tax favorability since they don’t meet the requirements for them by law. Some employees opt out for  PPO coverage because they have children or a specific preference with who they receive theirhealthcare treatment from. So other options must remain in the program to encompass thesespecific individuals but some method of steering must take place to get more individuals to takethe CDHP option. Even though the Maryland small group reform law is good for the time beingit is important that BAI keep in mind alterations they will need to make in order to comply withnew federal regulations brought on by health reform.When asked what benefit the employees at BAI value the most and why, Lisa explainedthat the AFFLAC voluntary benefit program was the most requested inclusion in the benefitsprogram since she has been with BAI. The AFFLAC voluntary benefit program is great for thecurrent and future designs of the benefit program. Lisa stated that employees were so into theAFFLAC program because it reduced the overall cost of healthcare for everyone by slimming down what had srcinally been offered and provided specific options that tailored to individuals’ specific needs. This ideology is great for a benefits program and might be where benefits ends upultimately; with a plan that provides the bare minimum and many voluntary options that tailor 1  http://mhcc.maryland.gov/smallgroup/sgm_reform.pdf   2   “A Shift Towards   Smaller Health Insurance Networks”. Los Angeles Times    Part III| Plan Design Analysis Page 4 the plan to an employee’s specific needs , whether it be for dependents or a spouse. Employees atBAI are not opposed to voluntary benefits if it reduces the cost of other benefits or eveneliminates the ones they never utilize. Every person has specific and general needs, a healthcareplan should target the general needs and a voluntary plan should be a decision that employeesmake based on what they deem necessary enough to purchase. Controlling the problem of marginal benefit far exceeding marginal cost in the healthcare market is made possible throughvoluntary benefits and can severely reduce the cost of a benefit plan if employees are willing toparticipate.In conclusion BAI should consider some slight changes in the design of the overalloffering of the employee benefit plan. BAI is a small employer so the pressures that are affectingthe market place are especially stressful for them. Larger companies can opt out and provide self- funded benefits. Since BAI is so small they don’t have the capital to take on this project. Since BAI is so small they must rely on brokers to help draft options for the plan and insurance carriersto carry out third party administration. BAI should remain aware that brokers receivecommission for the amount  of coverage in a plan. This can cause an issue in letting your brokerdraft the plan for you. They may add in unnecessary coverage that no one at Berkshire utilizes.Lisa should get much more involved in creating the healthcare options and the limits under otherpolicies to reduce moral hazard and price. Lastly, many steps need to be taken in considerationfor the future. The Maryland small group reform initially took place in 2009 and has helped keepprice inflation down, but with new regulatory compliances that will arise through PPACA andany new organization set to aid in healthcare reform, BAI can face a very difficult complianceissue. Considerations for Health Care Benefits IntroductionBerkshire Associates Incorporated strives to offer is a smaller employer, and their statusas such predetermines many of their plan design decisions. The loss experience of their 85employees has more variance than that of a larger employer and makes the employer actuariallyincredible for retrospective and prospective. State legislation and PPACA has a positive effect on
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