No Easy Answer to Employee Benefits Plan Woes; Rising Health Insurance Costs an Ongoing Problem

PITTSBURGH – Eckert, Seamans, Cherin & Mellott LLC Partner Sandra Mihok says when it comes to crafting employee benefits programs, there is no magic key or secret formula that employee benefit lawyers are privy to. “What seems to help any benefit transition go smoothly is educating employees to understand how much the employer is bearing for coverage,” said Mihok. “Once they see it in terms of dollars and cents and employers explain that changes are not designed to harm employees but are necessary in order to be able to continue coverage, it makes the change a little more palatable to employees.” With health insurance costs expected to rise an average of 16% this year, more employers are exploring options to offset part of this increase by adjusting overall benefits packages without diminishing the benefits they offer or significantly increasing plan administration costs. “A big myth out there is that many employers who shop the market for insurance believe that if rates are quoted then there is nothing that they can do or that there are no other alternatives, and that simply is not true,” said Mihok. “Before any changes are made employers should really look at what is in place now and evaluate how it is working. Figure out what you can afford, if employees can afford an increase, and if there is anything that can be done to improve or lessen the cost of what your offering. The answer may be no, but it is at least worth thinking about. Then look at some options.” According to Mihok, one of the more interesting approaches in recent years is the Health Reimbursement Account. The HRA plans can couple a high-deductible health plan with an employer-funded account that employees use to pay out-of-pocket medical expenses. The Treasury and IRS have set the following HRA guidelines: * Balances in these employer-funded accounts may be carried over from one year to the next without tax consequences for employers or employees * Employees can use the accounts to cover medical expenses and/or accident and health insurance premiums for themselves, their spouse and dependents. * The plan can define the maximum dollar amount and period of coverage provided. * HRA can be part of a consumer-directed health care plan or a stand-alone benefit. The premise is that employees will shop around for the best price and that the employers’ costs will be reduced in the long run as the money in the HRA is rolled forward. “Insurance companies and agents will tell you that the most costly part is all the small claims paid not the big claims,” said Mihok. “So in theory the high HRA will cost far less than the regular medical plan.” So for example if the HRA deductible is set at $1,000 and the employee only uses $500 the following year, the credit union would only pay out the difference. Mihok says that success of this plan depends on the credit union’s claim experience and the age and health of the work force. In addition, this plan could involve a significant outlay of cash at the beginning to fund. “If your employees are significant users of healthcare, the deductible is quickly used, and when the insurance plan kicks in it could end up being the same vicious cycle with insurance costs that might even go up,” said Mihok. Other considerations for credit unions looking to combat health care costs could be as simple as establishing a wellness program. Under a wellness program credit unions can offer employees access to health services such as blood pressure monitoring, cholesterol screening, smoking cessation programs and nutrition counseling. Essentially the employer becomes a partner in the health and welfare of staffers. According to program advocates, benefits generally come in the form of improved employee morale, fewer employee sick plans, reduced use of healthcare benefits and increased productivity. Mihok says despite the challenges faced by employers, the future is still hopeful since the government is taking employee benefit plans seriously. Congress is currently considering passing a law to exempt association health plans from state regulations and make them only subject to federal regulations like a large employer plan. Mihok says that the law could make the cost of maintaining such plans go down with less regulatory burdens, but it is a highly debated complex issue that may not pass without a fight. “One last thing to keep in mind is that employee benefit plans are regulated by ERISA and employers are fiduciaries of those plans, so any changes must be made in the best interest of participants, not the employer,” said Mihok. “That doesn’t mean you can’t cut costs, but keep in mind the reason a change is made is not for the employer’s personal benefit.” [email protected]