The Employee Benefits Marketplace

1. The Employee Benefits Marketplace Presentation before Insure NM! Council By: Anne Sperling, CSA Daniels Insurance, Inc. October 15, 2004

2. Introduction • In order for the process of marketing employee benefits to begin, it is absolutely necessary that a detailed fact finding session take place. • Fact finding allows the agent to discover the nuances of the employer and the employees and then apply the correct insurance guidelines, laws and regulations to the group.

3. Introduction Continued… • In my presentation today, I will educate the audience on the fact finding process with one example of a real employer located in Santa Fe. This employer is managing two other locations other than Santa Fe. They have satellite offices in Espanola and Las Vegas, NM. • The purpose of this exercise is to expose the twists and turns in employee benefit planning and how important it is to be flexible when designing a package for employers. • The role of the employee benefits agent is to educate the client in matters of benefit packaging and administration, human resources management, and to be a resource to information that directly affects the plan. The employee benefits agent must review the plan design at least annually to be sure it continues to suit the need of the client.

4. Business Legal Name Business “Doing Business As” name It’s important to have the exact legal name because of the legal contract that is issued by the insurance company. It’s important to have the DBA because that will be how the business in recognized in the community. Fact Finding ProcessWith this example, the name of the business will not be disclosed.

5. Business administrator and title Mary Smith (not her real name), Human Resources Director. It’s important to identify who this person is for the purposes of law compliance, e-service correspondence, and administration communications. Fact Finding Process

6. Requested Effective Date of Coverage January 1, 2005 The effective date of coverage opens a discussion of deductible satisfaction, carryover provisions, open enrollment, communication during the holidays, and the marketing and implementation timeline. Fact Finding Process

7. Business street address Business mailing address 999 Cerrillos Road, Santa Fe, NM 87505 PO Box 999, Santa Fe, NM 87504 It’s important to have a physical address for the insurers because it’s one of the factors used to prove that the business is based in NM and thereby allowing to receive NM compliant plans and rates. Fact Finding Process

8. Business telephone number Business fax number Business email address Important for communication purposes. The preferred communication method is noted. It is noted with the prospect that no coverage can be bound by email or voicemail. Business telephone numbers also allow the insurers to search for the business Standard Industry Code (SIC), which plays a part in rating the group. Fact Finding Process

9. Nature of Business Number of Years in Business Provide social services to individuals and families struggling with addiction 35 years in business The nature of business will enlighten the insurers beyond the SIC for purposes of offering coverage. Insurers have the right to deny coverage for life insurance, short term and long term disability, but not health, dental or vision coverage based on the nature of business if the group is under 50 employees on the payroll. If a business is new, (less than three months), an insurer can deny coverage based on the fact that one quarter of wages has not been paid and not yet filed with the state. Fact Finding Process

10. Fiscal Year Type of entity July 1 – June 30 Non-profit The fiscal year is important for incorporating it into the summary plan description and for establishing a cafeteria plan. The type of entity is important for tax consequences, financial consequences, and communication purposes. Fact Finding Process

11. Business Worker Compensation insurance carrier Is workers compensation coverage placed on the owners of the business? New York Mutual Casualty Company Non-profits have no owners, so all employees are covered by the workers compensation plan. It’s important to learn about an employer’s workers compensation plan because some health insurers charge an extra fee for covering owners, partners, directors on a 24-hour basis because they have opted out of WC coverage. Ranches do not have to offer WC and health insurers will rate those groups up for 24-hour coverage on all ranch employees. Fact Finding Process

12. Total number of employees on the payroll Number of full time employees Number of part time employees Number seasonal employees 48 total employees 40 full time employees 8 part time employees 0 seasonal employees The total number of employees is important to know for the purposes of discussing various benefit laws like HIPAA, COBRA, FMLA, Age Discrimination Act, Pregnancy Discrimination Act, NM State Continuation Law, Mothers and Newborns Law, etc. The other numbers will indicate how many employees will be eligible for the plan. Fact Finding Process

13. Number employees on other coverage Number COBRA recipients Number employees on NM State Continuation Coverage Number union employees Number contract employees Number eligible to be covered 10 employees on other coverage 5 COBRA recipients 0 on NM State Continuation Coverage 0 union employees 0 contract employees 30 eligible employees and 5 COBRA recipients to be covered This count is important for the maintenance of proper participation in the plan. Most carriers with the exception of the NMHIA must maintain 75% participation of eligible employees. This group must enroll at least 23 employees. Fact Finding Process

14. An eligible employee is defined by the number of hours worked in a week An eligible employee is defined by the number of days he/she has worked for the company An eligible employee is defined by their class of employment status 30 hours is full time 30 days for management and 180 days for all others as the new employee waiting period Management employees will be given more life insurance than non-management. Only management employees will be given disability coverage. Some insurers will go down to 20 hours in a work week. This is important to know for COBRA purposes. The long waiting period of 180 days indicates that the employer suffers from high turnover with their non-management staff. The different classification of employees allows the employer to discriminate and offer different benefits to the highly qualified and/or loyal employees. Fact Finding Process

15. Employer definition of eligible dependent Legal spouse Children of the insured, legally adopted children, stepchildren residing in the insured’s home. Domestic partner who can prove a bonafide relationship with the insured. It’s important to know this definition because not all insurers will cover domestic partners. It’s also important for COBRA and HIPAA purposes. Fact Finding Process

16. Employer contribution to employee premiums Employer contribution to dependent premiums 60% contribution to the medical, dental plans for employees and dependents. 100% contribution to the life and disability plans for the employees The medical and dental plans are considered to be “contributory” in this example and that has tax consequences for the employer and employee. The life and disability plans are “non-contributory” and this also has tax consequences as well as enrollment consequences. Fact Finding Process

17. Number of business locations Addresses of business locations Number of employees at each location 3 business locations Santa Fe, Espanola, and Las Vegas, NM 20 employees in Santa Fe, 11 employees in Espanola, 17 employees in Las Vegas. All 5 COBRA recipients are in Santa Fe. It’s important to know the location of the employees for physician and facility network issues. It’s also important for contract compliance. If more than 50% of the employees reside outside the state, the coverage can be denied. The employer group is rated based on where the home office is located. FMLA is measured on mileage distanced among the employees in groups of over 50 employees. Fact Finding Process

18. Current Agent Information John Jones from ABC Agency in Albuquerque, NM 3 years with this agent Reason for exploring coverage with a new agent is the agent is unresponsive to their needs. It’s important to know this information so that the client can be best served. If they are looking outside of their current consultant arrangement, it means that the current agent has failed in some fashion. Fact Finding Process

19. Owners and their percentage of ownership Do any of the principal owners have any other ownership interest in other businesses? Board of Directors Information Who is the decision maker? Has the business ever declared bankruptcy? How is the business financed? There are no owners with a non-profit organization There are 9 board members and their names can be found on the business website The Executive Director is the decision maker Never declared bankruptcy The non-profit is financed by grants @ 30%, state funds @ 25%, federal funds @ 25%, donations @ 5%, patient payments @ 15%. All this information is important for the sales process to finalize as well as assuring the insurance carrier that this entity will be able to pay its premiums. Ownership in other businesses has a ramification for jointly insuring the businesses and COBRA issues. Fact Finding Process

20. Existing group medical coverage Desired group medical coverage HMO NM as a fully insured plan through the NMHIA The employer desires a PPO plan that is fully insured outside of the NMHIA. Currently the group is out of compliance with its participation for a carrier outside of the NMHIA. They have 50% of their eligible employees enrolled rather than 75%. They feel that if they can get their rates down, more will enroll. The current average single rate is $530.00 per employee per month. At renewal in January, the rate will go up. Fact Finding Process

21. Current group dental plan Desired group dental plan Delta PreferredOption plan An indemnity plan that allows the employees to go to any dentist. The single dental rate is $35.00 per member per month. Fact Finding Process

22. Current group vision plan Desired group vision plan No vision plan in place A vision plan that offers 12 months on exams, 12 months on lenses, and 24 months on frames and can be a PPO arrangement. Fact Finding Process

23. Current group basic life insurance Desired group basic life insurance No current group basic life insurance A life plan that pays 1 X salary for management up to $100,000 of salary and $15,000 of coverage on all other employees Fact Finding Process

24. Current short term disability coverage Desired short term disability coverage No short term disability coverage No short term disability coverage desired Fact Finding Process

25. Current long term disability coverage Desired long term disability coverage No long term disability coverage Long term disability on management staff only with a 90-day elimination period, 60% of covered monthly earnings payable to normal social security retirement age. Discussion regarding self-insuring disability events was appropriate for Federal Accounting Standards and for discrimination issues. Fact Finding Process

26. Current group long term care coverage Desired group long term care coverage No long term care coverage No desire for long term care coverage The tax ramifications of long term care coverage were discussed. The HR director was shocked to learn that the medical plan contained no long term care coverage. Open for discussion at a later date. Fact Finding Process

27. Current qualified pension plan Desired qualified pension plan 403B retirement program 401K retirement program. The group wants to shift to a 401K because this savings vehicle allows higher contributions and allows a vesting schedule to encourage employee longevity. Fact Finding Process

28. Current tax incentive programs Desired tax incentive programs No current tax incentive programs in place Desire Premium Only Plan for employee premium contributions. Desire Flexible Spending Account for unreimbursed medical expenses and child care expenses. Fact Finding Process

29. Current COBRA Administration Desired COBRA Administration HR Director is currently relying on HMO NM to administer COBRA for the group. HR Director did not know that COBRA applied to dental plan as well and was not offering this benefit to COBRA qualified beneficiaries. She was not aware that COBRA is an employer law and therefore the insurance carrier could not be held liable. The desire of the HR Director was to outsource this obligation after hearing the rules of the law. Fact Finding Process

30. Current HIPAA Administration Desired HIPAA Administration HR Director was not aware that HIPAA was an employer law and that she had any obligation under the law. She did not supply initial notifications, nor did she understand special, timely, open, and late enrollment. She did not know that her group could be denied coverage if it grew to 50+ employees. She did not know the meaning of Certificate of Creditable Coverage. The desire of the HR Director was to outsource this obligation after hearing the rules of the law. Fact Finding Process

31. The Marketing Process • The marketing process takes into account all of the facts gathered during the fact finding process. • The marketing process can take up to 4 weeks depending upon the size of the group. • The agent works with a variety of forms to market the plan.

32. The Marketing ProcessThe Forms • Census including name, DOB, marital status, number of children, location zip code, salary, title, date of hire, date of termination, date COBRA began, number of hours worked in a week. • Health questionnaire on each employee and COBRA recipient. This can be substituted for loss information if the group is large enough for the carrier to track it. NM state law requires that loss information be made available on groups of 25+. • Proof of business: SUTA, Tax Return, Incorporation papers, Partnership agreement, etc. • Request for Proposal description for each desired benefit.

33. Educating the Small Employer on Small Group Insurance Law • HIPAA • Small Group Rate and Renewability • COBRA • State Continuation • Pregnancy Act • Age Discrimination Act • HMO Regulations • Patient Protection Act

34. Educating the Employer on Tax Ramifications • Agents cannot give out tax advice, but know the basics of tax code for their benefit plans. Agents recommend that their clients contact their accountants for advice on taxes for their benefits all the time. • Tax implications fall into virtually every aspect of benefit planning including deductibility, pre-tax deductions, tax-free benefits, trust planning for employer-sponsored sick pay plans, trusts for Health Reimbursement Arrangements, custodial accounts for Health Savings Accounts, sole proprietors vs. c-corporations vs. non-profits vs. government entities vs. churches vs. unions.

35. The Enrollment ProcessThe Forms, the Meetings • Employer meeting to complete the master application • Employee meeting for plan orientation and enrollment forms • Employer meeting to collect 1st month’s premium • Employer meeting to discuss the timeline and idiosyncrasies of a new plan.

36. Policy Delivery Process • Review of the master contract to be sure it is issued as applied for. Obtain employer signature. • Review of final rates to see if there is a variance from the original proposed rate. Obtain employer signature. • Delivery of the administration manual. • Delivery of the employee handbooks. • Delivery of the network directories. • Delivery of the i.d. cards. • Review the claims process.