Posts from — May 2010

It may be easier than you think to eliminate a major reason employees sue.

How? Well, roughly 75 percent of staff member lawsuits happen because of accidental disconnects between an employer’s internal policies and procedures, and what’s written in the plan documents.

Here are two areas where some the costliest errors lurk, and three steps your fim can take to catch and correct the mistakes before you’re ever sued.

1. Policy/coverage discrepancies

A lot of firms’ written benefits policies and plan documents are like siblings who begin to drift apart as they grow up.

In the benefits realm, nonetheless, the plan sponsor has the “parental” power - and legal responsibility - to make certain written policies and plan documents remain close as they grow and change.

As a routine practice, firms should be certain changes in their benefits policies are also written into the formal plan documents, according to benefits attorney William Wright.

If push comes to shove in court, any inconsistency with plan documents can prove fatal for the company. Example -  Upper-level management passes a new rule that employees must work 30 hours a week to be eligible for the health plan.

Benefits and HR then write the new coverage policy into employees’ benefits  handbooks and hold meetings with workers to explain the change.

Now suppose an employee drops to part-time status. Are you legally protected if the employee challenges the loss of benefits?

Not necessarily. for the policy in  the handbook to stand up in court, the plan documents must also say there’s a 30-hour-a-week eligibility requirement.

Same thing goes for disputes over run-out coverage.  Suppose it’s your firm’s policy to carry over coverage for a terminated employee during the COBRA election period, but the requirement was never written into the plan document.

A few weeks later, the worker has a major health claim. the TPA denies it, saying coverage had expired. Reason -  the plan document says “active employees” are covered, but doesn’t specify that the insurer pay claims until the end of the month.

The likely result -  the ex-employee sues, saying the company is liable for the mistake.

2. Coordination of benefits

Watch out for cases where an employee’s claim might  be covered under two or more policies (e.g., your firm’s plan and one from a spouse’s employer).

Make certain there’s a clear-cut coordination-of-benefits policy in all of your plan documents. Normally, when a plan contains no instructions for coordination of benefits, it’s expected to pay first. Two key areas to check -

1. Be sure there’s a statement that says only the amount actually paid by each plan will be charged against the maximum benefit, and

2. Be certain that the order of benefits determination spells out which plan pays first for a covered child when the staff member is divorced from his or her spouse.

Similarly, if your firm offers domestic partner coverage, be sure there’s a coordination-of-benefits statement for dependent and non-dependent partners.

Three best practices

On an ongoing basis, you are able to cut your lawsuit risk by 75% when you -

• gather all materials related to specific plans into a binder, including renewal letters from providers and materials distributed to employees

• perform a each year self-audit, checking to see when plan-document wording matches your current policies, and

• pay special attention to keeping benefits descriptions up to date.

Reminder -  If you don’t have a formal plan document, your contract with the vendor legally serves as the “control document” for the plan. By law, all staff members must’ve access to the plan document and be notified in writing of any alterations, including minor ones.

Nine of 10 HR managers polled by Colonial Life feel that employees have at least a vague notion that benefits are a valuable part of working at a company.

Notwithstanding, the same study found that only 21 percent of those employers believed their employees had a strong understanding of the workings of their own benefits.  and 5 percent believed that their employees didn’t know anything about their benefit choices.

Implication -  the greater emphasis placed on staff member education, the more likely staff members understand the role of benefits in sum compensation.

Incorrect billing from health insurance carriers is more common than you may think. the average plan sponsor can get overcharged by 5 percent a year, according to brokerage and consulting firm Corporate Synergies Group.

Like most organizations, insurance carriers rarely keep perfectly up-to-date records on their patrons. as a result, plan sponsors often get charged for people  who shouldn’t be covered on the health plan. Here are two areas to watch -

Claims vs. enrollment

It’s common to have cancelled staff members still in the carrier’s claims eligibility system - even after they’ve been taken off your enrollment list.

Reason -  Many carriers use separate computer systems for tracking enrollment and claims - and the two systems use different technologies that don’t “talk” to each another.

Carriers have no incentive to upgrade their systems, as reported by CSG president Eric Raymond, because doing so would cost the insurers money.

Leaving things as is, carriers simply charge customers when they put through claims for ineligible staff members and dependents.

That’s why an annual claims audit is a must -  That way, you won’t get charged fees for claims the carrier accidentally put through.

Even when your firm outsources the work (it’s a rather time-consuming task when performed in-house), you’ll typically see several percentage points of savings on your total healthcare costs.

Dependent eligibility

Poor carrier record-keeping also could be the cause for employees’ ineligible dependents not being taken off the enrollment files.

Few carriers have systems that automatically integrate with your Payroll department and your current enrollment forms (including the electronic “employee self-service” kind). Instead, data entry individuals  employed by the carriers input the information in the vendors’ system.

Human error by the carriers’ workers costs plan sponsors another several percentage points. Solution -  annual dependent audits.

With the downturn in the economy, it seems like most organizations are shifting their focus when it comes to staff member benefits and compensation. the current situation is also very stressful on benefits managers.

In times like these, it’s crucial for peers to share their concerns, experiences suggestions. Several weeks ago, HRBenefitsAlert.com ran a special report on calming employees’ 401(k) fears.

The reader comments revealed that many benefits pros were just as afraid as workers, and people ’s frustration led to some unfortunate carping back and forth between several readers.

The purpose of the comments section, apart from giving individuals  the opportunity to react to the story, is to provide a forum for benefits managers to interact.

It’s my hope that we can generate an exchange ideas that have (and have not) been working at readers’ businesses during the current situation. Namely -

• What are you doing to manage health benefits costs as budgets are either frozen or shrink?

• Have you noticed a dip in morale or productivity with all the doom-and-gloom in the news?

• How is your corporation attempting to calm employees’ fears about salary freezes or layoffs, 401(k) losses, medical cost shifting and other issues that get a lot of mainstream media focus?

• What are you saying to employees to deliver the news they need to know but also keep morale high?

Thank you in advance for your willingness to share your expertise and personal experiences. Everybody benefits in the long run.

Few corporations benchmark their flu programs, a study  from the Disability Management Corporation Coalition locates. But those that do often discover room for improvement.

Almost 80% of companys provide workers access to flu shots, either onsite or at a local clinic. and 72% cover some or all the cost (typically paying between $10 to $20). But -

• at 89% of firms, fewer than half of workers actually get a flu shot

• at 38% of organizations, fewer than 25% of employees participate

• only 6% of firms are able to get at least 75% participation

• 87 percent of survey respondents said  they never measure absenteeism during flu season, and

• 75% never tracked whether workers who get flu shots are actually absent less often.

The firms that get best results are those that actively educate employees, track flu-related absenteeism and send sick employees home.

The fastest-growing use of EAPs since 2002 has been tied to employees’ financial worries.

Over the last five years, there’s been a announced 69 percent jump in staff member employee assistance program (EAP) use related to personal financial concerns. the trend is not all that surprising.

Statistics show that, for the first time since the Great Depression, the average American has negative savings - in other words, debt exceeds income - in a average month.

With salaries frozen in many organizations and many staff members racking up higher and higher credit card debt, the problem may continue to get worse.

Troubling trends

Here are some ominous numbers from a recent staff member survey -

• 27 percent of respondents said they were “one major setback away from financial disaster”

• 22% say they were “worse off than last year, with less take-home income and more debt”

• 40% say their employer is “insensitive to their employees’ financial needs,” and

• only 6 percent said they felt comfortable with their current financial situation and ability to manage their debts.

The majority of personal-finance related EAP use arises from concerns over debt management, household refinancing and/or failed investments.

The problem of presenteeism - workers showing up at work but taking a “mental vacation day” - isn’t going away any time soon.

A recent survey found the typical staff member has three unused vacation days after the year. But 33% admit that they sometimes take “unofficial” vacation days of a half-day or more.

Not surprisingly, the day after Thanksgiving, Christmas Eve day and December 26 rank one of the highest “presentee” days among companies (in particular in the white-collar realm) that remain open on those days.

In terms of the expanded question of presenteeism, what’s keeping people  from using their vacation time as it’s intended?  Top answers -

• supervisors frown on staff members taking vacation time

• there’s too much work to make up after using vacation time, and

• individuals  want to “reserve” time in case of an emergency.

On the flip side, many folks who take vacation time have trouble leaving work behind. One worker in four admits to checking work e-mail and/or voicemail while on vacation.

And 29 percent say they have trouble forgetting about work-related stress, even when they’re using compensated time off.

Among all industrialized nations, USA  employees receive the fewest yearly vacation days - 14 on average.

It’s tough to get employees to participate in benefit programs that they don’t even know exist.

Seventy-one% of staff members lack basic knowledge of standard benefit programs, as reported by a new study by the American Payroll Association (APA).

Low participation rates

The ASA study  focused on workers knowledge of their company’s pre-tax benefits. While nearly three quarters of workers say they live paycheck to paycheck, and would like to stretch their current salaries -

• 52% don’t participate in available flex spending accounts (and 6% of had never even heard of an FSA)

• 17 percent didn’t know their company offered a health savings account or health reimbursement arrangement (46 percent of those aware of the benefit still don’t participate), and

• 18% are unaware of existing transportation benefits or subsidies their business offers.

Compliance with health insurance portability and accountability act (HIPAA) non-discrimination rules is a big challenge for wellness programs. the old rules were unclear about which incentives passed muster.

That’s all changed, with the rules established earlier this year by the DOL and United States  Treasury Department. the rules themselves haven’t changed, but they’ve been clarified. Here’s what you need to know -

‘Participation incentives’ are fine

As long as you structure incentives as rewards for wellness participation, the new rules provide a lot of freedom. All of these are fine under HIPAA -

• reimbursing all or a portion of the cost of health club membership

• financial rewards for undergoing health risk (assessment|appraisal}s so long as the reward is based on participation rather than test results

• encouraging preventive care by waiving co-pays or deductibles for these services (i.e., well-baby visits or prenatal care)

• reimbursing employees for the cost of smoking-cessation programs without regard to the result, and

• offering rewards tied to staff members attending a monthly health education seminar or working with a health coach.

Conditional rewards OK if…

But what when you want to make the reward conditional on participants meeting specific health goals? Example -  Employees who achieve a cholesterol count under 200 get a 20% reduction in the cost of their medical plan contributions pending results of an annual cholesterol test.

The feds say it’s OK under health insurance portability and accountability act (HIPAA) to do this, too, but your plan must meet five additional requirements -

• the reward can’t exceed 20% of the cost of employee-only (or, when you allow dependents to participate, employee-plus-dependent) coverage under your health plan.

• the standards should be reasonable (e.g., you can’t limit rewards to folks who can run a marathon). the rewards also can’t be used as a backhanded way to adversely single out certain workers (e.g., rewards for all non-diabetics).

• Participants must’ve the opportunity to qualify for the reward at least once per year (e.g., a smoker who fails to quit this year gets another chance next year).

• Rewards ought to be available to all “similarly situated person.” In other words, you can’t make a company-compensated weight management program available to certain staff members but not others.

If, for medical reasons, it’s unreasonably challenging for an individual to satisfy conditions that are otherwise reasonable, you must offer an alternative. Example -  A pregnant worker may not be able to meet certain standards, so you must offer her an alternative.

Negative incentives violate HIPAA

So what’s not permitted under health insurance portability and accountability act (HIPAA)’s non-discrimination rules? Anything that punishes individuals  for their health conditions or health risks.

The rules prohibit companys from charging different premiums, contributions, co-pays or deductibles based on personal health factors like obesity or tobacco use. Nonetheless, it’s OK to reimburse these expenses based on someone’s participation in your wellness program, without regard to success.

In addition, the feds have added an important new non-discrimination rule -  Companys’ health plans can’t deny benefits for treatment of injuries resulting from a health condition, even when the condition wasn’t diagnosed before the injury.

For  instance, some health plans have a “suicide exclusion” that denies payment for treating self-inflicted wounds from a suicide try. Now let’s suppose the employee suffers from clinical depression. Even when the depression was undiagnosed before the suicide try, it’s illegal for your plan to deny benefits to this employee.

Ever set out to organize and dispose of old staff member files and paperwork in the office? the job is tougher than it seems.

Best practice -  Create a records retention policy as your first step. A host of federal and state laws specify how long you must retain pay- and benefits-related documents.

Compliance is essential when a current or former employee sues or the DOL, IRS or the state audits your records.

Here’s a records-retention schedule advised by employment lawyer Jacqueline McManus -

• Retain for two years employee personnel files, including performance reviews and training.

• Hold these for three years -  wage records, including time cards, base pay and overtime wage-rate calculations and records explaining wage diferentials for workers performing the same job, and hold I-9 forms for three years from hire date or one year after termination, whichever is later.

• Keep these four years -  all Payroll documents, including - home address records, and all wage records, including weekly OT earnings, straight time pay, deductions, bonuses, pay period designations and payment dates.

• Use a five-year retention window for worker health info such as medical and first-aid records from on-the-job injuries, and alcohol and drug testing records.

• Keep this benefits data for six years (or one year after plan termination) -  elections and enrollment forms, benefit change documents, and COBRA notices.

• Retain 401(k) files indefinitely.