Employee Benefits Feed

Employer Life and Disability vs. Other Policies

Shutterstock_380394427One of the questions we’re often asked is why considering purchase a policy for life or disability when those are benefits offered by an employer. Today, we’re going to unravel that mystery.

It Doesn’t Have to Be Either/Or

Typically, employer policies are small (for instance, 1-2x salary for a life insurance policy – which isn’t nearly enough coverage for most people) and you don’t have to go through underwriting unless you’re looking for a larger amount. Premiums are usually paid on a pre-tax basis. In other words, securing this coverage is pretty quick and painless. It’s worth considering for this reason. You can then supplement this coverage with a policy outside of your employer. While most don’t realize it, your professional or alumni association can be a good source for these policies.

If you have medical conditions that make you believe you might be turned down for an outside policy, an employer plan is a very good option for at least securing some coverage.

The Downside to Employer Policies

Your Employment Isn’t Usually Forever

First and foremost, there is no guarantee you’ll be with your employer forever. These policies almost always terminate when you leave the company. If you’ve been with the company for a while, health issues may have crept up that make getting an individual policy difficult.

But What if It Is

If you retire at age 65, chances are you’ll still want to have a policy in place, but your coverage may terminate with retirement.

The Tax Man Cometh

In the case of disability coverage, employer plans present an interesting (and not so pleasant) quirk. You’ve paid for your premiums with pre-tax money and let’s say the benefit is 60% of your salary, which is about the norm. Sure, living on 60% of your salary would be tough (particularly if you’re paying on medical bills relating to your disability), but it’s reasonable to think it’s doable. But wait…there’s untaxed money out there and now is the time that the tax man cometh. That’s right, your 60% of salary benefit will be taxed – meaning you’ve got much less to live with than you may have counted on. This is not usually the case with disability policies secured outside of the employer environment because the policy was paid for with money that’s already been taxed. This allows you to realize the full benefit amount (in our example here, 60%).

You Could Probably Do Better

Since any employee can secure coverage without underwriting, there’s a chance these rates aren’t the best you can get. Underwriting ensures you’re a good risk and therefore, rates are usually less expensive when you have to go through it.

Only you know your exact circumstances and if any employer plan, external plan or both are right for your situation, but we hope this post helps you understand the differences so you can make an informed decision.

Understanding Insurance Underwriting

Shutterstock_223155742When being presented with an insurance offer, you’re likely to encounter one of three scenarios:

  1. The offer doesn’t require an application and states that you cannot be turned down for coverage.
  2. An offer with a series of around 3-5 short questions, typically requiring a “yes” or “no” answer.
  3. An offer that includes a full application.

The first scenario is what’s called “guarantee issue.” If the product is individually underwritten, you may pay higher rates due to the increased risk to the insurance company. In a group plan (such as through an association), the rates are normally unchanged. In a plan such as dental or vision, it’s very common for the plan to be guarantee issue at all times. For life or disability insurance, these offers are usually only offered at very infrequent intervals – maybe only once every other year. These offers can be to add onto your existing coverage or to start a new policy. It can be a quick and simple way to add to your insurance portfolio with minimal effort.

The second scenario, with several “yes” or “no” questions is “simplified issue.” These questions are often referred to in the insurance world as “knockout questions” because the insurance company may consider a “yes” answer to any of the questions as disqualification for coverage. This isn’t always the case though. Certain “yes” answers may be okay or it may trigger additional underwriting activities.

Lastly, when you receive a full application, this is called “fully underwritten.” In some cases, the application information will be enough for the insurance company to approve or deny your coverage. More often than not though, they will have a paramed appointment set up with you where the company will come to the location of your choice and collect blood and/or urine samples. For very large policies, you may also have to go through financial underwriting to prove that the policy isn’t unreasonable in comparison to your assets. For instance, if you make $30,000 annually, the company may not approve a $2 million policy. It’s important to note that the fully underwritten process can take a bit of time to complete; thirty to ninety days is not completely unheard of.

We hope that this blog helps you to understand the different types of insurance offers you may receive. Of course, if you have additional questions, please feel free to comment, send a message or call us.

How to Promote your Association’s Insurance Member Benefit Program

Shutterstock_28378954Associations are now realizing that their membership is no longer made up of the “joiner” generation. It’s increasingly more difficult to keep membership flat, much less growing. Those ahead of the curve realize that they must demonstrate the value of membership through as many tangible benefits as possible, including having an insurance program. The key to making it a “sticky” member benefit is promoting it properly.

Back in the day, associations could just link to the insurance program off of a benefits page, maybe send out a direct mail piece or two, and call it a day. Unfortunately, that strategy has limited reach, assumes members already know what they are looking for, and that they are ready to buy. The key to today’s successful programs is an omnichannel approach that leans heavily on educating members. This not only brings visibility to the insurance program, but provides an additional benefit of positioning the association as a resource for items beyond the core mission.

Here are some steps to help promote your program more effectively:

  1. Consider sending emails to support direct marketing efforts. Consumers are bombarded with so many messages these days that it’s necessary to meet them multiple times in multiple channels to get their attention.
  2. Meet regularly with your broker to discuss opportunities for promotion. Many of these opportunities don’t cost the association a dime, yet provide valuable visibility to get the word out.
  3. If you have a last minute opening for content, call your broker and ask what they can provide. They likely have educational articles, blogs, videos and other content at the ready.
  4. Ask if your broker is willing to set up a content portal for you that will enable your association to self-serve pre-approved content at any given moment.

Particularly as members now want to be educated and not marketing to, it’s necessary to shift the mindset of both the broker and association to finding opportunities to do so. When executed properly, members don’t see the messaging as helpful and welcome content.

Should Employers Change Their Policy Year to Delay ACA Compliance?

by Brian McLaughlin

Shhealth insurance change sign_133335902The definition of a "small employer" will change on January 1, 2016 from a firm with up to 50 employees to one with up to 100 employees. As a result,  several insurers are encouraging employers with 51-100 full-time employees to convert their policy years in order to delay Affordable Care Act requirements that apply to non-grandfathered group health plans. Before your company makes any changes, here are several compliance issues to consider:

Beginning in 2015, large employers can be subject to a penalty if they fail to offer affordable, minimum-value coverage to all full-time employees. Final rules provide relief for mid-sized employers to delay the employer penalty until 2016. The transition relief applies to all calendar months of 2015 and 2016 that fall within the employer’s 2015 plan year. It will cover non-calendar year plans only if the employer did not modify the plan year after Feb. 9, 2014 to begin on a later calendar date (e.g., changing the plan year’s start date from January 1 to December 1).

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Employers Face Looming Reporting Deadline

ACA_236908606by Brian McLaughlin

While the new reporting forms required under the Affordable Care Act’s employer mandate rules are not due until January 31, 2016, employers should be collecting the data now.

The code requires applicable large employers (ALE), those with 50 or more employees, to complete Forms 1094-C and 1095-C that detail offers of health coverage to full-time employees (FTEs). It also requires self-insured employers to report information on everyone covered by their health plans. The IRS uses the forms to determine the following:

  • Does an employer owe a penalty payment under the employer mandate?
  • Is an employee eligible for subsidies to purchase coverage in the marketplace?
  • If  an individual has minimum essential coverage (MEC) in order to avoid a penalty tax under the individual mandate.

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