Benefits March 10, 2011

Employers Revamping Health Programs in Anticipation of Changes

March 10, 2011 (PLANSPONSOR.com) - According to the findings of the 16th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care, many employers are taking bold actions, and implementing new health benefit program changes to drive employee and provider accountability.
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According to a press release, in 2011, total health care costs per active employee, on average, are expected to reach $11,176, up from $10,387 in 2010. Employers pay 36% more for health care and employees contribute over 45% more than they did five years ago.   

To mitigate costs, employers are redefining their financial commitments to health benefits by redesigning programs to incorporate enhanced point-of-care consumerism, positioning incentives more aggressively and redefining the employee versus dependent subsidy, Towers Watson said. Further, coming changes in the pre-65 and Medicare marketplace are fueling some employers to reconsider their commitment to retiree medical sponsorship.  

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Among the notable planned benefit design changes cited in the survey are: 

  • Dependent coverage subsidies: 68% are moving to increase contributions for dependents, with 19% targeting per-dependent contributions, and 35% using or planning to implement spousal waivers or surcharges. 
  • Retiree medical coverage: 26% of employers plan to cease employer sponsorship; 25% plan to convert a current subsidy to a retiree health account, and 23% plan to eliminate employer-managed drug coverage for post-65 retirees and rely on Medicare Part D plans. 
  • Incentives for high-value providers: 28% of employers plan to differentiate cost sharing for high-performance networks or centers of excellence in 2012, and 21% plan to adopt value-based designs over the next year. In addition, 18% plan to offer incentives or penalties to providers for coordination of care, use of emerging technologies or use of evidence-based treatments. 
  • Accountability for engagement: A third of employers plan to reward or penalize their employees based on biometric outcomes (for weight and cholesterol), compared with just 7% in 2011 and 6% in 2010. Social media is one of the emerging creative strategies employers (9%) are using to improve employee health and well-being. 

Employers Pushing Account Based Health Plans  

Recognizing the financial benefits for the business and their employees, employers are continuing the shift toward Account Based Health Plans (ABHPs) according to the findings of the 16th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care.  

In 2002, just 2% of all employers offered ABHPs, but by 2011, that number jumped to 53%. By 2012, another 13% of all respondents plan to add an ABHP.   

In addition to effectively lowering employer health care cost trends and helping employers delay costs related to the implementation of the 2018 excise tax, these plans can offer employees the ability pay for current costs while giving them a wealth-accumulation vehicle for retirement, Towers Watson said in a press release.  

Employers are trying to encourage ABHP adoption by offering employees significant reductions in premium contributions. For example, the survey found 56% of employers set their employees’ ABHP premium contributions at least 20% lower than contributions for their traditional plan, and more than one in four employers (26%) cut employee premium contributions by more than half when compared with other plan types.   

Companies that added 10% or more employees to their ABHP between 2009 and 2010 held their health care costs nearly flat, and the companies that were most successful at driving ABHP adoption reduced their costs by nearly $1,000 per employee.  

The Towers Watson/NBGH survey also revealed that employers believe the opening of insurance exchanges in 2014 will have some impact on their active (70%) and retiree (78%) medical programs. In addition, more than a quarter of employers (27%) believe the opening of the exchanges will have an extensive impact on their retiree plans. The implementation of the excise tax is expected to have an impact on both active (81%) and retiree (66%) medical programs as well, with 24% and 20% of employers anticipating an extensive impact on their active and retiree programs, respectively.  

While the excise tax will not take effect until 2018, Towers Watson research has shown that, if current average annual cost increases continue, 60% of companies will reach the taxable level by 2018, and companies that take strategic actions now will have a distinct competitive advantage, the company contends.  

For the full survey report, visit http://www.towerswatson.com/hcreport2011.
Products March 10, 2011

ING Offers Alternative to Help Recruit Key Talent

March 10, 2011 (PLANSPONSOR.com) - The ING Life Companies (ING) are introducing a new solution to give employers a way to recruit key talent by helping key employees prepare for their retirement income needs.
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According to a news release, Self-Owned Life and Retirement (S.O.L.A.R.) Insurance Arrangements offer a life insurance policy to key employees funded through employer contributions, after-tax employee contributions, or a combination of both. This arrangement can help reduce the risk to the employer while providing more flexibility for the employee, ING said.   

Key to the new arrangement is the idea that the employee may borrow from a life insurance policy to help pay the employee’s current income taxes.  

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“Some traditional nonqualified plans simply aren’t getting the job done in today’s environment.  Employers want to get rid of the complexity associated with these plans and employees want more control over their retirement benefits,” said Kurt Fasen, senior vice president and head of Insurance Sales Support, ING, in the announcement. “S.O.L.A.R. Insurance Arrangements are simpler for the employer, and it puts the insurance policy in the hands of the employee.”    

ING explains that for many years, the preferred method of rewarding key employees was through nonqualified deferred compensation funded with life insurance, but these plans have a potential negative impact on the corporate balance sheet since the employer must record the promised benefit as a current liability.  Insurance companies responded to this need by developing specialized life insurance products for corporate-owned life insurance (COLI).    

ING has introduced S.O.L.A.R. Insurance Arrangements to aid employers retention of key employees by helping to fund supplemental retirement income with a cash-value life insurance policy.  While COLI-specific products were developed for nonqualified plans, ING has developed a new product for S.O.L.A.R. Insurance Arrangements, ING’s Indexed Universal Life-Global Plus (ING IUL-Global Plus), issued by Security Life of Denver Insurance Company.   

Similar to ING Indexed Universal Life-Global launched in 2010, the product offers policy holders valuable death-benefit protection and the choice of a fixed strategy or an indexed strategy. The indexed strategy credits interest based upon a formula that uses a portion of the two better-performing of three indexes (S&P 500 Index, the EuroSTOXX 50 Index, and the Hang Seng Index) looking back over a five-year period.    

However, the new ING IUL-Global Plus also offers a “select loan” feature that allows the policy owner the ability to take a loan (with a fixed interest rate charge of 6% per year) from the policy that could be used to pay the income taxes owed on the compensation paid by the employer.  The loan amount remains in the fixed or indexed strategy elected by the policy owner. Because the amount borrowed remains in the crediting strategy, the cost of borrowing for taxes may be partially or wholly offset by the amount of interest credited to the account.

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