© Crawford Advisors, LLC. 2013.

Today’s healthcare system is complex and ever-changing. With rising costs of care and tough economic conditions, CFOs are consistently faced with the challenge of managing an effective Employee Health and Welfare Benefit Plan – One that appropriately balances the budgetary needs of the organization and the individual needs of its workforce.

So what do modern CFOs need to avoid?

Here are the 7 Most Dangerous Employee Benefits

Trends Facing CFOs Today…

Dangerous Trend #1. Fundamentally Flawed Design of the Plan

While the lion’s share of respected benefit professionals agree with many of the predictions made about the immediate future, it is alarming to see a number of traditional plans still in force.

Traditionally, controlling cost meant making changes year-to-year that included:

Lowering company contribution Raising employee deductibles Raising employee out-of-pocket maximums Bidding or changing insurance or reinsurance carrier Increasing waiting periods, etc…

While it’s important to evaluate these items, it should only be part of your initial planning stage and not part of your long term strategy. Limited to these options, your plan WILL get worse and eventually all value in the plan will be diluted.

Modern plans that consistently outperform their peers combine the right funding methods with a number of plan options to meet the unique needs of a diverse workforce, while driving employee participation for maximum return on investment.

Just as it is a misconception to believe that self-funding (in any variation) is only for the largest of companies, it is false to assume that the needs of your 20s something employees have needs similar to your 60s something employee.

Understand your corporate culture and long term goals and plan accordingly.

Is the plan meant to satisfy the minimum essential benefit, match competition or offer above-average benefits to recruit and retain top talent?

Dangerous Trend #2. Crippling Costs of Communication Breakdown

Every company is legally required to provide, or make available, certain documents relating to the plan. The Summary Plan Description (SPD) for example – how many of those have you read? Do you believe that your employees read them…or see value in having received it?

Legalities aside for now, the primary role of a communication strategy is to educate employees on how to effectively use the plan.

ARE EMPLOYEE BENEFITS COMMUNICATED EFFECTIVELY TO HELP EMPLOYEES MAKE GOOD DECISIONS?

EMPLOYERS – Just 37% said YES

EMPLOYEES – Just 34 % said YES

2013. The Guardian Life Insurance Company of America.

Financially, thousands of dollars are attributed to medical waste as a result of employees not understanding their benefits or how to use them. Not to mention the value perception that is attributed to the benefit plan.

Consider this. Two companies are compared to determine the value their respective employees attribute to their actuarially identical employee benefits package.

Company A Company B Offering Above-Average Benefits

Package Above-Average Benefits

Package Frequency Monthly communications Annual communications Delivery Multiple mediums/channels Printed packet Perceived Value/ Appreciation

83.6% 25.9%

Many businesses spend considerable time, effort, and money to train an employee, only to have them develop into a valuable commodity and leave the company for what they perceive to be a “better deal.”

Dangerous Trend #3. The Profit Pitfall of Data Deficiencies

Information is King! One of the most prevalent advantages to some form of self-funding arrangement is the access to data. This access enables deep analysis into the true cost drivers that impact a plan. Its accurate dissemination is paramount in avoiding financial ruin.

On the other end of the spectrum, fully insured plans lack deep access to data (particularly claims data) but still provide insight into trends of the organization.

Regardless, it is proven that the effective analysis of information equates to significant differences in an employer’s annual cost outlay. A study performed by Towers Watson found that:

Percentage of Employers using a data warehouse to analyze and

apply findings in plan decisions

500 Employees = 23%

20,000 Employees = 61%

In the past it was argued, and maybe substantiated, that smaller margins and economies of scale prevented an employer with as few as 500…or even 200 employees to invest in advanced technology such as a data warehouse. However today, there are modern benefit firms and benefit administrators that make this tool much more accessible. And the monetary outcomes can be significant, as found in the study:

Employer’s cost per employee per year (PEPY)

500 Employees = $6,618

20,000 Employees = $4,870

A thorough evaluation on the behalf of a new client revealed that its previous consultants had failed to quantify the true cost of a number of ongoing claims. Inaccurately calculating it’s Incurred But Not Reported (IBNR) claims resulted in an otherwise avoidable lack of contributions from employees to hedge the additional cost that inevitably followed.

Dangerous Trend #4. Expensive Failure to Embrace New Technologies

The digital age has changed the entire business landscape, however many organizations are still living in the stone-age when it comes to embracing technology.

Admittedly, it is nearly impossible to stay on top of the advancements in technology as seen in almost every aspect of our lives from appliances to consumer electronics. However, the tools available to assist in the administration and education of employee benefits are necessary.

Research by multiple organizations including the DOL, SHRM and Forrester undeniably conclude that a significant amount of time and energy is wasted, primarily among members of Human Resources, focusing on non-essential tasks.

An internal study concluded that roughly 9.25 hours every year is spent on administrative duties with EACH employee. Supporting this finding, is a Forrester study that estimates the average HR department devotes only 20-40% of their time on strategic activity; while the remaining time is spent on administration.

Notwithstanding the monetary value of time, errors are significantly more common in more antiquated systems. Unnecessary risks include:

Overpayment of premiums due to: a) data entry errors; b) eligibility errors; and c) the absence of streamlined premium reconciliation

Errors resulting in denials of coverage Vendors not receiving member information accurately or timely Lack of reliable audit and validation processes to verify coverage Excessive employee confusion and waste from the use of paper benefit

election forms and confirmation statements

Additionally, the perception value employees have of the plan is diminished simply due to its delivery system.

The impacts resulting from employee benefits data reporting, online enrollment, multi-media comparisons, FSA/HRA administration, etc. place companies that do not have these tools at a competitive disadvantage.

Dangerous Trend #5. Haphazard Approach to Employee Health

At its root, there are two types of organizations; those that believe in wellness programs and those that don’t.

Whether you are part of the latter group that is just unconvinced your population will go for it or you have dipped your toe in the water with a weight challenge; education and participation can and does have a significant impact on employee morale, productivity and more importantly–cost.

One of the most common mistakes I see each time a prospective client engages me to evaluate their situation is the failure to formalize a plan. A wellness strategy is not different from your business; it must adhere to a scheduled and measurable plan to be effective.

Secondly, having a plan that is not tied to the overall benefit design can have adverse financial effects and will likely result in low participation. Doing something is often better than nothing, but without proper design and established metrics it is impossible to report on progress – let alone calculate an accurate Return on Investment.

Let’s look at the impact of a client that began a well-structured wellness plan.

This graph depicts the same company divided into 3 groups of employees. Focus on the red bar (those with 5 or more risk factors):

In 2008, more than 50% of the population had 5 or more risk factors.

After 3 years, less than 20% of the population had 5 or more risk factors.

Had this company continued on its pre-wellness plan path, it is likely to deduce that the population would have continued to age and get sicker, thereby increasing the number of employees with 5 or more risk factors– ultimately leading to increased claim volume and expense.

Dangerous Trend #6. Playing With Fire – When Your Plan Falls Prey to

Government Penalties

The Patient Protection and Affordable Care Act (PPACA) was written into legislation on March 23, 2010 and with that came a series of mandates for companies and individuals alike.

Here, we’ll highlight some of the largest mistakes found that carry the most common and most painful fines.

Failure to Maintain Required Plan Documents ($110 up to $1,110/ participant/ day)

Any plan that details compliance with the Employee Retirement Income Security Act (ERISA) rules such as: claims procedures, eligibility provisions and summary plan descriptions (SPDs) need to be maintained. 99% of the time, insurance contracts are not sufficient to meet ERISA’s standards. Failure to Retain Related Documents ($110/day/employee) ERISA requires that employers keep them for at least 6 years. Some states have even longer statutes of limitation. This includes amendments to original plans, open enrollment materials, payrolls, bank statements, ledgers, contracts and worksheets. Retention is the employer’s obligation and responsibility, not the insurance carrier or third party administrator. Failure to File Form 5500 Each Year ($2,000 plan/year)

Required for plans with more than 100 participants. This includes, but not limited to Medical/RX, Dental, Vision, Life, Disability, Severance Plans, Employee Assistance Plans and Travel Accident Policies. At minimum, it must contain number of people covered under the plan, the amount of assets in the plan, the identification of plan providers, paid premiums, commissions and fees. Health Insurance Portability and Accountability Act (HIPAA) ($2,500/incident of

noncompliance/standard)

The DOL is becoming more vigilant about enforcing compliance. Auditors come to the company offices for 3-10 days and go over its HIPAA documentation with whoever is responsible for monitoring compliance standards under the law.

Dangerous Trend #7. Not Watching the Watchers. Inadequate Care

Management

The financial risk associated with managing highly variable, high-cost conditions is a growing concern for most organizations. With the growing cost for more complex operations, methods of treatment and prescription drugs; managing the effective use of care is big business.

Too often it is found that an insurance carrier or third party administrator identifies a claim at a level too high to impact the course of action an individual may be on. For instance, once a participant reaches the $25,000 mark, it triggers a disease management or care management system, followed by their outreach and intervention program. However by this point, the actual amount including claims Incurred But Not Reported (IBNR) is far greater. Furthermore, the predicted final cost for the diagnosis to result in recovery, continued treatment or death is even greater still.

Programs that set event triggers at much lower levels of $10,000 or even $5,000 have a much greater chance of managing the diagnosis and delivering care more efficiently.

A study conducted by Milliman reported that the cost of each transplant now averages $472,000. While lifesaving to the individual, transplants represent extraordinary financial risk to employers. With a combination of the right coverage and a well designed managed care program, the cost of the transplant may be reduced by 51% or more – resulting in a final charge of $231,800.

Cancer accounts for one out of every four deaths in the United States according to the American Cancer Society with costs expected to rise up to 66% by 2020.

Lack of the right care management program that successfully negotiates the most successful caregivers while partnering with individuals to make more informed decisions could likely result in less favorable outcomes with up to 43% greater costs.

Would You Like Me To Personally Reduce Your Costs, Increase Your Efficiency

and Improve Your Ability to Recruit... For Free?

I'm looking for a “dream” client that I can bring in massive windfalls for… If you're that client, my team and I will personally work with you one-on-one in your business to help you drastically improve the financial outlay and management process of your group health and welfare plans. The first thing I'm going to do for your business is to personally identify where you have short and long-term opportunities for cost savings and plan improvement. There's no charge for this and it only takes about 60-90 minutes for us to do together. With 125 years of experience within my team, we've gotten pretty good at producing tangible results…quickly. Anyway, I'll even do most of the heavy lifting for you... Telling you exactly what to do, when to do it, how you compare to competitors, and how to ensure your plan out-performs local, regional and national benchmarks. At the end of this initial planning session one of these two things will happen: 1. You love the plan and decide to implement it on your own. If this is the case, I'll wish you the best of luck and ask that you keep in touch with me to let me know how you're doing. 2. You love the plan and ask to become a client so I can personally help you execute, maximize, and benefit from it ASAP. I fully understand that your time is the most valuable asset you have, and I respect that.

As with every organization that has engaged me in this process, you will see tremendous value in this process. Regardless of whether you become a client or not. The worst that can happen is that you receive an unbiased strategic plan from a nationally recognized team of employee benefit experts. And on the other hand, we immediately begin executing the details of our plan to drive a greater return on investment for the healthcare dollars being spent. Period. It’s that simple. Here’s how it works: First, we get on the phone and discuss whether this opportunity is the right fit for your organization. If mutually agreeable, we meet in your office for a structured consultation we call Discovery. I will ask a series of fact-gathering questions to determine your strengths, dangers and opportunities across 11 critical areas proven to impact plan cost. Once I have that “raw data”, my team prepares a 36 month plan built for maximum impact and immediate execution. This plan, called a Blueprint, is a tangible and executable plan with specific strategies built specifically for YOU to save time and money. There are a number of ways I might do this for you. For example, I might show you how to redesign your plan for better pricing, coverage, participation... How to budget and predict future costs...

How to increase productivity and free up the time of your HR department to focus on more strategic activities... How to drastically improve employee perception value to give you an edge in recruiting and retaining top talent… How to remove concern and eliminate compliance risk – both governmentally and contractually… How to effectively structure and tie a wellness plan into your contribution strategy with greater than 75% participation… And if you have a solid foundation… We will be able to take the plan’s performance to the next level. And like I said, there’s no charge for this. So why would we offer this? First of all, it works. I have helped numerous companies reduce their healthcare costs and achieve a greater return from their health and welfare investment. Secondly, it is how I attract new clients. A certain percentage of the companies I engage will hire my firm to implement the details of the Blueprint. It is our way of providing tremendous value to an organization we believe may be a long-term partner… …While providing a virtual test drive of our intellectual capital and award-winning resources to achieve the greatest impact in the shortest amount of time. Typically, my firm’s compensation for actual full-service brokerage, consulting and administration is covered by the commissions and/or fees already being paid to the incumbent broker.

In many cases, there is an actual cost savings to receive more value! We are able to do this because we are a true “in-house” broker. We do not outsource our technology, compliance, administration, communications, etc. And if at the conclusion of our meeting, you determine not to hire us… There are no hard feelings or an impending sales pitch coming your way…EVER. Our model is boutique in that we only look to bring in a small number of clients each year and exceed their expectations. In fact, most of our client base is made up of industry leaders that send in glowing remarks and understand the value of a true benefits partner. This process works, and if we work through this together, I guarantee you’ll be thrilled with the results. However, this process is NOT for everyone. You need to have… 1. At least 100 US based employees on the health plan. 2. The ability to implement strategies or influence decisions (after all, you will not see results if you are unable to execute the plan). 3. View employees as an asset and not an expense on a balance sheet. That’s it. If you fit these criteria and would like to discover your healthcare plan’s “True Bottom Line” here is what you need to do: You need to fill in some information. (Don’t worry it’s nothing intrusive) I just need to know some of the basics commonly found on your 5500 filing and what your goals are. I will then personally reach out to you to schedule our first call that will last anywhere from 10 to 30 minutes.

Afterwards (and if it is the right fit), we will schedule time for your Discovery meeting in your office. Time is a factor. Because of the hands-on nature and amount of time I invest in building unique strategies, my time is limited to the number of organizations across the U.S. I can help. Therefore, it is physically impossible for me to work with more than a handful of organizations. If you feel this is the right fit and worth exploring, click this link to leave me your information and let’s talk… http://www.crawford-advisors.com/advantage You may be wondering what you would get as a client? In addition to our extensive value-add model and millions invested in technology, our people make the difference… Each client has direct access to our full-time Consultants, Underwriters, Graphic Artists, Communication Writers, Account Managers, Customer Service Representatives (2), Systems Analysts, Operation Managers, and an ERISA Attorney. I don’t know if you were counting, but that’s 10 full-time professionals that are financially tied to your plans’ success. We built our full-suite of services by listening to our clients over the last 35 years. Aimed to solve every issue facing benefits management, some of them include… Brokerage | Plan Design | Benchmarking | Customer Service Center | Data Warehouse™ and Predictive Modeling | Branded Enrollment Site | HRIS Platform | Dashboard Reporting | Avatars and Onsite Education 24/7 Website, Mobile App, Etc. | Branded Communication Strategy Compliance | Private Exchange Platform… There are virtually countless others but they mean nothing if they do not directly apply to your unique situation.

That is why this process is so impactful. It effectively pairs 2 organizations that share a common goal of successfully EXECUTING a plan that drives reduced costs and increased value. Complete the form on the below link and let’s talk. http://www.crawford-advisors.com/advantage To Your Success,

William J. Grossmiller, V CrawfordAdvisors, LLC (800) 451-8519