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1 IN THIS ISSUE New Congress in Volume Sixteen Issue One January 2013 New Congress in 2013 About the ViewsLetter... 1 Wellness Incentive Ideas... 2 Did You Know... 2 Your Questions... 3 Trend Tidbits... 4 Technical Corner... 5 President Obama was re-elected in November. The new Congress was seated in January. Because Mitt Romney had vowed to repeal the health care reform law, many employers were waiting to see if the law would survive. We now know that the law will not be repealed. Employers need to charge forward in considering health reform impact for Although there will be new members in Congress, its overall makeup will change little. Republicans retain the majority in the House of Representatives. The Democrats still control the Senate. No major changes will be made to health care reform unless Democrats support them. However, Congress may modify some of the less popular provisions of the law. Even with a favorable Congress, we can still expect battles over health care reform issues in the coming years. For example, many organizations are challenging the requirement to cover FDA-approved contraceptives. Some religious organizations want this requirement removed because it violates their religious About the ViewsLetter We welcome you to the first quarterly issue in Volume Sixteen of the McGraw Wentworth ViewsLetter. It is our mission to be the leader in the employee group benefits brokerage and consulting industry to mid-sized organizations. We have established the ViewsLetter as an integral part of our commitment to keep beliefs. Similarly, some private employers are challenging this requirement because it violates their personal religious beliefs. Some states are also considering legal challenges regarding the premium subsidies for moderate and low income individuals. State Exchanges must provide qualified individuals subsidies when they purchase coverage through the Exchange. The statute specifies that subsidies are available for anyone purchasing coverage through a state Exchange. In many states, the federal government will run the Exchange. The law does not explicitly allow the federal government to provide the subsidies. The federal government argues that states are responsible for providing the subsidies. The federal government is merely an administrator running the program for the state. Some believe the federal government does not have the power to make this determination. Continued on page 2 you informed of benefit trends, legislative and marketplace developments that may affect your group benefit programs. We welcome your comments and suggestions regarding the ViewsLetter. You can pass your comments directly to your McGraw Wentworth Account Director or Account Manager, or you can reach us at

2 New Congress in 2013, cont. The states play an important role in implementing many health care reform requirements. Many Republican-run states will refuse to expand Medicaid or create a state Exchange. Although the government has steadily released guidance over the last several months, it delayed releasing anything controversial before the election. Thus, employers need more details in order to evaluate their new options in Many of the more positive aspects of health care reform were included in the first wave of changes. These include covering dependent children up to age 26, expanding coverage for preventive care services with no cost-sharing and expanding appeal rights. Since many of these initiatives have been positive, it is remarkable that nearly half of Americans do not support this legislation. Most people do not understand the dramatic changes that will affect the health insurance market in The Obama administration has spent significant time marketing the positive aspects of health care reform, but has not talked much about the 2014 changes. The administration may need to begin a yearlong marketing campaign to inform Americans of the 2014 changes and their options. DID YOU KNOW? The most popular employer wellness initiatives were: - Flu shots (85%) - Health assessments (80%) - Smoking cessation programs (68%) The most popular fitness and nutrition programs: - Walking and fitness challenges (59%) - Weight loss/weight management programs (53%) - Nutrition counseling (40%) - Onsite fitness center or fitness equipment (26%) 87% of employers awarded incentives for participation in wellness initiatives Most frequent incentives used by employers: - Gift cards and gift certificates (38%) - Health insurance premium reductions (37%) - Non-cash options, such as raffles and prizes (31%) - Cash rewards (27%) Source: 2012 Wellness Programs and Value-Based Health Care Survey & Samples Series, International Foundation of Employee Benefit Plans The new administration may agree to compromise on certain aspects of health care reform. The projected costs of this expansive law are a legitimate concern. In addition, the country will face significant budget challenges in If President Obama wants Republican support in the House to pass a budget bill, he may have to agree to compromises on health care reform. One possible compromise could be delaying, reducing or phasing-in the premium tax subsidies the public Exchanges need to provide in 2014 and beyond. Other possibilities could be repealing the medical device tax or repealing a new tax on health insurers in Republicans in the House are pushing these repeals. However, the funds these new taxes raise would be used to pay for expanded coverage. If Congress repeals these taxes, the government would need to find another way to pay for health care reform. Clearly, employers must move forward with health care reform. Employers who waited for the Supreme Court decision and the 2012 elections will now have to catch up quickly. In fact, a good part of 2013 may involve learning about and evaluating the 2014 changes. All employers will need to make some changes in coverage. All employers will also experience new costs in These coverage requirements and new costs will need to be included in 2014 planning. MW Wellness Incentive Ideas Wellness plans were a cutting edge strategy just five years ago. Today, they are more common as employers work to keep health plan costs under control. Employers that have successfully implemented wellness strategies believe that they not only keep health plan costs in check, but also contribute to overall business success. Some organizations find it difficult to launch successful wellness programs. They need to analyze their programs to determine the specific barriers they face. In some cases, a lack of support from senior management contributes to failure. All levels of management should Continued on page 3 2

3 Wellness Incentive Ideas, cont. actively participate in the wellness program to encourage employee participation. Poorly implemented programs can hinder success. Incentives are often necessary to encourage employees to participate in wellness initiatives. Although healthconscious employees will usually participate even without incentives, the opportunity to improve health will not be enough to motivate many others. In fact, the employees who would benefit the most from wellness plans will often not participate at all without an incentive. Studies conclude that incentives do increase participation rates. However, for incentives to be effective, they must reward employees not only for participating but also for achieving health goals. How can you determine which incentives will motivate your employees to participate and change? The answer depends on your employees. You may want to consider incentives tied to different wellness activities or awarded at different stages of the wellness initiatives. The incentives picture is more complex than most employers realize. Employers must determine how to structure their incentives. They must also ensure that their incentives do not violate any laws. Employers should decide whether to offer a carrot or a stick. For example, an employer could offer a health insurance premium discount to nonsmokers or to employees joining a smoking cessation program. This carrot approach rewards employees for participating. Another employer may assess a health insurance surcharge if an employee is a smoker and refuses to enroll in a smoking cessation program. This stick approach penalizes employees for not participating. Whether they decide to use the carrot or the stick, the financial impact on employees will be the same. In addition, the tone of the incentive should match the tone of the wellness program. Most employers try to keep the tone of their wellness programs positive and encouraging. The tone, however, may evolve over time. If employees do not improve with incentives, some employers will begin to focus more on penalties. Employers also have to decide what behavior will earn the incentive. Will an employee earn the reward by simply participating in the activity or will the YOUR QUESTIONS employee have to achieve a health goal? The employer may want to build several incentives into the program to keep employees interested and active. The first incentive may be awarded merely for participating in the program. Others can be awarded during the course of the program. For example, if one activity is a team exercise competition, the employer could offer prizes for the first, second and third place teams. If employers have a weight loss competition, incentives could be provided for each ten pounds an employee loses. Continued on page 4 Q. The three self-funded plan options we offer our employees are grandfathered under health care reform rules. Our plan pays secondary to auto insurance in our no-fault state. The plan pays primary for injuries related to motorcycle accidents. Our state recently rescinded a helmet law. Motorcycle riders do not need to wear a helmet if they have at least $20,000 in medical coverage under their motorcycle coverage. Can our plan remain grandfathered if we begin paying for motorcycle accident claims only after the first $20,000 in medical coverage has been exhausted? We want to pay after the first $20,000 in claims, even if our employee does not have the medical coverage the state law requires. A. The grandfathered guidance released to date does not directly deal with this situation. However, if a plan stops covering services that had been covered on March 23, 2010, the plan would lose its grandfathered status. For example, if a plan covered gastric bypass surgery on March 23, 2010, and then excluded this coverage on January 1, 2012, the plan is no longer grandfathered. This situation is similar. The plan is excluding coverage for the first $20,000 of expenses related to a motorcycle accident. This is a significant cost shift to the member, even though the law requires the member to obtain that coverage through the motorcycle insurance carrier. Because the guidance does not discuss this issue directly, you should seek legal advice. However, excluding the first $20,000 for services related to a motorcycle accident would probably cause your plan to lose its grandfathered status. 3

4 Wellness Incentive Ideas, cont. Incentives do not have to be cash. You can be creative in developing them. For example, if you allow employees to wear jeans on Fridays, provide extra jean days or consider allowing your employees a day to leave early or arrive late as your incentive. If your company has a company store, employees can earn credits to purchase company merchandise. In addition, you may want to offer a discount on health insurance to employees who participate in a health assessment with biometric screenings. You could also award a paid vacation day for particularly significant accomplishments. The key is to offer incentives that will both motivate employees to participate and encourage them to make lifestyle changes. Employers need to make sure their incentives comply with state and federal laws. The following summarizes key considerations: Health Insurance Portability and Accountability Act (HIPAA) Nondiscrimination: HIPAA rules apply to wellness plan participation incentives. A separate set of criteria applies if the health plan rewards employees when they achieve a specific health factor. Americans with Disabilities Act (ADA): The ADA rules stipulate that any medical exams employers require must be voluntary. Requiring tests such as biometric screenings to be eligible for health coverage may render the exam mandatory. The EEOC has not issued direct guidance on allowable parameters, but employers need to be mindful of ADA rules. Genetic Information Nondiscrimination Act (GINA): GINA rules cover the use of genetic information. Essentially, to avoid GINA issues, answers to any family health history questions on a health assessment must be voluntary. State law: States laws may affect wellness plan incentives. For example, some states will not allow employers to charge smokers more for their health insurance. The federal and state laws regarding wellness incentives can be complex. More details on these laws can be found at com/benefit_advisor/2012/ BA_Issue_2.pdf. Employers need to review their wellness plan initiatives and incentives annually. The goal is to motivate your employees to improve their health. Well-chosen incentives can be the key to increasing participation and achieving health goals. MW TREND TIDBITS $ PPO plans are projected to increase 8.3% with Rx coverage and 8.8% without Rx coverage in $ HMO plans are projected to increase 7.9% with Rx coverage and 8.2% without Rx coverage in $ High Deductible Health Plans (HDHPs) are projected to increase 8.6% with Rx coverage and 9.1% without Rx coverage in $ Indemnity plans are projected to increase 10.0% with Rx coverage and 10.8% without Rx coverage in $ Prescription drug carve-out plans are projected to increase 6.4% in Source: 2013 Segal Health Plan Cost Trend Survey Continued on page 5 4

5 Technical Corner Employers and Social Media Passwords Some employers are requiring employees and applicants to provide social media passwords. These employers want employee passwords, in some cases, to investigate employee misconduct. They want access to applicants social media to make sure the applicant is a good fit. Some employers consider requesting these passwords to be an invasion of privacy. However, very few laws govern social media. Michigan recently passed a law that prohibits employers and educational institutions from asking for passwords to social media sites and personal accounts. California, Maryland and Illinois employers cannot access employees and applicants social networking sites. Nine other states and the federal government are considering similar laws. California s law is particularly stringent. It prohibits employers from requiring or requesting employees or applicants to: 1. Disclose social media usernames or passwords. 2. Access their social media in the presence of the employer. 3. Divulge any social media. Employers cannot retaliate against an employee or applicant for refusing access to personal social media. The California law has two exceptions. First, employers can require employees to disclose user names and passwords in order to investigate employee misconduct or violations of the law. Second, employers can require an employee to disclose the user name and password for employer-issued electronic devices. Employers need to learn about the new Michigan law and the laws in other states they may have employees. Employers should also be aware of any pending legislation designed to protect the privacy of employees and applicants social media activity. Many employers already have policies that apply to employees using social media as part of their jobs. Employers may want to consider carefully whether it makes sense to revise these policies. Most employers do not want access to employees personal social media sites. MW Copyright McGraw Wentworth, a Marsh & McLennan Agency LLC company. Our publications are written and produced by McGraw Wentworth staff and are intended to inform our clients and friends on general information relating to employee benefit plans and related topics. They are based on general information at the time they are prepared. They should not be relied upon to provide either legal or tax advice. Before making a decision on whether or not to implement or participate in implementing any welfare, pension benefit, or other program, employers and others must consult with their benefits, tax and/or legal advisor for advice that is appropriate to their specific circumstances. This information cannot be used by any taxpayer to avoid tax penalties West Big Beaver Road, Suite 200 Troy, MI Telephone: Fax: McGraw Wentworth 250 Monroe Ave. NW, Suite 400 Grand Rapids, MI Telephone: Fax: