Monday, June 24, 2013

Some Small Businesses Choose to Self-Insure

NorthBay Adventure is just the kind of small business that could be expected to buy medical insurance for workers under health act rules taking effect in 2014. But Executive Director George Comfort says that's not likely to happen.

Instead, NorthBay became self-insured last year, paying most workers' health costs directly, a practice more typical of large employers. The decision to self-insure was about free choice, savings and what's best for his company, Comfort says.

But others see it as a threat to the Affordable Care Act. As more small employers such as NorthBay avoid the act's requirements through self-coverage, small-business marketplaces intended to cover millions of Americans could break down and become unaffordable, they say.
"What you've got is basically a loophole for the small employer to get out of the ACA requirements," says Robert Laszewski, a Virginia-based consultant and former insurance executive.

To employees, medical self-insurance looks like a regular health plan. Self-insured employers pay for most worker health costs directly, though they contract with an insurer or other company to administer claims. The employers also buy coverage known as stop-loss for claims exceeding a certain amount. Brokers say a growing number of firms see such plans as low-cost alternatives to conventional coverage, as they're exempt from ACA requirements such as insurance taxes and specified benefits.

NorthBay, which is based in Maryland and delivers outdoors education to sixth-graders, saves some 45% on self-insured health costs for its 60 or so covered employees compared with the price of regular coverage, Comfort says. "We have a very young workforce," Comfort says. "Our average age is at or below 30. We have a very healthy group."

But if too many small companies take a similar route, insurance plans for small businesses will be stuck with older and sicker members, say policy scholars.

Under some conditions, such a dynamic could drive up the cost of traditional insurance by as much as 25%, says Matthew Buettgens, a researcher at the Urban Institute.

"If it becomes too easy to self-insure, you're inviting employers to choose one kind of coverage if their workers are healthy and a different kind of coverage if they're sick," says Mark Hall, a law professor at Wake Forest University.

Facing a conundrum

That undermines a basic feature of the exchanges: the "community rating" that obligates insurers to offer similar prices to all comers, spreading the cost of care among well and sick alike. In a worst-case scenario, small employers will self-insure when workers are healthy, avoiding community rating, then immediately buy price-controlled coverage on the exchanges if someone is gravely ill.

Health-act advocates especially worry that firms with fewer than 50 employees will self-insure. Those companies aren't required to offer policies under the health law, but many are expected to buy in online marketplaces, called exchanges, scheduled to open in October.

However, self-insurance might be the only way some struggling employers can afford medical coverage, says Michael Ferguson, chief operating officer at the Self-Insurance Institute of America, an industry group.

Even so, he disputes the notion that firms and stop-loss companies can "cherry pick" the system by self-insuring only when workers appear healthy. Even young people have accidents and get sick. He says companies often know less about employees' health than they think.

"The idea about employers gaming the system is just a canard," he says.

The key to self-insurance for small companies is stop-loss coverage, which often kicks in when medical costs per worker are as low as $10,000 or $20,000, limiting the employer's risk almost as well as a regular plan.

Brokers report brisk sales of self-insured plans and this backstop stop-loss coverage. "Last year, we saw a huge uptake of self-funded or partial self-funded business," says David Fear, a Roseville, Calif., consultant who helps brokers and agents issue stop-loss coverage.

The average size of self-insured companies that Fear handles is between 25 and 30 workers, he estimates. His business for firms with fewer than 100 employees doubled in the last year, he says.

A booming business

At BSI Strategic Consulting, a Fresno, Calif., firm that helps small companies self-insure, "our business has more than doubled in the last six months," says CEO Lawrence Thompson. "There's a lot more interest in self-funding than I've seen in the last 32 years."

At insurance giant Cigna, self-coverage for small employers grew by a fifth last year, says Julie McCarter, vice president of product development for Cigna Select, which sells medical stop-loss coverage and claims processing.

"A lot of it comes down to what's going on in Washington," says Donald Drelich, CEO of D.W. Van Dyke, a Connecticut insurance consultant. "People are seeing the cost of insurance rising because of the things that are being added (under the ACA), so they're exploring other possibilities."

Self-coverage is exempt from premium taxes, which are estimated to raise prices from 2% to 4%, as well as from the health law's "essential benefit" and community rating rules. Employers such as NorthBay's Comfort say that gives them the flexibility to tailor plans for their workers.

Officials in some states are trying to limit self-coverage. California, Rhode Island and Minnesota are considering legislation that raises the point at which stop-loss insurance kicks in, reducing or eliminating small firms' ability to self-insure.

Two years ago then-New Jersey Commissioner of Banking and Insurance Thomas Considine warned stop-loss insurers to cease "selectively marketing" to small employers with young workers. He pledged to issue regulations prohibiting the practice but, following industry protests, they were never published.

Last month, the self-insurance institute formed an alliance with the National Retail Federation and other business groups to oppose such measures. If the idea behind the ACA is to increase health coverage, such groups ask, why would anybody want to limit small businesses' ability to offer self-insured plans?

"To the employers, it looks like health insurance, it feels like health insurance, and it's less costly," says David Burton, general counsel for the National Small Business Association. "Do you want to set up a situation where an IBM or a GM can be self-insured — or even a small company with 100 or 150 employees — and the smaller guys don't have that option? I don't see the logic in that."

Monday, June 17, 2013

Summer Driving Tips for Teens (and Adults, too)



Summer months, specifically the period between Memorial and Labor Days, are historically the most dangerous for teen drivers, with the highest percentage of motor vehicle collisions. The roads are busy with vacationers, college students home from school and teens as they travel between summer jobs and social activities. We're put together 10 tips to help you beat the heat on the road and ensure a safe and fun summer.

Prepare yourself.

      1.  Watch your speed. While driving through neighborhoods and backing up, watch out for kids playing and oncoming cars. According to SmartMotorist.com, most accidents are caused by excessive speed or aggressive driver behavior. An advantage of taking it slow? A lower speed means better gas mileage, and more money in your pocket. Rapid acceleration and braking also waste gas.

      2.  Don't rush. Allow extra time for you to get to work or meet up with friends. There are more people on the road and speeding is still the number one cause of accidents, and was found by the NHTSA to be a factor in 31 percent of all fatal crashes. Defensive drivers get into fewer accidents and crash prevention programs like In Control in Massachusetts can offer you significant insurance discounts.

      3.  Respect trucks. Trucks on the road, especially bigger ones, have significant blind spots to avoid. The general rule is that if you can't see a truck's side mirrors, the truck driver can't see you. According to the Insurance Institute for Highway Safety, large trucks and commercial vehicles caused over 5,000 fatal crashes and over 100,000 serious injuries in 2010.

      4.  As the weather changes, your driving should, too. Always use headlights in the rain, and allow even more following distance between you and the next car (more than the general 3-second rule). See SmartMotorist.com's full list of rainy driving tips here.

      5.  Focus on the road. Save your calls and texts for after you are safety at your destination - nothing is that important, and if it is, pull over. Eating, putting on makeup and searching for music all add to the horrific statistics for casualties and injuries. Take a few moments to review these facts from the U.S. Government. For example, sending or reading a text takes your eyes off the road for 4.6 seconds. At 55 mph, that's like driving the length of an entire football field blindfolded. Distracted driving kills.

Prepare your car.

Rising temperatures can be tough on a car's mechanics so keep your car's owner manual close by. Keep the list for colder months, as many apply.

      1.  Test your car's battery. Hot weather can strain batteries, so if the vehicle's battery is more than three years old, test it at a certified car repair shop.

      2.  Get an oil change. Look for local Living Social or Groupon deals in your area, which often feature discounts on car services like oil changes.

      3.  Tire inspection. Remove snow tires if you have them on (many in NH and Mass. do), and check tire pressure (refer to your owner manual). Ensure that your tires are in good condition as this is critical to the safety of your vehicle; according to the NHTSA, approximately 400 fatalities may be due to tire failures annually. Not sure about your tires? Check out seven steps to determine when your tires need replacing.

      4.  Monitor fluid levels. Too little engine coolant/antifreeze can lead to overheating. Replenish brake, power steering and windshield washer fluid while you're at it. Antifreeze will be your best friend if your car overheats; you can buy it as most gas stations, as well as larger chain stores like Target or Pep Boys.

       5.  Keep a basic roadside emergency kit in your car. This should includs roadside flares (1-2), jumper cables, a flashlight with fresh batteries, paper towels, extra washer fluid, antifreeze and a small first aid kit. Check out Edmunds.com for a more comprehensive list.

Finally, some tips for parents of teen drivers. Take advantage of cheaper GPS prices, and buy one for your teen's car so they won't need to use their smartphones for directions. Or, if they're going to use their smartphones, ensure they've downloaded an app like the free Mapquest app that gives directions verbally and does not require the driver to look at their phone/map. If your children want to head to a summer concert or beach, offer to drive with them before to practice the route. Planning the trip in advance, having directions or knowing your route will ensure the main focus is on driving. While it might not make perfect, practice builds experience and skills that teen drivers desperately need.

Monday, June 10, 2013

Summer Safety Tips

Smart Insurance Coverage This Summer

Sure, the risk of severe storms and natural disasters increases during the summers months, but there are also plenty of "hidden dangers" you may not always consider.  If you're not adequately protected against them, you could find yourself in the middle of an insurance storm.

Property Insurance Covers More Than Your Home

Home damage caused by intense thunder storms accounts for many homeowner's insurance claims over the warmer months, but so much more can go wrong in and around your home.

Things like bicycles, high-end camping gear, and the cameras you use to record your adventures are expensive items that can be damaged in a catastrophe or fall victim to theft. Luckily, they're often covered by your homeowners insurance or renters insurance policy. But as you accumulate these kinds of goodies over time, it's important to verify that your coverage levels still meet your needs—speaking to your insurance agent is an easy way to make sure your coverage is keeping up with your lifestyle.

Should the unexpected occur, you'll want to have all the information you need to file your claim.

Going Above and Beyond Your Policy Limits

What if a wayward sparkler on the 4th of July caused a burn or set a flammable item on fire? Or
how about a backyard BBQ where a faulty grill leads to mayhem?

Consider the additional level of protection that comes with a Personal Umbrella Policy. A personal umbrella policy provides liability coverage over and above your standard auto insurance or homeowners insurance. Basically, it offers protection against large and potentially devastating liability claims or judgments, kicking in right where your other liability coverage stops.

A personal umbrella policy's added protection is a great safeguard if you own a pool, but don't ignore the other potential dangers lurking around your house. Check out our article Is Your Backyard Safe for Summer? to help keep your summer fun accident-free.

Two-Wheeled Trips Call for Motorcycle Insurance

As the weather gets warmer, the open road calls. Unfortunately, so do nearly 100,000 annual motorcycle accidents and injuries. One way to protect yourself is making sure you use the right safety gear every time you ride. For help making smart decisions, check out our Tips for Buying the Right Motorcycle Gear.

Your auto insurance won't help you on a motorcycle. You'll need motorcycle insurance that protects your bike—and also protects you.


Your Home on Wheels Needs Fixed Protection

If your summer travel plans include an RV or motor home, remember that these special vehicles fall outside the coverage of your regular auto insurance. The good news is that motor home insurance offers specialized protection for you and your family, and even the contents inside.




Plan for Your 4-Wheeled Fun

Many people don't think to insure their all-terrain and off-road vehicles. While their relative size may be small, they can come with outsized price tags. And with so many dips, jumps, turns, and outdoor hazards (like tree limbs!), there's no shortage of things that can go wrong. Off-road vehicle insurance can help protect your investment whether you're riding on back trails in the woods or on the back 9.

Get Covered Before You Get Drenched

When you set out to boat, you've got more than just fueling your tank to think about. Fun on the water also means having the right safety equipment, emergency service plan, and wreck coverage ready in case you need it—read our What to Put in a Boat Safety Kit article to get a head start.

Monday, June 3, 2013

Water, water everywhere, but no flood insurance

What’s wrong with us? We’ve lost thousands of dollars of household goods and priceless remembrances because of torrents of water in our streets, homes and basements — yet we still don’t have flood insurance.

Some 81% of Americans know that the standard homeowners’ insurance policy doesn’t cover flood damage, but barely one in 10 has a flood-insurance policy, according to Bankrate.com.

What’s more, flooding is the No. 1 natural hazard in the U.S., according to the National Flood Insurance Program, a division of the Federal Emergency Management Agency. Flash floods alone are the top weather-related killer in the U.S.

“Flooding is very common, and people need to wake up to the fact that they may need flood insurance,” says Doug Whiteman, insurance analyst at Bankrate.com, which recently asked people what they knew about flood insurance.

It’s something to consider ahead of this year’s hurricane season, which is roughly June 1 through Nov. 1 and is forecast to be a tough one.

Meteorologists at the University of Colorado warn that the tropical Atlantic has warmed unusually over the past several months, and there’s an “above-average probability” that a major hurricane will make landfall. They’re looking for nine hurricanes this year, four of which are expected to be major, and 18 named storms. Remember that it’s not always the hurricane’s winds that wreak havoc, but the storm surges and flooding that come with them.

As entire neighborhoods throughout the Midwest grapple with heavy spring rains and flooding, just six months after Hurricane Sandy lambasted the East Coast from Florida to the New England states, we find that one in five homeowners still seems clueless about flood insurance. That’s true even after insurance agents reported a surge in new flood-insurance policies in New York and New Jersey post-Hurricane Sandy.

You must get a flood-insurance policy on top of your homeowners’ insurance. The basic homeowners’ policy underwrites your home’s structure, your personal belongings like furniture, clothes, electronics, and sports equipment, liability and additional living expenses if you cannot stay in your home because of damage from a fire, storm or any other insured disaster. All, of course, have limits — and one of them is if the home is flooded. In some high-risk areas, you won’t be able to get a mortgage without flood insurance.

There’s a good tool at Floodsmart.gov that will give you the risk level of your property and direct you to insurance brokers who can help you get coverage under the National Flood Insurance Program. The average flood-insurance policy will set you back about $600 a year, though costs vary widely.

Here’s what you should know about flood insurance:

  • It covers physical damage to your property and possessions.

  • You may need both building and contents coverage. Building insurance covers the home’s foundation and the equipment necessary to keep it running, like a furnace, water heater and circuit breaker. It will even underwrite carpeting, paneling and wallboard. Contents insurance covers items like a washer and dryer, a freezer and the food inside it.

  • Flood insurance doesn’t cover moisture, mildew or mold that could have been avoided. Nor does it cover property outside the house, like the deck, sidewalks and hot tubs. Not all basements are covered either.

  • The costs vary, depending on the design and age of the property, what the flood risk is and the amount of coverage.

  • The coverage doesn’t start when your check is cleared. There’s typically a 30-day waiting period, which means if you’re looking to avoid this year’s hurricane season, now is the time to jump in.