DURING OPEN ENROLLMENT, EMPLOYEES SEEK LIFE-STAGE APPROPRIATE ADVICE

In days past, open enrollment could be a relatively straightforward experience, both for employers and employees. Benefits choices were few, requiring simple communications and little decision-making. With the era of one-size-fits-all benefits packages almost a thing of the past, however, open enrollment has become a big deal. Employers devote considerable time and resources in selecting an array of benefits to offer to employees, along with the vendors to provide them. Employees need to figure out which of the benefits to choose, considering both what they think they need, and the cost.

According to a survey from MetLife, employees are looking for more help during open enrollment to pick the benefits that are right for them. Specifically, 59% would like their employer to suggest benefits that would be appropriate for someone in their “life stage” — single, married without kids, new family, established family, or nearing retirement. Other than a spouse, employees said they were most likely to view someone in their same life stage as the most important source of advice (22%), rather than HR (14%) or a professional advisor (11%).

Young singles were most interested in guidance, with 78% of those seeking HR advice saying they would like their employer to suggest life-stage guidelines to help them in benefits selection. According to life-stage guidance from MetLife for this group, having the money to survive an income loss should be a pivotal concern.

For dual income/no kids employees (DINKs), both disability and life insurance are key benefits, since the couple has become accustomed to relying on two incomes. Employees in this group also may be seeking a tax break, which pretax 401(k) plan contributions can provide.

Employees with new families should do a complete and careful review of their benefits during open enrollment, since the addition of dependents would have required a change in coverage categories, and also brought on the need for types of benefits that previously may not have seemed important, such as life insurance and dependent care.

Established families might be in the habit of knowing what benefits they need, but as family members get older future financial concerns loom closer on the horizon. Employees in this life stage should check to make sure that they’re on track for saving for expenses such as college education for the kids, long-term care and retirement, using any tax-favored vehicles or insurance products available to them through their employers.

For many employees in the pre-retirement life stage, it’s catch-up time. More than half (56%) of pre-retirees in the MetLife survey said they were somewhat or significantly behind where they wanted to be with their retirement savings. With dependents’ financial needs lessening, many pre-retirees are able to make larger 401(k) plan contributions. Though employees aren’t limited to open enrollment for making 401(k) plan changes, with the benefits-examination atmosphere that open enrollment inspires, it’s a good time to remind employees to review where their accounts stand. Also, pre-retirees who haven’t considered long-term care insurance might want to give it a serious look.

The MetLife survey also offered these observations:

• Of the surveyed employees who wanted their employer to suggest the right benefits based on their life stage, 84% said they would be willing to share personal information — such as their age, marital status, number of children and income — that would allow the company’s benefits insurer or provider to offer customized advice on benefits selection.
• Only 51% of the surveyed employees said they had actually read the entire open enrollment package.
• Employees tended to hold their employer responsible for a bad open enrollment experience — 58% of those who felt negative or not confident about their enrollment decisions blamed their employer for this feeling.

This survey data provides food for thought on how to make the most out of open enrollment. Although open enrollment isn’t your only time to communicate with employees, it certainly is one of the most significant. Building employee goodwill by providing tools to help them make the best benefits choices can pay off in greater employee satisfaction throughout the year.

PRESCRIPTION DRUG SPENDING TREND SLOWS DUE TO INCREASED GENERICS USAGE

According to pharmacy benefit manager Express Scripts, increased usage of generic drugs helped slow growth in prescription drug costs for 2007, resulting in an estimated $5.2 billion in savings for benefit plan sponsors and their employees. In 2007, total spending on prescription drugs grew 4.7%, the slowest rate-of-growth ever reported by the company.

Data shows that average prescription costs increased just $1.09 to $54.34 in 2007, up from $53.25 in 2006. Factors contributing to higher costs included a 2.5% increase in overall utilization and 7.4% increase in average brand name drug prices, while average generic drug prices decreased 3.1%. Without the so called “generic effect,” the cost per prescription would have increased $3.58 to $56.83.

Generic purchasing power wielded its biggest impact on cholesterol drugs, the nation’s most-prescribed drug category. Both Pravachol(R) and Zocor(R) went generic in 2006, causing a significant shift in generic utilization of these drugs. Costs for cholesterol drugs overall fell 15.5% in 2007, averaging $67.32 per prescription versus $79.48 in 2006. Express Scripts reported that 48.9% of all prescriptions in 2007 for a cholesterol drug were for a generic, while 63.7% of all prescriptions filled were for a generic.

On a per-member-per-year basis, spending in 2007 increased from $762.76 to $798.76, including both plan costs and member co-payments. Had generic utilization remained constant, spending would have been $32.53 higher for each of the nation’s 158.5 million commercially insured employees.

To determine drug trend, Express Scripts includes both member co-payments and plan sponsor costs to calculate total cost. The company also accounts for changes in utilization, the relative rates at which brands and generics are used, price inflation, units per prescription and changes in the mix of chemical entities and dosage forms used.

Research such as this clearly shows the cost savings potential that generic drugs can offer to an employer’s health plan. Co-payment differentials that make generics significantly more cost-effective for employees and communications that educate employees on generics’ safety, effectiveness and affordability can lead to increased generic usage and, ultimately, help in moderating health plan costs.

WHAT ARE THE COBRA REQUIREMENTS FOR YOUR COMPANY?

Under COBRA (Consolidated Omnibus Budget Reconciliation Act), the federal government requires employers to offer temporary continuation of health benefits to certain employees who suddenly lose their jobs.

The law says that employers who fit a certain profile must offer COBRA to employees who undergo a “qualifying event.” This event is typically the termination of employment, whether voluntary or involuntary. It could also be a reduction in work hours, resulting in the loss of the employee’s health benefits. However, if an employee loses their job due to some type of gross conduct, the employer may not have to provide COBRA benefits.

Unfortunately, like many federal employment laws, COBRA can be confusing to interpret and understand. It can be quite a challenge to figure out whether or not your company is required to comply with this law. However, it’s critical that you first determine if COBRA applies to your business. Otherwise, you may end up facing expensive excise taxes, government investigations, fines or even litigation brought forth by former employees.

Here are the factors that determine if an employer is subject to COBRA:

Company size

According to the Department of Labor, employers with 20 or more employees are generally subject to COBRA. However, the law does not cover the District of Columbia, federal employees, particular church-related programs and some companies with less than 20 employees. If you fall into this group, you are required to give detailed notice to employees about their COBRA rights.

Small employer exception

Although many smaller businesses do not have to comply with COBRA, there are some exceptions. Under the law, if an employer “normally” employed 20 or more employees in the previous calendar year, they must offer employees COBRA benefits.

In other words, if your business employed more than 20 employees on half or more of the company’s typical business days the previous year, you are required to comply with COBRA. You have the option to figure the number of people you employed either on a daily basis or a pay-period basis. You must count all employees, regardless of whether they were enrolled in the group health plan.

Under COBRA, both full-time and part-time employees count toward the total number. However, a part-time employee does not count as a “whole” employee. Instead, they count as a fraction of an employee depending on how many hours they work as compared to a full-time employee.

For example, let’s assume your company requires that an employee must work 30 hours per week to be considered a full-time worker. In that case, an individual who works 15 hours a week would be considered half of an employee, someone who works 10 hours a week would count as a third of an employee, and so on. However, no business can require that employees work more than 40 hours a week to be considered full-time.

Self-employed workers, independent contractors and corporate directors do not count, even if they receive health benefits from the company. But here’s where it gets confusing: even though these workers do not count as an employee for the purpose of small business exceptions, they may still be eligible to receive COBRA benefits due to a “qualifying event.”

Multi-employer plans

In a multi-employer health plan, each participating employer must determine independently whether or not they are subject to COBRA laws. For example, if a multi-employer plan that is not required to follow COBRA suddenly adds an employer that does fall under the law, the entire plan is then subject to COBRA.

Additionally, business mergers and spin-offs can impact COBRA requirements. If you are uncertain about whether your company is subject to COBRA, you should consider meeting with an attorney.