Small biz optimism remains stagnant

Small-business owners’ optimism remains fixed at zero, which is neither optimistic nor pessimistic, as confidence regarding today’s financial climate couldn’t counterbalance worse expectations for future revenues and capital spending allocation, according to Wells Fargo & Co.’s third-quarter results from its Wells Fargo/Gallup Small Business Index.

“Business owners are demonstrating a reluctance to invest in their businesses and are holding onto cash,” says Doug Case, Wells Fargo small business segment manager. “In recent months, we’ve seen strong growth in deposit balances as business owners prepare for potential business challenges and save for future opportunities.”

The third-quarter results indicates some improvements in sentiment concerning small-business owners’ financial situation, cash flows, hiring and credit availability over the last 12 months, leading to negative 10, a four-point improvement in the survey’s “present situation” from negative 14. This survey metric has been a negative figure since the first quarter of 2009.

However, significant declines in expectations for revenues and capital spending over the next 12 months are also reported. All six measures of the Index, which include financial situation, cash flow, revenues, capital spending allocation, hiring and credit availability, reveal declines in the Index’s future expectations component, falling four points to 10 this quarter.

“Sales and demand clearly remain challenged,” says Dr. Scott Anderson, a Wells Fargo senior economist. “Rising inflation and gasoline prices combined with renewed weakness in U.S. job creation has undermined consumer confidence and their ability to spend.”

For the present financial situation, 53 percent rate it as somewhat or very good, a jump from 47 percent in the second quarter of 2011, while 28 percent rate it as somewhat or very poor, a decline from 33 percent in the second quarter of 2011. Forty-two percent rate their present cash flows as somewhat or very good, which is up from 38 percent, and 34 percent rate their present cash flows as very or somewhat poor, a decrease from 38 percent.

Regarding hiring, 14 percent rate that the amount of jobs or positions at their employers grew by a lot or a little, an increase from 10 percent in the second quarter of 2011. Thirty-four percent rate their credit availability as somewhat or very difficult to obtain, which is up from 30 percent in the second quarter 2011.

In the next 12 months, 42 percent expect employer revenues to grow by a little or a lot, a decline from 49 percent in the second quarter of 2011 while 21 percent believe the money allocated toward capital spending to increase a little or a lot, a decrease from 26 percent in the second quarter 2011.

Negatives vs. Positives: Companies Try Penalties to Change Behavior, Trim Costs

For years, companies have dangled incentives — such as money, gift cards and merchandise — in front of employees, hoping the cash and prizes would push workers to improve their health and ultimately create health care savings for employers.

Now, many employers have grown tired of playing nice.

More companies are using financial penalties to strong-arm employees into a better lifestyle, according to a new survey sponsored in part by the National Business Group on Health (NBGH). According to a report on the survey by CCH, the number of companies using penalties more than doubled from 2009 to 2011 and is expected to double again in 2012, when 38 percent of poll respondents said they expect to have penalties in place.

While the study notes that positive incentives are still playing a large part in employers’ strategies, it also shows that penalties are becoming more pronounced as employers look for new ways to keep spiraling costs under control. Examples of such penalties include higher premiums for smokers or for workers who can’t keep their weight or cholesterol levels under control.

Some industry critics worry that these tactics might lead to oppressive policies that might violate employees’ rights, but employers say they are tired of waiting for workers to get on board and hope penalties will be the tipping point for many employees.

“Nothing else has worked to control health trends,” LuAnn Heinen, vice president of NBGH, told Reuters. “A financial incentive reduces that procrastination.”

As companies increasingly opt for the stick over the carrot, some employers are making a more dramatic move by trying to completely alter the way workers use health care through health “consumerism,” which includes high-deductible health plans and other consumer-driven programs.

Apart from the savings created by cost-shifting with these types of plans, consumerism might actually lead to better health, which can create even more savings, according to an article in the American Journal of Health Promotion. The journal reported on a new study that found that employees who enrolled in “activated consumer” training — which taught them how to successfully evaluate providers and take advantage of preventive services — achieved equal health results compared with those who enrolled in a traditional program focused on nutrition education and exercise.

Perhaps the biggest cost-containment hurdle — one that penalties and consumerism are designed to clear — is that many employees remain clueless about how much their health care actually costs. A recent analysis by Kelton Research found that only 35 percent of workers with employer-sponsored care were aware of the amount of their plan’s deductible and only 33 percent knew how much they contributed to their premiums, according to a PLANSPONSOR report.

By actively encouraging employees to change their behavior — either through positive incentives, penalties or consumerism — companies can tighten the leash on some of the cost pressures from health care, experts said.

“This is the next evolution in trying to squeeze costs out by not incurring them in the first place,” Sean Slovenski, chief executive of the firm that oversees the rewards program for Humana, told the Los Angeles Times. “It’s not the holy grail, but it’s a giant leap forward in bending the health care cost trend.”

Employers in the Dark About Effects of Health Care Reform

More than a year after the passage of the Patient Protection and Affordable Care Act, U.S. employers remain uncertain about the lingering effects that the sweeping law will have on the employer-based model for benefits. A survey report by employee benefits brokerage and consulting firm, Health Care Reform Survey: What We Know and What’s Coming provides a baseline of employer views and highlights the continuing uncertainty.

Respondents to the August 2011 survey, fielded to the firm’s current and prospective clients and other businesses, included U.S. employers in all industry segments, most of which are East Coast-headquartered businesses offering comprehensive employee benefits to full-time workers.

The survey results are intended to represent what’s “on the minds of business and HR leaders” as the health care issue continues to be front and center on the public docket. Highlights of the results are presented below:

• 28 percent of respondents reported that health care reform added 6 percent to their 2011 benefits plan renewal costs, while 24 percent reported that reform added between 4 percent and 6 percent to their 2011 renewal costs.

• In thinking ahead to 2012, 32 percent of respondents expect minimal increases attributed to health care reform. However, the results were mixed, as 20 percent expected a larger increase related to reform.

• A good deal of concern remains about the short- and long-term impact of the law. Toward that end, 52 percent of respondents were concerned about their ability to offer benefits to their workers in the future. Yet uncertainty remained a constant when it comes to the law. Whether it’s the upcoming presidential election or court battles, 44 percent said it’s still too early to measure the impact of the law, while 32 percent believe that it will hurt their business. In the end, 40 percent of respondents believe that Congress or the courts will not alter or revoke the law, 36 percent believe changes might be made and 24 percent are unsure.

• In thinking ahead, close to 50 percent of respondents are planning to make plan design/coverage changes to their benefit plans to contend with the impact of health care reform.

• 2014 is when major pieces of the law will take effect. For example, the advent of state exchanges and penalties on employers do not offer coverage, or offer inadequate coverage, take effect. Perhaps because of the uncertainty of the law or a lack of appreciation for the magnitude for the 2014 changes, 56 percent of respondents have yet to begin to plan formally for its impact.

• By 2014, many employers will have to decide whether to continue to offer coverage or pay a penalty to the government. The issue has gained a good deal of attention as employers and plan sponsors have begun to calculate the cost of coverage vs. the cost of the penalty. Some 60 percent of respondents have indicated that they do not plan to eliminate coverage, while 28 percent are still evaluating the matter.

• In examining the issue of dropping coverage for workers, 96 percent of respondents said it is important to their business culture that they continue to offer benefits. Furthermore, 92 percent believe that if they did drop coverage, it would be received unfavorably by their employees.

• When thinking of the full impact of the law and areas of concern, 68 percent of respondents were concerned with its expected new costs, 60 percent indicated they were concerned with the many unknown aspects of the law, and 56 percent said they were concerned about costs that insurance companies might pass along.

• In spite of the overwhelming information available about the law and its near-term impact, when asked if they had enough information to make important business and benefits decisions, some 60 percent of respondents said they did not and 64 percent reported that their employees did not understand the changes related to the law.

• The law has forced organizations to engage senior leaders in examining its impact. Toward that end, 64 percent of respondents report that C-suite executives have been involved and engaged in making decisions related to the law. Yet only 28 percent report having created a formal committee or process to review the impact of the law on a continuing basis.

Employee benefits: Rising costs will eat into your paycheck

With jobs scarce and pay raises slight, workers can take heart in at least one positive trend: Businesses are restoring some of the benefits they axed during the recession.

The flip side of the trend is not so encouraging: Firms seem resolute in holding the line on benefit costs. So workers who want new benefits from their firms will probably have to pay for many of them themselves.

“Employers are not willing to take on any more” costs of benefits, says Chris Covill, of the national integrated benefits practice at Mercer, a New York-based human-resources consulting firm. “They’re looking for ways to mitigate cost increases and to shift the financial responsibility” for benefits to employees.

The most obvious move is that benefits cut during the recession are starting to reappear. FedEx Corp., the shipping service based in Memphis, Tenn., announced in late 2009 that it would resume merit raises and restore company 401(k) contributions to half their prerecession levels. This past January, FedEx fully restored its 401(k) match. In October, trucking firm Con-way Inc. plans to resume basic and transition contributions to its retirement savings plan, which it had cut temporarily in April 2009 (still not restored: its matching contribution to the retirement plan).

Already, 59 percent of companies had restored all or some of their employee perks that they had cut during the recession, according to a poll of human resources executives by Challenger, Gray & Christmas, a Chicago-based outplacement consulting firm. (Another 23.5 percent of respondents said they had introduced new perks.) Within the next two years, 51 percent of companies that recently trimmed or suspended their 401(k) plan matches expect to reinstate them, says a recent survey by the Transamerica Center for Retirement Studies, a private nonprofit foundation in Los Angeles.

But even as employers reinstate some benefits — to help attract and retain workers once jobs open up — they’re also aiming to keep a lid on costs. That means that more employers want workers to pay a larger share of the benefits bill, especially as the costs of that bill go up. If employees want more employer-sponsored perks, they increasingly have to pay for them out of pocket.

Already, many workers have seen health-benefit costs rise in the form of higher deductibles and copayments. In some cases, plans no longer cover certain items, experts say. Last year, employees paid a larger share of the total health insurance premium: an average of 19 percent for singles and 30 percent for families, up from 17 and 27 percent, respectively, a year earlier, according to the Kaiser Family Foundation. The private nonprofit foundation in Menlo Park, Calif., called it a “notable change from the steady share workers have paid on average over the last decade.”

That trend seems likely to continue. For instance, in its 2011 survey, consulting firm Aon Hewitt found that, while em-ployers still bear most of the cost of insurance, they are accelerating cost-shifting. “There’s no evidence to suggest that the cost-shifting is temporary,” says Mr. Covill of Mercer. “I think staying the current course will be as good as you’ll get” on benefits.

All the while, some organizations are reclassifying as “voluntary” certain benefits — such as vision or dental care — that they once paid for. So employees who want these benefits, or any new ones added to the roster, must pay for them partially or fully.

Such offerings can still be attractive: Buying them at an employer-sponsored group rate can save employees money. In a study of employee benefits trends, insurance giant MetLife found that 61 percent of employees value voluntary benefits as a way to obtain perks that meet their personal needs.

Firms still can be creative with their benefits dollars., an 11-employee online directory firm based in San Francisco, can’t compete for talent with the likes of Google and Facebook on salary, says cofounder Sander Daniels. It does offer health-care coverage, transportation cost benefits, and in-house exercise equipment, but no 401(k) retirement plan.

“So we introduced a perk that everyone loves,” Mr. Daniels says. Five days a week for lunch and three nights a week for dinner, employees can sit down to a meal prepared by a chef trained at Le Cordon Bleu culinary school. “At our Wednesday night dinners, anyone can invite any guests they want.”

The cost to the Thumbtack staff: zero. The cost to the company: probably less than the cost of having to replace workers recruited away.

By Margaret Price

Experts: Do Not Rush into Reform Decisions

If one thing can be said about the recent health care reform law, it’s that it has generated a barrage of questions for employers.

Will companies drop health care coverage and instead pay the penalty under the Patient Protection and Affordable Care Act (PPACA)? Will they drive their employees into the new state exchanges? Will the Supreme Court rule that the law is unconstitutional, throwing part or all of the law out the window?

The answers, of course, remain unknown for now. In the meantime, employers may want to consider some facts from a number of experts and recent reports about the law’s possible impact on businesses and their workers.

End of Benefits? Not So Fast . . .
While conventional wisdom holds that many employers will drop their health benefits in 2014 when the major provisions of PPACA take effect, that decision wouldn’t make economic sense for most, according to a new report by the Urban Institute for the Robert Wood Johnson Foundation.

That’s because “employers who drop workers’ coverage but fail to increase the employees’ wages in order to maintain their overall compensation will inevitably lose these employees to competitors,” according to a report by National Public Radio.

The law states that employers with more than 50 workers who don’t offer benefits in 2014 would have to pay a penalty (ranging between $2,000 and $3,000 per worker). If a company drops coverage, it would need to pay the penalty in addition to boosting wages to offer a competitive overall compensation package. For many employers, that might cost more than sticking with a robust benefit package that will recruit and retain quality employees, the researchers noted.

Switching to Exchanges? Hold On . . .
The proposed state exchanges that would help employees find health care coverage on their own might seem to provide an easy way for companies to dump their health plans while still ensuring that their employees have some coverage.

The drawback of the exchanges, however, is they will reduce an employer’s ability to affect worker health and behavior, which ultimately have a significant impact on productivity, said Troyen A. Brennan, an executive vice president with CVS Caremark, in a recent CCH report.

“Do you stay in the driver’s seat and proactively manage the health and productivity of your workforce, or do you climb into the back seat and take your chances?” Brennan asked at a recent industry conference. “Absenteeism and productivity go to the bottom line.”

Court Rulings? Wait and See . . .
This month, the Supreme Court announced that it would start reviewing cases involving PPACA (likely in February or March). Recently, a federal appeals court in Washington, D.C., upheld a lower court’s ruling that the individual mandate created by the law is constitutional. Many observers have noted that until the high court makes a ruling, it’s anybody’s guess as to the long-term effects of PPACA.

Dec. Webinar: Health Savings Accounts

Health Savings Accounts:

Employer Rights and Responsibilities

Tuesday, Dec 13, 2011 – 2 p.m. ET / 11 a.m. PT

As consumer-directed health plans continue to grow in popularity, employers need to understand their options in this area. One of those options is to offer their employees a health savings account (HSA), in combination with a high-deductible health plan (HDHP). Although HSAs carry certain advantages, they are not for everyone (or for every employer). In this webinar, we’ll examine the advantages and disadvantages of an HSA/HDHP combination.

Among the topics we’ll explore are the following:

The special treatment of HSAs under both the Tax Code and ERISA

The Tax Code’s “comparability” rules for employer HSA contributions

The types of health coverage that will preclude an employee from making pre-tax HSA contributions

Comparisons to other types of consumer-directed health plans (such as HRAs and FSAs)

The effect of health care reform on HSAs

Steps employers can take to simplify the administrative burdens associated with HSAs.

Finally, we’ll present recent survey data on the extent to which employers (and their employees) are (or are not) jumping on the HSA bandwagon.


Kenneth A. Mason, Partner – Spencer Fane Britt & Browne LLP

Ken heads the Employee Benefits Group. He concentrates on ERISA and other aspects of employee benefits law, including tax and fiduciary issues, retirement and welfare plans, executive deferred compensation, federal employment discrimination statutes and issues unique to governmental and other tax-exempt employers.

Chadron J. Patton, Associate – Spencer Fane Britt & Browne LLP

Chadron is a member of Spencer Fane’s Employee Benefits Group. Chadron received his juris doctor from University of Kansas School of Law, where he completed the Tax Law and Business and Commercial Law certificate programs.

This series is brought to you by your Member Firm of United Benefit Advisors – a member-owned alliance of more than 140 premier independent benefit advisory firms and one of the nation’s five largest employee benefits advisory organizations – and Spencer Fane Britt & Browne LLP, with offices throughout the Midwest and more than a century of experience providing legal counsel.

Health Care Reform Update: Anticipated Cost Implications

Yesterday brought a couple of potentially substantial changes to Health Care Reform that have not been discussed in the media. First, the Federal Appeals Court in Virginia reversed a lower court ruling that the Health Care Reform law is unconstitutional. The reasoning behind it being declared unconstitutional is what makes this interesting. It has been the general assumption that the U.S. Supreme Court would eventually have to make the final decision on the constitutionality of Health Care Reform and that it would decide sometime in 2012. However, if the Supreme Court follows the logic of yesterday’s ruling the decision could not be made until 2014–after the law is scheduled to become effective.

Second, in his speech last night, the President made job proposals that would cost about $450 billion. He then said that he would look for the Super Committee, already created by the debt limit compromise to find $1.5 trillion of budget reductions, to come up with this $450 billion on top of the $1.5 trillion. It was expected that a large portion of the original $1.5 trillion would come from money budgeted for Health Care Reform. Those original dollars of cut would have certainly cut into the impact and effectiveness of Health Care Reform. Now that another 30% of cuts will be necessary, implementing Health Care Reform will be even more difficult.

On a related note, the hospitals have begun lobbying to make part of the $1.5 trillion of cuts come from raising the eligibility date for Medicare from 65 to 67 or higher. In addition to cutting the budget and deficit this move would actually increase revenues to the hospitals because they get reimbursed about 30% more for non-Medicare patients than they do for patients who have Medicare. Hospitals are facing very substantial reductions in reimbursement as the result of Health Care Reform and looking to find ways to get an increased share of their reimbursements from employer sponsored group employee benefit plans. Keep in mind that if this type of change occurs, the cost of employer sponsored health care plans will rise even more than normal.

The second most powerful person involved with the implementation of Health Care Reform, Donald Berwick who heads up Medicare, recently described Health Care Reform as “an expedition of discovery”. One has to wonder how that “expedition” is going to be affected by drastic reductions in funding levels that were probably already inadequate when the law was passed. It appears that Health Care Reform as it stands is going to get more and more difficult to implement.

These developments should tell plan sponsors to plan for the future on two tracks:

The first is to assume that Health Care Reform will go into place in 2014 and plan accordingly.

The second track is to plan to do what makes the most sense for your organization assuming that Health Care Reform will not ever become effective. Reality will probably lie somewhere in the middle.

Posted by Jim Farley

Open Enrollment: Communicating in an Uncertain Economy

Given the dual impacts of U.S. health care reform and an uncertain economy—combined with renewed corporate focus on wellness and health care consumerism—relying on “the same old stuff” for open enrollment communication is no longer sufficient, advised Jennifer Benz, founder and chief strategist of Benz Communications, an HR and benefits communications firm.

“Clearly, the era of ‘we’ll take care of everything for you’ is over and ‘we’ll help you find your way’ is here to stay. Employers have a responsibility to educate employees about making good short-term decisions and helping them see the longer-term picture of how health and financial security stack up,” Benz said. She offered five tips for the 2011 open enrollment campaign:

#1. Be Purposeful

Neither the company nor its employees can solve the systemic problems related to health care costs. Yet there are concrete, simple actions that do help control costs—in the short term and long term. Keeping the focus positive and on what’s within reach encourages and motivates employees and their families, and it makes health care reform an opportunity to change behaviors and control costs better.

Focus on the tangible behaviors that impact employees’ pocket books, such as getting preventive care, participating in biometric screenings and other wellness programs, enrolling in more cost-effective plans, switching to generics, using the prescription mail order program, and taking advantage of tax-advantaged health savings accounts (HSAs) and flexible spending accounts (FSAs). Also, use enrollment as an opportunity to promote those programs the company continues to invest in that are largely unnoticed and underused by employees.

#2. Be Personal

Whether explaining a new program or re-engaging employees with existing benefits, focus on their needs and provide meaningful examples.

Many companies put their efforts behind getting people to choose to elect account-based consumer-driven health plans among existing offerings or providing only consumer-driven plans and no other choices (the “total replacement” strategy). In either scenario, make sure to give personal, real-life examples of how these plans operate. For instance, employees with family coverage need to be certain about how the family deductible works. Those with a chronic condition might appreciate free preventive medicines for the first time. Highly compensated individuals will be interested in the investing options in the HSA and how to shelter the maximum amount from taxes. All of them are going to have a lot of questions long after enrollment is over.

#3. Keep It Simple

Keep open enrollment communications simple and direct. Employees don’t use or understand benefits jargon. Use every-day, real-life language. Define terms. Repeat concepts. Try different formats to say the same things. Don’t overwhelm with too much print. Use visuals. And keep in mind that bullet points, graphics, charts and Q&As are helpful. This is especially important as benefit plans become more complex. A results-based wellness program or value-based plan design needs to be communicated in a way that makes sense to employees without raising their suspicion or fears.

#4. Communicate Frequently

People are staying connected continuously with mobile applications and social networks. The gap between how the rest of the world communicates and how companies communicate about their benefits is growing wider. To remedy this, use social media to communicate year-round. Tools like benefits blogs and Twitter benefit feeds are easily implemented with little risk. Not sure what to say? There are countless resources, tips and reminders you can find online to help get started.

#5. Acknowledge Uncertainty

While it’s tempting to lay out a long-term timeline of potential changes, there are too many things influencing the health care and retirement systems to make short- or long-term predictions or promises, even though employees might ask for them. An honest acknowledgement of this tension and a commitment to regular communication can help employees to feel that their concerns are being heard.

By SHRM Online staff

News Briefs: Employers Take the Hit on Costs

The trend of rising health costs continued in 2011, with employers shouldering the bulk of the increases, according to a new study by the Kaiser Family Foundation. The annual cost for family health insurance coverage jumped 9 percent to $15,073 this year, a sharp increase from $13,770 in 2010. Workers’ share of the total cost rose slightly more than 3 percent, while their employers’ share increased 12 percent to $10,944 per family.

Nearly one in five Americans are smokers, with the highest rates found among the least educated, poorest, youngest and uninsured, according to a new report by the Centers for Disease Control and Prevention. Of employees without a high school education, more than 28 percent smoke, similar to the rate of workers with no health insurance.

Most employers have a poor understanding of how specialty pharmacy benefits work, according to a new survey by the Midwest Business Group on Health. The study found that 25 percent of employers said they have little or no understanding of specialty pharmacy benefits and 53 percent have only a “moderate” understanding of the benefits. Seventy percent of the 120 employers who said their specialty pharmacy benefit was managed by an outside administrator did not know how much they were spending on the drugs, the survey said.

Thirty-five percent of workers who telecommute do so full time, putting in at least eight hours per day, according to a new CareerBuilder study. Employees who telecommute between four and seven hours per day made up 40 percent of the respondents, while 17 percent of telecommuters said they spend one hour or less on work per day. Also, 37 percent of workers who telecommute said they are more productive when they come into the office, while 29 percent said they were more efficient at home.

A new study by several universities concluded that insomnia costs U.S. companies $63 billion in lost productivity annually. That means an individual worker with insomnia costs the employer between $2,280 and $3,274 per year, the research said.

Principal Launches Voluntary Benefits Program

A Principal news release said the key advantages of voluntary benefits is that they allow employers to offer a wide variety of products at no cost to the company and workers can pay for the benefits through payroll deduction.

The company said it works with employers to create a customized enrollment strategy and benefit education program for voluntary benefits. Ranging from group meetings to one-on-one sessions, education programs feature working directly with a salaried financial professional at the work site.

Using an interactive needs analysis tool, the financial professionals help employees identify gaps in insurance and financial protection and then prioritize and select the most appropriate type of voluntary benefits both inside and outside of the group program.

The Principal now offers online enrollment for both English and Spanish-speaking workers.

“Employers taking a closer look at their benefit budgets are feeling the financial squeeze, but also realize retaining valued employees in the current environment is critical. Voluntary benefits allow employers to offer attractive benefits at a lower cost for both the employer and their employees,” said Amy Friedrich, vice president of the Specialty Benefits Division of The Principal, in the announcement. “We’re seeing an increase in our customers offering voluntary benefits because they realize it’s a win-win situation for their business budget and their biggest asset, employees.”

Fred Schneyer