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HR Update: Pregnant Worker Accommodation Protections Addressed By U.S. Supreme Court

On March 25, 2015, the U.S. Supreme Court ruled in favor of a former employee of United Parcel Service (UPS) who was faced with the choice to either continue working her labor-intensive job during pregnancy or take unpaid leave. In a 6-3 decision, the Supreme Court held that the employee should be given the opportunity to prove that UPS violated the Pregnancy Discrimination Act (PDA) by not giving her the same light-duty accommodation that was given to other UPS employees who were considered injured or disabled.

The Supreme Court’s decision establishes a legal framework for this type of pregnancy discrimination case. Due to this ruling, it may be easier for employees to succeed on claims that their employers violated the PDA by failing to accommodate them. To help limit liability under the PDA, employers should review their employment practices and policies regarding accommodations to make sure pregnant workers are treated the same as other workers with similar restrictions.

Pregnancy Discrimination Act

Title VII of the Civil Rights Act prohibits a covered employer (15 or more employees) from discriminating against any individual with respect to the terms, conditions or privileges of employment because of the individual’s sex. In 1978, Congress added the PDA to Title VII. The PDA has two clauses:

  • The first clause clarifies that Title VII’s prohibition on sex discrimination includes discrimination based on pregnancy, childbirth or related medical conditions.
  • The second clause requires that women affected by pregnancy, childbirth or a related medical condition be treated the same for all employment-related purposes as “other persons not so affected but similar in their ability or inability to work.

Factual Background

The employee, Peggy Young, worked as a part-time driver for UPS. When Young became pregnant in 2006, her doctor advised that she should not lift more than 20 pounds. UPS, however, required drivers like Young to be able to lift up to 70 pounds. When Young presented UPS with her doctor’s note, she was told that she could not work while under a lifting restriction. Young consequently stayed home without pay during most of the time she was pregnant and eventually lost her employee medical coverage.

Young sued UPS, alleging that her employer violated the PDA’s second clause because it had a light-duty policy for other types of workers, but not for pregnant workers.

Under its light-duty policy, UPS accommodated workers who were injured on the job, those suffering from disabilities under the Americans with Disabilities Act (ADA) and those who had lost their Department of Transportation (DOT) certifications. According to UPS, because Young did not fall within one of these three categories, it treated her the same as it would treat other relevant persons and therefore did not discriminate against her based on pregnancy.

Legal Decision

The district court granted UPS’ motion for summary judgment, concluding that those who Young compared herself to—those falling under the on-the-job, DOT and ADA categories—were not similarly situated groups of employees. The 4th Circuit Court of Appeals affirmed the district court’s decision.

The Supreme Court vacated the 4th Circuit’s decision and remanded the case for further proceedings. The Supreme Court ruled that Young created a genuine dispute as to whether UPS provided more favorable treatment to at least some employees whose situations were similar to hers. Thus, the Supreme Court gave Young another chance to show that UPS violated the PDA when it failed to accommodate her light-duty request.

The Supreme Court also outlined the framework that applies in this type of disparate treatment case under the PDA. Under this framework, an individual alleging pregnancy discrimination may establish a case by showing that:

  • She was pregnant at the relevant time;
  • Her employer did not accommodate her; and
  • Her employer did accommodate others who are similar only “in their ability or inability to work.”

According to the Supreme Court, this burden is “not onerous” for an employee. It also does not require the employee to show that she and the non-pregnant employees who were treated more favorably were similar in all non-protected ways.

The employer may justify its refusal to accommodate the employee by relying on a legitimate, non-discriminatory reason. The employee may then in turn show that the employer’s justification is a pretext for discrimination. An employee may show pretext by providing sufficient evidence that the employer’s policies impose a significant burden on pregnant workers and that the employer’s reasons are not strong enough to justify the burden. A significant factor that will help prove an employee’s case is if the employer accommodates a large percentage of non-pregnant workers while failing to accommodate a large percentage of pregnant workers.

Impact of Decision

The Supreme Court’s decision in Young v. UPS is a victory for pregnant workers because it establishes an easier framework to prove illegal discrimination. However, many employers may have already changed their policies to allow light-duty accommodations for pregnant workers due to other recent legal developments.

  • In 2008, Congress expanded the definition of “disability” under the ADA to make it clear that physical or mental impairments that substantially limit an individual’s ability to lift, stand or bend are ADA-covered disabilities. This expanded definition, as interpreted by the Equal Employment Opportunity Commission (EEOC), requires employers to accommodate employees whose temporary lifting restrictions originate off the job.

In July 2014, the EEOC issued enforcement guidelines that cover employers’ light-duty policies for pregnant workers. According to these guidelines, if an employer provides light-duty assignments to any of its employees who are temporarily unable to perform their full duties, then similar accommodations should be made for pregnant employees who cannot perform their full duties. Although the Supreme Court decided not to take these guidelines into consideration in Young vs. UPS, employers may have reevaluated their accommodations policies based on this guidance.

Q1 2015 Benefits Bulletin: A Look Back, and Ahead

From CIBC of Illinois

IRS Invites Comments on Cadillac Tax Implementation

On Feb. 23, 2015, the Internal Revenue Service (IRS) issued Notice 2015-16 to describe potential approaches for a number of issues related to the Affordable Care Act’s (ACA) so-called Cadillac tax. The IRS is seeking comments as it begins developing guidance for the implementation of the Cadillac tax. Public comments may be submitted to the IRS until May 15, 2015.

Proposed or final regulations have not yet been issued on the ACA’s Cadillac tax provision. This notice is intended to invite comment as guidelines are assembled, and taxpayers should not rely on the information provided in Notice 2015-16.

Cadillac Tax Overview

The Cadillac tax will go into effect beginning in 2018. This provision imposes a 40 percent excise tax on high-cost group health coverage. The Cadillac tax is intended to encourage companies to choose lower-cost health plans for their employees.

The Cadillac tax provision is found in Internal Revenue Code Section 4980I. This provision taxes the amount of an employee’s “excess benefit.” The excess benefit is the amount by which the monthly cost of an employee’s employer-sponsored health coverage exceeds the annual limitation.

For 2018, the statutory dollar limits are:

  • $10,200 per employee for self-only coverage; and
  • $27,500 per employee for other-than-self-only coverage.

The tax amount for each employee’s coverage will be calculated by the employer and paid by the coverage provider.

The Cadillac tax applies to “applicable employer-sponsored coverage” (both insured and self-insured). Applicable employer-sponsored coverage is coverage under any group health plan made available to the employee by the employer, which is excludable from the employee’s gross income under Code Section 106.

Applicable coverage also includes health flexible spending accounts (FSAs), health savings accounts (HSAs), on-site medical clinics, retiree coverage, multiemployer plans and coverage only for a specified disease or illness and hospital indemnity or other fixed indemnity insurance (if paid on a pretax basis or if a Section 162(l) deduction is allowed).


DOL Issues Final Rule to Expand FMLA Protections for Same-sex Spouses

The Department of Labor (DOL) has issued a final rule that will expand rights under the Family and Medical Leave Act (FMLA) for same-sex spouses. Under the final rule, eligible employees in legal same-sex marriages will be able to take FMLA leave in order to care for their spouses or family members, regardless of where they live.

The DOL’s new guidance is effective March 27, 2015, and it replaces guidance regarding FMLA protections for same-sex spouses that was issued following the U.S. Supreme Court’s decision in United States v. Windsor.

The final rule changes the definition of “spouse” under the FMLA as follows:

Adopts a “place of celebration” rule (which is based on where the marriage was entered into), instead of the “state of residence” rule that applied under prior DOL guidance; and

  • Expressly includes same-sex marriages in addition to common law marriages, and encompasses same-sex marriages entered into abroad that could have been entered into in at least one state.

This change will impact FMLA leave in several ways. Specifically, the definitional change means that eligible employees, regardless of where they live, will be able to:

  • Take FMLA leave to care for their same-sex spouses with serious health conditions;
  • Take qualifying exigency leave due to their same-sex spouses’ covered military service; or
  • Take military caregiver leave for their same-sex spouses.

In connection with the final rule, the DOL also issued a set of frequently asked questions (FAQs) to help employers and employees understand the changes to the FMLA’s definition of “spouse.”

To comply with the final rule, employers should review and update their FMLA policies and procedures as necessary. Employers should also train employees who are involved in the leave management process on the expanded eligibility rules for same-sex spouses under the FMLA.

DOJ to Allow Claims Based on Gender Identity Discrimination

On Dec. 18, 2014, the U.S. Department of Justice (DOJ) announced a reversal of its position regarding whether discrimination based on sex incudes discrimination based on an individual’s gender identity and transgender status.

The DOJ has now taken the position that discrimination based on sex includes discrimination based on an individual’s gender identity and transgender status.

Although the DOJ’s authority to file discrimination lawsuits is limited to government employers, this announcement solidifies the federal government’s position on gender identity rights.

Background Title VII of the Civil Rights Act prohibits employers from discriminating on the basis of race, color, religion, sex or national origin when making employment decisions. In 2006, the DOJ took the position that discrimination based on sex excluded discrimination based on an individual’s gender identity or transgender status. The DOJ has now reversed this position.

Gender identity is an individual’s internal sense of being male or female. An individual’s internal identification may or may not correspond to the individual’s biological gender. Transgender individuals are people with a gender identity that is different from the sex assigned to them at birth.

Effect on Employers Employers can expect to see more individuals file claims based on gender identity discrimination and increased federal support for employee protections against discrimination based on gender identity and sexual orientation.

Employers should review their employment policies to ensure that they are compliant with federal, state and local anti-discrimination regulations.

New Guidance and Relief for Employer Payment of Individual Premiums

Under the ACA, employer payment plans do not comply with several provisions that took effect beginning in 2014. Violations of these rules can result in excise taxes of $100 per day for each employee.

An employer payment plan is an arrangement where an employer reimburses or pays premiums for an employee’s individual health insurance.

New Guidance on Employer Payments
The Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury have released several pieces of guidance clarifying the rules regarding these arrangements. The IRS issued Notice 2015-17 on Feb. 18, 2015, providing further clarification.

Specifically, this notice provides information on several related issues:

  • Reiterates that employer payment plans are group health plans that will fail to comply with the ACA’s market reforms applicable to group health plans;
  • Clarifies that increases in employee compensation do not constitute an employer payment plan, as long as the increases are not conditioned on the purchase of individual health coverage;
  • Provides transition relief from the excise tax for employer payment plans sponsored by small employers (those not subject to the ACA’s employer shared responsibility rules) and to S corporation health care arrangements for 2-percent shareholder-employees;
  • Addresses whether employers may reimburse employees for Medicare or TRICARE premiums for active employees under the ACA; and
  • States that employer payments for individual premiums can be excludable from an employee’s income under the tax code but will still violate the ACA’s market reforms.

Employers should review their benefit and compensation plans and policies to ensure they are not in violation of current guidance regarding employer payment plans.

The information contained in this newsletter is not intended as legal or medical advice. Please consult a professional for more information.

Individual Health Insurance: Reporting Coverage and Paying Penalties

A key provision of the Affordable Care Act (ACA) is the individual mandate, which requires most individuals to purchase health insurance coverage for themselves and their family members or pay a penalty.

Starting in 2015, individuals will have to report on their federal tax return whether they had health insurance coverage for 2014 or were exempt from the individual mandate. Any penalties that an individual owes for not having health insurance coverage will generally be assessed and collected in the same manner as taxes.

How will coverage be reported under the individual mandate?

Starting in 2015, when you file a federal tax return for 2014, you will have to:

  • Report that you, your spouse (if filing jointly) and any individual you claim as a dependent had health care coverage throughout 2014; or
  • Claim a coverage exemption from the individual mandate for some or all of 2014 and attach Form 8965; or
  • Pay an individual mandate penalty (called a shared responsibility payment) for any month in 2014 that you, your spouse (if filing jointly) or any individual you claim as a dependent did not have coverage and did not qualify for a coverage exemption.

If you and your dependents all had minimum essential coverage for each month of the tax year, you will indicate this on your 2014 tax return by simply checking a box on Form 1040, 1040A or 1040EZ; no further action is required.

If you obtained a coverage exemption from the Marketplace or you qualify for an exemption that you can claim on your return, you will file Form 8965, and attach it to your tax return.

For any month you or your dependents did not have coverage or a coverage exemption, you will have to make a shared responsibility payment. The amount of the payment due will be reported on Form 1040, Line 61, in the “Other Taxes” section, and on the corresponding lines on Form 1040A and 1040EZ.

Who is exempt from the individual mandate?

You may be exempt from the individual mandate penalty if you:

  • Cannot afford coverage
  • Have income below the federal income tax filing threshold
  • Are not a citizen, are not considered a national or are not lawfully present in the United States
  • Experience a gap in coverage for less than a continuous three-month period
  • Qualify as a religious conscientious objector
  • Are a member of a health care sharing ministry
  • Are a member of certain American Indian tribes
  • Are given a hardship exemption by the Department of Health and Human Services
  • Are incarcerated

How much will the individual mandate penalty cost me?

The penalty for not obtaining acceptable health care coverage is being phased in over a three-year period. The amount of the penalty is either your “flat dollar amount” or your “percentage of income amount”—whichever is greater.

For 2014, the annual penalty is either:

  • One percent of your household income that is above the tax return filing threshold for your filing status; or
  • Your family’s flat dollar amount, which is $95 per adult and $47.50 per child, limited to a family maximum of $285.

Your payment amount is capped at the cost of the national average premium for a bronze level health plan, available through the Marketplace in 2014. For 2014, the annual national average premium for a bronze level health plan available through the Marketplace is $2,448 per individual ($204 per month), but $12,240 for a family with five or more members ($1,020 per month).

Calculating your payment requires you to know your household income and your tax return filing threshold.

Household income is the adjusted gross income from your tax return plus any excludible foreign earned income and tax-exempt interest you receive during the taxable year. Household income also includes the adjusted gross incomes of all of your dependents who are required to file tax returns.

Tax return filing threshold is the minimum amount of gross income an individual of your age and filing status (for example, single, married filing jointly, head of household) must make to be required to file a tax return.

High Deductible Plan Options: Bringing Consumerism and Cost-Savings to tthe Marketplace

CIBC of Illinois specializes in Group Benefit plans, and in order to best serve our clients, we also employ consultants that specialize in individual and family health insurance plans. In both of these areas, we continually get asked about high deductible plans because, in most cases, there is a significant cost advantage found in these types of plans. Hopefully this article will provide some basic information, and as always, please contact us for a detailed analysis.

Moving From a Standard Plan to an HDHP

There is no such thing as a one-size-fits-all health plan. Everyone has different health insurance needs depending on their health care requirements along with those of their dependents. While some prefer standard deductible health insurance (often called a PPO health insurance plan), people are increasingly switching to a High Deductible Health Plan (HDHP) with a Health Savings Account (HSA) as a better way to maximize their health care dollars.

Standard Plans vs. HDHPs

Standard plans and HDHPs are set up much in the same way. Under both plans, the member pays a premium for coverage. Both must cover preventive services free of charge. If a member receives nonpreventive medical care, he or she pays a deductible—a specified amount of money that the insured must pay before an insurance company will pay a claim. The chief difference between the plans is that under an HDHP, premium payments are considerably lower and the deductible is considerably higher.

The minimum deductibles for HDHPs are established by the IRS. For 2015, the minimum deductible is $1,300 for individuals and $2,600 for families. Comparatively, standard plans come with a deductible that is generally quite a bit lower.

The cost of the higher premiums for HDHP plans is offset by two factors. First, as previously mentioned, the premium price for an HDHP is much lower than standard plans. This means that members who use little or no medical care during the year can save hundreds of dollars that would otherwise go to unnecessary health coverage, while still remaining compliant with the individual mandate provision of the Affordable Care Act (ACA).

While some people prefer standard deductible health insurance, people are increasingly switching to an HDHP with an HSA as a better way to maximize their health care dollars.

The second major factor setting HDHPs apart from standard plans is the addition of an HSA.

Health Savings Accounts

HSAs are one of several types of tax-advantaged health accounts, and are exclusively available to people enrolled in an HSA-compliant HDHP.

With an HSA, the account holder or his or her employer (usually both) make contributions into a savings account. No taxes are deducted from money placed into the account, as the HSA contribution is withdrawn from a paycheck before taxes are assessed. While in the savings account, the money can earn interest. The employee is free to spend that money on qualified medical expenses.

The total amount that can be placed in an HSA per year is capped by the IRS. For 2015, the maximum contribution limit is $3,350 for individuals and $6,650 for families, though account holders over 55 years old may contribute an extra $1,000 to those totals.

These limits are significantly higher than other types of tax-advantaged health accounts, and unlike the other options, HSAs have additional unique features that allow you to save more money and keep it over a longer period of time. Whereas funds in health Flexible Spending Accounts (FSAs) and Health Reimbursements Arrangements (HRAs) come with an expiration date or a maximum carry-over dollar amount, HSAs allow you to build your balance as high as you wish in perpetuity. Except for the cap on total contributions per year, there are no limits on how much money can be in your account and how long it remains open.

Additionally, HSAs are individually owned accounts, meaning employees take the account—including any employer contributions—with them if they leave their employer.

Using Health Care with an HDHP

Because of the high deductibles associated with HDHPs, having an HDHP means you need to become a smart health care shopper.

The most important thing to keep in mind is that some types of health care products and services cost much more than similar items, and the more expensive option may not be necessary for the treatment you require.

Additionally, like most other health plans, HDHPs cover preventive services at no cost. Preventive care is defined as medical checkups and tests, immunizations and counseling services used to prevent chronic illnesses from occurring. Preventive care not only keeps you healthy, but it can also monitor and even reduce the risk of developing future, costly health problems.

Most types of specific preventive services are listed here. While it can sometimes be difficult to determine if a specific medical service qualifies as preventive, you can call your health plan to learn if a service is considered preventive before receiving it.

Other medial savings strategies people with HDHPs should consider are:

  • Using a generic in place of a name brand prescription can result in significant savings. While there is not a generic version for every type of drug, the only difference between a branded drug and a generic counterpart is the name; they both have the same active ingredients. If you need medication, find out what class of drugs your prescription is classified under. If you receive a name brand prescription from a doctor, ask if a generic is available.
  • Emergency Room vs. Urgent Care.Like prescriptions, there is a sizable cost adjustment between emergency rooms and urgent care. It is very expensive for hospitals to support all of the equipment and staff that an emergency room requires, so visits to the emergency room generally cost much more than those to a doctor’s office or an urgent care center. If you develop a problem that needs to be treated quickly, but it is not life threatening or risking disability, go to an urgent care clinic.
  • Qualified Medical Expenses. Use your HSA to pay for qualified medical expenses without paying taxes. Qualified medical expenses include the costs of diagnosis, cure, mitigation, treatment or prevention of disease, and the costs for treatments affecting any part or function of the body. These expenses include payments for medical services rendered by physicians, surgeons, dentists and other medical practitioners. They also include the costs of equipment, supplies and diagnostic devices needed for these purposes. Like preventive care, there can sometimes be uncertainty surrounding what is an allowable qualified medical expense. Specific qualified medical expenses are approved by the IRS, and a list of them can be found here.

HDHPs and HSAs are not the ideal health coverage plan for everyone. However, for many people, HDHPs are a great way to avoid paying for superfluous coverage and HSAs are an excellent vehicle for stockpiling tax-free money to use on future health care needs.

ACA Update: Feds Prohibit All Employer Reimbursement of Individual Premiums

Due to the rising costs of providing group health insurance, some employers have considered helping employees pay for individual health coverage instead of offering an employer-sponsored group plan. However, these employer reimbursement arrangements do not comply with Affordable Care Act (ACA) requirements.

On Nov. 6, 2014, the Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury issued FAQs clarifying that all individual premium reimbursement arrangements are prohibited. Despite the previously widespread understanding that only pre-tax reimbursement arrangements are prohibited, the clarification includes pre-tax and post-tax premium reimbursements and cash compensation for individual premiums.

An employer arrangement that provides cash reimbursement for an individual market policy is considered to be part of a plan, fund or other arrangement established or maintained for the purpose of providing medical care to employees, without regard to whether the employer treats the money as pre-tax or post-tax for the employee. Therefore, the arrangement is group health plan coverage subject to the ACA’s market reform provisions.

In addition, the Nov. 6 FAQs clarify that an employer cannot offer a choice between enrollment in the standard group health plan or cash only to employees with a high claims risk. This practice constitutes unlawful discrimination based on one or more health factors, which violates federal nondiscrimination laws.

Violation of this guidance by offering prohibited individual premium reimbursement arrangements to employees may trigger penalties. Under Code Section 4980D, an employer could be fined an excise tax of $100 per day for each applicable employee ($36,500 per year per employee).

The information contained in this newsletter is not intended as legal advice. Please consult a professional for more detailed analysis and specific information.

HR Brief: How to Deal With Medical Marijuana in the Workplace

HR Brief - January 2015

Live Well, Work Well: December’s Employee Wellness Newsletter

Pages from LWWW - December 2014_Page_1Pages from LWWW - December 2014_Page_2

Paid Paternity Leave: What Working Mother’s…and Farher’s Should Know

Although the advantages of offering paid maternity leave are frequently recognized, the importance of providing paid paternity leave is often overlooked. Many new fathers would like to take time off when a child is born or adopted, but not all companies offer paternity leave benefits. Paid paternity leave can be an attractive benefit when recruiting and retaining these employees.

Paid Paternity Leave v. FMLA

Paternity leave is the paid or unpaid time that a father takes off work for a child’s birth or adoption. The Family and Medical Leave Act (FMLA) requires covered employers (typically those with 50 or more employees) to provide 12 weeks of unpaid leave for eligible employees for certain circumstances, which includes for the birth and care of a child within one year of his or her birth or placement.

Some states have additional leave requirements beyond federally mandated family leave. However, there are no laws requiring that private companies pay employees during paternity leave.

Paid paternity leave goes beyond the FMLA requirements and offers fully or partially paid leave for new fathers. Paid paternity leave typically runs concurrently with FMLA-required leave, but it can be offered in addition to FMLA leave.

Advantages of Paternity Leave

Although unpaid leave is mandated by FMLA, paid paternity benefits are an attractive but not universally offered benefit. Only 14 percent of employers provide paid paternity leave, according to the 2014 National Study of Employers by the Families and Work Institute. Paid paternity leave serves as a great recruitment and retention tool, and offering this benefit can set your company apart when recruiting talented job candidates. Studies show that the majority of working fathers think paid paternity leave benefits are important, and more than half of young fathers have considered the availability of paid paternity leave benefits when deciding whether or not to take a job.

An additional benefit of paternity leave is to the employee’s family. Studies have shown that a father taking paternity leave to be with his family for the first weeks after a child’s birth improves both the mother’s wellbeing and the quality of the bond between father and child.

Offering Paternity Leave

If you choose to offer paternity leave, you will need to consider the following:

  • How much time off will you provide for paternity leave?
  • Will paid leave run concurrently or in addition to FMLA leave?
  • Can paid paternity leave be taken incrementally or must it be taken in one chunk of time directly following the birth or adoption of the child?
  • Can paternity leave be taken part time?
  • Will paternity leave include partial or full pay?
  • How will you determine eligibility? For example, does the employee have to be employed for a certain length of time before becoming eligible for paid paternity leave?
  • How will you encourage employees to take advantage of the benefit? Studies show that many of the fathers who are offered paternity leave but don’t use it fear the stigma that may come with taking time off work for a newborn.

Paid paternity leave can be a great addition to your benefits package and can help with both recruitment and retention. Consider how paternity leave fits into your company’s culture and create a policy that works for you.

Self-Funding Your Benefit Plans: Take Advantage of Probability

Importance of claims analysis

In today’s business climate, managers need benefits solutions as resourceful and cutting-edge as the organizations they run. For many employers, pre-packaged full insurance health plans do not provide the greatest value to meet their organizations’ needs. Employers of all sizes are looking to mold their plans around the requirements of their businesses.

There are many reasons employers might eschew a traditional plan system. Small and mid-sized employers might want to avoid risk charges and state premium taxes. Large employers may want administer their benefits plans themselves and grow their cash flow by holding their reserves in an interest-bearing account. Multi-state employers might want to free themselves from the burden of complying with the insurance regulations of multiple states. Employers of young, healthy workforces may be looking to capitalize on their advantages by saving on health insurance.

Because each business is unique and requires its own set of insurance solutions, diversity in provided benefits plans is needed. For many employers it may be far more beneficial to pursue self-funding as a benefits solution.

Self-funding Advantages

A self-funded group health plan is one in which the employer eliminates obligations to a health plan provider by assuming the financial risk for providing health care benefits directly to its employees. While experienced, successful business managers are experts at mitigating risks, many will gladly take on risk exposure if the probability is good for a high payout. There are numerous well-documented advantages to self-funding for employers that manage risk well; including:

  • Reduced insurance overhead costs. Carriers assess a risk charge for insured policies (approximately 2 percent annually), but self-insurance removes this charge.
  • Reduced state premium taxes. Self-insured programs, unlike insured policies, are not subject to state premium taxes. The premium tax savings is about 2 to 3 percent of the premium dollar value.
  • Avoidance of state-mandated benefits. Self-insured plans are exempt from state insurance laws, subject only to ERISA compliance.
  • Choosing benefits services à la carte
  • Flexibility in plan designs, administration and offered services
  • Customizable stop-loss insurance to reduce the risk associated with high claims
  • Improved cash flow. Self-insured employers do not have to pre-pay for coverage, and claims are paid as they become due.
  • Additional cash flow if reserves are held in an interest-bearing account

Complete Customization

One of the greatest assets offered by self-funding is the complete freedom to structure benefits according to needs of your company. Employers can choose what benefits they want to offer, while opting to insure individual benefits through traditional means or forgo offering them altogether.

The following benefits may be self-insured:

  • Health care (indemnity, PPO, POS and HMO)
  • Dental
  • Short-term disability
  • Prescription drugs
  • Vision care

Employers can also make the final call on important variables, such as:

  • Eligibility
  • Exclusions
  • Cost-sharing
  • Policy limits
  • Retiree benefits

Employers are also free to administer benefits themselves if they have the resources, or to retain a third-party administrator at a fraction of the cost of a traditional benefits provider.

Most advantageous to employers worried about the potential for large claims is the ability to acquire stopgap insurance, allowing managers to determine their total amount of yearly costs with 100 percent certainty.

CIBC of Illinois, Inc. welcomes the opportunity to help your organization examine its plan designs and make recommendations for improvement.

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