January 2009

Employee benefits compliance issues can challenge any size company, but can be especially troublesome in small firms that lack dedicated human resources specialists on staff who are trained and up-to-date on the deadlines and intricacies of the numerous rules and regulations that govern the field. That’s why an annual compliance review is so important. A missed filing, inadequate document or neglected rule violation, if uncovered on a Department of Labor or Internal Revenue Service audit, can result in harsh consequences for both the employee benefit plan sponsor and, possibly, employees.

The following lists some of the compliance issues that frequently plague employers, especially small businesses:

Summary plan description content and distribution. Employee benefit plans that are subject to ERISA require a summary plan description (SPD) written for and distributed to employees. The SPD describes the plan’s provisions and requirements and participants’ rights and obligations. If a plan is provided through a third party — such as a health plan through an insurance company or a 401(k) plan through a mutual fund company — that provider may supply a SPD. In many cases, a SPD may not include all the information required by ERISA or may not state information in terms that are specific enough to the particular plan or plan sponsor. Also, a busy employer might overlook that a revised SPD or a summary of material modifications must be distributed within a certain timeframe when a plan undergoes a significant change, and that a completely up-to-date SPD is required every five years. SPD distribution must be made through a method “reasonably calculated” to ensure actual receipt by participants and beneficiaries, which means more than simply making the original or revised document available to participants.

Cafeteria plan document requirements and participation restrictions. All Sec. 125 cafeteria plans require a written plan document, even simple cafeteria plans such as premium-only plans and flexible spending accounts. This requirement can be easily overlooked, especially in the case of a premium-only plan, since it is essentially a funding mechanism for the company’s health care plan. IRS regulations detail what must be included in the written plan document. A plan that does not comply with the written plan document fails to be a cafeteria plan, meaning that participants’ contributions will lose their pretax advantage. Also, cafeteria plan participants must be “employees,” a term which regulations state does not encompass self-employed individuals, including sole proprietors, partners and 2% shareholders in Subchapter S corporations. Thus, small businesses that operate in these forms must remember to restrict participation in their premium-only plan (or other type of cafeteria plan) to employees only.

Annual report filing. Except for fully insured welfare plans with fewer than 100 participants, a Form 5500 must be filed for employee benefit plans subject to ERISA for IRS and DOL reporting. Many employers are tuned into this requirement for their qualified retirement plans, but are unaware that it applies to welfare plans — health plans, for example — as well, unless the plan meets the exception noted. Fortunately, if filings have been missed in the past, a plan sponsor can file them late under the Delinquent Filer Voluntary Compliance Program and received reduced penalties. Unfortunately, if the missed filings are uncovered on an agency audit, that program is not available.

Employee benefit plans are a critical element of most companies’ overall compensation programs, and are key in attracting and retaining the best employees. They also provide tax advantages for participating employees and the organizations sponsoring the plans. Compliance with applicable rules and regulations is essential to avoiding adverse consequences and getting the most from your company’s investment in your employee benefits programs. Contact one of our benefits specialists today.

Although hordes of consumers use the Internet as a tool for seeking out medical information, new studies show that only a scarce few are using physician ratings sites to choose their doctor. More than 80% of California based adults say they use the Internet for health-related information, such as medical symptoms and diagnoses, according to a Harris Interactive poll commissioned by the California HealthCare Foundation. However, only a handful of adults are visiting and using the information from physician ratings sites. As a matter of fact, less than 25% of those surveyed say they have visited physician ratings sites, and only 2% of those actually made a physician change based on the information they found. Even fewer, less than 1%, say they made a hospital or health plan switch based on online ratings.

Will ratings sites ever take off?

Some experts say these statistics prove it will be a long while before physician ratings sites grow in popularity — and that they may never catch on at all. However, other industry professionals believe that few patients visit these sites because the market is still in its infancy. They believe that as the ratings information becomes more in-depth, more consumers will flock to the sites. Additionally, some insurers are encouraging members to use their own ratings sites. In these types of networks, members pay less out of pocket if they visit a physician that meets the insurer’s “quality criteria.” However, many doctors claim this system is flawed.

Physicians should still watch their online reps

Although physician ratings sites aren’t skyrocketing in popularity as of yet, industry experts say that physicians should still be concerned about their online reputation. For many decades, word-of-mouth has been deemed the most influential advertisement for any business. Therefore, continuous negative word-of-mouth could lead to a medical professional’s downfall. Patients are already sharing information online about medical conditions and other health issues, and this communication can spread like wildfire. Some experts predict the details about specific physicians, especially those who are either exceptionally great or really terrible, will soon follow suit in the online world.

Small, but growing

Although few patients are actually using the information gleaned from physician ratings sites, these sites have seen an uptick in visitors over the past few years. According to a Harris Interactive survey of 1,007 Californians, the number of people who say they have visited one of these sites has grown from just 14% in 2004 to 22% in 2007. Some medical industry experts believe the only reason more patients aren’t taking action based on the information they find is because the sites often don’t include details specific to their needs. Additionally, most patients are not willing to switch physicians if they are happy with their current provider. However, they may be more likely to take online advice if they are unhappy with their doctor, have been diagnosed with a medical condition or if they have recently moved.

Keeping a close eye on ratings sites

Although these sites have yet to take off, the American Medical Association and other organized medicine groups are keeping watch over the market. In some cases, the AMA has opposed ratings sites. As a matter of fact, the association joined forces with other medical groups in Missouri to push back UnitedHealth Group’s plan to use claims data to rank physicians.

Additionally, some states are regulating physician ranking and ratings networks. For example, some states require health plans to use quality measures for rankings instead of price. Plus, some rules allow physicians to see the basis for their ratings and have an opportunity to appeal.

The use of health and wellness programs continues to grow, with more than three-quarters of the employers in a recent survey offering them, and more than half of those without programs planning to implement one. Increasingly, these employers are encouraging employee participation in wellness initiatives by offering incentives for participation, with more than seven in 10 employers doing so in 2008. Why? Employers are becoming more successful in measuring these programs� return on investment, and finding that they are more than breaking even.

The survey is the second annual from Health2 Resources, and respondents were employers that are members of the National Association of Manufacturers and the ERISA Industry Committee.

According to the survey, in 2008, 77% of the employers offered health and wellness programs � a 5% increase over 2007 � and 48% offered disease management programs. Among the health and wellness programs:

Between 2007 and 2008 the survey reported a �substantial shift� in the types of incentives employees could earn for taking part in health and wellness programs. The use of gift cards � now the most prevalent incentive � increased from 17% to 28%, while offering a premium reduction declined from 41% to 26%. In 2008, employers used these incentives:

The value of incentives ranged between $100 and $300 per person per year, with the average incentive value being just under $200.

The most common behaviors rewarded with an incentive were participation in the health and wellness initiative (48% of employers provided the incentive for this), completing a program (38%), and signing up for or enrolling in a program (25%). The survey notes that these behaviors are easy to track, and they �steer clear of regulatory caps on monetary incentives� that the Health Insurance Portability and Accountability Act (HIPAA) place on programs tied to a health-related standard. That said, some employers did require the employee to achieve an outcome or goal before awarding the incentive (16% for achieving this during the program, 12% for achieving it after the program, and 6% for maintaining it after the program).

Most employers implementing health and wellness programs still do not measure return on investment (ROI), with only 36% of respondents saying they had attempted to do this in 2008 and 26% saying they had done so successfully. Among those who were able to measure ROI, 83% estimated an ROI greater than break-even in 2008, up from 66% in 2007.

The complete survey results are available through the ERISA Industry Committee�s web site, www.eric.org.