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November 2009

NEW HSA FUNDING LIMITS FOR SELF AND FAMILY COVERAGE FOR 2010

By Life and Health

For 2010, the contribution limit for an individual with self-only coverage under a qualifying high deductible health plan is $3,050, up $50 from 2009. For an individual with family coverage, the limit is $6,150, up $200 from 2009.

A qualifying high deductible health plan, for 2010, is defined as a health plan with an annual deductible greater than or equal to $1,200 for self-only coverage or $2,400 for family coverage. The limit on annual out-of-pocket expenses is $5,950 for self-only coverage or $11,900 for family coverage.

The current limits and corresponding 2010 limits for self-only and family coverages are compared in the chart below.

2009
2010
Self-only coverage minimum deductible $1,150 $1,200
Self-only coverage maximum out of pocket $5,800 $5950
Self-only coverage maximum HSA contribution $3,000 $3,050
Family coverage minimum deductible $2,300 $2,400
Family coverage maximum out of pocket $11,600 $11,900
Family coverage maximum HSA contribution $5,950 $6,150
Catch-Up Contributions (age 55 or older) $1,000 $1,000

The IRS release can be viewed at http://www.irs.gov/pub/irs-drop/rp-09-29.pdf.

DON’T MAKE THESE COSTLY INSURANCE MISTAKES

By Personal Perspective

Fear is an important motivator when it comes to buying insurance. We worry about what will happen to assets like cars or homes if they are involved in a disaster, so we buy insurance to help us maintain their financial integrity if something should happen.

But in spite of the fact that insurance is designed for this purpose, sometimes it can’t give us the outcome we expect. That’s not because of something inherently wrong with the policy, but rather it is the result of human failure. When you bought your policy, you might have failed to take into consideration the level of coverage you really needed, and what you have isn’t sufficient to restore your assets to pre-disaster condition.

That’s just one of the most common insurance mistakes that could end up costing you. Here are some others:

  • Thinking you’re saving money because you bought the cheapest policy you could find – Initially those low premiums will seem like a savings; but if the cost of an accident ends up being more than your policy coverage limits, the rest of the expense will be out-of-pocket. In addition, the other parties involved could sue you, and if you don’t have any coverage, you could end up losing a large part of your assets.
  • Failing to pay your premiums on time, or not at all – There could be a legitimate instance in which you don’t pay on time. However, when you don’t pay, your insurance company isn’t required to cover you. To avoid a disruption in coverage, set up automatic payments through your bank or insurer.
  • Making assumptions about what is covered – There are limitations to the coverage a Homeowners or Auto policy will provide for high-ticket items. You should never assume that all of your possessions are covered. What you can do is add extra coverage to your policy with an endorsement, which gives you higher limits on these types of items.
  • Overlooking the importance of Umbrella Liability policies – These policies got their name because they protect you from a financial downpour. They can be purchased separately or you can obtain one from the same company that insures your car or home. Buying from the insurer you already have usually entitles you to a premium discount on the liability coverage. Umbrella policies are usually sold in increments of a million dollars. Generally you would pay between $100 to $300 a year for the first million dollars worth of coverage and another $50 to $100 for each additional million. Keep in mind that when determining your premium, your insurer may take into consideration such factors as the number of traffic tickets you’ve received during the past few years, and your credit report.
  • Failing to inform your insurance agent about changes that could affect your coverage needs – If you’ve added on to your home, or purchased an expensive sound system, you need to contact your agent to see if the policy you have still meets your needs. Your agent can also find ways to help you save money on premiums that won’t affect the quality of your coverage such as enrolling in a driver safety class, installing a home security system, increasing your deductible, or taking advantage of multi-policy or good student discounts.

SPEAK WITH AN INSURANCE PROFESSIONAL TO UNDERSTAND YOUR COVERAGE

By Personal Perspective

Every insurance policy has a section popularly known as “the fine print,” though its actual title is “Exclusions.” Exclusions are provisions in an insurance policy describing losses that the policy will not cover. For example, a Homeowners policy does not cover losses caused by the use of cars, and a Business Auto policy does not cover injuries caused by a bulldozer on a construction site. Although it might appear at first glance that the insurance company includes these provisions to get out of paying claims, the reasons are more complex and less insidious than that. There are very sensible reasons why no insurance policy covers everything.

First, not every person or business has the same exposures to loss. Most homeowners do not own a dump truck used in a business; the owner of the dump truck might not have employees to insure for jobsite injuries; the employer with a dozen employees might not own the building it occupies. Imagine if there were one insurance policy that covered all of these exposures — it would be hundreds of pages long and very complex. Therefore, over time insurance companies have developed different policies for different exposures — Auto, Home, Business Liability, and so on. The Homeowners policy excludes losses that the Auto policy should cover, personal policies exclude losses that business policies should cover, and vice versa.

Related to this are the issues of cost and choice. Standard insurance policies contain coverages that apply to large groups of households and businesses, but they do not cover every possibility. Those with additional needs have coverage options to choose from. For example, Homeowners policies do not cover damage caused by water backing up from an overflowing sump or drain, but households that have basements with sumps or drains have the option of buying this coverage. Households without a basement do not have to buy it. This affords the buyer choices but does not force coverage on those who do not need or want it.

Furthermore, exclusions reduce the cost of the insurance policy. Every coverage comes with an associated cost — the company must factor in the costs of potential claims, expenses and profit for that coverage. The more coverages a policy provides, the higher its premium will be. Without exclusions, people and businesses would be forced to pay for coverages they do not need. Exclusions help keep the premium affordable.

Finally, certain types of losses are uninsurable. Insurance companies cannot accurately predict when certain types of losses will happen, and the potential loss amounts are too large for them to absorb. For example, almost all policies exclude losses suffered as the result of a war or a nuclear accident. These events would cause massive losses beyond the abilities of insurance companies to pay. Other losses are not insurable as a matter of common sense.

Because the purpose of insurance is to pay for losses from accidents, it will not cover most losses that a person causes intentionally. Because every household or business’s circumstances are different, standard policies might not provide all the coverage necessary for proper protection. Properties in flood-prone areas, businesses that have a lot of contracts with other businesses, and individuals who post to online message boards could all lack important coverage. Consultation with one of our professional insurance agents will help determine whether more coverage is needed, whether it is available, and how much it will cost. The time to find out the availability and cost of coverage is before the loss occurs.

IS PURCHASING INSURANCE ONLINE REALLY A WISE DECISION?

By Personal Perspective

Online shopping has become an American pastime, and can be an exciting adventure. For nearly everyone, it is enjoyable to receive surprising new packages and offers in the mail. But would you want your insurance coverage to be a surprise? You might want to ask yourself some essential questions before making the decision to buy insurance online:

  • What questions should I be asking before making the purchase?
  • Am I certain about exactly what coverages I need?
  • Have I researched the insurance company, and are they legitimate?
  • Will the personal information I provide online be secure?
  • Will there be real savings in both time and money by making an online purchase?

When buying insurance, it is important to be confident about exactly what coverages you need. Since insurance varies widely from state to state, it is necessary to have a knowledgeable resource that understands your individual needs. If you need to file a claim, you want to be certain that the insurance you purchase will protect you. If you make the decision to use an online company that does not involve themselves personally with your insurance needs, you run the risk of being left without coverage. Take the time to ask questions. Additionally, an online insurance company should be asking questions of you, to ensure they are recommending the proper coverage.

Buying insurance online could endanger your personal security. You will be required to fill out long forms providing personal information about you and your family, including social security numbers and personal property information. The forms are sent over the Internet where there is a risk that they might fall into the wrong hands, especially if the online company does not take proper security precautions. Furthermore, how will you verify that the insurance company you select is legitimate? Despite the fact that one must have a license to sell insurance, there is no license required to establish a Web site that is designed to sell insurance online.

After studying insurance information such as your state insurance regulations, coverages you will require, and the security and legitimacy of an online company, you obviously will not be saving much time in making an online purchase. And, there is no guarantee that you will save money either. It might be convenient for the insurance company since they will not have to meet with you, but they will still need to provide you with the proper coverage for the dollar amount of protection you need.

An insurance purchase should take place only after careful consideration, and should not include surprises. The decision to shop online could result in uncertainty about what you really get. Selecting a professional agent to prepare a personal insurance policy is a more reasonable choice. When you work with an independent insurance agency such as ours, you receive the benefit of our expertise and industry knowledge. We can help you get the protection you need based on your individual requirements, rather than taking a one-size-fits-all approach.

TAKE STEPS TO REDUCE WORKERS COMP COSTS DURING A LAYOFF

By Business Protection Bulletin

Between December 2007 and July 2009, the U.S. economy lost almost seven million jobs. In times of economic uncertainty, employees worried about their jobs might look toward the Workers Compensation system for supplemental income. Workers who have ignored aches and pains over the years and haven’t reported them might decide that the time is right to make a claim. Others who might have been healthy and who suffer an injury that they might have previously ignored might now decide they have nothing to lose by reporting it. Employers facing the possibility of having to lay off employees must be aware that their Workers Compensation costs could rise. However, there are steps they can take to keep a lid on costs.

Once risk managers learn that a workforce reduction is coming, they can prepare in a number of ways. They should become familiar with the unemployment insurance laws in each affected state, including the levels and durations of benefits and how they affect Workers Compensation benefits. They should investigate other state programs available to employees that could offset Workers Compensation costs. They also might want to meet with their insurance broker to review pending claims and identify those that might become problems.

Another priority is claims documentation. The firm should back up employee records and store both in secure locations. Claim records should be updated with the latest available information. The risk manager might want to create a video record of conditions in the building prior to the layoff so that they can demonstrate to a court what the work environment was like. Finally, exit interviews that include written questionnaires completed by the employees can serve as evidence as to the employees’ physical condition at the time of termination.

When the layoffs occur, the company should handle them as sensitively as possible. Losing a job is a traumatic experience for anyone; clumsy communications from the employer can inspire a worker to seek retribution. To the extent that the employer can help affected employees, it should do so. For example, it might want to offer resume preparation, outplacement services, or employee assistance programs for those who need emotional support. Also, if the company can afford them, it might want to offer severance payments to the employees in return for their written agreement to forego any future claims against the company. Finally, though it might seem unlikely, the company should have contingency plans in place should any of the employees become violent, either at the time of the layoff or later.

To defend against exaggerated or fraudulent claims, risk managers should ask the broker and the insurance company to coordinate claims handling through one office and one senior claims adjuster. They should also request that the insurer assign the defense of all cases to one law firm. To assist in the defense, they should make relevant records, such as videos, employee files, job descriptions, and exit questionnaires, easily accessible to the attorneys and any medical specialists the firm might hire. Finally, they should identify key personnel who might be available to testify as to job requirements and conditions, and make a list of their names and contact information available to the attorneys.

Cutting jobs is one of the most difficult things any organization must do. The goal of a workforce reduction is to lower the firm’s costs. Uncontrolled Workers Compensation expenses resulting from the action could wipe out any benefits from it. Careful planning and handling of the action and its aftermath can go a long way toward ensuring that the company’s pain will not be for nothing.

KEEP YOUR BUSINESS FREE FROM TOXIC TORTS

By Business Protection Bulletin

In the 1800s, manufacturers and builders started using a natural resource that vastly improved the quality of their products. It added strength to materials, resisted heat, electrical and chemical damage, and absorbed sound. When mixed with cement and used in building construction, it enhanced fire safety. By the middle of the 1900s, manufacturers were using it in insulation, automobile brake pads, drywall, lawn furniture, fireplace cement, gaskets, and a host of other products. Unfortunately, this material, asbestos, can cause serious lung disease and even death in those who inhale its fibers. Builders and manufacturers who used it have endured hundreds of thousands of lawsuits from the victims or their survivors.

Claims resulting from exposure to asbestos fall into the category of what is known as “toxic torts” — injury and damage lawsuits stemming from exposure to substances proven to cause illness or injury in people. Other substances that lead to toxic torts include lead paint, toxigenic mold, industrial chemicals, pesticides, and toxic landfill waste. These lawsuits can ravage a company’s balance sheet, ruin a good reputation that took years to build, and divert resources and attention away from normal operations and toward legal defense.

Asbestos has been associated with instances of cancer affecting the protective lining that covers most of the body’s internal organs. This form of cancer was killing 3,000 Americans a year by the late 1990s. Most of the victims had long-term occupational exposure to asbestos. A Rand Corporation study estimated that 27.5 million people in the U.S. were exposed to asbestos in their workplaces between 1940 and 1979. Consequently, by 2002 more than 730,000 people had sued more than 8,400 firms for illnesses caused by the fiber. The cost of asbestos-related litigation in the U.S. has exceeded $250 billion.

Toxigenic molds produce a chemical that can be dangerous to people exposed to large amounts of it over a long period of time. Normally, the mold is not present in large enough quantities to be harmful. However, concern has grown during the past several years about the possible effects of long-term exposure to these molds. Newer energy efficient homes have become air tight, preventing moisture from escaping and creating an environment in which mold can grow. A Texas woman who sued her insurance company over its refusal to pay for cleaning up mold that allegedly made her home unlivable won a multi-million dollar damage award; a court later reduced the amount. Although health experts have not reached a consensus about the actual harm mold can cause, the increased attention to it makes future litigation likely.

The standard Commercial General Liability insurance policy does not cover most losses resulting from pollutants. However, alternatives exist: Pollution Legal Liability insurance policies. These policies cover damage to the organization’s own property; injuries or damages that others suffer as a result of a toxic incident for which the organization is liable; and associated cleanup costs. Depending on its terms, such a policy might also cover new injury claims, cleanup, and the discovery of new toxic substances after the organization implements a pollution remediation plan. Our professional insurance agents can help locate the appropriate coverage at a reasonable cost.

Toxic torts are likely to remain a financial threat to all organizations for the foreseeable future. Controls to prevent injuries or to make existing ones less severe, coupled with the right insurance company, can help ensure that your organization will survive this threat.

EMPLOYERS: UNDERSTAND AND AVOID EMPLOYMENT DISCRIMINATION

By Business Protection Bulletin

During the past several decades, Congress and state legislatures have enacted numerous laws protecting workers from unfair discrimination by their employers. These laws affect all but the very smallest employers and cover a wide variety of employee characteristics. Failure to abide by them can cause a great deal of trouble for employers. Under Title VII of the Civil Rights Act of 1964, employers may not discriminate against employees on the basis of race, national origin, religion, or sex. The prohibition applies to aspects of employment such as:

  • Hiring and firing
  • Compensation, assignment, or classification of employees
  • Transfer, promotion, layoff, or recall
  • Job advertisements
  • Recruitment
  • Testing
  • Use of company facilities
  • Training and apprenticeship programs
  • Fringe benefits
  • Pay, retirement plans, and disability leave
  • Other terms and conditions of employment.

Employers are also prohibited from taking actions that would have a disparate impact on a protected class of employees. For example, firing all employees who cannot work on Sundays might have a disparate impact on individuals whose religions forbid them to work. Title VII also bars discrimination based on pregnancy. Finally, the law prohibits “reverse discrimination,” which occurs when an employer goes so far to protect members of a minority or protected group that it harms members of other groups.

Other types of restricted discrimination include:

  • Pay discrimination based on gender. The federal Equal Pay Act of 1963 requires employers to provide equal pay to men and women for equal work on jobs where the performance requires equal skill, effort, and responsibility, and which are performed under similar working conditions. However, employers can make allowances for seniority, merit, quality or quantity of production, or differentials based on factors other than sex.
  • Age discrimination. The Age Discrimination in Employment Act bars deliberate discrimination against workers over 40. However, it does not prohibit actions that have a disparate impact against older workers as a group.
  • Disability discrimination. The Americans with Disabilities Act forbids employers from discriminating against workers who are disabled, have a history of disability, or whom the employer considered to be disabled. The law requires the employer to provide reasonable accommodations for the disabled employee, such as modified work duties or schedules, special tools, and unpaid time off, if needed.
  • National origin. Under the Immigration Reform and Control Act, employers may not discriminate against U.S. citizens or non-citizens who are in the country legally on the basis of their national origin.

Some of these laws also prohibit harassment against protected employees; retaliation against those who make complaints; and discrimination based on employee’s marriage to or association with a member of a protected group or participation in schools or places of worship associated with these groups. Although federal law does not prohibit discrimination based on a person’s sexual orientation, some state and municipal laws do. Other local laws may forbid discrimination against employees with children, welfare recipients, and on the basis of marital status. Employers should familiarize themselves with the laws in their states.

Even the most well-intentioned employers might find themselves the target of an employment discrimination action. For this reason, every employer should consult a professional insurance agent about purchasing Employment Practices Liability insurance. This coverage protects the employer from the cost of suits and damages alleging most types of discrimination. They do not, however, cover fines or penalties assessed by regulators. One of our agents can help you obtain appropriate coverage at a reasonable cost.

Workers who used to endure unfair discrimination now have the law on their side. Employers must avoid discriminatory practices, for the good of their workers and their businesses.

MAKE YOUR BUSINESS THRIVE WITH STRATEGIC RISK MANAGEMENT

By Construction Insurance Bulletin

Risk in business is unavoidable. Operating a store, owning or renting office space, hiring employees, driving a truck, giving insurance advice — all of these involve a certain amount of risk. Businesses can spend resources trying to avoid as much risk as possible by being cautious about introducing new products and services, opening new locations, or hiring additional workers. However, this approach could limit the organization’s future growth prospects while still not eliminating all the risks. Businesses face a variety of risks, including:

  • Risk of violating laws or regulations
  • Risk of property loss from sudden causes such as fires
  • Risk of property loss and injuries from geographic perils, such as floods or hurricanes
  • Risk of violating clients’ privacy should someone hack into computerized records
  • Risk of business failure from competitive pressures

These are just a few of the risks organizations face. Those that do not prepare in advance for them will suffer serious negative consequences. However, organizations that do address the risks before losses occur and that make plans to seize the opportunities a loss can create will survive and even thrive.

Organizations can address risks in three ways. They can avoid a risk altogether (choosing not to manufacture a certain product, locating away from hurricane-prone areas, not hiring employees). They can reduce the risk of a loss occurring (having vehicles regularly maintained, implementing procedures to comply with regulations, installing computer security systems). Lastly, they can reduce the severity of losses that do occur (installing automatic sprinkler systems, implementing return to work programs for injured workers, creating a public relations plan to counter negative news reports). All three of these techniques are necessary, but to fully prepare, organizations need a risk strategy.

Risk management experts Mark Layton and Michael Corcoran write that a good risk management strategy will include procedures such as:

  • Identifying the organization’s most basic strategic assumptions and asking whether they are true. Should the firm be offering a particular service or competing in a specific market? What are the risks that follow those strategies?
  • Allocating resources appropriately between rewarded and unrewarded risks. Launching a new product line is a rewarded risk, because it might bring additional profits. Hiring a human resources consultant to ensure that the firm does not violate labor laws is an unrewarded risk, because it will not bring more profits but could save the firm from legal trouble.
  • Focusing on the effects of potential losses instead of their numerous causes. How do the firm’s assets depend on each other, and how will a loss to one or more affect the others? With planning, can they function independently?
  • Running different scenarios to see how the organization will respond to each. Are procedures flexible enough? What changes will produce more effective responses?
  • Remembering that not every available tool to test risk preparedness is appropriate for a given situation. Strategic risk planning is not an exact science; there is no guarantee that taking certain steps will produce the desired result.
  • Making risk management efforts efficient. This means promoting effective communications between managers, coordinating the work of different areas within the organization, and eliminating unnecessary duplication of procedures. As with any other part of an organization’s work, risk management should not be wasteful.

An organization that is implementing a strategic risk management plan must pay equal attention to financing its risks of loss. Our professional insurance agents can assist you in arranging a plan that combines appropriate insurance coverage and sensible deductibles and risk retention in a way that best meets your needs. Risk is an unavoidable part of business, but risk handled properly can spur your company’s growth.

YOUNGER WORKERS ARE MORE PRONE TO ACCIDENTS, SAYS NATIONAL COUNCIL ON COMPENSATION INSURANCE

By Construction Insurance Bulletin

According to a study conducted by the National Council on Compensation Insurance, younger workers have more injuries and illnesses than older workers; but older workers have higher costs per claim. The researchers discovered that age is an important factor in overall claim costs, but the significance of age on claims frequency has lessened. This has been interpreted to mean that age might not play an important role in future frequency trends. However, the relationship between age and claim severities is basically unchanged.

Factors associated with age, such as average wages, claim durations, lump-sum payments, injury diagnoses, and number of medical treatments, comprised a large part of the reason for the differences in the severity of claims between younger and older workers. The differences in wages and duration of claims were the principal reasons for the differences in the amount of payouts between younger and older workers. Differences in wages accounted for approximately one third of the differences in the amount of payout, while the differences in the duration of claims accounted for almost one half the difference.

Older workers experience more high-cost injuries, such as injuries to joints like rotator cuffs and knees. These were more commonly experienced by workers aged 45-64. Workers aged 20-34 more commonly experienced ankle sprains. Carpal tunnel syndrome and injuries to the lower back are among the top 10 diagnoses for workers of all ages. The researchers pointed out that the differences in the types of injuries only comprised about a quarter of the difference in medical severities between younger and older workers. The real factor influencing the difference in medical severities between older and younger workers was the significantly higher number and different mix of treatments within a diagnosis. This alone accounted for 70% of the difference.

Less than 10% of the difference in medical severities is due to a slightly more costly mix of treatments for older workers. This was reflected in small differences in the average prices of different types of medical services. The greater number and different mix of treatments also contribute to the longer duration of payments for older workers.

As for trends in loss costs, the researchers noted that the baby boomers’ impact was apparent when the data was viewed historically, but the major impact of this aging workforce has probably already occurred and employers should not anticipate that the aging workforce would present a major problem in terms of future claims costs.

GET CREATIVE WITH RETURN TO WORK PROGRAMS, AND SAVE ON WORKERS COMP COSTS

By Construction Insurance Bulletin

The National Safety Council has estimated that employers annually lose 80 million work days to illnesses or injuries suffered on the job. The federal Bureau of Labor Statistics reported that, in a recent year, 1.2 million workers missed an average of seven days of work due to occupational health problems. The resulting cost in lost productivity, disability benefits, and Workers Compensation premiums is enormous. However, these are costs that employers can reduce with a little creativity. Often, treating physicians will release an injured worker for return to some work duties after a relatively short period of time. Although the worker might not yet be ready to resume their former duties, they can still perform some work for the employer. To enable this to happen, the employer needs a return to work program and policy.

The idea behind return to work programs is to provide temporary jobs that (ideally) take into account an injured worker’s physical capabilities, skills, and interests. A good program encompasses several objectives:

  • Addressing factors — physical, environmental, emotional, knowledge — that prevent the employee from returning to work full-time.
  • Focusing on what the employee can do rather than what they cannot do.
  • Easing the transition from temporary work assignments to full-time regular work.
  • Maintaining productivity by decreasing the number of lost work days.
  • Improving the employee’s morale and increasing incentives for them to return to work and stay there.

The benefits to employers from return to work programs are many.

  • They make it easier to retain valued employees and to obtain some production from those recovering from injuries.
  • Because they help retain employees, they reduce recruiting, hiring, and training costs.
  • They show the employer’s concern for the welfare of injured employees.
  • They reduce the duration of disability payments to injured workers and might also reduce associated medical costs.
  • They facilitate communication among the employer, the employee, and the health care provider.
  • They make it more difficult for unmotivated employees to stay out of work.
  • Over the long term, they reduce an employer’s Workers Compensation claim costs, making the employer more attractive to insurance companies and inviting competitive pricing.

Return to work programs also accelerate an employee’s recovery process. According to the California State Compensation Insurance Fund, half of all employees who stay out of work for six months or more never return to their former jobs. Those who are out for more than a year have only a 10% chance of returning. Most workers want to feel like they are productive and contributing. Getting an injured employee back to work early heightens those feelings of accomplishment and increases the chances that they will return to their old job eventually. It also helps to maintain job skills and reduces the adverse impact of the injury on families. A return to work policy should include the following elements:

  • Employee eligibility criteria.
    Provisions requiring assignment of meaningful tasks to the employee, not busy work such as “counting paperclips.”
  • Descriptions of the types of duties to which an injured employee might be assigned.
  • Stated parameters for the length of time a temporary assignment will last and conditions for extension.
  • Provisions covering situations where an employee returns to work and subsequently has to take additional medical leave.
  • Provisions for alternative work arrangements acceptable to the employer, such as telecommuting.

Workers Compensation is a major part of personnel costs for any employer. Well-executed return to work programs can help employers reduce those costs, recover productivity that would have been lost, and keep good employees happy. That’s a good outcome for everyone.