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No penalty for employers who don’t comply with state section 125 plan requirements

The Health Connector issued guidance this week in the form of Administrative Bulletin 03-13, providing that employers would not be subject to penalties for failing to comply with specific state based section 125 plan requirements. Section 125 plans allow employees who are not eligible for benefits to purchase health insurance on a pre-tax basis. State law currently requires employers with 11 or more full-time employees to offer a section 125 plan or face a penalty in the form of a Free Rider Surcharge. Proof of compliance with the section 125 plan requirement is through a report called the Health Insurance Responsibility Disclosure Form.

Recent federal guidance from the Department of Labor and the Internal Revenue Service prohibits the use of pre-tax dollars from section 125 plans to purchase non-group health insurance inside or outside the Health Connector. While earlier versions of this prohibition applied only to the purchase of non-group plans from the Exchange (in MA, the Exchange is the Health Connector), the final rule applies to section 125 facilitation of non-group plans both inside and outside the Exchange, starting in 2014.

As a result of the federal guidance, the Patrick administration will pursue a repeal of the section 125 plan requirement. The legislature will need to take action before anything is actually undone (e.g., the section 125 requirement, the Free Rider Surcharge, or the employer Health Insurance Responsibility Disclosure), but the Health Connector is pursuing a path of “non-enforcement” with respect to the Free Rider Surcharge, which is the mechanism to enforce the section 125 requirement. While the legislative process takes place, no employers will be subject to penalties for failing to comply with the section 125 requirement.

Existing section 125 plans may continue until the expiration of the employee’s plan in 2014.

If employers have any questions about their specific 125 plans or benefit plans, they should contact their attorneys or tax advisors.

What are the best ways for a startup to provide health insurance for the founding team and early hires?

I’m going to make an assumption here and say that early hires means hires that were brought on board very soon after the founders started the company and have the same blank slate. Most people in this niche will likely have coverage through some other means, parents, spouse, individual plan, something. If not (especially if a founder doesn’t) something has to give and timelines move up.

First thing is find a broker, someone the company already knows, or perhaps a trusted referral. You can go looking for coverage yourself, but with the different companies, plans and now regulatory changes with the Affordable Care Act, let someone else do the homework and distill things down for you.

Second, get ahead of things by answering a few questions. Do we need to accommodate out-of-state employees now or with future hires? What percentage of my employees live or work in the state my company is domiciled in? How rich of a plan do I want to get, and how much of a percentage am I looking to contribute to my employees plan (this last question will require some quotes, but employers should have an idea of what they would like to do in a perfect world)? These are some key points that will determine how things play out.

How is the ACA (Affordable Care Act, aka ObamaCare) going to affect my company?

If you are a startup, the assumption is you are starting with only a few employees. With that in mind, the regulatory impact of the ACA on startups is minimal. The ACA’s primary impact will be on companies with more than 50 employees nationally. How insurance rates will be affected by the new laws will play out over time. Changes to plans in order to become ACA compliant will be rolling out in 2014. That said, most of the changes to become compliant are already baked into most plans that companies in MA would choose to implement already.

Do I have to offer health insurance?

Short answer is no, by and large, small companies are not forced by law to offer health insurance.  In MA, there was a state provision mandating that if a company had 11 or more full time equivalent employees, and a company did not offer coverage, then a ‘free rider’ surcharge would be imposed. This provision was lifted by Governor Patrick in the most recent MA budget in July ’13 in order to avoid overlap with the new federal laws.

You can follow Business Insurance & Benefits Services on Linkedin at http://linkd.in/17gITep

Nathan Therrien
Founder
Business Insurance & Benefit Services of MA
978-400-7014 p
978-400-7015 f
[email protected]
www.bibsma.com

3 insurance triggers startups should be aware of.

Startups have to worry about a lot of things when they are getting going. Quite a few items i’m sure we all wish they could sidestep, insurance is one of them. Unfortunately, insurance is one of those things that is going to creep up occasionally and in some cases inevitably. Below are 3 instances where you just plain have to bite your lip and take care of business.

1)      Vendor contracts

As startups begin to pick up business, vendor contracts may come into play. Vendor contracts may require that the firm entering into an arrangement with a client company secure certain levels insurance coverage. This may extend to specific coverages such as professional liability (errors & omissions), commercial auto and umbrella coverages as well as general liability, especially in the case of services firms.

A common vendor contract will require that at a minimum general liability and professional liability coverage is put into place. Starting points for amounts of coverage will be $1 million per occurrence and increase from there dependent on the nature and scale of the work.

2)      Moving into commercial space

Some startups will make this move quickly, others when revenues can support it. Bottom line is most startups won’t stay in their basement forever. Moving into commercial space, even virtual or shared office space will likely entail a lease or some form of agreement. These agreements may include an insurance clause stating that the startup needs to go secure a certain level of General Liability coverage and name the property owner on the policy.

Property Owners will likely require that they be named on such policies as additional insureds and require that a valid certificate of insurance be provided to the management office before handing over the keys. It’s good to be conscious of such requirements to make such a move seamless. The cost associated with coverage that will satisfy property manager typically aren’t too expensive, relatively speaking. You can usually take care if things for less than 1k/year.

3)      Getting Workers Comp

You will need to secure Workers Compensation with your first hire, be it full or part time.  But one question that crops up quite often is ‘do I need to get it for myself?’ This will depend on how your company is set up. If you are an officer of an S or C-Corporation then the company may need a Workers Compensation policy that includes those officers. Any corporate officer who owns at least a 25% interest in the corporation may be able to exempt themselves from the provisions of the Workers’ Compensation Act. If the company is a sole proprietorship, LLC or LLP, owners can hold themselves exempt from the requirement.

In Massachusetts, penalties for not having Workers Compensation coverage can add up quickly. Per the MA Dept. of Industrial Accidents, employers operating without Workers’ Compensation insurance will be issued a STOP WORK ORDER by the DIA Office of Investigations and shall be assessed a minimum fine of $100 per day commencing  on the date of the issuance. Fines accrue each day until insurance coverage becomes effective, and the  fine must be paid in full to release the STOP WORK ORDER, as authorized under M.G.L. c. 152, Sec. 25C. These orders can be appealed, but fines accrue at $250 per day when appealed, and STOP WORK ORDERS remain in effect until insurance becomes effective and the fine is paid.

In addition, an employer may be subject to criminal sanctions, including not more than one-year imprisonment and/or up to a $1500 fine upon conviction. Uninsured employers are also subject to debarment from public contracts for a period of three years.

Needless to say, it’s better to get the coverage in place.

For more information on the topic or guidance, use the form below or reach out directly to Nathan Therrien at 978-400-7014 or at [email protected]

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For all the buzz about coworking spaces, incubators, accelerators and whatever other buzz words you want to use when it comes to supporting young businesses, all the talk seems to have centered around Boston….until now.

Barb Finer, founder of QuiTivity, is starting a new venture slated for 2013 to bring those types of resources to Metrowest. TechSandbox’s mission will be to accelerate the success of science and technology entrepreneurs based in the 30+ cities and towns located near the 495/90/rt9 Metrowest corridor. While details will be finalized on the project in the coming weeks and months, it’s good to see that business communities west of Boston are staring to get in on the action. Learn more at http://techsandbox.org

The call has been put out to the Metrowest  community at large. Check out the mass-connect calendar, there are several events scheduled to pull together volunteers to help nurture this project. There are 5 events scheduled through December and January, an open call for volunteers including the formation of steering committees that will work the details of programs to be offered.

If you want to get in on the action, the events will be Thursday nights on Dec 20th and Jan 10th and Friday mornings the 14th, 21st and 28th of December, all to be held at Tatnuck, 18 Lyman St., Westboro, MA. Get on board before the train leaves the station and support the emerging entrepreneurial effort in Metrowest.

Check out Janet Egan’s Blog at http://eganwriter.blogspot.com

fun, fortunes, and big news at #MIN 44

View of Boston from 10th Floor

With everything from hailing a taxi cab to telling your fortune on the agenda, a Big News announcement, and a cool venue high above Kendall Square, #MIN44 set the bar high. Once again an innovative good time was had by all. Diversity of products and people, great views of Boston across the river, and fun hosts established a great vibe from the start.

Darth Potato Head

VMWare proved gracious hosts with free food, beverages, and Star Wars themed Mr. Potato Head toys decorating the lobby. The Experts were set up in conference rooms along the outer wall — more of an Experts Row than an Experts Corner. The demo tables occupied hallways surrounding the main presentation area.

USpin

This month’s presenters were:

• Prospective Plus — a Common Job Application for recruiting entry level employees. Developed by a Northeastern student entrepreneur, it’s similar to the Common App used for college admissions.
• SmartBooks — your Virtual Finance Department. Bookkeeping and finance services in the cloud for startups and small businesses.
• Hailo — a free smartphone app that lets you  hail a safe and reliable Boston cab from wherever you are.
• Justellus — replaces all those customer surveys with a cool way to submit feedback to companies in seconds, earn rewards, and support great causes.
• USpin — a way to find, plan, and reserve awesome activities for your diverse group of friends.

Yes, you counted right, there were five. All of them were good. Hailo had an impressive video. Prospective Plus represented well for Northeastern (alma mater of one of my girl scientist nieces :-)) and had great energy

I had even more fun that usual checking out the demo tables because the placement of Jibununext to Tell a Fortune tickled my geeky sense of humor. Jibunu answers questions using custom data collection and analysis. Tell a Fortune answers questions using a card reading/astrological app. Both invited me to ask questions. I figured “what is the meaning of life, the universe, and everything” was too easy so I tried to formulate a question about the future of technical communication. I got a good laugh from the Jibunu representative and a prediction about my strength and determination from the fortune telling app.

Jibunu

Both enjoyed posing for photos. Oh by the way, 42 is the answer to life, the universe and everything for the 2 or 3 readers unfamiliar with The Hitchhiker’s Guide to the Galaxy.  And while we’re on big data and predicting the future, how is it that not one big data startup has named themselves Seldon Foundation? OK, enough geekery for now. 🙂

Fortune Telling

Justellus has the answer for getting feedback from “fans to brands”. No navigating company web sites to find out how to give feedback, no endless surveys (if certain brands survey me one more time, they’re going to lose me), no sitting on hold to talk to an offshore call center, just enter your feedback and it goes to the brand’s employee who is encouraged to listen or to take action. It’s that easy.

Justellus

Living out here off the edge of the universe, I don’t often have to hail cabs in Boston. If I did, I would definitely want Hailo on my smartphone. No flailing around in the rain trying to catch the driver’s attention, no futzing around with payment, no worries. Just; two taps on your smartphone and pay by card, with no charges above the meter. That’s it. Team Hailo had the best matching T-shirts so I awarded them Best Costume of MIN44.

Best Costume

SmartBooks had the greatest number of clouds on their slides. Their virtual bookkeeping and accounting services leverage cloud technology and integration with QuickBooks to make it easy for startups and small businesses to access their information and reports from any computer anytime and submit expenses and pay bills from their mobile phones. It’s like having a finance department in your pocket.

SmartBooks

Best Hat of MIN44 goes to Osmium Apparel. They were there to launch the Mobius Belt, which is very cool — the buckle is separate from the belt, very customizable. As cool as the belt was, I found I had to try on a hat. Mark from Osmium assured me I looked very Left Bank– just like in my high school fantasy of hanging out at Les Deux Magots with Simone deBeauvoir and Jean-Paul Sartre.

Best Hat

BRIGHTdriver, creator of  interactive audio games, had the best table location right next to the door of the presentation area. They describe the intent of their product as a way for drivers to be able use their smartphone to have all the fun of social gaming without the dangers of texting. Personally, I think I would find audio gaming distracting too.

BRIGHTdriver

Yes, there was indeed big news.

Big News

Big News: Mass Innovation Nights has a new sponsor, American Airlines. This is an awesome partnership. Paul from American described the awesome MIN perks: All exhibtors can participate, 5000 Business ExtrAA points for the first place winner, and 2000 Business ExtrAA points for the next three. So all four presenters end up with some air travel — very useful for startups.

Paul from American Airlines

I had some great conversations with folks in the Experts Corner — or Experts Row — about what people are looking for when they come to Mass Innovation Nights, how to tap into innovative ideas, and a little about what current innovators might be able to learn from those of us who were working at startups when dinosaurs roamed the earth.

Is that a potato masher in his hand?

The crowd was an excellent mix of regulars and newcomers and I saw lots of connections being made. That’s what people come to MIN for — connection.

As is traditional, I’ll close with an Expert looking expert, in this case Mike the Sharepoint expert doing his best “expert look” and kind of reminiscent of NBC’s Chuck Todd on election night.

Expert Looking Expert

(Updated to correct the number of Business ExtrAA points for the 3 runners up)

What kind of plan is going to suit my company? HMO vs. PPO

Once the question whether a company needs to implement a health plan, one of the next logical questions winds up being ‘What kind of plan do we need? In Massachusetts, the most common types of scenarios boil down to an HMO (Health Maintenance Organization) versus a PPO (Preferred Provider Organization). The POS (Point of Service) plan is a less common hybrid that is really a discussion for itself, therefore for the purposes of this entry, I will stick to the HMO vs. PPO argument.

First off, let’s cut right to the chase and talk about cost. This is here the rubber meets the road for a company anyway in terms of affordability anyway, so let’s lay it out there. As a general rule, a PPO is more expensive than an HMO plan. The difference in cost between the two can vary, especially as you compare different states. With that said, I will stick to the MA market. In my experience, if you have the same ‘apples to apples’ benefits design where one is an HMO and one is a PPO, you can use a good rule of thumb of 10-15% more expensive on average.

This doesn’t answer the first question though, ‘What’s the best plan for my company?’ So what are the primary differences, aside from cost?

First there is the network issue. With HMO’s you can go to an established network of doctors, that’s it. If you go outside your network, outside of an exceptional circumstance, you are going to pay the bill. PPO’s also have networks, very big nationwide ones in fact, and if you are within that expanded network, you will be subject to the cost associated with your plan. But you can also go outside your PPO network if really want to. You’ll likely wind up paying more, 20% is not uncommon, but it’s there.

Second is the referral issue. With HMO’s you have a Primary Care Physician, or PCP, this is your service gatekeeper. Your PCP is typically the doctor you’ve always gone to, s(he) will be the one to refer you to other services such as specialists or for ongoing testing. The referral is not unlike getting a ‘note’ or a ‘pass’. PPO’s have no referral issues, meaning you can self-refer for services such as specialist visits or testing. Does your PCP want to be a pain about letting you see a specialist? If you have a PPO it’s a non-issue, self-refer. If you have an HMO, maybe you want to find a PCP who isn’t a pain.

One of the primary drivers that determines whether a company implements one or another is where do the employees live. If you have a company where you have employees in different states, you’re going to likely need a PPO. Some vendors have expanded HMO networks, so let’s say that if you have employees outside of New England, you’ll need a PPO. If all of your employees live within a geographic area that is serviced by an HMO network, then you have the choice of either an HMO or PPO on the merits and needs and budgets of your employees moreso than geopgraphy.

A caveat to this is in cases where certain parameters are met, a company can have what is called a split option plan, meaning you can have both a PPO and an HMO to choose from. This is common where perhaps you have 1 or 2 employees outside the network are, but still need to make sure they are taken care of. In some cases, the desire for the freedom on a PPO versus HMO will supercede the cost issue and a company will implement the option even if the geography says you don’t need to. Issues such as company and enrollment size can impact this scenario though.

I hope you found this post helpful, further details and discussion is part of any company sponsored health plan implementation. If I can be of any assistance in that context, answer a question, or run you a quote on a plan, please don’t hesitate to reach out to me, more than happy to help.

Nate Therrien

Founder, Business Insurance & Benefits Services of MA

978-400-7014, [email protected]

So one of the questions I get asked frequently is ‘What can I do to lower my health care costs?’ So often it’s been a matter of taking a step back on benefits, either by including or increasing a deductible on a company health plan. Recently though, August in fact, Blue Cross Blue Shield of MA came up with something new.

BIBSMA has come out with a wellness program that can actually impact cost. What’s the catch? Well, here’s the broad scope version of how it works. You need to have 10 enrollees on a plan, so if you have a company of less than 10 employees, or a company where less than 10 employees enroll in the coverage, it won’t work. The gist of this plan is to engage employees to go to the doctor and get a clean bill of health, and if not start working toward better health.

What’s the bottom line? If you are a business owner in MA, and you have 10 enrollees on a plan, you’ve passed the first criteria. How much you can potentially save falls to enrollee engagement as a function of those that engage and complete the program. By completion, the enrollees doctor deems them healthy per key health measures (height, weight, blood pressure, smoking status, etc..). The graph below illustrates the percentage of enrollees that complete the program vis a vis the percentage of premium that can be rebated at the end of a plan year.

There is also an incentive to drive engagement of the program at the employee level in the form of debit cards. Employees can receive as much as $300 in a debit card by completing the program and be deemed healthy per the program parameters. This helps the whole thing become a win/win for the employer and employee.

If you’d like to find out more. feel free to reach out by emailing me at [email protected] .