Insurance Premiums – Setnor Byer Insurance & Risk

Florida Employers Will Be Paying Less for Workers’ Compensation Insurance in 2019

Great news for Florida employers! The Office of Insurance Regulation approved a statewide overall workers’ compensation rate level decrease of 13.8 percent for new and renewal policies starting January 1, 2019. This will be the second consecutive year that rates have gone down in Florida.

The rate decrease is due in part to declines in claim frequency resulting from safer workplaces, enhanced workplace efficiencies and an increased use of automation and innovative technologies. Reduced assessments and increased investment income also contributed to the rate decrease.

When combined with the 9.5 percent reduction that took effect January 1, 2018, Florida’s overall rate level will be nearly 25 percent lower in 2019. To offset this revenue loss, insurance companies may begin auditing employers to make sure employees have been assigned the correct job classification code.

Classification codes are used to categorize employees based on the type of work they do. Each code is assigned a rate that reflects the relative risk associated with that type of work. A higher risk means a higher rate, which ultimately means a higher premium.

A car dealership, for example, may have employees classified as salespersons. This may change if an audit reveals that these ‘salespersons’ also work in the dealership’s parts department. The rate used to calculate premiums for non-salesperson employees is nearly five time higher.

It’s unclear how aggressive insurance companies may be in conducting audits, but it’s something employers should be aware of. Please contact us if you have any questions about employee classification codes or want to discuss ways to lower your workers’ compensation insurance premiums.

Business Interrupted? Don’t Let a Property Loss Jeopardize Your Business

Did you know that nearly 40% of businesses do not reopen and another 25% fail within a year after a catastrophe or disaster? The actual loss or damage to buildings, facilities and property is often the reason for this frightening statistic, but it isn’t the only reason. Businesses are increasingly struggling to recover after a property loss because of the economic impact caused by the interruption of business operations during and after the event.

It’s common for business operations to be suspended temporarily after a property loss. Depending on the severity of the loss, a business may be forced to shut down for weeks, possibly months. Though revenue often stops, expenses continue. The inability to pay expenses (payroll, mortgage, suppliers, taxes, etc.) can turn a temporary suspension of business operations into a permanent shut down. Business interruption insurance can prevent this from happening.

Business Interruption, also known as Business Income, is a type of commercial insurance that protects against loss of income when a covered loss causes a business to reduce or suspend its operations. In the event of a covered loss, business interruption insurance will cover lost revenue and fixed expenses, like rent and utilities, during the suspension of operations. Extra expense coverage is also available to reimburse costs over and above normal operating expenses, like temporary relocation costs.

Business interruption coverage is triggered when there is direct physical damage to property that was caused by a covered peril. For example, if wind damage is covered under a commercial property insurance policy, there would be business interruption coverage if operations were suspended due to a windstorm. On the other hand, if wind damage is not covered, there would be no business interruption coverage.

To calculate a business interruption loss, insurance companies need to determine how much the business would have earned if the loss had not occurred. They may review and consider various financial documents, such as tax returns, bank statements, profit and loss statements and balance sheets, to establish the amount of a business interruption loss.

According to the Insurance Information Institute, a recent report found that the economic impact from business interruption is often much higher than the cost of physical damage. Business interruption losses now make up a much larger part of overall property losses than they did just ten years ago. The increasing interdependence among businesses locally and globally also means that business interruption losses are expected to increase in frequency and severity.

Businesses should consider adding business interruption coverage to their existing insurance program. Though many aspects of this coverage are relatively standard, there are some variations among insurers and policy forms. For example, some policies may provide Civil Authority coverage. Given the relative complexity of business interruption coverage, an experienced and reputable insurance agent should be consulted to help identify needs and evaluate options.

Please contact us to learn how business interruption insurance can protect your business.

If you’d like to subscribe to our weekly newsletters, please click here.

What is a Grandfathered Group Health Plan?

Though the term ‘grandfathered’ is commonly used when discussing group health insurance under the Affordable Care Act (ACA), many people don’t know what it means. ‘Grandfathered’ is used to describe group health plans that are exempt from many of the ACA’s provisions. These exemptions were included in the ACA so groups that were happy with their health plans could keep them.

To be eligible for grandfathered status, a group health plan must have been in existence on March 23, 2010, which is the day the ACA became law. Plans starting after this date do not qualify for grandfathered status. Additionally, plans that have made significant changes since March 23, 2010 may lose their grandfathered status. For example, increased cost-sharing requirements, such as copayments and deductibles, decreased employer contributions, elimination of benefits, and changes in annual limits may cause a plan to lose its grandfathered status.

Grandfathered group health plans are exempt from many of the ACA’s provisions. For example, the following provisions do NOT apply to grandfathered plans.

Fair health insurance premiums: Under the ACA, health insurers may not charge discriminatory premium rates.
Guaranteed availability of coverage: Under the ACA, insurers must generally accept every employer group in the State that applies for coverage, though they can limit enrollment to annual open and special enrollment periods.
Guaranteed renewability of coverage: The ACA generally requires guaranteed renewability of coverage regardless of health status, utilization of health services, or any other related factor.
Comprehensive health insurance coverage: The ACA generally requires that insurers include coverage for defined essential benefits, provide a specified actuarial value, and comply with limitations on allowable cost sharing.
Coverage of preventive health: Under the ACA, group health plans must cover certain preventive services, immunizations, and screenings, without any cost sharing.
Prohibition on discrimination in favor of highly-compensated individuals: The ACA prohibits fully-insured group health plans from discriminating in favor of highly compensated individuals with respect to eligibility and benefits.
Patient protections: The ACA generally requires group health plans to permit an individual to select a participating primary care provider, to provide direct access to obstetrical or gynecological care without a referral.

Grandfathered group plans are not exempt from every provision of the ACA. There are a number of provisions that DO apply to grandfathered plans, such as:

Prohibition of preexisting condition exclusion or other discrimination based on health status: Under the ACA, group health plans may not impose a preexisting condition exclusion or discriminate based on health status.
Prohibition on excessive waiting periods: The ACA prohibits any waiting periods that exceed 90 days.
No lifetime or annual limits: The ACA generally prohibits group health plans from establishing lifetime limits and annual limits on the dollar value of benefits.
Extension of dependent coverage: Under the ACA, group health plans that provide dependent coverage are generally required to make such coverage available to children until age 26.
Prohibition on rescissions: Group health plans may not rescind health coverage except in the case of fraud or intentional misrepresentation.

The number of grandfathered group health plans is steadily decreasing. A 2013 study by the Kaiser Family Foundation found that 36 percent of those getting health coverage from an employer are enrolled in a grandfathered health plan, which is down from 48 percent in 2012 and 56 percent in 2011. The study also found that the number of employers offering grandfathered plans and the number of employees enrolling in them is also decreasing. This trend is expected to continue and more plans are expected to lose grandfathered status over time.

Very specific regulations govern grandfathered group health plans, so establishing and maintaining grandfathered status can be a complicated process. For example, grandfathered plans must disclose their status to participants and beneficiaries and must maintain any documents that are necessary to verify, explain or clarify a plan’s grandfathered status. Given the significance of the ACA’s grandfather exemptions, it’s important to seek guidance from reputable and experienced experts.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the changes coming in 2014. Check back with us periodically for future informational updates about the Affordable Care Act. If you have specific questions about the ACA or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

If you’d like to subscribe to our weekly newsletters please click here.

Offering Health Insurance to Same-Sex Spouses

Under the Affordable Care Act, health insurance issuers in the individual and group markets are generally required to guarantee insurance coverage to every employer and individual that applies. Beginning in 2015, this guarantee will extend to same-sex spouses.

On March 14, 2014, the Department of Health & Human Services (HHS) announced that insurance companies offering non-grandfathered health insurance plans can no longer refuse to offer health insurance coverage to same-sex spouses. In taking this position, the HHS relied on federal regulations prohibiting health insurance issuers from employing marketing practices or benefit designs that discriminate on the basis of, among other things, an individual’s sexual orientation.

According to HHS, an issuer is considered to employ discriminatory marketing practices or benefit designs if the issuer:

Offers health insurance coverage to a spouse in an opposite-sex marriage; and
Does not offer the same coverage to a spouse in a same-sex marriage that was validly consummated in a jurisdiction where the law authorizes same-sex marriages.

Importantly, the prohibition against discriminating against same-sex spouses applies regardless of the jurisdiction in which the insurance policy is offered, sold, issued, renewed, in effect, or operated, and regardless of where the policyholder resides. This means that insurance companies must offer coverage to legally married same-sex spouses even if they live in a state that does not allow same-sex marriages.

HHS noted that its position regarding coverage for same-sex spouses does not require a group health plan to provide coverage that is inconsistent with the terms of eligibility for coverage under the plan, or that otherwise interferes with the ability of a plan sponsor to define a dependent spouse for purposes of eligibility for coverage under the plan. It only prohibits an issuer from refusing to offer the option to cover same-sex spouses on the same terms and conditions as opposite sex-spouses.

According to HHS, it is only clarifying the current regulations’ prohibition against discrimination based on sexual orientation in a manner that is consistent with the policy of ensuring that all individuals have access to health coverage. However, since “some issuers may not have understood the prohibition,” HHS is not requiring immediate compliance. Rather, health insurance issuers must implement changes for plans or policies years beginning on or after January 1, 2015.

Though fewer than half the states allow same-sex marriages, employers in every state need to be aware of health insurance requirements for same-sex spouses. Beginning in 2015, the focus will need to be on the legality of the marriage rather than the gender of the spouses.

Recent developments with the Affordable Care Act suggest that change rather than stability should be expected. At Setnor Byer Insurance & Risk, we are committed to guiding you through the changes coming in 2014 and beyond. Check back with us periodically for future informational updates about the Affordable Care Act.

If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

If you would like to subscribe to our newsletters please click here.

Understanding the National Flood Insurance Program

Property damage caused by flooding is not covered by standard homeowners’ insurance policies, so those facing a flood risk need a separate flood insurance policy. The National Flood Insurance Program (NFIP) provides access to affordable, federally backed flood insurance.

What is a Flood?

The NFIP defines a flood as a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from:

Overflow of inland or tidal waters;
Unusual and rapid accumulation or runoff of surface waters from any source;
Mudflow; or
Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above.

What is Covered?

A flood insurance policy generally covers physical damage to building or personal property directly caused by a flood. The NFIP offers coverage for Building Property and Personal Property (contents), which must be purchased separately.

Building Property coverage generally insures:

the building and its foundation
electrical and plumbing systems
central air conditioning equipment, furnaces and water heaters
refrigerators, cooking stoves and built-in appliances
permanently installed carpeting over an unfinished floor
permanently installed paneling, wallboard, bookcases and cabinets
window blinds
detached garages (up to 10 percent of Building Property coverage)
debris removal

Personal Property coverage generally insures:

personal belongings such as clothing, furniture and electronics
curtains
portable and window air conditioners
portable microwave ovens and portable dishwashers
carpets not covered by the Building Property policy
washers and dryers
food freezers and the food in them
certain valuable items such as original artwork and furs (up to $2,500)

What is Not Covered?

Neither type of coverage protects against:

damage caused by moisture, mildew or mold that could have been avoided
currency, precious metals and valuable papers
property and belongings outside of a building, such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs and swimming pools
living expenses, such as temporary housing
financial losses caused by business interruption or loss of use of insured property
most self-propelled vehicles such as cars, including their parts

If you would like more information about the National Flood Insurance Program or are interested in obtaining flood insurance, please contact us.

If you would like to subscribe to our newsletters please click here.

Shopping for Insurance: Quality versus Cost

People typically purchase insurance because they have to, not because they want to. For the most part, consumers are happy to obtain the minimum required insurance coverage at the lowest price they can find. That is, until a claim comes along. Only then do they discover that buying the cheapest insurance available wasn’t such a bargain after all.

The quality versus cost argument is nothing new especially when it comes to insurance. Consumers who pay less tend to get less, whether in the form of coverages, limits or financial security. And, when people choose cost over quality, it usually means they are uninformed about what they really need.

As a full-service independent insurance agency, it is our job to help our clients understand their insurance needs. We evaluate, compare and quote various options from multiple insurance companies so that our clients have the right information before making a decision. Though many still choose cost over quality, it is important that they understand what they may be sacrificing.

Low Premiums

Would you rather have automobile insurance that protects you from damage caused by someone who is uninsured or underinsured? Uninsured Motorist Coverage is commonly excluded from a policy to reduce the premium. Rejecting GAP coverage or electing non-stacked coverage are other ways to save money. But these choices come with a risk. When shopping for insurance it’s better to determine what coverage is desired, see how much that coverage would cost, and work with an independent insurance agent to help get the coverage you need at a cost you can afford.

Financial Stability

Although cost is important, the financial strength of an insurance company may be more important. Financially weak insurance companies are more likely to become insolvent or go bankrupt, which means that their policyholders are less likely to get their claims paid. Though purchasing insurance from a financially weak company may be cheaper, how valuable is the money saved on premium if there is no money to pay a claim? An independent insurance agent can help you evaluate the financial stability of the insurance companies you are considering.

Customer Service

Insurance companies don’t typically assign an agent to their customers. Each time you call you speak to a different person which means you have to explain your situation over and over. Look for an agent that offers personalized service. Those are the agents who are willing to go the extra mile to get you what you need. For example, at Setnor Byer Insurance & Risk, our commercial clients enjoy complimentary access to our risk management services to help them manage the risks associated with owning a business.

A solid understanding of your insurance needs is the key to overcoming the quality versus cost argument. An experienced and reputable independent insurance agent can help you purchase insurance that is both economical and effective.

If you would like more information about our insurance products, please contact us.

If you would like to subscribe to our newsletters please click here.

Final Rules Issued for Mental Health Parity and Addiction Equity Act

The Departments of Labor, Health and Human Services and the Treasury issued final rules implementing the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Act). Though interim final rules implementing the Act were published and became effective in 2010, these final rules will become effective 60 days after their November 13, 2013 publication date.

Under the Act, group health plans and group and individual health insurance coverage are required to treat mental health and substance use disorder benefits on par with medical/surgical benefits. Though the Act does not require group health plans to provide mental health benefits or substance use disorder benefits, if they are provided, financial requirements and treatment limitations cannot be more restrictive for mental health and substance use disorders than they are for medical/surgical benefits.

Financial requirements include deductibles, copayments, coinsurance and out-of-pocket maximums, but do not include aggregate lifetime or annual dollar limits. Treatment limitations include limits on the frequency of treatment, number of visits, days of coverage, days in a waiting period, and other similar limits on the scope or duration of treatment.

According to a press release issued by the administration, the final rules include specific consumer protections, such as:

Ensuring that parity applies to intermediate levels of care received in residential treatment or intensive outpatient settings;
Clarifying the scope of transparency required by health plans, including the disclosure rights of plan participants, to ensure compliance with the law;
Clarifying that parity applies to all plan standards, including geographic limits, facility-type limits and network adequacy; and
Eliminating an exception to the existing parity rule that was determined to be confusing, unnecessary and open to abuse.

Health and Human Services Secretary Kathleen Sebelius said, “This final rule breaks down barriers that stand in the way of treatment and recovery services for millions of Americans. Building on these rules, the Affordable Care Act is expanding mental health and substance use disorder benefits and parity protections to 62 million Americans. This historic expansion will help make treatment more affordable and accessible.”

The final rules generally apply to group health plans and health insurance issuers offering group health insurance coverage for plan years beginning on or after July 1, 2014; however, they do not apply to small employers with between 2 and 50 employees. Since the Affordable Care Act extended the Act to grandfathered and non-grandfathered individual health insurance coverage, the final rules apply to individual coverage with policy years beginning on or after July 1, 2014.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the constantly changing health care reform landscape. Check back with us periodically for future informational updates.

If you have specific questions about the Mental Health Parity and Addiction Equity Act or the Affordable Care Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

If you would like to subscribe to our newsletters please click here.

IRS Modifies “Use-or-Lose” Rule for Flexible Spending Accounts (FSAs)

On October 31, 2013, the Internal Revenue Service (IRS) modified the longstanding cafeteria plan “use-or-lose” rule for health Flexible Spending Accounts/Arrangements (FSAs). Under this rule, unused FSA account balances are forfeited at the end of the plan year. Now, up to $500 of unused money may be carried over to the next plan year.

A cafeteria plan FSA, which is offered with other employer-established benefits, reimburses employees for qualified medical expenses. FSAs are usually funded by employees through voluntary salary reductions of up to $2,500 per year, though employers may also contribute. FSA contributions are not included in an employee’s income and reimbursements for qualified medical expenses are not taxed.

For nearly 30 years, FSAs have been subject to the “use-or-lose” rule. However, last year the IRS asked whether the rule should be modified to provide greater flexibility. The overwhelming response was yes. The reasons for increased flexibility include:

Difficulties in predicting future medical expenditures
Minimizing incentives for unnecessary spending to avoid forfeiture
The possibility that lower paid employees are reluctant to participate in FSAs because even modest forfeitures can be significant
Easing and simplifying the administration of FSAs

Under the new rule for cafeteria plan FSAs, employers may allow employees to carryover up to $500 of unused FSA money to the next plan year. Any amounts carried over may be used to pay or reimburse medical expenses incurred during that entire plan year. Employers have the option, not the obligation, to let employees carryover unused FSA money. And, since $500 is the maximum amount that can be carried over, employers may choose a lower amount.

Currently, cafeteria plans are allowed to have a “grace period” of up to two months and 15 days after the plan year during which participants may use remaining FSA money from the previous plan year to pay expenses incurred during the grace period. Since this is a popular feature among many plans, it is important to note that plans may provide employees with a carryover option OR a grace period. A health FSA cannot have both.

Employers wishing to utilize the new carryover option must amend their cafeteria plan. The amendment must be adopted on or before the last day of the plan year and may, in some cases, be effective retroactively to the first day of that plan year. Plans must also be amended to eliminate any grace period by no later than the end of that plan year, though the IRS notes that this may be subject to “non-code legal constraints.”

Given the complexity of providing and managing cafeteria plans, as well as the liability for getting it wrong, employers should consult with appropriate professionals to make sure their plans meet their minimum needs and provide maximum benefits.

If you have any questions or would like to speak with one of our Risk Management Professionals, please contact us.

If you would like to subscribe to our newsletters please click here.

Are You Ready for Halloween’s Scary Treats?

Halloween is here! Get ready for the costumes, parties, pranks, trick-or-treaters, candy and…the risk. Every year we are reminded how quickly Halloween celebrations can go wrong. Since cancelling Halloween is not an option, it is important to identify risks that can be controlled and insure against those that cannot.

Vehicle-Pedestrian Accidents

A study by the Centers for Disease Control and Prevention found that the number of childhood pedestrian deaths increased fourfold among children on Halloween. The following tips can limit the likelihood of being involved in a vehicle-pedestrian accident.

Slow down and be alert. Children may move in unpredictable and unsafe ways.
Take extra time at intersections. Pay attention to medians and curbs.
Enter and exit driveways slowly and carefully.
Eliminate distractions, such as cell phones and music.
Turn headlights on earlier in the day

Standard auto insurance policies would typically provide coverage for damage and liability resulting from a vehicle-pedestrian accident, subject to any policy exclusions.

Slips, Trips and Falls

Whether they are trick-or-treaters or party guests, people typically have more visitors than usual on Halloween. This means a higher risk of slip, trip and fall accidents and liability. To prevent accidents:

Keep areas well-lit.
Remove all objects that could cause children or guests to slip, trip or fall.
Make sure Halloween decorations don’t create a hazard.
Repair any broken walkways, sidewalks, driveways, paths and steps.
Warn visitors of, and clearly mark, any hazards that cannot be removed or repaired.
Keep pets inside and away from guests and trick-or-treaters.

If a guest is injured, standard homeowners’ and renters’ policies will typically provide coverage in the event of a lawsuit. These policies may also provide an injured guest with medical coverage, which may help avoid a lawsuit.

Fire

The National Fire Protection Association says that Halloween ranks among the top 5 days of the year for candle-related fires. The NFPA also found that decorations, like jack-o-lanterns, are often the items first ignited in home fires. To prevent fires:

Don’t leave candles unattended and keep them away from flammable materials.
Make sure decorations and costumes are flame resistant.
For decorations requiring electricity, make sure plugs, wires and cords are not damaged and are used properly.

Fires caused by candles or decorations will typically be covered under standard homeowners’ and renters’ policies.

Vandalism

Homes and vehicles are often damaged by mischievous or malicious trick-or-treaters. To limit the risk:

Keep areas well-lit.
Move items indoors or to another location.

Vandalism damage that exceeds the deductible will typically be covered under standard homeowners’ and renters’ policies. If a car is vandalized, the comprehensive portion of an auto insurance policy should cover the damage.

If you would like more information about identifying and insuring against various risks, please contact us.

If you would like to subscribe to our newsletters please click here.

Self Storage Facilities: Protecting the Bottom Line

Most businesses rely on their facilities to manufacture products or provide services. In the self storage industry, the facilities typically are the product. If property loss or damage is not fixed quickly, the business may fail. Though most believe their self storage facilities are adequately insured against property loss or damage, many overlook Ordinance and Law coverage. This oversight can be the downfall of any self storage facility.

Ordinance and Law insurance is designed to pay the extra expense of rebuilding to comply with ordinances or laws, such as building codes, which did not exist when the building was originally constructed. Since the costs of improving a structure to bring it up to code are specifically excluded under most property policies, this coverage can be quite valuable.

An insured’s obligation to rebuild according to current and stricter codes is often triggered when an insured building experiences a covered loss, such as a fire or hurricane. Unfortunately, many insureds first learn of this additional obligation and expense after they experience a property loss. To avoid the burden of these additional rebuilding costs, self storage facilities can add Ordinance and Law coverage to their current property insurance policies. Doing so will generally cover:

Loss to the undamaged portion of the building;
Increased demolition costs; and
Increased costs of construction.

Since rebuilding according to current building codes may suspend operations for an extended period of time, self storage facilities can purchase Business Interruption insurance to cover reductions in net income caused by an inability to continue business operations. Since payroll, mortgage/rent payments, money owed to suppliers, taxes, and other continuing expenses must be met, Business Interruption insurance may provide badly needed capital when operations are suspended.

Combining Ordinance and Law coverage with Business Interruption coverage, self storage facilities increase the likelihood of surviving not only the initial property loss, but a protracted suspension of operations resulting from the obligation to rebuild in accordance with current building codes.

While the decision to obtain Ordinance and Law and Business Interruption coverage should be easy, understanding specific policy provisions and terms can be difficult. Since there may be variations among different policy forms, it is important that you consult with an experienced insurance agent to discuss your options.

If you would like more information about protecting your self storage facility or obtaining Ordinance and Law and Business Interruption insurance coverage, please contact us.

If you would like to subscribe to our newsletters please click here.