The Barkley Buzz Newsletter October 2009 Issue

Risk Management News and Tips brought to you by Barkley Insurance & Risk Management

In this issue:

• Property Valuation Errors Can be Costly
• Sound Methods for Reducing Noise Hazards
• Health Care Reform Starting to Take Shape
• American Health Future Act of 2009 Released
• Open Enrollment Education Opportunities
• Reimbursement of Over-the-Counter Medications: IRS Issues Informative Letter

DID YOU KNOW...?

The Kaiser/HRET 2009 Health Benefits Survey was just released. According to the survey, premiums for employer-sponsored health insurance rose to $13,375 annually for family coverage this year – with employees on average paying $3,515 and employers paying $9,860. Family premiums rose about 5 percent this year compared to general inflation which fell 0.7 percent during the same period.

Risk Management

~ Property Valuation Errors Can be Costly

Obtaining a professional property valuation can help insureds avoid many common property valuation errors. If your company has significant business personal property, multiple locations, any form of unique construction or sizeable total values, you may wish to consider using a professional appraisal service. When you consider the potential costs of over- or underinsurance, the cost of this service could pay for itself in a short time.

A professional appraiser has the advantage of being able to use up-to-date comparative information. Different appraisers have different specialties, so make sure any firm you use has experience evaluating properties like yours.

Appraisers offer a range of services:

• Developing accurate values by using multiple indexes, modeling approaches and other techniques
• Calculating depreciation accurately
• Identifying property excluded in the policy to avoid reporting it
• Providing documentation that can help prove loss in the event of a claim
• Providing expert testimony in case of loss

Some appraisers will offer periodic updating of your property valuations at a reduced charge and appraisals for property difficult to value, such as art.

For information on obtaining a property valuation, please contact us.

~ Sound Methods for Reducing Noise Hazards

Noise-induced hearing loss is one of the greatest occupational health threats in the United States – a silent threat that can go unnoticed because it develops over time, there are no visible effects and except in very rare cases, there is no pain.

According to OSHA, more than 30 million American workers are occupationally exposed to hazardous noise levels and 10 million workers suffer work-related hearing losses.

Under OSHA regulations, businesses must accurately identify employees exposed to noise levels at or above 85 decibels (dB) averaged over eight working hours. This is done by testing and mapping noise levels. As a rough guide, if workers have to raise their voice to speak to someone within touching distance they are likely exposed to excessive noise. Other telltale signs are ringing ears or dull hearing after leaving a noisy place.

Workers exposed to noise levels above 85 dB must comply with strict exposure limits as detailed in the table to the right. The employer must notify each employee who is exposed at or above the action level of the results of the monitoring. Employers that have any workers whose noise exposure meets or exceeds these levels must develop a hearing conservation program for them.

To satisfy OSHA requirements, this program must include annual monitoring, audiometric (hearing) testing, hearing protectors, training and recordkeeping.

Environmental noise levels can be significantly reduced by using ear protection devices. Most manufacturers will give a noise reduction rating (NRR), or a measure of the reduction in noise, in decibels, the device achieves in a laboratory setting. Occupational health professionals use several different calculations to determine noise exposure, but generally speaking, you can estimate effective noise exposure levels by subtracting the NRR from the environmental noise level. You want a NRR high enough to block harmful noise, but not so high that the worker is unsafe.

There are three basic types of hearing protection devices:

• Expandable foam plugs – These conform to the shape of the individual’s ear canal to block sound. They provide good protection if they fit right. But the plugs must be rolled into shape manually. This means that they will not always fit properly and could introduce dirt or dust into the ear canal.
• Premolded plugs made from silicone, plastic or rubber – These are washable and convenient and won’t introduce dirt into the ear canal. However, each worker must find the right size and style to make sure they adhere properly to the shape of the ear canal.
• Earmuffs – These block noise by covering the entire outer ear. Some contain noise cancellation electronics that produce sound waves designed to counteract specific environmental noise. Other features allow users to communicate. But they work poorly if not properly sealed around the ear, which is often the case for workers with glasses, beards or long hair. Also, they can be heavier than other devices and can get hot.

Experts recommend annual training to ensure proper device use, supervision to make sure devices fit properly and encouraging workers to use the devices outside the workplace to reduce the chances of cumulative damage.

It’s also important to remember that noise is not the only risk factor. Exposures to chemicals and other substances can also cause hearing loss. Combined exposures to noise and chemicals can cause more hearing loss than exposure to either agent alone. Vibration and extreme heat are also potentially harmful to hearing when combined with noise. Employers whose workers contact these substances will likely want to implement a hearing conservation program, whether or not noise levels require one.

Group Employee Benefits

SURVEY SAYS!

While consumer-driven health plans continue to be of interest to employers, overall health plan design is a critical piece in the puzzle. How are employers positioning their plan design offerings? Contact Barkley Insurance for this year’s survey results to determine how you fare.

~ Health Care Reform Starting to Take Shape

As the health care debate carries on, what will be included in the final bill is still unclear; however, the following is likely to be included:

• Every American would be required to have basic health insurance. Those without insurance from an employer or government entity such as Medicare, Medicaid or the Veterans Affairs Department would be required to buy it or pay a fine. Subsidies would help lower-income families and individuals pay for insurance.
• Insurance companies would be prevented from denying coverage for preexisting conditions and capping patients’ out-of-pocket costs for care.
• Nothing in the plan will require employees or employers to change coverage or the doctors they have.
• There is a disincentive for employers in dropping health care insurance – penalties (tax on payrolls) for employers who don’t offer health insurance, with small businesses exempt.
• Those who are uninsured would be able to purchase insurance on their own from a new exchange, a marketplace for companies offering policies. Individual insurance rates are expected to drop.
• It is unclear whether a public option will be one of the health care plans offered on the new insurance exchange alongside private insurance companies’ plans. A national or regional cooperative with the same objective of increasing competition is also being proposed.
• Medicaid would be expanded to include low-income childless adults.
• Medicare and coverage from the Veteran’s Administration will not change; however, some benefits may be trimmed from Medicare Advantage.
• The cost over 10 years is estimated at $900 billion to $1 trillion.

~ American Health Future Act of 2009 Released

Senate Finance Committee Chairman Max Baucus recently released his plan, American Health Future Act of 2009, to overhaul America’s health care system. Key provisions include:

• Starting in 2013, all U.S. citizens would be required to have insurance. An excise tax will be levied on those who do not, and tax credits will be made available so low-income individuals can comply.
• Employers with 200 or more employees must automatically enroll them in employer-sponsored health insurance plans, unless the individuals can prove they have insurance from another source.
• Employers do not have to provide health care coverage, but if they have 50 or more employees, and do not, they will pay a fee for every employee that gets coverage through an exchange. Employers would be required to disclose total premiums paid for an employee on an employee’s W-2.
• Insurance companies that offer health plans that cost more than $8,000/year for individuals and $21,000/year for families will pay a non-deductible 35 percent tax.
• FSAs will be capped at $2,000 per year, and over-the-counter meds would not be allowable expenses. HSA funds that are used for other than qualified medical expenses will be penalized 20 percent.
• To increase competition and bring down rates, not-for-profit co-ops will be established.

~ Open Enrollment Education Opportunities

Open enrollment is a period of time each year when employers permit new employees to enroll in a health plan and allow current employees to make changes to their existing medical coverage. During open enrollment employees may decide to change plans, add or drop a dependent, or add an optional program such as a dental plan.

Employers can assist employees during open enrollment by distributing materials that explain new health options and changes to existing benefits. To facilitate employees selecting the plan option that best meets their family’s needs, employers should provide information about the following:

• A general summary of what benefits are covered by the plan
• Limits on coverage, as well as limits on coverage for certain disorders
• Preexisting condition clauses that restrict coverage for a specific period of time
• Coverage for preventive services, procedures and medications
• Extent of medication coverage, particularly for new drugs
• Cost-sharing (i.e., premium contribution, deductible, copayment or coinsurance requirements)
• Consumer-directed health plans (high-deductible health plans) or other non-traditional plan types

Nine methods that employers can use to improve their open enrollment communication strategies:

1. Communicate frequently with employees regarding their health coverage options, but avoid overwhelming them with information. Give them ample time to absorb new information, ask questions and express concerns.
2. Use simple terms to explain any changes.
3. Thoroughly explain the goals and rationale of health care benefits to managers and business leaders so they can effectively explain health plans to employees.
4. Be ready to answer questions and face challenges from management and employees regarding changes.
5. Be honest and direct when discussing health benefits, especially if employees are facing cost increases for their coverage.
6. Discuss the “5 Cs” of enrollment with employees: Cost, Coverage information, Changes to plans, Comparison’s to last year’s plans and options, and Current options.
7. Provide information to employees about the health care providers that will be available to them in new or revised plan options.
8. Provide testimonials from other employees about their experiences with changes in health care coverage.
9. Use a variety of methods to communicate with employees; for example, use the Web, printed materials and face-to-face discussions.

~ Reimbursement of Over-the-Counter Medications: IRS Issues Informative Letter

On July 14, 2009, the Internal Revenue Service (IRS) issued an information letter regarding reimbursement of certain over-the-counter (OTC) items by health flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs). Specifically, the letter provides guidance on whether these items qualify as “medical care” expenses that may be reimbursed. The IRS notes in the letter that it is intended for informational purposes only and does not constitute a ruling by the IRS.

Medical Care Expenses

In the letter, the IRS explains that medical care expenses are amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting a structure or function of the body. Expenses for OTC items may qualify as medical care only if they are “primarily for” the prevention or alleviation of a physical or mental defect or illness. Expenses that merely benefit general health, on the other hand, are considered to be only personal expenses and will not qualify as medical care expenses.

Medical Care Factors

Whether an otherwise personal expense is primarily for medical care is a question of fact. Several objective factors may be considered in making this determination, including:

• The motive or purpose for making the expenditure;
• Whether a physician has diagnosed a medical condition and recommended the item as treatment;
• The link between the treatment and the illness;
• Treatment effectiveness; and
• The proximity in time to the onset or recurrence of a disease.

The “But For” Test

For the expense to be deemed medical care, it must be established that the expense would not have been paid “but for” the disease or illness. That is, the item is not for medical care if the individual would have paid for it even without a medical condition.

Personal and Medical OTC Items

The IRS letter specifically addresses a number of items that may be both personal and medical in nature, as well as items that are generally used only for medical care.

Personal Items as Medical Care:

Certain items may qualify as medical care, or may be personal items, depending on how they are used. For example, a person may use these items to maintain general health, or as toiletries or cosmetics. These are personal uses. However, if it can be shown that the item is used to treat or alleviate a disease or injury, and satisfies the “but for” test, the item may qualify as a medical care expense. These items include:

• Sunscreen;
• Medical grade face masks;
• Skin products;
• Anti-bacterial hand sanitizers;
• Fluoride rinses;
• Petroleum jelly;
• Fiber supplements; and
• Probiotics.

Medical Care Only Items:

Items that have no purpose other than to treat a disease, illness, or mental or physical defect may qualify as medical care. Treatments for the following conditions will most likely qualify as medical care:

• Acne;
• Incontinence;
• Arthritis;
• Constipation;
• Colds and sinus problems;
• Dehydration; and
• Indigestion.

In addition, the following items will probably qualify as medical care:

• Support braces and shoe inserts for injured or weakened body parts;
• Products that have no purpose but to treat existing skin conditions such as eczema (as opposed to products that are designed to prevent the development of the condition); and
• Wheelchair cushions that are a necessary accessory to a wheelchair.

Excess Cost of Personal Items:

The excess cost of an otherwise personal item that is specifically designed to treat or alleviate a medical condition, over the cost of the item without the special features, may be considered an expense for medical care. For example, the cost of specially designed clothing that is used to treat a specific disease, such as diabetic socks, compression hose or orthopedic shoes, that exceeds regular clothing may be a medical care expense. However, these items may also be used for personal or preventive reasons. Whether they are eligible for reimbursement will depend on the facts of each specific case.

Food and Food Thickeners:

The cost of food is not a medical care expense if it is a substitute that a person would normally consume to meet nutritional requirements. However, it is possible that food thickeners may be considered a medical care expense. This is a question of fact that must be determined on a case-by-case basis.

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