Lane 3

Is your benefits broker clueless?

I am constantly amazed at the lack of detailed benefits knowledge exhibited by many of our competitors. Hiring a competent insurance broker makes good business sense. A well-informed broker will be able to guide you and your HR department through the maze of benefits regulations and insurance company policies and procedures.

Have some fun and give your broker the following quiz. Judge the timeliness and accuracy of his or her response.

1. An employer just hired an employee whose wife is pregnant. For the twelve months prior to being hired, the employee and spouse were uninsured. Will the pregnancy be considered a pre-existing condition under the group’s medical plan?
2. An employer with more than 20 full-time employees has a medical policy subject to the laws of Georgia. A 61 year old employee terminates employment because of a health condition. For how long must the employer allow him to stay on the group plan?
3. A fully insured welfare benefit plan had over 100 participants at the beginning of the plan year. What are the plan sponsor’s ERISA reporting and disclosure requirements? Is compliance the obligation of the broker or employer?
4. In the preceding calendar year, an employer had sixteen full-time employees and eight part-time employees. Only twelve of the full-time employees are covered by medical insurance. None of the part-timers are covered. For the current calendar year is this group subject to COBRA?
5. An employer with a fully insured medical policy written in Georgia hires an employee with a history of cancer. This individual was uninsured for 70 days prior to joining the employer. When is the earliest this employee can incur a cancer related claim and have it covered? Does the answer change if the plan is not subject to Georgia law?
6. If Joe terminates employment April 16th and coverage ends April 30th, by what date must he have elected COBRA? If he elects COBRA on May 22nd, by what date must all back premiums be paid?
7. An employee returns to his previous employer after having been deployed in the U.S. military. Can the employer make the employee satisfy the health plan’s 90 day waiting period?
8. A Georgia corporation which is subject to COBRA has several employees in Texas. What is the maximum duration of continuation coverage for Georgia employees? Texas employees?

I hope this helps you evaluate the quality of your benefits broker. Shoot me an e-mail (amcrae@angusmcrae.com) or give me a ring (770-300-0001) if you would like the answers…

Feel the Burn… Benefit Plan Selection for a Newly Funded Start-Up

Okay, so your bank account just went from 0 to 60 in Porsche Carrera GT kinda time. Sorry I just needed an excuse to post a video of a car that’s so hot it’s not even on Porsche’s retail site. 605 horsepower. Stock. But at a price tag of $440,000. I digress…

After spending months or maybe even years with little to no employee benefits – being covered by COBRA, your spouse’s policy, or maybe a substandard individual plan – a newly funded start-up may be tempted to hasten the burn by purchasing that well-deserved, gold-plated employee benefits package. Before doing so, answer this question: “Why do you want to sponsor an employee benefit plan in the first place?”

Attract and Retain Employees

There is one overwhelming reason to become a plan sponsor and that is to attract and retain employees. You should purchase whatever benefits will allow it to hire and keep qualified employees. A company trying to recruit highly trained engineers in a tight job market will have a different benefits strategy than one hiring run-of-the-mill, non-technical types.

The level of premiums you pay on behalf of your employees and their families should follow this same strategy. Should you pay 100% of both employee and dependent coverage? 100% employee and 80% dependent? 50% employee and 0% dependent or something in between the extremes? All will depend on what it takes to attract and retain employees.

What to Buy?

Scarce dollars should follow catastrophic risks. Suffering an accident or illness which results in a $200,000 medical bill is catastrophic. Becoming disabled and therefore unable to earn a paycheck for the next 30 years is catastrophic. Having to buy a pair of eyeglasses or having to pay for a root canal is inconvenient, but not catastrophic.

Consider purchasing the components of an employee benefit plan in the following order: 1. health insurance, 2. long-term disability insurance, 3. retirement plan, 4. dental insurance, 5. employer paid life insurance, 6. short-term disability insurance, and 7. vision insurance.

You may ask why I put dental insurance so high on the list. True, dental in and of itself is not a great insurance buy, but it is an excellent employee benefit. Believe it or not many employees will appreciate your dental plan more than your medical insurance. People typically get their teeth cleaned twice a year and under a good dental plan it will cost them zero. Dental is a very visible benefit. Whereas it often takes a significant sickness or injury before someone truly understands the value of medical insurance.

Insurance Brokers

Entrepreneurs are consistently told to surround themselves with competent advisers. When it comes to employee benefits you should seek out the services of an ethical insurance broker. It is that person’s job to get to know your business – your needs as an employer, to prepare a request for proposal, to shop the insurance marketplace, to consolidate the quotations from various insurers into an easy to understand format, and then to help the business owner come to an informed decision as to which insurer and what plan(s) should be offered to employees.

It is the insurance broker’s responsibility to conduct employee enrollment meetings. These meetings are a golden opportunity to explain how the employee benefits package is an integral part of the company’s long-term vision.

Conclusion

If you are smart enough to get a start-up off the ground then you have the mental capacity to make a valid argument for a Carrera GT as your new company car. Or as reality enters the picture maybe you should install that badly needed employee benefits package instead. With the help of an ethical insurance broker, select plans and contribution schedules that will attract and retain the employees you need to grow your business. What do you think? Car or benefits?

The Blue Schoolhouse

The nexus of three events resulted a calling for Atlanta entrepreneur Wayt King. First, while on a backpacking expedition in the mountains of Guatemala Wayt came across a struggling English teacher from Auburn who had just lost his funding. Second, at a Mayan campfire ceremony in the little town of San Marcos which is nestled along the shores of Lake Atitlan, the local Shaman or priest told Wayt that what he had been seeking had been found in the village. Third, and most important, Wayt met the kids.

These are young school children who are not only poor by U.S. standards, but by Guatemalan standards as well. That said, they are rich with a desire to learn and explore their world. They speak two and maybe three languages (Spanish, their Mayan dialect, and English). And, the children live in one of the most beautiful and peaceful places on Earth. But ignorance in the ways of politics has left the village vulnerable to corrupt officials.

In the Atlanta tech community Wayt King is well known as one of the founders of N2 Broadband (purchased by Tandberg Television, an Ericsson company). Since leaving N2 he is involved in a number of web-based projects with Last Minute Tee Times as the one consuming most of his time. The trip to Guatemala inspired him to create a non-profit, Blue Schoolhouse, Inc., which has the mission of improving education in the town of San Marcos. This is described nicely in an Atlanta Business Chronicle article by Justin Rubner.

In Dunwoody, however, Wayt is known primarily as Linda King’s husband. After supporting the family when Wayt was going through law school, Linda has become very active with their church working in outreach programs, sports leagues and new member orientation. Though not quite as eager to take Spartan backpacking trips as Wayt, Linda is equally involved in the Blue Schoolhouse.

Like any start-up, Blue Schoolhouse has seen its share of challenges. The Kings were able to restore electrical power to the schoolhouse, to wrestle a satellite dish through four months of bureaucratic red tape (customs), and to finally establish internet connectivity. The children have responded to the new technology and are working through the typical learning curve – the goal being to transform from using technology as entertainment to that of education and empowerment.

You can imagine that children who have an aptitude to understanding a number of verbal languages are already primed to excel at learning computer languages. Wayt and Linda hope to use the Blue Schoolhouse in San Marcos as a testbed program that may be spread to other villages around Lake Atitlan.

A new generation of children, better educated than their parents and more capable of earning a living within their own community, is the goal. I’ve posted some pictures within the photo gallery. Take a look at them, the Blue Schoolhouse website and see if you can share Wayt and Linda’s dream…

Clearleap goes Cool!

Two weeks ago, Deborah Michael and I spent some time with Braxton Jarratt and John Vecchio, two of the founders from Clearleap. I got to know John during his days at N2 Broadband (now Tandberg Television, an Ericsson company). Our agency, specifically Deborah, has been privileged to handle Clearleap’s benefits package since the company’s inception.

Clearleap’s mission is to harness all of the power of video and to make the experience easy, reliable and flexible. It is developing a revolutionary new internet video system that enables any business to easily upload, manage, enhance, and distribute digital video.

Clearleap is working on cutting edge video technology and $9 million in recent funding from Trinity Ventures and Noro-Moseley Partners validates the potential of its business model.

Clearleap boasts a talented group of founders who have bootstrapped the company thus far. In July 2007, we installed a solid core of benefits (health and dental) mainly designed to take care of the founders’ immediate needs. Now, as Clearleap is poised to ramp up its operations clearly the focus must shift to the goal of attracting and retaining employees.

Clearleap is an exciting, vibrant place to work. The founders recognize that Clearleap’s employees will drive its success and that a responsive benefits package is one of the keys to employee satisfaction.

Deborah and I are honored to have a front row seat to witness the evolution of such a talented young company. Keep your ear to the ground as you’ll be hearing a lot more about Clearleap soon…

Slow is Smooth and Smooth is Fast. Therefore…

And then there is me. I’m just plain slow! That said, some of us from the Fowler YMCA masters – Mark, Brian, Sue and myself – had a great time Sunday at the Dynamo Masters St. Patrick’s Day Invitational (fill out an entry form, pay your $$, and you were invited). Check out the photo gallery for more pictures.

Here’s what we swam and the results:

Mark Metz – 200 IM, 100 breast stroke, 100 IM
Brian Green – 500 freestyle, 100 freestyle, 100 butterfly
Sue Sinclair – 500 freestyle, 100 freestyle
Angus McRae – 100 breast stroke, 100 butterfly
Britt Dobbins – Oh yeah, nevermind, he showed up last week.

IM stands for Individual Medley which is butterfly, back stroke, breast stroke and freestyle. It also starts the phrase, “IM out of #%&@ air!”

Even though I’d shaved my head for St. Baldrick’s none of the other swimmers seemed intimidated. Somehow I was counting on that as my only way to take gold. In the end I swam a respectful third place in each event for my age category. I’ll credit Mark for some good coaching and Dr. Sellers for insisting I start to exercise.

Swimming is great exercise and I’d recommend it to anyone. It’s not hard on the knees and you don’t get the road rash/broken bones (Steve) like you do biking. There’s a lane for everyone from the fastest to the slowest. And, you’ll get to know some great people along the way…

St. Baldrick’s 2008

Well, as you can see from these pictures (and more in the photo gallery) we had a great time this past Friday at Fado’s Irish Pub for the St. Baldrick’s fund raiser. My good friend, Dave Rodberg, cut my hair then somehow decided it was safe to give me the shears. Big Mistake!

Dave is one of those trusting guys who knows his friends would never take advantage of a situation where cameras and sharp objects are involved! Dave and I go way back to his days when he worked for GA Aeromedical as a flight nurse. Now he is active duty Air Force taking care of our soldiers.

I must credit Dave and his wife, Lorna, for getting me involved in St. Baldrick’s. He is probably the most dedicated, selfless individual I will ever know.

So you are asking yourself, “What is this St. Baldrick’s thing and why would anyone want to shave their head?” St. Baldrick’s is the world’s largest volunteer-driven fundraising event for childhood cancer research. Thousands of volunteers shave their heads in solidarity of children with cancer, while requesting donations of support from friends and family. I like the organization because they directly sponsor doctors who are doing the important research.

I had a lot of great support in this year’s event: My family first and foremost, everyone in the office (Deborah Michael showed up, but didn’t shave her head), lots of masters swimmers from the Fowler YMCA, and my long time friend and tech collaborator, Andrew Lunde. I think it would have only taken one more Black and Tan for Andrew to shave his long hair. We may have him talked into participating next year!

The mission of St. Baldrick’s Foundation is to raise awareness and funds to cure kids’ cancer by supporting cancer research and fellowships. If you would like to sponsor me I’d be honored! Just click here to get to my web page.

Health Connector Coming to Georgia?

Senate Bill 404, promoted by Lt. Governor Casey Cagle, passed 42-12 last week. 404 would establish a health connector type plan here in Georgia. A connector is basically an on-line marketplace where individuals and groups can purchase insurance/health care products.

The goal of Cagle’s plan is to reduce the number of uninsured Georgians (currently at about 1.7 million) by making it easier for them to afford and access coverage. Affordability is addressed by removing many of the state mandated coverages and by allowing pre-tax premium payment. Accessibility is addressed by making it easy to evaluate alternative products and enroll via the web portal.

Massachusetts blazed the trail with the Commonwealth Connector – a program championed by Governor Mitt Romney. After being in business for a short time, Commonwealth Connector is being pressured to cut costs, most notably by reducing physician reimbursement.

Commonwealth Connector’s target market fit into two major groups: (i) participants earning less than 300% of the poverty level who therefore receive tax-payer funded subsidies, and (ii) participants earning more than the 300% threshold who do not receive the tax-payer subsidies. As it turns out, enrollment in group (i) was 24% higher than expected, and group (ii) was 54% lower than expected. In a nutshell, they got 33,000 more subsidized customers and 19,100 less non-subsidized customers than expected. Kinda proves that people will do what you pay them to do, huh? Capitalism, anyone?

It also doesn’t surprise me that Commonwealth Connector had higher than expected claims costs. Imagine not having health insurance for years and years. What’s the first thing you are going to do as soon as you get your fancy new ID card? That’s right, incur a claim!

The Georgia model looks to include traditional individual and group health insurance products, the PeachCare for Kids products (SCHIP), and uninsured plans that offer pre-paid doctor and hospital care. A new governmental entity, the Georgia Health Marketplace Authority, will be in charge of running this program.

I’m told that the playing field will be leveled by allowing Georgia insurance brokers the ability to offer reduced state mandate products. This is certainly a good thing for both my profession and Georgians.

As we approach the national elections the topic of national health care is front and center. Insurance is regulated on a state by state basis. This is why you see individual states like Massachusetts and Georgia enacting such legislation. There is a natural tug-of-war between state and Federal authorities over control of health care – you (and your wallet) have a front row seat!

You can read my thoughts on national health care by clicking here. It will put much of this discussion on connector plans in perspective.

So, what do you think? Will the Georgia Health Marketplace be a good thing for the citizens of Georgia? In your mind, what are the key success factors for such a program?

Bald for a Cause!

Just when you thought my hair couldn’t get any shorter along comes the St. Baldrick’s fund raiser at Fado’s Irish Pub on March 14th! Last year our office sponsored the event by buying the hats that shavees received after the deed was done. This year I’m actually getting my head shaved.

The mission of St. Baldrick’s Foundation is to raise awareness and funds to cure kids’ cancer by supporting cancer research and fellowships.

Here is an AJC article on the upcoming event. If you would like to sponsor me I’d be honored! Just click here to get to my web page.

Key Person Insurance

I must thank Tony over at PeachSeedz for teeing one up for me. He must know that I’ve just started this blog!

Key person insurance, in less politically correct times known as key man insurance, is designed to offset a company’s financial loss which is due to the death of an important employee. In a nutshell, the company purchases a life insurance policy on this “key person.” The company pays the premium and is the beneficiary. If key person dies then the company receives the proceeds of the life policy. It can then use that money to hire a replacement, offset lost revenue, pay off creditors, etc.

Understand that, in the event of a high-tech start-up, the period of time that a key person policy needs to be in effect may be relatively short – probably less than 10 years. A VC, for example, may be insisting on the purchase of this policy and it plans to have exited from the venture well before 10 years is up. So it makes sense to the VC to purchase a cheap term policy with a 10 year level premium.

Now let’s say that you are the key person and you are 45 years old. You have plowed all of your savings into getting the venture off the ground – and certainly not spending it on life insurance. A $1 million policy has been purchased on your life. Time has passed and the VC has left the picture and you are exiting the company. Don’t forget that policy! It can typically be transferred into your name. This is important if your health status has changed and you are no longer insurable.

My point is that if you are in a position to influence the quality of the key person policy being purchased consider a decent insurer that has a favorable conversion feature. Maybe a 20 year level term would have suited the long-term needs of the key person in the example above – even though it is a bit more expensive a policy than the VC would have wanted to purchase.

Some day you may find that key person life policy purchased years ago to be an important part of your personal estate planning tools.

Taking the Leap: What about my Health Insurance?

The January 2008 Consumer Reports magazine had a article on the challenges some people have finding health insurance (On their own, page 22). In it there is a story of a 55 year old man who had a liver transplant 10 years ago. He decided to leave his corporate job to start a new business, but was surprised when insurers declined to cover his blood tests and anti-rejection drugs or when they rejected his application altogether.

If you are going to take The Leap please do some homework on the front end. Understand that there are two major types of health insurance: group (employer sponsored plans) and individual.

Group coverage has a number of advantages: (i) insurers are required by law to accept a small employer group no matter what pre-existing conditions exist, (ii) an insurer must credit prior insurance coverage against its pre-existing condition provision, and (iii) if a plan participant loses coverage (termination of employment, for example) he can take the group coverage with him for a period of time (COBRA and/or “state continuation” coverage).

In order to be eligible for group insurance you must be an active employee or on COBRA/state continuation with your former employer. Individual policies are an alternative for some people, but are not a universal solution. An “individual conversion” policy is an unattractive solution if it is available at all. Here are some options to consider if you decide to take The Leap:

1. The group option. If you have at least two employees you can establish a group plan under your new start-up. As an alternative, you could take your former employer’s COBRA coverage or state continuation coverage until you can get up to two employees and start a group plan of your own. COBRA generally may last up to 18 months. The maximum period for state continuation varies state to state; here in Georgia it lasts only three months.

2. The individual option. You will need to think about applying for an individual policy if (i) your new venture does not have two employees and/or you are going to exceed the maximum duration of COBRA or state continuation, or (ii) you don’t have any significant health conditions and your former employer’s COBRA/state continuation coverage is relatively expensive.

3. The “individual conversion” option. Things are not good if you are at this point – your COBRA/state continuation has expired and you have been declined for an individual policy. Some group policies may allow you to “convert” the group coverage to an individual policy. Be forewarned, these policies are generally a state-mandated benefit designed as a safety net for uninsurable individuals. Therefore, coverage is minimal and premiums are high. Before jumping ship, review your current insurance policy to verify that individual conversion is even available.

4. The “pull-the-plug” option. Hopefully not, but you may get to the point where the lack of available benefits forces you back into corporate world.

So should you be like the gentleman in the Consumer Reports article who learns the realities of health insurance only after having left a good job with benefits? Obviously not! I hope this helps as you move forward with your plans…