Should We Self-Insure? We’re Here to Help You Decide
Taking the Risk Out of the Pool: League Assessors Ensure Safety in Aquatics
Helpful Hints on Your Workers’ Compensation Audit Process
League Now Offers Safety Grants
Property Appraisals for NCLM Pool Members
There’s a lot of talk in the health insurance world about self-insurance these days – with the rising costs associated with providing employee health insurance benefits, self-insurance is often touted as the least expensive way to manage the rising cost of healthcare. And for many large employers, that may be true. But for smaller organizations, it is important to first understand the pros and cons of self-insurance, and how such a program would impact the entity’s budget before jumping on the self-insurance bandwagon.
“A lot of our member cities and towns, and other local government entities who are eligible for the League’s group health insurance options, have fewer than 300 employees, which makes self-insuring more of a toss-up,” said Ken Canning, the League’s Associate Executive Director of Risk Management Services. He further explained, “Self-insurance can help an employer have more control of how they manage healthcare costs and decisions, but an employer needs to have a large enough pool to spread the risk. Having at least 300 employees is a good rule of thumb when even considering the self-insurance option.” Canning suggests considering the following questions when making decisions about group health insurance:
So what is a self-funded plan, anyway? Self-insurance is a funding mechanism where employers assume the financial liability associated with health care expenses in exchange for potential cost savings and more control of the health plan’s design. In a self-funded plan, employers pay for all claims that are actually incurred, plus administration fees, stop-loss insurance and commissions or fees to brokers and consultants if used. So if claims are lower than expected, the entity retains the savings. The inverse is true as well, though – if claims are higher than what is budgeted, they still must be paid on time and the program could end up costing more than the employer expected.
What is your municipality’s risk tolerance? Entities that are fully insured are on the least risky option and usually have less flexibility. Being self-insured with no stop-loss protection is the most risky alternative, but has the most flexibility. Self-funded coupled with stop -loss insurance is the middle ground option with some risk and flexibility.
What is stop-loss insurance? This is simply a financial threshold below which the entity assumes 100 percent of the claims expense and above which claims costs are paid by the stop-loss carrier. There is a cost for stop-loss coverage and the lower the threshold, the higher this fixed expense will be.
Do you need predictability or can your budget handle volatility for health insurance claims of your employees? The benefit of being fully insured is the predictability of cash flow from one month to the next because premiums are based on the number of employees and are a fixed expense. In self-insurance, the employer pays not only the fixed expenses for claims administration, broker fees and stop-loss coverage, but also the claims payments themselves which is the biggest portion of the health care expense and can be unpredictable. This creates volatility, and if an entity is not able to tolerate and manage this effectively, then maybe self-funding isn’t the right option.
Do you have a good sense of your total cost of providing health care coverage to your employees? Do you understand the health insurance utilization of your employees and how that might change year to year? Careful consideration needs to be given to the ongoing fixed costs of a self-funded program as well as the volatility of claims below the stop-loss threshold.
Are you considering self-insurance only because you’ve been told it will save you money? Self-funding may save an entity money in how it structures its plan, but it does not in and of itself lower health care costs. There is also the phenomenon of first year “savings” anomaly. There is a big difference between a first year self-insurance contract and a mature program. In the absence of a mature–to-mature claims cost comparison, the first renewal could be a shock. Entities considering self-insurance must set aside reserves and plan well to make sure they can cover their commitments.
“If all of this is clear as mud, don’t panic,” adds Canning. “The good news is that the League is here for our members. We are the best resource for understanding what self-funding and other health insurance options are available for local government entities in North Carolina, and we want what’s best for our members.”
The Health Benefits Trust itself is a member-owned, self-funded health insurance pool, which means it can offer competitive rates and provide a tremendous amount of control and flexibility to League members. Being self-funded on a program basis, members have the benefits of being self-insured plus the budget predictability of a fully-insured plan. For example, for large entities, the Health Benefits Trust can offer administrative services only (ASO) plans to members who choose to self-insure. On the flipside, we offer fully-insured, customizable coverage that is underwritten based upon individual group’s risk exposures and claims experience and for the smallest members, our pooled rates program provides the best value.
Finally, the Health Benefits Trust can provide a hybrid approach for groups who want the best of both worlds. One great option for entities wanting to lower their fixed costs and take some risk in a controlled manner would be a Health Savings Account compatible High Deductible Health Plan. This is also known as a Consumer Driven Health Plan as depending on how the plan is structured employees also have a little skin in the game and are incentivized to be more discerning in their use of health care resources and to price shop for the lowest cost service. This can lower costs for everyone in the system: employees, employers and the Pool. If this sounds interesting, we would be happy to discuss this option with you in more detail.
The League’s Health Benefits Trust staff and Business and Membership Development Services consultants can help you determine if self-insuring is the best option. We’re here to help you determine the best options for your employees and budget. To find out more or if you have questions about health insurance, contact Julie Hall, the League’s Director of Health Programs, at 919-715-9782 or jhall@zyjqlt.com. We will meet with you – and your agent if you have one – to determine the best way to provide health insurance that your employees want and the cost savings your budget needs.
You're familiar with risk pools, one of the more basic concepts in insurance. An important piece of the League's risk management work, however, centers on another sense of the term.
Its goal specifically is to make pools of the aquatic sort safer for swimmers and other visitors -- reducing or eliminating risks that could lead to injuries and subsequent claims at municipally owned facilities. And not just for wet-surface slips and falls or drownings. The scope can extend to water quality or bacterial issues, and even electrocution. The key is knowing that not all risks are apparent, and that it’s important that a practiced eye review the possibilities.
The League's aquatic risk assessments aren't new -- they've always been a part of the property and liability program -- but have evolved in recent years following studies of how actual incidents have occurred and as splash parks and other modern, interactive water features are added to municipal parks and recreation systems for all-ages enjoyment.
"This year, I have been checking with those towns to determine how they are maintaining and ensuring the integrity of the water quality of these interactive water features," said Risk Management Field Consultant Amy Whisnant, who was in Morganton recently assessing the city's pools and splash park. That city is adding an additional splash pad at one of its parks, bringing into focus the water quality of that location.
The city is doing it right, Whisnant reported.
"Morganton uses water straight from their water treatment plant to feed into the interactive fountains at Martha’s Park," she explained. "The water is then sent into the sewer system, so the water is not recycled into the fountains again; therefore, water quality at the splash park is maintained."
Clean practices in aquatic recreation became a household topic last year following media focus on the so-called "brain-eating” amoeba blamed for the death of a teenage girl who was rafting at the U.S. National Whitewater Center in Mecklenburg County. According to the Charlotte Observer, the Whitewater Center (which is not a municipal facility) logs more than 800,000 visits annually and, following the amoeba's detection in water there, instituted new safeguards to prevent its reappearance. The League's risk management team monitors and analyzes such events, however rare, to improve guidelines.
The exponential growth of technology hasn't left pools behind, either, and there's plenty of safety application for cities and towns. Lightning-detection systems are being integrated, for instance. The League is also working with a member to evaluate a new product designed to alert lifeguards when a swimmer has been under water for too long. If that pilot is successful, the risk control team may advise cities with public pools to consider the technology for swimmer safety and claims reduction.
Staffers have also seen new, creative uses for pools or pool settings in community events, like movie nights in which participants lounge with flotation devices during the viewing. The risk management team would examine whether the pool room is darkened during the movie and whether lifeguards are on duty, or, if not, whether signage is posted saying so.
"The other issue is the number of electrocution injuries and fatalities that have occurred in pools, both private and public, nationwide," Whisnant said, adding that field staffers give municipalities copies of anti-hazard literature and information about monitoring equipment built to detect voltage in pool water.
The N.C. Department of Labor points out that while electrical hazards aren’t always on the pool-goer’s mind, public pools involve a lot of electrical componentry. Meanwhile, water and chlorine happen to be great conductors. Citing U.S. Consumer Product Safety Commission data collected between 1993 and 2003, there were roughly 60 deaths and nearly as many serious injuries resulting in bad combos of electrical equipment and pool water. From 2003 to 2014, regulators documented 14 related deaths.
The dangers are quite real, but Whisnant said North Carolina cities and towns do a great job complying with regulations and best-practices for safe aquatics facilities, which, she added, are also inspected by their regional environmental health inspectors before they can open to the public.
Our audit season is in full-swing now. This year we have already emailed your Workers’ Compensation Self Audit to you or have scheduled an on-site audit to be performed by Gary Burkhardt or myself, Steven Hulme. We have also asked our senior underwriters (Ariele D’Angelo, Patrice Adams and Michael Young) to assist us in the processing of your self-audits.
The most common question we entertain is related to pre-tax wages and how they tie your 941’s into gross payroll. We really do not wish you to spend an inordinate amount of time trying to tie them together, but would rather that you know that they do: add 941 Medicare wages in line 5C-Column 1 to your pre-tax medical, dental, vision, Aflac and cancer premiums deducted from your employee’s salary. When you do so, the result should be relatively close to the gross payroll shown on your Gross Wage, WC Report or Earning by Pay Type Report. At a minimum, your gross payroll should be equal to or greater than your ESC or 941 Reports (but never less than). If it is less, you have left out a pay type or terminated employees.
There are always a few members that are surprised at audit time by a rather large invoice that follows the processing of their audit. This is especially true for members that are growing at a fast rate and end up hiring more employees than were projected. Another factor that can contribute to a large bill is if you have many highly-paid employees who retire during the year. We do charge for accrued vacation, sick and holiday pay when it is paid out. We charge for the straight time portion of overtime as well (we exclude the half-time portion of time and a half).
Please take a few minutes to verify your current 17-18 year projected payrolls. If you are way off track, or have added a new department, consider revising your estimated payrolls so that your premiums may be charged in the current fiscal year.
For those who have an on-site audit scheduled, please have your reports and documents printed. Some may be able to export your reports into an excel spreadsheet. This is a great help to both Gary and myself.
If you need another copy of the WC Self Audit; please follow this link:
http://rms.zyjqlt.com/workers-compensation/Documents/Worker%20Compensation%20Self-Audit%202016-17.pdf
As a reminder, your self-audits are due by September 1st. Please call or email if you have questions or need some help. Thank you in advance for sending in your self-audits in a timely fashion.
Steven Hulme - Workers’ Compensation Auditor/Underwriter
Email: shulme@zyjqlt.com
Phone: 919-715-3923
Fax: 919-715-9751
The North Carolina League of Municipalities is excited to offer a new program to members in our workers’ compensation and property and casualty insurance pools. The Safety Grant Program was created to assist insurance pool members in the reduction of accidents, injuries, and liability claims. The program has allotted $100,000 in each pool to help members purchase equipment and services that will significantly reduce the potential for future workers’ compensation, property/casualty, or liability insurance claims. Members are eligible for up to $5,000 in matching grants, depending on their annual premium, for each pool in which they participate.
Grants are a great way to incentivize safety-focused behavior, support risk management recommendations, and lower claim costs to the pools. The purpose of this program is not for the purchase of safety equipment, such as eye and hearing protection, that the employer is required to provide exposed employees. Rather, it is for enhanced equipment and services that can help mitigate claims.
All applications will be reviewed by a panel to verify that the requested items meet the requirements of the grant program. Members are encouraged to contact their risk management field consultant to review their claims activity and identify any potential liability concerns before applying for a grant.
Additional information can be found under the Insurance Services tab of our website at na.zyjqlt.com. Select Loss Control & Safety Services and look for Programs and Services.
You can also contact Bryan Leaird, Director of Risk Control, at 919-715-2905 or bleaird@zyjqlt.com
An added benefit provided to the League’s property and casualty insurance pool members is that we provide, at no additional cost, a property appraisal service that helps to determine the insurance replacement cost for your insured buildings. The North Carolina League of Municipalities has contracted with HCA Asset Management, LLC to perform the appraisals for our pool members. This year, all municipal properties on your schedule with a value of $250,000 or greater will be appraised. HCA will also be conducting appraisals on all structures located at your scheduled water and wastewater treatment plants, as well as all scheduled pumps and lift stations.
HCA will begin these appraisals on the eastern part of North Carolina starting in September 2017 and will conclude the five-year project in western North Carolina. An HCA appraisal team will contact property and casualty insurance pool participants to schedule a specific time and date for them to perform the appraisal inspection at your location. HCA has provided us with a list of items that will help them complete the most accurate appraisal of your buildings. We realize that some of this information may not be readily available. However, any of the data you can make available will certainly help. That list is as follows:
As-built blue prints, if available. It should be noted that they will NOT require copies of plans, nor will they need to take any of these documents offsite.
Access to Buildings. Either inform personnel at each location of their pending arrival or assign one of your personnel to escort the appraiser. It is imperative that the appraiser be given access to the interior of these buildings in order to accurately determine building, contents, and computer values.
Details on any recent construction costs, including copies of contractor pay applications for larger projects.
Complete details of all the water and wastewater facilities – and site plans if available. Please include capacities, daily flow, list of all technologies on each plant, year built, etc.
We will provide our members a list of all properties that are scheduled to be appraised prior to the visit from HCA. With your assistance, this appraisal visit should run very smoothly and should take only a minimum amount of your time. This process will help our members verify that their property is adequately insured.
Thank you for your cooperation with this project. League staff is available to assist our members with any questions they may have concerning the property appraisals, insurance schedules, coverage questions, or any other risk management needs. You can contact Bryan Leaird, Director of Risk Control, at 919-715-2905 or bleaird@zyjqlt.com
