Critical Illness Insurance

Written by: The Deerfield Team

Simply having health insurance does not guarantee that an emergency health situation won’t compromise your savings. A critical illness can cost an average of $35,500, mostly in the form of lost wages. In terms of U.S. individuals that file for bankruptcy each year, 60% involve medical illness issues, and over 75% were insured by traditional health insurance when the illness began. Traditional health insurance is important but financial gaps still exist because of the co-insurance & deductible constraints embedded in these policies. Securing coverage through critical illness insurance is one way to fill those gaps. Its popularity is rising but many still lack information about its purpose, benefits, and costs. In this article under title  “Critical Illness Insurance  we’ll explore the important features of this type of coverage.

CI Insurance: An Overview

A South African cardiac surgeon introduced critical illness insurance in the 1980s, but it did not catch on in the U.S. until the late 1990s. Since then the voluntary offering has become almost mainstream. As of 2014, CI insurance sales exceeded $391 million, surpassing cancer insurance. The industry’s growth in the last ten years has been especially dramatic.

CI insurance covers an average of 19 conditions, including heart attack, heart transplant, stroke, bypass surgery, angioplasty, Alzheimer’s, paralysis, loss of sight, severe burns, benign brain tumor, and coma. CI insurance often offers cancer coverage as optional, along with such conditions as genetic disorders, congenital heart and structural defects, and cerebral palsy. Unlike cancer insurance, CI plans often charge lower premiums for younger policyholders and higher premiums for older policyholders.

The majority of plans offer a lump sum payment between $5,000 and $30,000 (some offer up to $1 million) when the insured is diagnosed with a covered condition. Policies are usually portable and the payouts are only taxed if employers pay part of the premium. The insured has full control over how to spend the payout, which isn’t tracked. Uses may include covering anything from experimental treatments and transportation to mortgage payments.

In recent years, CI plans have become more sophisticated. Some offer multiple payouts over several years rather than terminating the policy at the first payout. If the insured suffers a stroke and cancer a decade apart, they would benefit from the plan twice.

Educating Yourself About CI Insurance

About a third of midsize and large businesses offer CI insurance. Most of the 30% of employers offering to partially fund those benefits make partial funding voluntary.³ So it makes sense to check your benefits menu to see if it’s offered before you buy an individual plan.

While the popularity of CI insurance is clearly on the rise, employers must often work hard to justify the value of their offerings as healthcare costs rise faster than inflation.⁴ Many people mistakenly assume that medical insurance will cover all the costs that come with critical illness. Of the 28% of full-time employees who have even heard of CI, many confuse it with other insurance products.

Unless you understand this often-misunderstood, relatively new insurance product, and in light of the fact that you  are probably paying a higher percentage of your healthcare costs than ever before, tragically you may not opt in. Does someone with disability, life, and medical insurance really need it? The truth is, it depends.

Who Needs CI Insurance?

Almost 50% of American households do not have enough money saved to cover a major medical condition.⁵ In such cases, having critical illness insurance premiums automatically deducted each pay period from their salary could turn out to be the difference between bankruptcy and financial health. Individuals who are sole providers, recently paid off deep debts, or earn too little to save easily may also benefit from enrollment in a CI plan.

On the other hand, individuals with disciplined saving habits or disability coverage that replaces 60-70% of their salary may not need CI. A combination of a flexible spending account or health savings account to cover medical costs with an emergency fund to cover nonmedical costs can suffice to pay for critical illness costs. Opting for this more complicated alternative to CI insurance gives individuals the option to use these savings even if they don’t fall sick.

In this complex and quickly-evolving healthcare landscape, it’s more important than ever that you stay informed. Critical illness insurance is becoming popular because it fills an important gap in insurance offerings that leaves many families and individuals in serious debt during an already traumatic time. You should consider CI insurance and educate yourself about both its benefits and costs. 

As always we are here to help you any way we can.

Sincerely,

The Deerfield Team
800.233.6428
info@deerfieldadvisors.com


References:

1.http://www.foxbusiness.com/personal-finance/2012/05/15/critical-illness-insurance-do-need-it/

2.http://www.criticalillnessinsuranceinfo.org/learning-center/individuals.php

3.http://www.marketwatch.com/story/is-critical-illness-insuranceworth-the-money-2013-08-08

4.http://www.marketwatch.com/story/is-critical-illness-insurance-worth-the-money-2013-08-08

5.http://ebn.benefitnews.com/news/voluntary/critical-illness-coverage-reaches-tipping-point-2747628-1.html?zkPrintable=1&nopagination=1

SOURCES:

“Critical Illness Insurance,” CancerInsurance.com. http://www.cancerinsurance.com/critical-illness-insurance

“Critical Illness Insurance for Individuals,” American Association for Critical Illness Insurance. http://www.criticalillnessinsuranceinfo.org/learning-center/individuals.php

Fuscaldo, Donna. “Critical Illness Insurance: Do You Need It?” Fox Business, May 15 2012. http://www.foxbusiness.com/personal-finance/2012/05/15/critical-illness-insurance-do-need-it/

O’Brien, Elizabeth. “Is critical-illness insurance worth the money?” Market Watch, Aug 8 2013. http://www.marketwatch.com/story/is-critical-illness-insurance-worth-the-money-2013-08-08

Shutan, Bruce.”Critical illness coverage reaches tipping point,” Employee Benefit News, Nov 5 2015. http://ebn.benefitnews.com/news/voluntary/critical-illness-coverage-reaches-tipping-point-2747628-1.html?zkPrintable=1&nopagination=1

DISCLAIMER

This article is intended only as a general discussion of these issues & we cannot guarantee the accuracy thereof. It does not purport to provide legal, accounting, or other professional advice. If such advice is needed, please consult with your attorney, accountant, or other qualified adviser. The Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Accordingly, the information provided herein is provided with the understanding that Deerfield Advisors is not engaged in rendering legal advice. Deerfield Advisors strongly advises that clients and/or the reader of this publication contact an attorney to obtain advice with respect to any particular issue or problem discussed here. Also, please know that discussions of insurance policy language is descriptive only. We strongly advise that one’s individual policy & one’s advisor be consulted regarding this subject matter before any action is taken in any way. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. The Deerfield Advisor White Paper Series is a registered trademark of Deerfield Asset Management Inc. DBA, Deerfield Advisors and is produced by Deerfield Advisors for the benefit of its clients, and any other use is strictly prohibited. All rights reserved. Copyright © 2015

Comments Off on Critical Illness Insurance Posted in Uncategorized

Critical Illness Insurance: What It Is and Whether Employees Need It

Written by: The Deerfield Team

sm emp benefit fixed120415Simply having health insurance does not guarantee that an emergency health situation won’t cripple an employee’s finances. A critical illness can cost an employee an average of $35,500, mostly in the form of lost wages.¹ 

In terms of U.S. individuals that file for bankruptcy each year, 60% involve medical illness issues, and over 75% were insured by traditional health insurance when the illness began.² Traditional health insurance is important but financial gaps still exist because of the co-insurance & deductible constraints embedded in these policies. Securing coverage through critical illness insurance is one way to fill those gaps. Its popularity is rising among employers and employees, but many still lack information about its purpose, benefits, and costs. In this article under title Critical Illness Insurance we’ll explore the important features of this type of coverage.

CI Insurance: An Overview

A South African cardiac surgeon introduced critical illness insurance in the 1980s, but it did not catch on in the U.S. until the late 1990s. Since then the voluntary offering has become almost mainstream. As of 2014, CI insurance sales exceeded $391 million, surpassing cancer insurance. The industry’s growth in the last ten years has been especially dramatic.

Group or workplace CI insurance covers an average of 19 conditions, including heart attack, heart transplant, stroke, bypass surgery, angioplasty, Alzheimer’s, paralysis, loss of sight, severe burns, benign brain tumor, and coma. CI insurance often offers cancer coverage as optional, along with such conditions as genetic disorders, congenital heart and structural defects, and cerebral palsy. Unlike cancer insurance, CI plans often charge lower premiums for younger policyholders and higher premiums for older policyholders.

The majority of plans offer a lump sum payment between $5,000 and $30,000 (some offer up to $1 million) when the insured is diagnosed with a covered condition. Policies are usually portable and the payouts are only taxed if employers pay part of the premium. The insured has full control over how to spend the payout, which isn’t tracked. Uses may include covering anything from experimental treatments and transportation to mortgage payments.

In recent years, CI plans have become more sophisticated. Some offer multiple payouts over several years rather than terminating the policy at the first payout. If the insured suffers a stroke and cancer a decade apart, they would benefit from the plan twice.

Educating Employees on CI Insurance

About a third of midsize and large businesses offer CI insurance. Most of the 30% of employers offering to partially fund those benefits make partial funding voluntary.³ Average participation in CI insurance correlates with participation in other voluntary benefits.

While the popularity of CI insurance is clearly on the rise, employers must often work hard to justify the value of their offerings as healthcare costs rise faster than inflation.⁴ Many people mistakenly assume that medical insurance will cover all the costs that come with critical illness. Of the 28% of full-time employees who have even heard of CI, many confuse it with other insurance products.

Unless employers explain this often-misunderstood, relatively new insurance product to employees, who are paying a higher percentage of their healthcare costs than ever before, fewer employees will opt in. Does someone with disability, life, and medical insurance really need it? The truth is, it depends.

Who Needs CI Insurance?

Almost 50% of American households do not have enough money saved to cover a major medical condition.⁵ In such cases, having critical illness insurance premiums automatically deducted each pay period from their salary could turn out to be the difference between bankruptcy and financial health. Individuals who are sole providers, recently paid off deep debts, or earn too little to save easily may also benefit from enrollment in a CI plan.

On the other hand, individuals with disciplined saving habits or disability coverage that replaces 60-70% of their salary may not need CI. A combination of a flexible spending account or health savings account to cover medical costs with an emergency fund to cover nonmedical costs can suffice to pay for critical illness costs. Opting for this more complicated alternative to CI insurance gives individuals the option to use these savings even if they don’t fall sick.

In this complex and quickly-evolving healthcare landscape, it’s more important for both employees and employers to stay informed. Critical illness insurance is becoming popular because it fills an important gap in insurance offerings that leaves many families and individuals in serious debt during an already traumatic time. Employers should consider offering voluntary CI insurance to employees and, more importantly, educate themselves and employees alike about both its benefits and costs.

The Deerfield Team
800.233.6428
info@deerfieldadvisors.com


References:

1.http://www.foxbusiness.com/personal-finance/2012/05/15/critical-illness-insurance-do-need-it/

2.http://www.criticalillnessinsuranceinfo.org/learning-center/individuals.php

3.http://www.marketwatch.com/story/is-critical-illness-insuranceworth-the-money-2013-08-08

4.http://www.marketwatch.com/story/is-critical-illness-insurance-worth-the-money-2013-08-08

5.http://ebn.benefitnews.com/news/voluntary/critical-illness-coverage-reaches-tipping-point-2747628-1.html?zkPrintable=1&nopagination=1

 

SOURCES:

“Critical Illness Insurance,” CancerInsurance.com. http://www.cancerinsurance.com/critical-illness-insurance

“Critical Illness Insurance for Individuals,” American Association for Critical Illness Insurance. http://www.criticalillnessinsuranceinfo.org/learning-center/individuals.php

Fuscaldo, Donna. “Critical Illness Insurance: Do You Need It?” Fox Business, May 15 2012. http://www.foxbusiness.com/personal-finance/2012/05/15/critical-illness-insurance-do-need-it/

O’Brien, Elizabeth. “Is critical-illness insurance worth the money?” Market Watch, Aug 8 2013. http://www.marketwatch.com/story/is-critical-illness-insurance-worth-the-money-2013-08-08

Shutan, Bruce.”Critical illness coverage reaches tipping point,” Employee Benefit News, Nov 5 2015. http://ebn.benefitnews.com/news/voluntary/critical-illness-coverage-reaches-tipping-point-2747628-1.html?zkPrintable=1&nopagination=1

 

DISCLAIMER

This article is intended only as a general discussion of these issues & we cannot guarantee the accuracy thereof. It does not purport to provide legal, accounting, or other professional advice. If such advice is needed, please consult with your attorney, accountant, or other qualified adviser. The Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Accordingly, the information provided herein is provided with the understanding that Deerfield Advisors is not engaged in rendering legal advice. Deerfield Advisors strongly advises that clients and/or the reader of this publication contact an attorney to obtain advice with respect to any particular issue or problem discussed here. Also, please know that discussions of insurance policy language is descriptive only. We strongly advise that one’s individual policy & one’s advisor be consulted regarding this subject matter before any action is taken in any way. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. The Deerfield Advisor White Paper Series is a registered trademark of Deerfield Asset Management Inc. DBA, Deerfield Advisors and is produced by Deerfield Advisors for the benefit of its clients, and any other use is strictly prohibited. All rights reserved. Copyright © 2015

 

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A Practical Guide to HSAs

Last of a three-part series: The Benefits of a Health Savings Account

Written by: The Deerfield Team 

private-client-people-by-paIf you’ve been following our series, you know that a Health Savings Account is a tax-advantaged, IRA-like creation designed for people covered under a High-Deductible Health Plan. If you also found out that you are eligible for an HSA and like its many benefits, it may be time to open an account. But how do you go about it?

In this third and final segment of our series, we explain the basics of starting an HSA, making contributions, and withdrawing funds.

How do I start an HSA?

You don’t need authorization from the IRS, your employer, or your health plan provider to open an HSA. Any qualified trustee, including a bank, credit union, or insurance company approved to be a trustee of IRAs or Archer MSAs, can set up an HSA for you. Your employer may be able to help you set up a plan or offer information on local HSA trustees.

Before opening an HSA, shop around. Features from investment options to fees vary widely.¹ Some HSAs can be set up online, and many offer access to online tools that can help you make good decisions about healthcare, including a customer service center for HSA account holders. Compare these features and weigh your priorities before deciding on a particular HSA account.

How do I contribute to an HSA?

HSA contributions must be made in cash, not stock or property. You or anyone else, usually an employer or a family member, may contribute to an HSA. Wherever the contributions come from, they become yours immediately.

Some employers make contributions or allow you to make contributions on a pre-tax basis. While this benefit may only extend to employer-sponsored HSA plans, you are under no obligation to contribute to it. You and your employer may contribute in the same year without a problem. If you make post-tax contributions, you may use the contributions to decrease your gross taxable income in the next year.

Rollovers

Every year, you are able to make one rollover contribution to your HSA. If you already have an Archer MSA, or have an existing HSA, you can generally roll funds over into your new HSA without being taxed.² Rollovers do not count toward your annual contribution limits.

Note that funds from an HSA cannot be rolled into an IRA or a 401(k), and vice versa, except for a one-time funding distribution from an IRA.

Funding from your IRA

During your lifetime, you may make one qualified HSA funding distribution from a traditional IRA or Roth IRA. This distribution cannot come from an ongoing SEP IRA or SIMPLE IRA, and it goes toward your annual contribution limits.

How do I make withdrawals?

Just like you don’t need permission from anyone to start an HSA, you don’t need permission from anyone to withdraw funds. You can use these funds without paying any fees or income taxes when you pay for qualified medical expenses, including deductibles, coinsurance, co-payments, dental, vision, chiropractic services, glasses and hearing aids, and medical care-related transportation. Since 2011, over-the-counter medications do not count as qualified medical expenses unless prescribed by a doctor.

Withdrawal methods vary according to your particular HSA. Many supply you with a debit card and a checkbook. Some also offer to reimburse your expenses. While you can make a withdrawal for any reason, using it for anything but qualified medical expenses makes it subject to income taxes and a 20% penalty. It’s up to you to document your expenses and prove that the funds were used appropriately; otherwise the IRS may subject you to penalties. Once you turn 65, the penalty is waived but income taxes still apply if you use the funds for non-qualified expenses.

Where can I get more information?

IRS Publication 969 has information and tips about health savings accounts side-by-side with information about MSAs, FSA, and HRAs. There are also free help lines available for individuals (1-800-829-1040) and businesses (1-800-829-4933).

And, as always, we are here to help you any way we can. Please don’t hesitate to call or email if you have questions about your health plan or savings account.

The Deerfield Team
800.233.6428
info@deerfieldadvisors.com


References:

1.http://www.health401k.com/2011/09/health-savings-accounts-an-introduction/

2.http://www.irs.gov/publications/p969/ar02.html#en_US_2014_publink1000204020

SOURCES:

Folger, Jean. Investopedia. “Pros And Cons Of A Health Savings Account (HSA).” Accessed August 14, 2015. http://www.investopedia.com/articles/personal-finance/090814/pros-and-cons-health-savings-account-hsa.asp

IRS. Publication 969: “Health Savings Accounts and Other Tax-Favored Health Plans.” March 10, 2015. http://www.irs.gov/pub/irs-pdf/p969.pdf

“Health Savings Accounts: An Introduction.” Health 401k. http://www.health401k.com/2011/09/health-savings-accounts-an-introduction/

 

DISCLAIMER

This article is intended only as a general discussion of these issues & we cannot guarantee the accuracy thereof. It does not purport to provide legal, accounting, or other professional advice. If such advice is needed, please consult with your attorney, accountant, or other qualified adviser. The Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Accordingly, the information provided herein is provided with the understanding that Deerfield Advisors is not engaged in rendering legal advice. Deerfield Advisors strongly advises that clients and/or the reader of this publication contact an attorney to obtain advice with respect to any particular issue or problem discussed here. Also, please know that discussions of insurance policy language is descriptive only. We strongly advise that one’s individual policy & one’s advisor be consulted regarding this subject matter before any action is taken in any way. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. The Deerfield Advisor White Paper Series is a registered trademark of Deerfield Asset Management Inc. DBA, Deerfield Advisors and is produced by Deerfield Advisors for the benefit of its clients, and any other use is strictly prohibited. All rights reserved. Copyright © 2015

 

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Is an HSA Right for You?

Second of a three-part series: The Benefits of a Health Savings Account

Written by: The Deerfield Team

private-client-people-by-paDespite its unique triple tax advantage, over one third of those eligible for a health savings account do not have one. ¹ Since the average post 65-year-old married couple will incur well over $200,000 in healthcare expenses during retirement, it’s worth considering whether opening an HSA is right for you. What advantages does an HSA have over other savings accounts? Are you able to open one? Should you?

Eligibility

To qualify for an HSA, you must be covered by a high-deductible health plan, not be enrolled in Medicare, and not be claimed as someone else’s dependent.

Eligible individuals must also not be covered by any “other insurance,” including a spouse’s FSA. (Some exceptions apply.)² Your spouse may have non-HDHP coverage, so long as it does not cover you. 

What is a High-Deductible Health Plan (HDHP)?

An HDHP is a health plan with higher-than-average annual deductibles, co-payments, and other out-of-pocket medical expenses—for other services. In 2014, the minimum annual deductible for individual coverage was $1,250, and $2,500 for family coverage. The maximum annual deductible and out-of-pocket expenses—which do not include premiums—for in-network services was $6,350 for individuals and $12,700 for families.³

Benefits of an HSA

Control. An HSA is like an IRA in that you control what to do with the money inside the account in terms of investment and when, without having to check in with anyone else. Your contributions stay in the account until you withdraw them. Of course there are tax implications for withdrawal so you would want to check with your tax adviser about those.

Portability. An HSA stays with you if you change employers or leave the work force.

Tax advantages. HSAs offer several distinct tax advantages.

  • You can claim a deduction for contributions you make to your HSA without having to itemize them.
  • Your employer’s contributions to your HSA may be excluded from your gross income.
  • The interest and earnings on assets in your HSA are tax-deferred.
  • Distributions used to pay for qualified medical expenses are tax-free.
  • Distributions for non-medical (medical, vision, dental, prescription drugs) purchases are allowed however could carry up to a 20% excise tax & ordinary income tax.

HSAs Compared with Other Savings Accounts

How do these benefits compare with other options?

HSA vs. 401(k). You can withdraw money from an HSA tax-free at any age. Unlike 401(k) plans, HSAs have no required minimum distributions. In July 2015, CNN Money published an article titled “Why your next dollar shouldn’t go to your 401(k),” which explains why HSA contributions are sometimes a wiser investment than putting away money into a 401(k).

HSA vs. traditional savings account. Money goes into your HSA account before taxes are paid, while you’ve already paid taxes on money funding traditional savings account.

HSA vs. FSA. A flex spending account is another tax-advantaged health savings plan. But unlike an HSA, which builds over time, FSA money does not roll over; unused funds are lost at the end of the year. HSA accounts also enjoy the advantage of being portable and permanent unlike FSA’s.

HSA vs. Medical Savings Account (MSA). HSAs and HDHPs are not limited to the self-employed or employers with 50 or fewer people, while Archer MSAs were created for only that segment of the workforce.

HSA vs. Health Reimbursement Arrangements (HRA). While HRAs can be paired with standard health plans as well as HDHPs, they are company-owned. HSAs stay with you through changes in employment.

Limitations of the HSA

Only for medical expenses. Because HSAs are built to fund only qualified medical expenses, withdrawing money for any other reason incurs taxes for all account holders, as well as penalties for those under 65. While you can invest your HSA to gain earnings, you first need to meet a minimum balance in some cases.

Over-the-counter medicine reimbursement requires a prescription. Since 2011, Section 9003 of the Affordable Care Act requires that OTC medicines and drugs, except insulin, must be prescribed by a doctor to be considered qualifying medical expenses.⁴

Joined to a high deductible plan. Because HSAs are connected with HDHPs, they are only available to those willing to afford a high deductible health plan. In 2015, an HDHP must have a minimum deductible of $1,300 for individuals or $2,600 for families. Some HDHP holders may have a tendency to resist going to the doctor to avoid using money from their HSA to pay the deductible. That’s not good!

Yearly contribution caps. While there is no overall maximum contribution to an HSA, there are yearly caps. In 2015, total contributions from all sources may only reach $3,350 for an individual plan or $6,650 for a family plan. (An extra $1,000 per year contribution is allowed for those 55 and older.)

Conclusion

Consider whether you are or would like to be covered by a high-deductible health plan, meet the other qualification requirements, want to control your funds and keep growing your account for the rest of your life, and would benefit from the tax advantages of an HSA.

If your answer to all these questions is yes, you’re a perfect candidate for an HSA. If you’re eligible but not sure not sure if an HDHP and HSA make sense for you, calculate whether you would have saved or lost money last year if you had opened an HSA then. It’s up to you to choose the path that’s best for you and your family. We’re here to help you figure out your choices. Don’t hesitate to call on us if you need guidance.

To your good health!

The Deerfield Team
800.233.6428
info@deerfieldadvisors.com


References:

1.Ashlea Ebeling, “The Most Tax-Savvy Use Of A Health Savings Account,” Forbes, http://www.forbes.com/sites/ashleaebeling/2011/11/21/the-most-tax-savvy-use-of-a-health-savings-account/
2.https://www.hsaresources.com/faq/#opening-06
3.http://www.irs.gov/publications/p969/ar02.html#en_US_2014_publink1000204025
4.”Affordable Care Act: Questions and Answers on Over-the-Counter Medicines and Drugs”. IRS. September 3, 2010.

SOURCES:
Flexible Benefit Service Corporation. “HSA or 401(k)?” Accessed August 14, 2015. http://www.flexiblebenefit.com/blog/hsa-or-401k

Folger, Jean. Investopedia. “Pros And Cons Of A Health Savings Account (HSA).” Accessed August 14, 2015. http://www.investopedia.com/articles/personal-finance/090814/pros-and-cons-health-savings-account-hsa.asp

UPMC . “The Pros and Cons of Health Savings Accounts (HSAs).” Last modified April 17, 2015. http://www.yourhealthcaresimplified.org/news/pros-and-cons-of-health-savings-accounts-hsas-028mpv/

IRS. “Health Savings Accounts and Other Tax-Favored Health Plans.” March 10, 2015. http://www.irs.gov/pub/irs-pdf/p969.pdf

IRS. Publication 696. http://www.irs.gov/publications/p969/ar02.html#en_US_2014_publink1000204020

Fidelity. “Retiree health costs hold steady.” Last modified June 11, 2014. https://www.fidelity.com/viewpoints/retirement/retirees-medical-expenses

Ebeling, Ashlea. “The Most Tax-Savvy Use Of A Health Savings Account.” Forbes. Last modified Nov 21, 2001. http://www.forbes.com/sites/ashleaebeling/2011/11/21/the-most-tax-savvy-use-of-a-health-savings-account/

DISCLAIMER

This article is intended only as a general discussion of these issues & we cannot guarantee the accuracy thereof. It does not purport to provide legal, accounting, or other professional advice. If such advice is needed, please consult with your attorney, accountant, or other qualified adviser. The Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Accordingly, the information provided herein is provided with the understanding that Deerfield Advisors is not engaged in rendering legal advice. Deerfield Advisors strongly advises that clients and/or the reader of this publication contact an attorney to obtain advice with respect to any particular issue or problem discussed here. Also, please know that discussions of insurance policy language is descriptive only. We strongly advise that one’s individual policy & one’s advisor be consulted regarding this subject matter before any action is taken in any way. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. The Deerfield Advisor White Paper Series is a registered trademark of Deerfield Asset Management Inc. DBA, Deerfield Advisors and is produced by Deerfield Advisors for the benefit of its clients, and any other use is strictly prohibited. All rights reserved. Copyright © 2015

Comments Off on Is an HSA Right for You? Posted in Uncategorized

HSAs: An Introduction

First of a three part series: The Benefits of Health Saving Accounts

Written by: The Deerfield Team

private-client-people-by-paNot many people know about the benefits of Health Savings Accounts (HSAs), a relatively new addition to the healthcare menu. With premium healthcare costs during retirement for the average couple recently estimated at over $260,000,¹ starting a tax-advantaged savings account for health expenses now may make the future a bit more manageable from a financial standpoint.

In July 2015, CNN Money published an article titled, “Why your next dollar shouldn’t go to your 401(k).” The author argues, in spite of conventional wisdom, that contributing to a Health Savings Account may make more financial sense than contributing to a 401(k). Published on the heels of a 23% increase in the number of HSA accounts in a year,² the article reflects the growing popularity of this relatively new addition to the healthcare scene. With annual per capita healthcare costs topping $9,000 per year in the U.S.,³ setting aside pre-tax income for potential future health care costs is a wise decision for people of all ages, and the sooner the better of course.

What exactly is an HSA?

Sometimes referred to as a “Medical IRA” or “Medical 401(k),” a Health Savings Account is a tax-advantaged IRA-like creation designed for people covered under a High-Deductible Health Plan to pay for qualified medical expenses, including dental and vision. To qualify, the individual must not be covered by “other insurance,” including a spouse’s Flexible Savings Account (FSA).⁴ The account may be set up with any qualified trustee or custodian.

Anyone, including employers on behalf of employees (restrictions apply), can make a contribution to an HSA account, but total contributions are limited to a maximum each year, currently $3,300 for an individual and $6,550 for a family and if you’re 55 or older you can contribute an extra $1,000 which means $4,300 for an individual and $7,550 for a family. Contributions can be invested in financial assets like stocks & bonds for the long term. The account is portable and therefore belongs to the individual, no matter what employment changes they undergo.

Tax advantages of an HSA

Possibly the most attractive aspect of HSAs is that they enjoy a lot of tax advantages. Contributions to the account are deductible from taxable income, income & capital gains occurring inside the account are tax deferred and distributions for qualified medical expenses are not considered taxable income. 

 A little Background

The American healthcare industry has been struggling for many years from problematic & stubborn cost increases. In 2014, the U.S. ranked last among eleven wealthy countries in healthcare, with significantly more money per capita and a higher percentage of GDP or Gross Domestic Product spent on healthcare than in any other country.⁵ Several attempts have been made at health care reform to address issues of quality, efficiency, and equity in the industry. In 2003, as an answer to those rising costs, the  Medicare Prescription Drug, Improvement, and Modernization Act was signed by President George Bush, creating Health Savings Accounts to replace the Medical Savings Account system.

CDHPs and HSAs today

HSAs and HDHPs fall under the category called Consumer Driven Health Plans (CDHPs), which offer a combination of high-deductible plans with relatively lower premiums, supplemented by a savings account for expenses. CDHP proponents want to put more control in the hands of consumers so that they have more skin in the game as it were. Paying more out-of-pocket should make individuals better consumers, more aware of fraud and unnecessary services and less willing to put up with poor care. Wiser consumers could drive change in the industry from the bottom up, forcing service providers to compete with each other and provide better care and lower costs.

Consumer driven health plans, like everything else in healthcare today, are controversial. Liberals argue that individuals in HDHPs are more likely to avoid getting needed care, including services and medications, because of the cost.⁶ This issue would be particularly pronounced for those with poor health or lower incomes. Many studies have attempted to analyze these issues, including the Rand Corporation.

CDHPs have also always lagged behind traditional plans in terms of enrollee satisfaction. Nevertheless, satisfaction rates have been trending upward for CDHP enrollees and downward for traditional enrollees,and the number of CDHP enrollees has been growing.

In 2015, HSA assets exceeded $28 billion in a record 14.5 million accounts, according to Devenir’s mid-year report. The report also stated, “The average investment account holder has a $14,656 total balance,” and investors received “an average annualized return of 11.3% on their HSA investments over the last three years.”⁸ Please don’t think those types of returns are the norm because they certainly are not. Three or four percent seems infinitely more likely going forward.

Conclusion

HSAs offer incredible tax advantages and are an interesting, often overlooked option on the healthcare market. If you are eligible for or currently covered by a high deductible health plan, we recommend you consider investing in an HSA for medical costs in the immediate future and in retirement.

In two upcoming articles, we will compare HSAs with other kinds of savings accounts and describe how to start and use an HSA.

As always, we are here to help you any way we can. Please don’t hesitate to call or email if you need us.

The Deerfield Team
800.233.6428
info@deerfieldadvisors.com

 


References:

1.  http://www.hvsfinancial.com/PublicFiles/Data_Release.pdf
2. http://www.devenir.com/research/2015-midyear-devenir-hsa-research-report/
3. http://www.cdc.gov/nchs/fastats/health-expenditures.htm
4. https://www.hsaresources.com/faq/#opening-06
5. http://www.commonwealthfund.org/publications/fund-reports/2014/jun/mirror-mirror
6. http://www.commonwealthfund.org/publications/testimonies/2006/sep/health-savings-accounts-and-high-deductible-health-plans–why-they-wont-cure-what-ails-u-s–health-c
7. http://www.ebri.org/pdf/PR1133.CEHCS.16July15.pdf
8. Devenir “2015 Midyear Devenir HSA Research Report”
http://www.devenir.com/research/2015-midyear-devenir-hsaresearch-report/

SOURCES:
Centers for Disease Control and Prevention, Faststats: Health Expenditures. http://www.cdc.gov/nchs/fastats/health-expenditures.htm

Devenir, “2015 Midyear Devenir HSA Research Report,” August 11 2015. http://www.devenir.com/research/2015-midyear-devenir-hsa-research-report/

Employee Benefit Research Institute, “’Satisfaction Gap’ Narrows Between Traditional and Consumer-Driven Health Plans,” July 16 2015. http://www.ebri.org/pdf/PR1133.CEHCS.16July15.pdf

HealthView Services, “2015 Retirement Health Care Cost Data Report,” 2015. http://www.hvsfinancial.com/PublicFiles/Data_Release.pdf

HSA Resources, Frequently Asked Questions. https://www.hsaresources.com/faq/#opening-06

K. Davis, K. Stremikis, C. Schoen, and D. Squires, “Mirror, Mirror on the Wall, 2014 Update: How the U.S. Health Care System Compares Internationally,” The Commonwealth Fund, June 2014.

S. R. Collins, “Health Savings Accounts and High-Deductible Health Plans: Why They Won’t Cure What Ails U.S. Health Care,” Invited Testimony, Committee on Finance, Subcommittee on Health, United States Senate Hearing on “Health Savings Accounts,” September 26, 2006. http://www.commonwealthfund.org/publications/fund- reports/2014/jun/mirror-mirror

DISCLAIMER

This article is intended only as a general discussion of these issues & we cannot guarantee the accuracy thereof. It does not purport to provide legal, accounting, or other professional advice. If such advice is needed, please consult with your attorney, accountant, or other qualified adviser. The Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Accordingly, the information provided herein is provided with the understanding that Deerfield Advisors is not engaged in rendering legal advice. Deerfield Advisors strongly advises that clients and/or the reader of this publication contact an attorney to obtain advice with respect to any particular issue or problem discussed here. Also, please know that discussions of insurance policy language is descriptive only. We strongly advise that one’s individual policy & one’s advisor be consulted regarding this subject matter before any action is taken in any way. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. The Deerfield Advisor White Paper Series is a registered trademark of Deerfield Asset Management Inc. DBA, Deerfield Advisors and is produced by Deerfield Advisors for the benefit of its clients, and any other use is strictly prohibited. All rights reserved. Copyright © 2015

Credit scores and premiums: Are they connected?

Written by: The Deerfield Team

private-client-people-by-paMany companies use credit-based scores to evaluate policy seekers. The perception is that a high score makes you a better risk and will therefore cause you to pay less for insurance, while a low score makes you more of a risk causing you to pay more for the same coverage. Studies have shown that credit scores are a good indication of how much a policy holder will cost an insurance company, though no one knows exactly why. The method is so controversial that Massachusetts, Hawaii, and California have banned the practice. Those of us who live in the other 47 states, where a vast majority of insurance companies use credit-based scores, need to understand these scores and the implications they have on our own insurance costs. This article will give you an idea of what’s involved with credit scoring by insurance companies and how you may be able to improve your own “insurance credit score” position.

Credit score and risk: A mysterious link

Lenders use regular credit scoring to calculate the likelihood of a consumer to repay a loan. Insurers use credit-based insurance scoring to decide how much you are likely to cost them in claims. While the complex methods differ between industries and among scoring companies, both systems are based on a statistical analysis of consumers’ credit reports.

No one knows exactly why credit scores are predictive of insurance risk. Nevertheless, the University of Texas, the Federal Reserve, and the Federal Trade Commission have conducted studies that conclude that there is indeed a correlation between credit characteristics and insurance losses. 

Long before computerized credit-based insurance scores were invented, insurers manually reviewed credit information during their decision-making process, according to software and scoring giant FICO. Without the help of statistically valid predictive analytics, these insurers had to rely on the subjective perspective of individual underwriters, who scanned credit reports manually and tried their best to guess how risky a prospect was. Letting an algorithm determine how likely you are to cost your insurance agency money might feel strange; letting a tired underwriter make the same call may be worse.

How insurance companies use your credit information

When it comes to credit and insurance, it’s important to understand two things:
1) Credit-based insurance scores analyze credit report data in a different way than credit risk scores.
2) These scores are not the only factor in making decisions about whether or not to offer a policy and what its terms are.
Factors considered for credit-based insurance scores

  • Payment History
  • Outstanding Debt
  • Credit History Length
  • Pursuit of New Credit
  • Credit Mix

Factors not considered for credit-based insurance scores, according to the National Association of Insurance Commissioners:

  • Race, color, national origin
  • Religion
  • Gender
  • Marital status
  • Age
  • Income, occupation or employment history
  • Location of residence
  • Any interest rate being charged
  • Child/family support obligations or rental agreements
  • Certain types of inquiries of your credit report like account review inquiries, employment inquiries, promotional inquiries from credit companies, etc.
  • Whether or not a consumer is participating in credit counseling of any kind
  • Any information not found in the credit report

While these factors do not affect your score, insurers will use information like application data, motor vehicle reports, claim histories, inspection reports, demographic data and other details to make decisions about your policy.

Improving your credit-based insurance score

Your insurance company is required to give you a notice that includes your score and the name and contact information of their credit reporting company. You may ask your insurance company why your application was denied, or get a free copy of your credit report.

You can also proactively check your credit report and correct any inaccuracies you may find. The Fair and Accurate Credit Transaction Act of 2003 (FACT Act) allows you to get a free credit report annually from Equifax, Experian and TransUnion, or check all three reports at www.annualcreditreport.com.

Of course, paying your bills on time, keeping your debt low, building a good track record, and keeping your credit accounts to a reasonable number are all time-honored methods for improving both your credit risk score and credit-based insurance scores. Keep these tips in mind for lower premiums and access to beneficial insurance policies.

As always, we are here to help you any way we can. Please don’t hesitate to call or email if you need us.

The Deerfield Team
800.233.6428
info@deerfieldadvisors.com

 


 

SOURCES:

Esurance. “Your credit score doesn’t affect your rate: Partially debunking a car insurance myth.” Accessed September 1, 2015. https://www.esurance.com/info/car/myth-your-credit-score-doesnt-affect-your-insurance-rate

Federal Trade Commission. “Credit Scores.” September 2013. http://www.consumer.ftc.gov/articles/0152-credit-scores

FICO. “FICO Successfully Defends Insurance Industry’s Use of Credit.” October 2009. http://www.fico.com/en/wpcontent/secure_upload/FICO_Credit_Based_Insurance_Scores_2599WP.pdf

International Risk Management Institute, Inc. “This Month’s Tip: Understand Your Credit Score.” Accessed September 1, 2015 .“http://preview.irmi.com/online/newsletters/hidden/personal-lines-tips/2015/08-understand your credit-score

 

DISCLAIMER

This article is intended only as a general discussion of these issues & we cannot guarantee the accuracy thereof. It does not purport to provide legal, accounting, or other professional advice. If such advice is needed, please consult with your attorney, accountant, or other qualified adviser. The Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Accordingly, the information provided herein is provided with the understanding that Deerfield Advisors is not engaged in rendering legal advice. Deerfield Advisors strongly advises that clients and/or the reader of this publication contact an attorney to obtain advice with respect to any particular issue or problem discussed here. Also, please know that discussions of insurance policy language is descriptive only. We strongly advise that one’s individual policy & one’s advisor be consulted regarding this subject matter before any action is taken in any way. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. The Deerfield Advisor White Paper Series is a registered trademark of Deerfield Asset Management Inc. DBA, Deerfield Advisors and is produced by Deerfield Advisors for the benefit of its clients, and any other use is strictly prohibited. All rights reserved. Copyright © 2015

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Harassment in the Workplace: How to Respond to Complaints of Harassment

Third of a three part series: Harassment in the Workplace
Written by: The Deerfield Team

You did everything right. You read parts 1 and 2 of our series, so you know what harassment is and how to prevent it. You’ve disseminated a perfect anti-harassment policy, run fantastic trainings, and carefully vetted new hires. Then one day an employee walks into your office claiming that your best manager has been harassing her for weeks.

Prevention might be the best medicine, but it isn’t a cure-all. You must be prepared. Learn how to investigate harassment allegations—including conducting interviews, avoiding retaliation, and resolving the issue—before you hear that knock on your door.

The Art of Investigation

Once you are aware of a harassment complaint, you are responsible for conducting a prompt, thorough, and impartial investigation. This means interviewing the people involved to determine what happened and whether harassment occurred. Simple as it sounds, an effective investigation requires a lot of skill and wisdom.

Do:

  • Initiate stopgap measures to prevent harassment from continuing in the meantime. (Make sure these measures don’t burden the complainant.)
  • Choose an investigator who is not close with or a supervisor to the employees involved, knows the law about harassment, and is skilled in interview techniques.
  • Focus on behavior—what was done, said, and seen—not opinions during interviews.
  • Look for evidence: recovered emails, receipts, witnessed statements.
  • Keep detailed, fact-centered notes throughout the process.
  • Foster a sense of privacy during the interviews. Don’t conduct interviews over barriers like desks or tables.
  • Remind everyone involved that retaliation is strictly forbidden.
  • Be sensitive to the emotional pressures being felt by all parties. Remain open and gentle.
  • Ask the complainant what outcome they would like to see happen, without promising they will get the desired outcome.
  • Make sure you respond consistently to all harassment allegations, from the speed of the investigation to the disciplinary actions taken.
  • Document everything.

Don’t:

  • Ignore a third party or anonymous complaint.
  • Wait to start the investigation after a complaint has been filed.
  • Forget to familiarize yourself with EEOC guidelines before conducting an investigation.
  • Totally stop communication with complainant or alleged harasser during the process.
  • Ask the complainant to reach out to potential witnesses.
  • Expect straightforward evidence or perfectly accurate testimonies from either side.
  • Promise the interviewees total confidentiality, but do try to keep information as confidential as possible.
  • Express opinions or make assumptions about the complainant or alleged harasser until the investigation is finished.

The Biggest Don’t: Retaliation

Even employers and managers with the best intentions can do things that may appear as retaliation. Make sure to avoid negligent and accidental behaviors yourself and train everyone involved in the investigation to control their response as well. Make sure to manage resentment, prevent avoidance, deal with frustration, and ultimately avert a lawsuit. Read our blog post, Retaliation claims and what you need to be aware of to prevent them, for more information.

If the Investigation Was Inconclusive

If you couldn’t find evidence for or against the complainant’s allegation, let them know. Thank them for coming to you with the complaint and encourage them to report any future harassment. Make sure to keep up with this employee to make sure everything is all right. Let the accused also know that the allegations could not be substantiated, so they will not be subject to discipline. Remind them of your anti-harassment policy and invite them to share any evidence for their innocence they might find in the future.

If Harassment Did Not Occur

If you find out that harassment did not happen, assume that the accuser was mistaken, not lying, and let him or her know that unfortunately you could not substantiate the allegation. Inform the alleged harasser that they are no longer under investigation but that they are still beholden to the harassment policy in the future. In the rare case that you find irrefutable evidence that the accuser set up the alleged harasser intentionally, talk to an employment lawyer.

If Harassment Did Occur

If your investigation shows that harassment did occur, take action. Do whatever it takes to prevent it from happening again and make sure the victim is free from any negative effects of the harassment. Enact disciplinary measures against the harasser according to the seriousness of the harassment. This is determined by factors such as level of physicality, repetition of offense, how much authority and seniority the perpetrator had compared to the victim (the more, the harsher the punishment), and the effect on the harassed.

Conclusion

Unfortunately, prevention is not enough when it comes to harassment in the workplace. Conducting a prompt, thorough, and fair investigation with the appropriate follow-up is key to maintaining a safe environment and the trust of your employees. A well-documented investigation is also key to protecting yourself from vicarious employer liability.

As always, we are here to help you any way we can. Please don’t hesitate to call or email if you need us.

The Deerfield Team
800.233.6428
info@deerfieldadvisors.com

 


Sources:

Cooper, Lauren M. “Top Ten Tips for Conducting an Effective Sexual Harassment Investigation.” http://www.hrhero.com/hl/articles/2012/07/31/top-10-tips-for-conducting-an-effective-sexual-harassment-investigation/

“Interviewing Techniques for Harassment Investigations.” http://reid.com/pdfs/hitpreview.pdf

“Investigating The Complaint.” University of Pittsburgh Office of the Provost. http://www.provost.pitt.edu/information-on/InvestigatingTheComplaint.html

“Questions and Answers for Small Employers on Employer Liability for Harassment by Supervisor.” The U.S. Equal Employment Opportunity Commission, April 1 2010. http://www.eeoc.gov/policy/docs/harassment-facts.html

Shea, Robin. “ ‘Must-haves’ for your harassment investigation no. 3: A prompt, thorough, and fair investigation.” Employment and Labor Insider, June 5, 2015. http://www.employmentandlaborinsider.com/harassment/must-haves-for-your-harassment-investigation/

Shea, Robin. “Harassment ‘must-have’ no. 4: The Determination.” Employment and Labor Insider, June 12, 2015. http://www.employmentandlaborinsider.com/harassment/harassment-must-have-no-4-the-determination/

Shea, Robin. “Harassment ‘must-have’ no. 5: No retaliation!” Employment and Labor Insider, June 19, 2015. http://www.employmentandlaborinsider.com/harassment/harassment-must-have-no-5-no-retaliation/

 

DISCLAIMER

This article is intended only as a general discussion of these issues & we cannot guarantee the accuracy thereof. It does not purport to provide legal, accounting, or other professional advice. If such advice is needed, please consult with your attorney, accountant, or other qualified adviser. The Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Accordingly, the information provided herein is provided with the understanding that Deerfield Advisors is not engaged in rendering legal advice. Deerfield Advisors strongly advises that clients and/or the reader of this publication contact an attorney to obtain advice with respect to any particular issue or problem discussed here. Also, please know that discussions of insurance policy language is descriptive only. We strongly advise that one’s individual policy & one’s advisor be consulted regarding this subject matter before any action is taken in any way. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. The Deerfield Advisor White Paper Series is a registered trademark of Deerfield Asset Management Inc. DBA, Deerfield Advisors and is produced by Deerfield Advisors for the benefit of its clients, and any other use is strictly prohibited. All rights reserved. Copyright © 2015

 

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Harassment in the Workplace: What Makes Good Policy and Training?

Second of a three part series: Harassment in the Workplace

rectangle-hr-compliance4In our previous article, we outlined what harassment is and how state laws govern most harassment related legislation. We also mentioned the conditions, outlined by the Supreme Court in Vance v. Ball State University, under which an employer in any state is liable for an employee’s harassment. The employer is liable if the perpetrator is the victim’s supervisor, i.e., a person who has authority over employment decisions or the daily work activities of an employee. The employer is also liable if the company has been negligent, i.e., has no process in place to prevent harassment.

Thankfully, the methods to avoid allegations of negligence and can go a long way toward protecting the business owner from lawsuit. In this article, we’ll discuss best practices for harassment prevention every employer should know.

Best practices: A well-reasoned anti-harassment policy

Creating and communicating a strict, clear policy on harassment is the best way to keep potential harassers in check and create a sense of safety among all employees. Though an employer is not automatically liable for not having an anti-harassment policy, not having a policy eliminates a potentially important defense against future harassment claims.

Essential elements

  • Specify the non-sexual basis for harassment (e.g. race, religion, national origin, age, disability, and genetic information).
  • Specify the types of behavior that violate your policy, and what the penalties for these behaviors are. Give examples.
  • Even if you do not have an HR department, designate people outside the chain of command to accept complaints. If a supervisor is the harasser or cannot be impartial, the employee needs to have other officials to report to. There should always be an available and impartial point of contact for any employee that wants to report harassment.
  • State intolerance for retaliation against anyone who complains of harassment or is involved in a proceeding related to harassment.
  • Clearly set out the investigation procedure.
  • Get acknowledgment. Have employees sign on paper or electronically for their policy (and store their signed copies in case of a future charge), and go over the policy verbally with any illiterate employees.

Suggestions

  • Write the policy in plain language that all employees can understand. This means writing it in plain English and translating the policy into any other languages your employees speak.
  • Encourage employees to report harassment immediately, before it has become severe or pervasive.
  • Assure that harassment complaints will be handled with as much confidentiality as possible.
  • Consider prohibiting harassment based on sexual orientation or gender identity. It may be necessary in your state or if you’re a federal contractor.
  • As social media and smartphones are becoming ubiquitous in the workplace, blurring personal and professional lines, it’s increasingly important to address cyber harassment specifically.
  • If your policy includes protections beyond the legal requirements, include contract disclaimer language to prevent becoming legally liable for upholding these protections. See Marini vs. Costco for an example of how an excellent personnel manual citing very high standards might backfire in court.

Best practices: Effective training

Wouldn’t it be wonderful if simply publishing a thorough, clear policy were enough to educate employees on harassment? Unfortunately, most people need a little more guidance than that. The effective communication of your policies will take some strategizing, resource allocation, and consistency.

Guidelines for different types of employees

  • Supervisors. Managers and supervisors are your greatest liability and your greatest asset. Start with a very thorough training of 2.5 hours that covers specific examples and legal implications of harassment (with real life examples!), as well as details of your policy. A shorter session can follow every 12-18 months.
  • Pseudo-supervisors. Employees who don’t have the power to hire and fire other employees but are still seen as leaders in some way should also get special attention because they are likely to receive some harassment claims. Give them the management version of training, either as a separate session or as participants in the management training itself.
  • Non-management. Conduct training sessions every 12-18 months of about an hour which explain your policy, what harassment is, the consequences of harassment, how to report it, and what retaliation is.
  • Temps, independent contractors, and interns. Make sure to give all employees, especially those considered low in the hierarchy, your anti-harassment training.
  • Multilingual employees. If some (or even one!) of your employees is not fluent in English, invest in a translator.
  • New employees. Give new hires the first session of training as quickly as you can, even if it’s in the form of a recording of a previous session.

How to make the training “stick”

  • Make sure the speaker is engaging. Hire someone from outside your company if necessary.
  • Hold multiple sessions, so that everyone can attend and can engage better with each other and the speaker as a smaller group.
  • Have an HR representative at every session to answer specific questions. They might also gain some insight simply by attending the session about current or potential problems.
  • Illustrate harassment using live presentations and concrete examples.
  • Keep the training relevant by basing examples on recent cases.
  • Use multiple methods, such as live actors, discussion, quizzes, and videos, to keep employees engaged. A simple role-playing exercise practicing conversation between a potential harasser and someone who feels offended by them can demonstrate ways to prevent situations from spiraling out of control.

If you follow these steps, you’re well on your way to creating a safe work environment and protecting yourself from vicarious liability for an employee’s harassment. In the next article of this series, we’ll talk about what to do when even the best prevention methods fail and a harassment claim is made.

As always, we are here to help you any way we can. Please don’t hesitate to call or email if you need us.

The Deerfield Team
 800.233.6428
info@deerfieldadvisors.com

 


SOURCES:

Bridgeford, Lydell C. “Q&A: SOME TRICKY ASPECTS OF ANTI-HARASSMENT TRAINING, RETALIATION CLAIMS.” Bloomberg BNA Labor & Employment Blog, Jul 16 2013. http://www.bna.com/qa-tricky-aspects-b17179875217/

Bussing, Heather. “When Employers are Liable for Harassment.” HR Examiner, June 24 2013. http://www.hrexaminer.com/when-employers-are-liable-for-harassment/

Miller, Bridget. “What Should Be Included in Anti-Harassment Training?” HR Daily Advisor, May 23 2014. http://hrdailyadvisor.blr.com/2014/05/23/what-should-be-included-in-anti-harassment-training/#

Monsees, Paul R. “Employer’s Super Anti-Harassment Policy May Increase Its Liability.” Labor & Employment LawPerspectives, Dec 8 2014.  http://www.laboremploymentperspectives.com/2014/12/08/employers-super-anti-harassment-policy-may-increase-its-liability/

“Questions and Answers for Small Employers on Employer Liability for Harassment by Supervisor.” The U.S. Equal Employment Opportunity Commission, April 1 2010. http://www.eeoc.gov/policy/docs/harassment-facts.html

Shea, Robin. “5 Harassment Must-Haves for Employers.” Employment and Labor Insider, May 29, 2015.http://www.employmentandlaborinsider.com/harassment/5-harassment-must-haves-for-employers/

Wilkie, Dana. “Anti-Harassment Training Following the Supreme Court’s Vance Ruling.” Society for Human Resource Management, July 16 2013. http://www.shrm.org/hrdisciplines/employeerelations/articles/pages/anti-harassment-training-following-supremecourt-vance-ruling.aspx

“Workplace Harassment Benchmark Survey Demonstrates How Organizations are Addressing New and GrowingEmployment Law Challenges.”  NAVEX Global, May 20 2013. http://www.navexglobal.com/company/press-room/workplace-harassment-benchmark-survey-demonstrates-how-organizations-are

 


DISCLAIMER

This article is intended only as a general discussion of these issues & we cannot guarantee the accuracy thereof. It does not purport to provide legal, accounting, or other professional advice. If such advice is needed, please consult with your attorney, accountant, or other qualified adviser. The Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Accordingly, the information provided herein is provided with the understanding that Deerfield Advisors is not engaged in rendering legal advice. Deerfield Advisors strongly advises that clients and/or the reader of this publication contact an attorney to obtain advice with respect to any particular issue or problem discussed here. Also, please know that discussions of insurance policy language is descriptive only. We strongly advise that one’s individual policy & one’s advisor be consulted regarding this subject matter before any action is taken in any way. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. The Deerfield Advisor White Paper Series is a registered trademark of Deerfield Asset Management Inc. DBA, Deerfield Advisors and is produced by Deerfield Advisors for the benefit of its clients, and any other use is strictly prohibited. All rights reserved. Copyright © 2015

 

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HSA Plans for Business – Why you may want to consider it

sketch1With all of the recent media hype regarding federal health insurance reform and the state of the health insurance industry, you have no doubt heard the term HSA. HSA stands for Health Savings Account. It is a form of consumer directed health coverage which pairs a high-deductible health plan with a tax-free savings account for medical expenses. These plans are designed to reduce healthcare insurance costs for employers and employees alike & causes people with an HSA qualified policy to have a little skin in the game.

These are the main advantages of this strategy:

  • Individual plans are 100% portable, meaning that they are not tied to the employer’s business. The employees can take the coverage with them, wherever they go, as well as deal with the grunt work involved, thus removing it off of your plate and allowing you to concentrate on running your business.

  • Contributions from the business are expendable, so you can create an attractive & deductible employee benefit.
  • HSA accounts qualify for year to year “rollovers,” which enable the employee to create a sizeable health insurance cushion.

Saving for the Future:

Proponents of HSAs believe that it is an important reform that will help reduce the growth of health care costs and increase the efficiency of the health care system. They contend that HSAs encourage savings for future health care expenses, allow the patient to receive needed care without a gatekeeper to determine what benefits are allowed, and make consumers more responsible for their own health care choices through the required high deductible health plan options which they will choose. Funds in an HSA account can be used to meet your deductible as well as other non-covered legitimate medical expenses including vision and dental expenses. Funds in an HSA can be used for any family member’s eligible medical expenses even though HSA accounts are individual accounts. Small businesses need a creative solution to health insurance that will enable them to retain their valued employees and not “break the bank”. Like any health care option, health savings accounts have advantages and disadvantages. When considering a health savings account, think about your anticipated health care expenses, your financial situation and how much control you want over your health care spending. If you’re generally healthy and want to save for future health care expenses, an HSA may be an attractive choice. On the other hand, if you anticipate needing expensive medical care in the next year and would find it hard to meet a high deductible, an HSA might not be your best option. Therefore you will need to determine what works best for you.

As always, we are here to help you any way we can. Please don’t hesitate to call or email if you need us.

The Deerfield Team
800.233.6428
info@deerfieldadvisors.com

 


DISCLAIMER

This article is intended only as a general discussion of these issues & we cannot guarantee the accuracy thereof. It does not purport to provide legal, accounting, or other professional advice. If such advice is needed, please consult with your attorney, accountant, or other qualified adviser. The Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Accordingly, the information provided herein is provided with the understanding that Deerfield Advisors is not engaged in rendering legal advice. Deerfield Advisors strongly advises that clients and/or the reader of this publication contact an attorney to obtain advice with respect to any particular issue or problem discussed here. Also, please know that discussions of insurance policy language is descriptive only. We strongly advise that one’s individual policy & one’s advisor be consulted regarding this subject matter before any action is taken in any way. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. The Deerfield Advisor White Paper Series is a registered trademark of Deerfield Asset Management Inc. DBA, Deerfield Advisors and is produced by Deerfield Advisors for the benefit of its clients, and any other use is strictly prohibited. All rights reserved. Copyright © 2015

 

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Harassment in the Workplace: An Overview

First of a three part series: Harassment in the Workplace

An elderly employee is called “grandpa” by his coworkers. A young employee complains that the art on the office walls makes her uncomfortable. A supervisor jokes that a female employee might get a promotion if she gets a drink with him after work. A white employee sends derogatory emails to an African American employee. A female supervisor reprimands a male employee for being late to work three times in a row.

Which of these instances are forms of harassment? What legal responsibility does an employer have in these cases? This is the first article in a series that aims to answer these questions. Understanding what constitutes harassment, as well as how to prevent and respond to allegations of unlawful harassment, is essential to maintaining a healthy work environment and protecting your business’ reputation.

Harassment: A Definition

Harassment is generally defined as repeated, unwelcome behavior that threatens, annoys, intimidates, scares, demeans, or offends the victim.

Federal laws prohibit harassment related to discrimination. To qualify as such, the behavior must first be based on race, color, sex, religion, or national origin (Title VII); on age (ADEA); on disability (ADA); or on genetic information (GINA). Second, the victim must consider the actions abusive. Finally, the actions must be severe and pervasive enough to create a hostile environment by the standards of any reasonable person.¹  The line between teasing and harassment, between a healthy and a hostile work environment, is determined on a case-by-case basis. Importantly, harassment initiated against an employee because they opposed discrimination or participated in an investigation related to EEO statuses—called retaliation—also violates federal law.

Harassment based on the victim’s protected status can lead to an investigation by the Equal Employment Opportunity Commission. Claims of discrimination-based harassment have risen tremendously in recent years. In 2014, there were 26,820 harassment charges filed with the EEOC, resulting in $93.9 million in monetary benefits (down from $129 million in 2013). Of course, many more cases of harassment occur than are successfully charged. In a 2013 Huffington Post/You Gov poll, only 30% of respondents who experienced being sexually harassed in the workplace actually reported the harassment to their employer.

Outside discrimination, state laws are primarily responsible for governing harassment. In Texas, behavior that qualifies as harassment must involve obscenity; threatening to cause bodily harm or commit a felony against the victim or their family or property; conveying a false report that someone has suffered bodily harm or death; anonymous or offensive telephone calls; or repeated electronic communications “reasonably likely to harass, annoy, alarm, abuse, torment, embarrass, or offend another.” ²

Actions that may be considered harassment
Derogatory comments or slurs
Obscene propositions
Assault
Unwelcome touching
Physical interference with work or movement
Derogatory posters, cartoons, or art
Threats
Sexual demands

Actions that would not be considered harassment
A hug between mututally consenting friends
A compliment on physical appearance
A single off-color joke
Failing to refill the office coffee pot

Employer Liability

There are two cases in which employers are legally responsible for harassment.

The Supreme Court held that employers have “vicarious liability” for harassment by supervisors in two cases decided in 1998, Burlington Industries, Inc. v. Ellerth and Faragher v. City of Boca Raton. In 2013, the Court clarified in Vance v. Ball State University that an employer is not liable for its employee’s discriminatory harassment unless the harasser is a supervisor of the victim—with “supervisor” newly defined as someone who has the ability to hire, fire, demote, promote, transfer, discipline or change the employee’s job duties. The EEOC addresses vicarious employer liability in detail.

The Court also decided that the employer is also liable for harassment, even when the harasser is not a supervisor, when the employer is found to be “negligent.” Negligence means 1) failing to have a strategy for preventing harassment, or 2) knowing about the conduct and failing to take appropriate steps.

In the next articles in this series, we will address best practices for harassment prevention and following up on harrassment allegations. Apart from hiring trustworthy supervisors, there is no better protection from costly, detrimental harassment charges than implementing wise policies and processes before a complaint is ever made. Seeking legal counsel from a qualified employment lawyer is advised if you discover there is a problem or potential problem.

As always, we are here to help you any way we can. Please don’t hesitate to call or email if you need us.

The Deerfield Team
800.233.6428
info@deerfieldadvisors.com

 


 

References:

1.“What do I need to know about… workplace harassment.” United States Department of Labor. http://www.dol.gov/oasam/programs/crc/2011-workplace-harassment.htm

2.“TEX PE. CODE ANN. § 42.07 : Texas Statutes – Section 42.07: HARASSMENT.” http://codes.lp.findlaw.com/txstatutes/PE/9/42/42.07#sthash.3xQkEMaY.dpuf

SOURCES:

“Enforcement Guidance on Vicarious Employer Liability for Unlawful Harassment by Supervisors: Notice 915.002.” The U.S. Equal Employment Opportunity Commission, June 18 1999. http://www.eeoc.gov/policy/docs/harassment.html

“Harassment Definition.” Law.com. http://dictionary.law.com/Default.aspx?selected=853

“Harassment Law & Legal Definition.” USLegal.com. http://definitions.uslegal.com/h/harassment/

“Questions and Answers for Small Employers on Employer Liability for Harassment by Supervisor.” The U.S. Equal Employment Opportunity Commission, April 1 2010. http://www.eeoc.gov/policy/docs/harassment-facts.html

“Supreme Court makes it harder to sue businesses for retaliation and discrimination.” CBS News, June 24 2013. http://www.cbsnews.com/news/supreme-court-makes-it-harder-to-sue-businesses-for-retaliation-and-discrimination/

“TEX PE. CODE ANN. § 42.07 : Texas Statutes – Section 42.07: HARASSMENT.” /PE/9/42/42.07#sthash.3xQkEMaY.dpuf

“What do I need to know about… workplace harassment.” United States Department of Labor. http://www.dol.gov/oasam/programs/crc/2011-workplace-harassment.htm

Bussing, Heather. “When Employers are Liable for Harassment.” HR Examiner, June 24 2013. http://www.hrexaminer.com/when-employers-are-liable-for-harassment/

Eugene Volokh, What Speech Does “Hostile Work Environment” Harassment Law Restrict?, 85 Geo. L.J. 627 (1997). http://www2.law.ucla.edu/volokh/harass/breadth.htm

 

DISCLAIMER

This article is intended only as a general discussion of these issues & we cannot guarantee the accuracy thereof. It does not purport to provide legal, accounting, or other professional advice. If such advice is needed, please consult with your attorney, accountant, or other qualified adviser. The Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Accordingly, the information provided herein is provided with the understanding that Deerfield Advisors is not engaged in rendering legal advice. Deerfield Advisors strongly advises that clients and/or the reader of this publication contact an attorney to obtain advice with respect to any particular issue or problem discussed here. Also, please know that discussions of insurance policy language is descriptive only. We strongly advise that one’s individual policy & one’s advisor be consulted regarding this subject matter before any action is taken in any way. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. The Deerfield Advisor White Paper Series is a registered trademark of Deerfield Asset Management Inc. DBA, Deerfield Advisors and is produced by Deerfield Advisors for the benefit of its clients, and any other use is strictly prohibited. All rights reserved. Copyright © 2015

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