Here’s a strategy that many employers overlook: Many TPAs offer direct deposit as an FSA reimbursement option, rather than sending checks to participating employees. The choice is up to the participant. 

One of our readers from New Berlin, NY reports that simply adding this option for employees increased workers’ satisfaction with the turn-around of reimbursements, and offset a common reason some employees gave for not participating in the benefit. 

Several employees who hadn’t enrolled in past years because FSA contributions are deducted from their regular  paychecks were convinced to enroll because reimbursements went straight to their bank accounts, regardless of the amount deducted to date during the plan year.

Typically, TPAs require employees to submit a voided check if the employee wants the money direct deposited to a checking account. If the employee prefers the money go into a savings account, the employee typically has to submit a direct depost form from his or her financial institution.

Two common errors to watch out for:  Some employees make the mistake of submitting a deposit slip rather than a voided check. Administrators typically reject this form of enrollment, thereby delaying enrollment).  In addition, it’s up to the employee to notify the administrator promptly of any account changes or closings.

The statements can easily backfire – or contain inaccuracies. Here’s how to find and fix two common trouble spots:

1. Avoiding incorrect info

Accidental math errors are the most common – and damaging – problem with total comp statements.
They’re also the toughest for you to spot and correct before the firm sends out the statements, since you aren’t the one who crunches the numbers.

But there are two ways to minimize the risk:

• Make a list of the data sources you use, such as Payroll, your 401(k) provider and health plan carrier, and
• Ask each source to pull and review a few random samples. If they’re OK, chances are the rest will also be fine. But if they contain errors, you can be pretty sure others will have mistakes.

A related problem: Some statements are arranged as a single list of costs, one line after another. To cut the risk of putting something on the wrong line, break the statement down into small sections (e.g., salary, healthcare and retirement). Bonus: This helps make statements easier for employees to follow.

2. ‘Just increase my salary’ syndrome

Sometimes, total compensation statements can actually decrease salary satisfaction, rather than boost morale. A handful of employees may gripe, “Why can’t you just increase my salary instead?” That’s especially true for legally required benefits (like workers’ compensation) and low-profile benefits such as term life insurance. Two fixes that work:

• List “government-required benefits” as a section of the statement. Avoid the term “mandated,” since many employees are unfamiliar with it, and
• Consider adding a section that shows employees how much it’d cost them to line up their own coverage instead.

Even if it’s not in the budget, you can adopt some of the newer employee education techniques used in successful plans.

What’s out: Harping on the message that smoking causes lung cancer, emphysema, etc.  Virtually every smoker knows the risks by now. That doesn’t mean you should ignore the issues of smoking and serious health conditions, but it shouldn’t be the only focus.  

What’s in: The employee education trend has moved toward teaching people strategies to overcome the barriers that keep them from quitting.

Common barriers

The Agency for Healthcare Research and Quality recommends that before smokers try another cessation attempt, they look at past quit attempts – what helped and what led to relapse. Three common relapse triggers:

• social drinking. Many smokers get their strongest cigarette cravings when they’re in social situations that involve drinking alcohol.
• smokers at home. Having other people in the household who smoke in the employee’s presence greatly reduces the chance of a successful quit attempt, and
•  the weaning approach. While some people can quit gradually, those who go cold turkey are usually better off once they get through the first few weeks of discomfort.

Identify non-health benefits

Your employees’ doctors likely already review the health benefits of quitting with their patients.
While it’s good to provide info that supports this message, you may want to make your focus the non-health rewards of quitting.

Example: Show smokers how much money they can save by quitting. Multiply the cost of a pack of cigarettes by the days or weeks of the year. Then add the cost difference between your health plan’s premiums for smokers and non-smokers.

One final step: Encourage people to set a personal “quit date,” preferably within two weeks. Many people respond best to deadlines – even when the deadlines are self-imposed.

These benchmarks from the Milliman index and EBRI can shed light on where your firm’s cost-sharing arrangement stands against the national averages:

• The average yearly total medical cost for a married employee with two dependent children has climbed to all-time high of $14,400
• Among firms with traditional coverage (PPO, HMO, etc.), employees’ shares of the cost have increased an average 11.4% over the last three plan years
•  Between salary contributions toward premiums, copays and deductibles, employees now pay an average 38% of the total medical cost, and
• Employers fork out $8,909 (62%) toward the total yearly cost of family coverage.

But a Duke University shows that the group you might think would be the least likely to quit – people over the age of 50 –  may actually have the best odds for quitting through a smoking cessation program.

Researchers tracked 573 older patients over 10 years. They found that just 16% of those who joined the smoking cessation program later returned to smoking.  Meanwhile, previous research has found young smokers who try to quit have a 35% to 45% relapse rate within two years.

Bottom line:  Given the aging employee population and the cost of retiree health care, you may want to keep trying with smoking cessation education for your older employees.

Generic versions of high-cholesterol drug Zocor have been on market for several years now, but a fair share of employer pharmacy plans have yet to make the switch.

If your PBM gives generic Zocor favored status on the formulary, now’s a good time to remind employees:

• most people on cholesterol-control meds will get the same therapeutic value from generic Zocor as from the label brand and the more potent – and still patented – Lipitor
•  they can save $10 to $50 (or more, depending on your drug plan design) on their co-pay by switching, but
•  they should ask their doctor first. People with cholesterol levels over 200 and/or family histories of  ultra-high cholesterol may be better off staying on Lipitor.

Reason: It takes four times the amount of a Zocor-type medication  to equal one dose of Lipitor.

Like most organizations, insurance carriers rarely keep perfectly up-to-date records on their clients. As a result, plan sponsors often get charged for people who shouldn’t be covered on the health plan. Here are two areas to watch:

Claims versus enrollment

It’s common to have terminated employees still in the carrier’s claims eligibility system – even after they’ve been taken off your enrollment list.

Reason: Many carriers use separate computer systems for tracking enrollment and claims – and the two systems use different technologies that don’t “talk” to each another.

Carriers have no incentive to upgrade their systems, according to CSG president Eric Raymond, because doing so would cost the insurers money. Leaving things as is, carriers simply charge clients when they put through claims for ineligible employees and dependents.

That’s why an annual claims audit is a must: That way, you won’t get charged fees for claims the carrier accidentally put through. Even if your firm outsources the work (it’s a rather time-consuming task when performed in-house), you’ll typically see several percentage points of savings on your total health costs.

Dependent eligibility

Poor carrier record-keeping also can be the cause for employees’ ineligible dependents not being taken off the enrollment files.

Few carriers have systems that automatically integrate with your Payroll department and your current enrollment forms (including the electronic “employee self-service” kind). Instead, data entry people employed by the carriers input the information in the vendors’ system.

Human error by the carriers’ employees costs plan sponsors another several percentage points. Solution: annual dependent audits.

On a nationwide basis, fraudulent long-term disability claims are a $5.5 billion drain on employers. The cost includes claim payouts, subsequent premium increases, lost productivity and staffing problems. The good news: There are legal ways to fight back.

None of the following factors automatically justify a full-scale investigation. But they add up. The more factors in place, the greater the likelihood of a false disability claim:

• The worker is a new hire and has a history of short-term employment
• He or she was recently demoted or clashed with a supervisor
• The employee is unusually aggressive about the claim (e.g., hires a lawyer as a first step) and/or
• The story about the cause or severity of the injury keeps changing.

According to experts, either of the first two factors in combination with either one or both of the latter two could provide cause to probe a little deeper into the claim.

Go through your carrier

What should you do if think you think the claim is fishy? Alert your plan carrier about your suspicions and let the insurer’s investigation department handle it.

The biggest mistake that employers make in these circumstances is to simply take matters into their own hands. Why? Because even if you uncover evidence of fraud, the information might not hold up in court.

It’s easy to feel like your PBM holds all the power over you. In most cases, it does.

A landmark 2004 study compared what pharmacy benefits managers (PBMs) charge employers’ plans to what they actually pay pharmacies. Researchers found staggering overcharges – especially for generic drugs. Unfortunately, four years later, the situation has scarcely changed. All too often, PBMs improve their own bottom line at the expense of the plan sponsor’s.

Chances are, it’s your health insurance vendor – not yourself – who contracts with the PBM to administer the prescription drug portion of your health benefits. So how can you feel confident your firm is getting the best value and service? Start by asking your health-plan broker these four questions about the current or prospective PBM.

1. How does the PBM calculate price?

Many PBMs gain hidden profits off your plan through a practice called “differential pricing,” says consultant Gerry Purcell. In other words, the PBM pays one price to drug retailers and then sets a lesser discount off the average wholesale price (AWP) for your company’s plan. Example:

• the PBM pays the drugstore the AWP minus 18%
• your plan and employees pay AWP minus 15% for meds, and
• the PBM pockets the difference.

Now for some good news. You do have some leverage in this area. If your drug plan is covered under the ERISA umbrella, the PBM must disclose this info. Ideally, you’ll find the rates are the same on both contracts. But if there’s differential pricing, insist your firm get the full discount.

2. What’s the PMPM?

One key cost figure PBMs can’t manipulate is the per-member-per-month (PMPM) cost of your plan. This number will show if your plan’s costs actually increased or decreased. The PMPM is calculated by dividing the total costs spent by the number of employees enrolled in the drug plan.

It’s also a great tool for comparing different PBMs to see which is the most cost-efficient for the size of your organization, says Peter Reed of Managed Benefits Strategies.

3. Can we get rebates, too?

Some PBMs receive money from drug companies that your brokers won’t tell you about – but may be able to leverage to your plan’s advantage. Example: Many PBMs get rebate checks from drug companies (typically 50 cents to $1.25 per claim) for helping increase the sales of their products.

If you push hard enough for it, your broker may able to work an arrangement where you either:

• split rebates from your plan evenly, or
• let the PBM keep the entire rebate in exchange for a price break on administrative fees.

Important: Ask to find out all the payment types the PBM gets from the drug firms. Rebates are often couched in the form of grants or classified as access fees or formulary fees.

4. How do changes in the formulary work?

In most states, PBMs can change your plan’s list of approved medications without prior notice.
The problem: PBMs often make mid-year switches that save them money, but may not save your organization or employees a dime.

Example: If the PBM adopts a mail-order-only coverage policy on a certain formulary drug, an employee who needs same-day access to the medication may be forced to pay full price for it at a pharmacy. Meanwhile, your plan is still charged the formulary price.To avoid such unpleasant surprises, insist the PBM give written notice of formulary changes, including the addition of new generics.

For the seventh straight year, the percentage of employees and their dependents with employer-sponsored health coverage has decreased, finds a new report by the Economic Policy Institute (EPI).

Since 2000, the rate has dropped from 68.3% to 62.9%. In real numbers, that means 4.1 million more uninsured employees. Employers dropping coverage is only one factor in the decrease.

Others include prohibitively high cost shares, increased waiting periods for coverage, decreased COBRA use and employer incentives for employees to line up their own coverage.

The EPI report also looked at employer healthcare coverage in each state and found sizeable decreases in 41 of the 50 states. The states most affected:

• Maryland
• Missouri
• North Carolina, and
• South Carolina.

These states suffered declines of a little more than 7%.