Health Benefit Exchanges – We’ve all heard about the creation of Health Insurance Exchanges, but the focal point of these exchanges for employers deals with the definition of “small group.” The Small Group Market is defined as employers with 100 or fewer employees in the preceding year. However the Exchanges are run by the states that have the authority to define the small group market at 50 or fewer employees in the preceding year.

So what do you need to do? Be aware of how your state defines the small group market because it can have a significant impact on your ability to access the Exchange.

Play or Pay Tax – Larger employers will be potentially subject to the play or pay tax if they do not offer coverage and certain criteria are met, or if they offer coverage and certain criteria are met. Employers will be considered “large employers” if they have an average of 50 or more employees in the preceding year. Employees include “full time equivalent” employees, which are calculated on a monthly basis. The taxes (penalties) for being out of compliance are assessable on a monthly basis.

So what do you need to do? It’s imperative to understand BOTH the way full-time employees are calculated, as well as understand the way coverage is deemed suitable (and thus not subject to possible penalties).

Small Business Tax Credit – Only employers that have 25 or fewer full-time employees and meet other eligibility criteria requirements can claim the tax credit. The average annual wages for employers in this category must be $50,000 or less AND the employer must have a contribution arrangement in effect that satisfies the IRS requirement.

So what do you need to do? If you’re potentially in this arena, you need to understand the calculation of full-time employees as well as the salary calculation. You’ll also need to work with an accountant or tax professional who can help with IRS form 8941 in order to claim the credit.

Medical Loss Ratio – Depending on how the Small Group market is defined in your state, a group may be subject to either an 80% or 85% medical loss ratio standard. This will have an impact on the chances enrollees have of receiving a rebate: 85% for the Large Group Market and 80% for the small group Market.  The medical loss ratio is a spending requirement imposed on carriers providing coverage.  Rebates are only required if the carrier does not meet the applicable medical loss ratio standard.

So what do you need to know? This element will have an indirect impact on employers because it is directed towards insurance carriers.  Many carriers will have to decide if they are going to continue to offer plans in certain markets or if it no longer makes financial sense to do so. If carriers drop out or pull back offerings, the result will be potentially increased pricing for those who remain, and/or driving more people to the exchanges.

Record Keeping Requirements for Everyone – regardless of the size of the company, the ACA is requiring all employers to keep records of their employees, records that are to include household incomes (yes, even for the spouse not employed by the firm), and if they have enrolled in an exchange. The purpose according to ACA is to determine possible “cost-sharing” for those employees who are at or near the poverty level for an individual and/or family (hence why they are requiring family income).

So what do you need to know? Some might think, well, I don’t have any employees at or near the poverty line…however that does not mean you are not required to keep records.  Everyone is required.  On the other end of the spectrum there may be a Cadillac tax coming down the road in 2017 assessed against those who have plans that are “too rich.”

Other questions employers are asking include, “I’ve heard about grandfathering plans, can I (should I) do that and if so, how?”  “Should exchanges be a part of my company’s offering?”  As the ACA continues to unfold, there will likely be additional elements of it that employers will be forced to address.  The best advice we can offer to employers is: make sure you are working with a Financial Professional who understands the ACA and can help you navigate its impact specific to your firm. Have a plan, and get out ahead of it as much as possible.

P. Allen Haney President, The Haney Company

Mr. P. Allen Haney is a Strategic Advisor to the Government Technology & Services Coalition. He is also a trusted advisor to business owners and nonprofit executives, Allen Haney is best known for solving problems. His consul on employee benefits, executive compensation, and retirement planning routinely vitalizes the health and sustainability of closely held businesses and associations.

He is most appreciated for his all-inclusive, uncompromising commitment to expand client capacity by uncovering risks and opportunities hidden in blind spots. Read more about Mr. Haney here.

For individuals the theft or misuse of private information occurs daily.  Signals stolen while using public internet, misplaced cell phones, fishing attacks on home computers, and theft of personal computers happen throughout our society and result in long-term financial crisis.

Small Business owners face even greater obstacles from cyber attacks.  A recent National Small Business Association reported 44% of their 800 surveyed members had fallen victim to a digital break-in.  What are the steps we can take to help thwart these information criminals?  Solutions for both companies and individual citizens are very similar.

All business firms using the internet must have a strong risk management plan established and adhere to the rules in order to lessen the impact of cyber theft.  With the growth of cloud computing, use of smart phones and tablets, employees telecommuting, and digital information flowing outside the office, cyber attackers have many more access points.  The Federal Communication Commission (FCC) lays out guidelines to prevent cyber attacks.  Among their suggestions are:

• Train employees in security principles.  Use strong passwords with expiration dates.
• Protect information, computers and networks from cyber attacks.  Install fire wall security, the latest security software and web browsers.
• Create a mobile device action plan.  Password protect devices, encrypt data, and install security apps and how to report lost or stolen equipment.
• Make copies of all important data.  Store offsite or in the cloud.
• Passwords and authentication.  Require unique passwords and change every three months.

Many businesses have the additional exposure of outsourcing data.  Many businesses share customer information with third parties who provide billing, payroll, and employee benefits.  Additionally, web hosting, HR services, and information technology services are frequently outsourced.  Despite this outsourcing exposure many businesses do not require third parties to cover costs associated with data breach in their contacts.  When using outside partners, what is the risk-management strategy they use to protect you against financial loss and reputation harm?

Because of the explosion in internet usage many companies are seeking contractual risk transfer and indemnification through insurance.  Starting in the early 1990’s insurance has changed to provide protection for cyber growth.  Today numerous insurance companies either provide stand-alone policies or add the protection with other coverages, such as Directors & Officers policies (D&O), Errors & Omission Policies (E&O), and Fiduciary Liability policies. An E&O policy is a type of professional liability typically issued to companies setting standards for them selves or other clients.  D&O liability coverage is designed to protect companies against their management decisions and covers directors, officers, staff and the organization itself.

Cyber Liability Policies should provide protection for both First Party and Third Party Claims.

First Party coverage includes:

• Network and Information Security Liability
• Communication and Media Liability
• Regulatory Defense Exposure

Third Party coverage includes:

• Crisis Management Event Exposures
• Security Breach Remediation and Notification Expenses
• Computer Program and Electronic Data Restoration Expenses
• Computer Fraud
• Funds Transfer Fraud
• E-Commerce Extortion
• Business Interruption and Additional Expenses

Cyber Insurance helps before the loss occurs by going through a thorough underwriting process to help highlight the potential risk exposures to be addressed.  Nevertheless, should the loss occur these policies help in determining the data leak, PR crisis, IT crisis, and the financial crisis.

The recommendation to combat today’s cyber threat involves risk management planning, assistance from third party partners, and insurance coverage to assist should a loss occur. For more cyber security tips, visit www.US-CERT.com. Learn about the FCC’s Small Business Cyber Planner here.

Mary Jordan, “CYBERSECURITY – A Special Report,” The Washington Post, Thursday, October 10, 2013

P. Allen Haney, President, P. Allen Haney Company

Mr. P. Allen Haney is a Strategic Advisor to the Government Technology & Services Coalition. He is also a trusted advisor to business owners and nonprofit executives, Allen Haney is best known for solving problems. His consul on employee benefits, executive compensation, and retirement planning routinely vitalizes the health and sustainability of closely held businesses and associations.

He is most appreciated for his all-inclusive, uncompromising commitment to expand client capacity by uncovering risks and opportunities hidden in blind spots. Read more about Mr. Haney here.