The Employee Benefits Update Produced by McInnes Group, Inc. Healthcare and Benefit Solutions
1st Quarter, 2005
Phone: 913-831-0999 Fax: 913-831-2333 www.mcinnesgroup.com
J. Duncan McInnes, IV, CLU
Stephen Brimacombe
Kevin Handlan
Treva Johnston
Dennis Maggart
John Pence
David Rismiller
Jon Roberts
Tyler Shelton
Mike Storrer
Brian Tamasi
Warren Williams jdm4@mcinnesgroup.com sbrimacombe@mcinnesgroup.com kevin@mcinnesgroup.com tjohnston@mcinnesgroup.com dennis@mcinnesgroup.com jpence@mcinnesgroup.com david@mcinnesgroup.com jon@mcinnesgroup.com tyler@mcinnesgroup.com mstorrer@mcinnesgroup.com btamasi@mcinnesgroup.com warren@mcinnesgroup.com
Ext. 1220
Ext. 1234
Ext. 1235
Ext. 1232
Ext. 1238
Ext. 1240
Ext. 1221
Ext. 1239
Ext. 1244
Ext. 1228
Julie Brainard julie@mcinnesgroup.com Ext. 1231
Large group medical, dental and LTD new and renewal business and service
Joyce Echols joyce@mcinnesgroup.com Ext. 1227
Small group medical, dental and LTD new and renewal business and service
Ext. 1223 Keri Grimmett
Agency accounting keri@mcinnesgroup.com
Matt McInnes matt@mcinnesgroup.com
Individual and small group health, life, and disability
Ext. 1247
Pat Roush pat@mcinnesgroup.com Ext. 1241
Small group medical, dental and LTD new and renewal business and service
Scott Sachse scott@mcinnesgroup.com Ext. 1236
Small group and association medical, dental and LTD new and renewal business and service.
Donna Seuferling donna@mcinnesgroup.com Ext. 1224
Large group medical, dental and LTD new and renewal business and service

Products, Services and Value-Added Resources
O ur company is focused on helping you solve a variety of financial problems, as well as capitalize on strategic opportunities. If you have questions about whether or not we might be able to help, please don’t hesitate to call.
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Employer Sponsored Health Care Plans
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Peripheral Benefit Plans
Dental, Long-Term Care, Short & Long Term Disability, Vision, Legal, HSA's and HRA’s, Partially
Self-Insured Plans, Section 125 Cafeteria Plans, Employee Paid Benefit Menus, and Group Life
Carve Out Plans.
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Benefit Consulting Services
Complete Benefit Plan Reviews, Plan Cost Analysis, Acquisition & Multi-location Analysis,
Compliance Audits, Alternative Funding Programs, Managed Care Plan Coordination & Analysis,
Employee Communication Services.
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Individual Products
Individual, Spouse and Children Health Coverage, State Insurance Pool Coverage, Medicare
Supplement Tie-In Plans, Temporary Health Coverage, Long-Term Care, Travel Health
Coverage.
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Association Plans
Agency Endorsed Marketing Agreements.
 Financial Services
Life Insurance, Buy-Sell Funding, Disability Insurance, Business Overhead Expense Policies, Key
Person Insurance, Qualified & Non-Qualified Deferred Compensation Plans, Section 162 Bonus
Plans, Section 79 Permanent Coverage Plans, and 403 (B) Plans
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Retirement Plan Services
Individual IRA’s, Roth IRA’s, Spousal IRA’s, 401(k)’s, Profit Sharing Plans – Integrated &
Cross Tested, 404(c) Education, Investment Policy Statement Document Production, Turn-Key
Plans, Multiple Source Plans, and 403(B) Plans.
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Life Insurance
Term Coverage, Whole Life, Variable Whole Life, Universal Life, Variable Universal Life,
and Viatical Settlements.
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Value Added Services
Property and Casualty Coverage, My-Wave Information System, Human Resource Solutions, Benefit
Statements, 125 Cafeteria Plan Administration, COBRA Administration, and Strategic Business
Planning.
P lease let us know if we can pursue other lines of coverage you have an interest in investigating.
We are enthusiastically at your service .

Employers were slower than individuals to snatch up health savings accounts in their first year, according to new research from America’s Health Insurance Plans.
Of the 438,000 HSA's sold between January and September of 2004, 79% were for individuals while the remaining 21% were for employer group plans. One reason for the slow start for employers is that the final guidelines were not released by the IRS until late July, which was too late for many employers to change their medical offerings.
This is an emerging market that will likely see vast growth in the coming months and years.
Employees like the idea of having control of HSA funds even after leaving their employer. Lower premiums are an attractive feature but many are wary of having to pay higher deductibles. Thirty-six percent of individual respondents in a Watson Wyatt survey cited “maximum out-of-pocket costs” as the most influential factor in deciding whether to enroll in an HSA.
According to new research from The Commonwealth Fund, about half of insured adults with a highdeductible health plan have medical bill problems or debts. The research found that rate to be around 31% for those with lower-deductible plans. Individuals with high-deductible plans are also more likely to experience access difficulties such as not filling prescriptions, failing to get medical testing, and skipping follow-up appointments and procedures.
C ommonwealth Fund President Karen Davis says, “Health savings accounts coupled with highdeductible plans have potential pitfalls, especially for families with low incomes or individuals with chronic health conditions. The evidence is that increased patient cost-sharing leads to under use of appropriate care.”
Davis suggests some legislative fixes for HSA's that could help prevent medical access problems and burdensome medical debt:
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Reduce deductibles for lower-income families
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Exempt effective services and medications for patients with chronic conditions
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Require provider discounts for uninsured low-income families
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Cap income eligibility for tax-sheltered savings accounts
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Prohibit discrimination in favor of high-wage employees in funding health savings accounts by employers
For Frequently Asked Questions about HSA's visit www.irs.gov/pub/irs-drop/n-04-2.pdf
.

Most employees don’t have a clue about how likely they are to need disability coverage. One-third of workers over age 30 will become disabled for at least three months during their careers, yet the public vastly underestimates that risk. In a survey of 800 working adults by America’s Health
In surance Plan, 47% of respondents say they are “not at all concerned” that a disability will put them out of work for three months or more. Only 27% were “very concerned” about the potential of a disability.
The majority of the workers (58%) believed they were covered by disability insurance, but in reality only 35% have such insurance. Worse still, most employees overestimate the potential of workers’ compensation insurance to cover them if they become disabled. While only 10% of disabilities are cov ered by workers’ comp, 59% of the survey respondents believe the proportion is higher than that.
Workers also misunderstand the drivers of disability, too, often associating it with accidents. Fiftyeight percent think accidents are more likely to cause a disability. The reality is that illness causes more than three-fourths of short-term disabilities and more than four-fifths of long-term disabilities.
Employers haven’t heard a lot of feedback from employees saying they want disability coverage because they think they are covered. The last thing an employer wants to have is an employee that ends up being disabled and not having adequate coverage. Fortunately for employers, disability is one of the most affordable employee benefits.
To better help your employees understand disability, AHIP, along with The Society of Actuaries and the Actuarial Foundations, have released a publication called Disability Insurance: A Missing Piece in the Financial Security Puzzle . It is available for free on AHIP’s website. www.ahip.org
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As pharmacy costs spiral, more employers are switching to coinsurance and urging employees to shop for lower-cost alternatives, experts say.
Such cost-control strategies helped moderate drug spending increases in recent years. Pharmacy spending growth per privately insured person has slowed each year since 1999, according to the nonpartisan Center for Studying Health System Change.
Nevertheless, medication costs continue to march upward. Pfizer, Inc. upped the price for most of its drugs, including the cholesterol-lowering drug Lipitor, by 5% in January 2005, according to The
Wall Street Journal . Prices also jumped for other popular drugs such as Celebrex (5%), Zoloft (5%), and Pravachol (5.9%), the paper reported.
Prices increase all the time and employers realize they don’t really have any control over it. What they can do, however, is share a portion of the price increases with employees through coinsurance.
Forty-five percent of large employers are doing so in 2005, up from 19% in 2002. Meanwhile, other efforts by employees, such as choosing generics, are helping to keep costs down.

Managing health plan expenses is hard enough when you are just dealing with those employees and dependents who are legitimately covered by your plan. But when you unwittingly pay for healthcare services for people who aren’t even eligible for benefits, you are simply adding to plan costs unnecessarily.
Couldn’t happen to you, you say? Perhaps, but before you dismiss the possibility, take this little quiz on health plan eligibility:
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Who performs enrollment and eligibility update functions for your plan?
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Does your summary plan description clearly define dependents and support your validation process?
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How quickly are terminations reported to various vendors?
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When is dependent and other insurance data collected? At initial enrollment only or every year during the p lan’s annual re-enrollment?
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What proof of dependency (documentation) is required?
If you can’t answer these questions with confidence, you may be at risk for paying for ineligible dependents.
Suffice to say, your plan costs could be affected enough to make it worth the effort to overhaul your procedure for checking eligibility.
Here are some examples of eligibility related issues revealed by some recent claim audits:
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$200,000 was paid on claims for an ex-spouse who was maintained as an active dependent after a divorce.
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Claims were paid under two different Social Security numbers for one employee; one showed active status, the other showed Medicare eligibility.
 A dependent child’s future termination date was entered into the claims system as the maximum age for a full-time student; but no investigation was performed to confirm whether the dependent actually had full-time student status
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Medicare payments were ignored because eligibility information showed the employee in question to be an active employee, not a retiree.
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The administrator did not perform preexisting investigations. As a result, all conditions “are covered because the employer approved enrollment in the plan.”
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Monthly fee were inflated because enrollment numbers were not reconciled.
At least annually, employers should conduct a participant status reconciliation to check active eligibility, special classification eligibility and terminated status. Along with this process and identification of overpaid claims, employers should consider an operational review to ensure effective procedures are documented and eligibility is communicated to the appropriate vendors.
An eligibility audit offers the employer the opportunity to introduce procedures and policies that place the plan in a more advantageous position for providing benefits at reasonable costs for employees and eligible dependents. Carefully checking eligibility can also save substantial health care dollars.
Key categories for potentially ineligible dependents:
Do Not Qualify Under Plan Rules
Grandchildren or other extended family dependents with no legal guardianship
Unmarried partners with no recognized relationship under the plan
Children of live-in partners with no legal relationship
Children not residing with the participant in a parent/child relationship
Married Children
Ineligible Because of Qualifying Events
Divorced spouses
Stepchildren following divorce of the natural parent
Overage dependents (not disabled or full-time students)

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