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4 1SELF-FUNDED BENEFIT PLANSINCREASINGLY POPULAR IN THE WAKE OF HEALTH REFORMBy Brad Tamulski, Employee Benefits Advisor

TAMPA • SARASOTA • NAPLES • FT. MYERS | www.bks-partners.com | TOLL-FREE 866.279.0698

Although self-funded benefit programs have been around for years, they are gaining traction among smaller employers as a solution to their benefit challenges. Health reform has fundamentally changed the health insurance industry, and now that more employers are recognizing the impacts to their organization, they are interested in how self-funding may work for their company.

Self-funding is actually more prevalent than many people think. In fact, 61% of employees covered through employer health insurance are in a self-funded plan, according to Kaiser Family Foundation. And while much of that is attributed to very large national organizations, companies with fewer than 500 employees are becoming more focused on its advantages.

In general, there is a false assumption that “self-funding” could jeopardize the financial stability of a company. The reality is that in most instances it’s not much different than traditionally insured plans. Employees still use their benefits and access care in the same way they’ve always done. The difference is how the employer funds it on the back-end.

In self-funded programs, companies only pay for the medical claims their employees incur, plus the costs to administer the plan and buy insurance protection for unpredictably large claims for an individual or the entire company. So employers “win” when they have a favorable claims experience, and are protected when claims are high. In a fully insured plan, the premiums do not change from month to month, so the best and worst case scenarios are the same. Health reform, however, has added new dynamics that impact the pricing of traditional plans:

• Minimum essential benefit levels could add 3 to 17% to premiums, according to Milliman

• Health insurers will collectively pay $8 billion in fees in 2014, and even more every year thereafter, which will be passed on in clients’ premiums

• Insurers face greater regulation on how they can set pricing for clients, as well as how much of the premium can be used for administration or profit

Key Questions to Consider:

• Do we feel our employees are generally healthy?

• Can we afford variations in our monthly benefits expenses?

After receiving double digit rate increases year after year, employers are notthe only ones realizing that self-funding affords them a different strategy.According to a Munich Re study, 69% of health insurance executives plan ongrowing their self-funded client base due to increasing interest from employers.

Regardless of the many advantages, self-funded plans are not a panacea, and are notimmune to some health reform changes. Certain fees and benefit mandates still apply toself-funded plans, as do other requirements, such as the removal of pre-existing conditions.

Along with evaluating the financial risk, employers should gauge their comfort with otheritems, such as cash flow or the overall health of their employees, to determine if it willwork for their company.

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1. Property insurance costs decreasing 5-20%: A variety of factors align to bring refreshing news for portfolio owners in the Southeastern U.S., including properties located in Coastal Florida. While each account and portfolio are different, below are some reasons to anticipate 5 - 20% decreases in property insurance costs:

• Competition and capacity drive down pricing• Decreasing loss forecasts due to new catastrophe modeling software (RMS 13)• Reinsurance pricing decreases

2. Flood insurance changes: Many owners and managers will feel the financial burden of the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) in 2014. Rate changes began in October and properties that currently have an NFIP policy will realize the extent of the impact at their next renewal. Owners planning acquisitions will need to budget for flood insurance expenses differently moving forward. Rather than relying on the current owner’s flood insurance expense as a benchmark for pricing in the per-forma, new purchasers will need to procure an Elevation Certificate and NFIP quote prior to making an offer. Situations will arise where a new policy will be significantly more expensive than the current owner’s coverage.

Fortunately, there are a few strategies to consider in alleviating the impact of BW-12:

• Manage lender requirements with customized policy language

• Explore private insurance options and specialty programs

• Consider having your locations remapped

COMMERCIAL REAL ESTATE BRIEFING4 INSURANCE FACTORS TO CONSIDER IN 2014By Matt Hammer, Commercial Risk Advisor

3. Terrorism insurance deadline looms: The Terrorism Risk Insurance Act (TRIPRA) was implemented in 2002 to serve as a financial backstop for terrorism claims as a result of the attack on the World Trade Center. TRIPRA’s original intention was to act as a temporary terrorism coverage solution in a market where little or no private options existed. The current act has a sunset provision of December 31, 2014 and estimates suggest that the House and Senate are many months away from voting on whether or not to extend the legislation, which results in lingering uncertainty.

Lender requirements often dictate the procurement of TRIPRA coverage for property insurance, but the act’s potential expiration will have ramifications on builder’s risk, liability, and workers compensation as well. In the coming months, it will be important to:

• Identify which properties are required to carry TRIPRA coverage• Negotiate commitments from current underwriters for coverage in the event TRIPRA expires• Find security knowing competitive options in the private market do exist

4. BKS RiskMapping™ delivers confidence by validating coverage and pricing: Some owners and managers find insurance to be a necessary evil, a black box of contractual verbiage that rarely provides the expected value in a claim to justify the annual financial investment. BKS’ RiskMapping™ process is designed to provide clarity to your insurance program by identifying gaps in coverage and providing feedback on opportunities to improve costs. By looking at the risk topography and coverage architecture, owners can feel confident that their program is the best available and adequately protects them from the risks they face.

PHASE I – GATHER• Insurance policy

information• Leases• Loan covenants • Vendor agreements• Employee handbook•Underwriting data• Loss information,

etc.

PHASE II – ANALYZE• Verify insurance

covers relevant exposures

• Benchmark pricing• Evaluate risk profile,

risk tolerance and balance sheet

• Identify claims trends

PHASE III – REPORT• Provide summary

of findings• Identify

opportunities for improvement

BKS RiskMapping™

3PREVENTING

• Leaky plumbing and water heaters: Plumbing should be inspected annually for signs of leaks or corrosion. Hire a plumber to inspect and flush your water heater annually. Three-quarters of all water heaters fail before they are 12 years old.

• Clogged drain lines on air conditioning units: Check air-conditioning drain lines yearly.

• Leaks from washing machine hoses, refrigerators and ice makers: Inspect these annually and replace them every three to five years or immediately, if signs of cracking or bulging appear.

• Water shutoff valve: Teach everyone in your household how to close these off to the main water supply, sinks, toilets and water-drawing appliances.

• Check the foundation: Inspect your foundation walls and floors for cracks. Move downspouts a minimal two feet away from the base. Grade your landscape away from your building.

• Pressure testing gauge: A major cause of leaks and burst pipes is stress and strain from water pressure being too high. But most hardware stores sell a

simple, inexpensive water pressure gauge. Attach it to an outdoor faucet, then turn the faucet on full force, for a reading of your water pressure. If the number is above the recommended psi, you will need a pressure-reducing valve.

• Inspect your roof: Missing, worn or broken roofing materials allow water to penetrate and deteriorate the roof structure.

• Automatic water leak detection or shut-off system: The system can detect water leaks or failures of appliances.

• Review your insurance program: Talk with your independent insurance counsel to learn what is covered on your homeowners policy. Ask about the “back-up limit,” whether your policy is a “named peril” or “all-risk” type, about the mold remediation limit and other limitations. Some insurers will not cover a water damage loss if they view the cause of loss as a maintenance issue versus accidental damage. Finally, ask your agent to recommend a specialist with moisture meters or thermographic cameras who can inspect your home to ensure it is water tight.

Water damage is one of the most common reasons for making homeowners insurance claims. In fact, up to 23 percent of homeowners insurance claims are caused by water damage, with plumbing supply failure being the leading source. Up to 93 percent of water damage, costing nearly $8.5 billion a year, could have been prevented or minimized with proper maintenance and precautionary steps. Laura Sherman’s latest Worth magazine article, “What measures can I take to prevent water damage?” provides insight and recommendations to deter water loss. If you would like a copy of the full article, please email info@bks-partners.com.

WATER DAMAGE

We are constantly turning our imagination free and looking for better ways to serve our valued clients.

www.bks-partners.comCheck out our new website

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ABOUT BALDWIN KRYSTYN SHERMAN PARTNERSBaldwin Krystyn Sherman Partners (BKS) is an award-winning independent insurance brokerage firm providing private risk management, commercial risk management, employee benefits, and Vitality™ programs to clients wherever life takes them throughout the U.S. and internationally. One of the largest privately held firms in Florida, BKS takes a holistic and boutique approach to insurance architecture and risk management. The firm builds personalized client relationships and utilizes a proprietary process called RiskMapping™ to examine client lifestyles, passions, professions and business ventures generating a 360° view of their unique risk profile. BKS Holistic Protection™ is then custom designed, which provides integrated coverage for all areas of a clients’ life. Headquartered in Tampa, with offices in Naples, Sarasota and Ft. Myers, BKS is driven to make a difference in their communities, rewarding colleagues’ community involvement and supporting over 40 charitable organizations.

BKS WELCOMES NEW COLLEAGUES!Stephanie Asche

Commercial Risk Analyst

Brittany CoakleyPrivate Risk Analyst

Janette L’Heureux Managing Advisor

Michelle Naglis Private Risk Analyst

Shana OlsonAccount Manager

Terri Van NortwickExecutive Assistant

Peter WhitmanEBG Client Service

Representative

BKS FSU ALUMNI CELEBRATING THE BIG WIN 1.7.14

PHOTOS

HOLIDAY SOIREE 12.5.13

TAMPA • SARASOTA • NAPLES • FT. MYERS | www.bks-partners.com | TOLL-FREE 866.279.0698

HELPING DURING THE HOLIDAYS