The BottomsLine

TBG NEWS:

FALL 2017

02 Life Insurance Underwriting

ABOUT TBGThe Bottoms Group, LLC, has for decades been listening to clients and developing employee benefits, insurance and estate planning solutions customized to their unique and changing needs. For more information about TBG, visit www.thebottomsgroup.com.

Gary had the honor of speaking at the Georgia Society of CPA’s Estate Planning Conference in July. The outline to his presentation, Insurance Decisions: It Comes Down to Alternatives, can be found on the new TBG Blog under Resources at www.thebottomsgroup.com.

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06 Creative Ideas to Enhance Employee Benefits

03 Telemedicine: Healthcare, Simplified

08 Know the Benefits You Have and Need

Early in my career, I had an opportunity to become the

advisor on the funding for a supplemental retirement

plan for a group of executives of a large employer.

Different funding options were considered and life

insurance was chosen as the vehicle. All of those

executives have now retired and I’m pleased to report

that they are all happy with the results. Accumulated

cash is a good thing. Some of the executives used the cash to supplement their

retirement. Others decided to leverage the cash to obtain additional life insurance

upon retirement to replace the group life insurance that they were losing, and a

couple chose to simply let the cash continue to grow on a tax-deferred basis until a

later date. (Continued on page 4)

ACCUMULATED CASH IS GOODBY GARY BOTTOMS, CLU, CHFC, PRESIDENTgbottoms@thebottomsgroup.com

Many employers have been awaiting a legislative silver bullet to reduce their health

care costs. With Congressional action lacking, what is an employer to do when

constrained by budget dollars yet needing to maintain benefits to retain talent? The

answer: get creative.

In this article, I will outline three common approaches employers both small and

large are using to mitigate the impact of increasing health costs while maintaining

the core benefit levels within their health plan. (Continued on page 7)

STRATEGIES FOR REDUCING HEALTH CARE SPENDING WHILE MAINTAINING BENEFITSBY DAVID BOTTOMS

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BY LAURA BOTTOMS HIGGINBOTHAM, VICE PRESIDENT, INSURANCE SERVICESlbottoms@thebottomsgroup.com

“I want to lose a little weight.”“I want to stop smoking.”“My schedule is so busy I can’t even think about it now.”

We’ve heard a lot of reasons to wait on applying for life insurance.

The bottom line is there is no better time than the present. Yes, you may not be where you’d like health-wise or you might not think the time is right, but waiting leaves room for your circumstances to change for the worse. In our experience, if someone does choose to wait, they then realize that their health status has changed. On the other hand, if your health doesn’t change or even improves, waiting means that your age is increasing and that alone can impact premiums greatly.

AGE CHANGESAge is the one aspect of underwriting that will undoubtedly raise premiums no matter what your health status. Unbeknown to most, your age increases at your half birthday or “age-nearest” for most insurance companies. There are very few exceptions to this where the insurance company uses “actual age.” If you are thinking about getting insurance before you turn a certain age, start the process well before your half birthday. Backdating is an option if the policy issues a couple of months after an age change, but you will be responsible for paying premiums back to that date.

HEALTH CHANGESWe don’t want to find ourselves in the situation of “if only we had done this sooner.” Good health can unfortunately change in an instant. Whether it is an accident, cancer diagnosis, or just a fluke health scare, we have seen underwriting go from best class scenario to a decline. Underwriters don’t like the “unknowns” of health so if someone isn’t particularly feeling well but the doctors can’t find anything wrong, the unknown of it all is also a cause for concern for underwriting.

The desire for long term care insurance is growing as the Baby Boomer generation has now seen what it is like to care for their aging parents. Long term care underwriting takes into consideration more criteria than life insurance to determine whether someone has developed a cognitive impairment such as Alzheimer’s or Dementia. Unfortunately, this is an insurance product that people try to get when it is too late. We receive calls like, “Mama is starting to forget things. Can we get Long Term Care?” It is our hope to convey the importance of long term care insurance to our clients before it is too late.

UNDERWRITING CHALLENGESOnce someone decides that now is the right time to explore new insurance, we always explain the process and set expectations. Unlike most other types of insurance (car, group benefits, etc.), life insurance along with disability and long term care, does not have a predetermined effective date upon application. It is sometimes a lengthy process through underwriting so it is best to account for this time. We always recommend to our clients to consider a “temporary insurance contract” upon application that adds protection during the long underwriting period, but there are stipulations to this. It is incredible in this age of technology that the underwriting process is taking longer and longer. The main culprit in the lengthy process is the task of obtaining medical records from various doctors. Many doctors and hospital systems are now outsourcing their record copy services which greatly hurts the turnaround time. We have found that with smaller practices, we typically get the records within a week but with larger organizations, it can take as long as three months (with constant follow-up). A lot can happen to a person’s health status in that time that could delay underwriting further or render them uninsurable all together; therefore, it is always best to take into consideration the lengthy process and hope to be pleasantly surprised when it goes quickly!

THERE’S NO BETTER TIME THAN NOW:LIFE INSURANCE UNDERWRITING

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Growth in the technology world has drastically changed how Americans do everything, including healthcare and the way it continues to evolve through technology with the use of telemedicine. Telemedicine is a fairly new concept that has developed with lightning speed. It is a highly dynamic and fascinating revolution that helps members save time and money with ease of access to a doctor by phone, computer, or online video consult. It’s a reasonable alternative to expensive urgent care or ER visits when you need the care right away, particularly if you are away from home on vacations, business trips, or for short term prescription refills. As technology develops more and more, so does the overall affordability and convenience of common care practices.

Telemedicine is a pragmatic approach for members to use since it is virtual care that can be accessed anytime or anywhere with the ability to connect with board certified doctors, who are able to provide treatment options, offer a diagnosis, and even prescribe medication via phone or video conference. Most Americans have trouble receiving timely medical care without having to visit the emergency room. Instead of going to an urgent care clinic or the ER, employees can cut unnecessary out-of-pocket costs and time wasted in crowded waiting rooms by using telemedicine services. When members get sick, doctors are standing by ready to help them with great care, 24/7/365.

Telemedicine can be used for a wide variety of common conditions such as, allergies, arthritic pain, asthma, bronchitis, colds and flu, infections, insect bites, rashes, respiratory infections, sore throats, vomiting, etc. While many illnesses are included on this list, telemedicine should definitely not be used for any service where an interpersonal examination is required. When medically appropriate, the doctor is able to prescribe medication and short term prescription refills for the specific treatment. Over 70% of doctors’ visits can be effectively resolved and treated with telemedicine which is why this is changing healthcare and employee benefits. For the employer this improves productivity, decreases absenteeism, boosts morale and encourages employees to seek help while keeping costs outside of the group health plan.

Another common question around telemedicine is around HIPAA compliance and if the disclosed medical history and stored data is kept confidential. All medical information will not be reviewed, shared, or discussed with anyone other than the doctor, unless consented to by the member. With the many types of mobile health apps that are user-friendly, members are starting to feel more comfortable using technology to observe and record their health information, especially knowing it’s kept private.

BY JAMIE MOODY, SENIOR ACCOUNT EXECUTIVE, BENEFITSjmoody@thebottomsgroup.com

TELEMEDICINE: HEALTHCARE, SIMPLIFIED

THE NEXT TIME YOU'RE SICK, CONSIDER YOUR POSSIBILITIES:TELEMEDICINE

VS.

EMERGENCY ROOM OR URGENT CARE

Request a convenient consult from home, smartphone, or computer Drive to the closest doctor's office while sick

Wait hours before seeing the nurse or doctor

Pay high ER and Urgent Care fees

A board certified doctor calls back in a timely manner

Get the care needed at a price that is affordable

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ACCUMULATED CASH IS GOOD CONTINUED FROM PAGE 1

OBJECTIVE PREMIUMS DANGER

Maximize the Investment Return (ROI) on Cash Accumulation

Maximize the Investment Return (ROI) on the ultimate Death Benefit

Maximum premium and minimize the policy Death Benefit

Minimize the premium necessary to keep policy in effect for a given time frame

If the maximum premium is exceeded, some tax advantages of life insurance will be lost.

If the minimum premium is not paid as scheduled, the policy may lapse.

BY GARY BOTTOMS, CLU, CHFC, PRESIDENTgbottoms@thebottomsgroup.com

Most life insurance policies available today are flexible, which means a design is required. In the absence of a conscious design, a default “out-of-the-box” design is usually implemented. We believe that an intentional design created to be in line with the client’s objectives is the best solution.

For example, the objective may be to maximize cash accumulation, or the objective may be to maximize the death benefit for a given premium amount. If the objective is both, we would typically recommend two separate policies as these two competing objectives cannot be ideally met with one policy. Below is an overview of these two choices:

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For this brief article, I will provide a summary of the cash accumulation life insurance objective. The death benefit objective will be reviewed in a future article.

Though we cannot foresee the future, most would agree that having access to cash is a good thing for the future. Based upon the interactions that we have daily with our clients, they are primarily concerned about two financial challenges related to the future:

1. TAX-FREE RETIREMENT INCOME:

• Clients don’t really know how much they will need.• Clients are not confident that they will have enough capital

saved.• Clients cannot identify any truly dependable sources of tax-

advantaged retirement income and they are concerned that they or their loved ones may outlive their money.

2. BUSINESS EXIT STRATEGY:• Clients don’t have an executable plan in place.• If the business cannot be sold to an outside third party, clients

don’t have a plan to ensure a smooth transition to a key person / family member to maximize the business’ value.

In order to maximize the cash accumulation, the death benefit is minimized when the policy is designed; however, a given minimum death benefit must be maintained according to a

formula that includes the premium paid and the accumulated cash. If the formula is not properly followed, some of the tax advantages generally inherent in a life insurance policy are forfeited. The minimized death benefit enhances the cash accumulation because the charges for the insurance are minimized.

A properly designed life insurance policy not only provides death benefit protection but can also add meaningful diversification to a long-term investment strategy because of the tax-free inside build-up of cash value. The returns can be linked to a stock market index, and downside protection against market-based losses is included. For example, the return credited to the policy might be based upon a formula that includes the return of the S&P 500 with a maximum of 10.5% and a floor of 0%. Thus, a properly designed life insurance policy can be a conservative and cost-efficient alternative to traditional investments such as equities.

Furthermore, the life insurance policy and the accumulated cash can be exchanged for an annuity on a tax-free basis in order to provide retirement income or tax-free cash withdrawals may be made from the policy up until the point that the policy contribution basis has been withdrawn, and then policy loans may be made on a tax-free basis.

Please contact us for an analysis of the cash accumulation objectives and additional concepts.

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CREATIVE IDEAS TO ENHANCE EMPLOYEE BENEFITSAs the cost of healthcare and employee benefits continues to rise, employers are searching for creative and innovative ways to maximize employee offerings in a cost effective way. There are multiple solutions that we provide to our clients including, but not limited to:

• Health Reimbursement Accounts• Health Savings Accounts (with qualified High Deductible Health Plans)• Flexible Spending Accounts (medical and dependent care)

Offering these benefits provide enhancements to employee benefits packages at minimal cost, and will improve the employee’s experience at your company.

HEALTH REIMBURSEMENT ACCOUNTS (HRAS) offer a way for employers to offset the out-of-pocket expenses for their employees and reduces their insurance premium on the medical plan. For example, if a company changes their medical plan to increase the deductible and out-of-pocket maximum while decreasing the premium, that company can offer a HRA plan to cover the increase in the deductible and also reimburse employees for those expenses over a set dollar amount. These plans are very flexible and we work with vendors that would administer the claims process with the employees directly. In some cases, Health Reimbursement Accounts allow the employers to offer a lower out-of-pocket cost to the employees while paying lower premiums to the insurance carrier.

FLEXIBLE SPENDING ACCOUNTS (FSAS) are used to withhold pre-tax money from the employee’s paycheck to use for medical or dependent care expenses. The 2017 contribution limit is $2,600 for the health/medical FSA and $5,000 for the dependent care FSA. These plans are also administered by vendors that process the claims reimbursement from the Flexible Spending Accounts. These accounts are often known as “use it or lose it” benefits. Some cases may allow for a rollover or a transportation benefit to the employees.

HEALTH SAVINGS ACCOUNTS (HSAS) are only available to those who are enrolled in a qualified High Deductible Health Plan. Health Savings Accounts offer employees tax-free benefits either through payroll deductions or by using an outside bank. The biggest difference between the HSA and FSA is that the HSA money belongs to the employee which resides in the participant’s separate bank account and the money is not forfeited at the end of the year. The funds in the Health Savings Accounts can be used for medical expenses, prescription drugs, dental, vision, and other expenses based on the IRS guidelines. There is, however, a contribution limit associated with the HSA, and the limitations for the HSA contribution and deductible amounts are listed in the chart below.

BY KELLY THOMPSON, SENIOR ACCOUNT EXECUTIVE, BENEFITSkthompson@thebottomsgroup.com

HEALTH SAVINGS ACCOUNT (HSA) - IRS LIMITS

2017 IRS LIMITS

Maximum Contribution Limit

Single Plan

$3,400 $6,750

$1,300 $2,600

$6,550 $13,100

$1,000 $1,000

Family Plan

MinimumDeductible

MaximumOut-of-Pocket

Catch-up Contribution (55+)

Source: http://www.hsabank.com/hsabank/education/irs-guidelines-and-eligible-expenses

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APPROACH #1:Utilize a Health Reimbursement Account (HRA) strategy. HRAs are extremely flexible tax favored accounts that enable employers to purchase reduced cost insured benefits, for example, with high deductibles on the open market and then offset the increased cost via reimbursements to covered individuals when they incur claims that hit certain triggers. For instance, let’s consider an employer with 100 covered employees whose employee-only monthly medical premium for a $1,000 deductible plan is $500 per month. Let’s then consider that the cost for an alternate plan with the same core benefits but with a $2,500 deductible is $400 a month. While the employer may be reticent to increase the deductible to $2,500 given the impact to employees, with an HRA, the employer can reimburse employees for incurred deductible costs in excess of $1,000 and up to $2,500. Given that only somewhere around 30% of covered employees tend to hit $1,000 of deductible expenses in a given year, the employer realizes $120,000 in premium savings while likely reimbursing employees for $45,000 in incurred expenses. As a result, the employer saves $75,000 in benefit costs and the employees retain the same benefits as in the previous year. A win-win.

APPROACH #2:Go “level-funded.” For an employer accustomed to a fully-insured benefit plan in which the employer pays premiums and the insurer retains all claims risk, the idea of going self-funded may be cause for concern. Level-funded plans provide employers with all of the comfort of a fully-insured plan but with a portion of the benefits associated with self-funding. In a level-funded plan, employers are guaranteed to pay a pre-specified monthly premium to the insurer. The insurer agrees to pay all claims. So far, I know, this sounds like a fully-insured plan. However, with a level-funded plan, at the end of the year, if claims costs are lower than expected, the insurer splits any claim surplus with the employer via either a direct payment or a premium credit in the new plan year. Use of a level-funded plan enables employers to

benefit during years in which claims are good and have downside protection in the event of a rough claim year. Additionally, employers with level-funded plans also receive plan specific claim detail from the insurer on a monthly basis such that they can monitor claim activity, gauge trends and, at the very least, benefit from the knowledge that any premium cost increases incurred are at least validated by current or projected claim costs.

APPROACH #3:Go “self-funded.” For employers on the larger end of the spectrum and/or who have solid cash flow and a higher risk/reward tolerance, a self-funded benefit plan provides maximum flexibility to build a benefit plan to the specification of the employer and even allows customization of prescription drug benefits (often one of the largest drivers of health insurance costs). Self-funded employers can protect themselves against downside risk by purchasing stop-loss insurance to offset both individual specific shock claims and can additionally purchase aggregate stop loss coverage to limit the overall exposure the employer carries for the plan during the course of the coverage year. While going self-funded is by far the most invasive of the three approaches outlined in this article, for an employer who is fully aware of the downside risks associated with a self-funded plan (and believe me, anyone who claims there are no downside risks is either misinformed or lying), the benefits can be significant over the course of time.

Needless to say, we all hope that Congress will provide relief to employer health plans in the months to come but rather than sit back and await Congress to act, working to ensure that you are doing everything that you can to gain benefit plan efficiencies within the constructs of the current regulatory environment is a good place to start as we advance toward the start of the 2018 benefit plan year.

BY DAVID BOTTOMS, REBC, RHU, CLU, CHFC, SENIOR VICE PRESIDENT, BENEFITS dbottoms@thebottomsgroup.com

WHAT'S NEXT FOR HEALTH CARE?CONTINUED FROM PAGE 1

180 cherokee street ne, suite 200marietta, ga 30060-1610770-425-9989

KNOW THE BENEFITS YOU HAVE AND NEED Medical, dental, and vision insurance are valuable benefits to offer as an employer. Some companies, however, also offer disability coverage to their team members. If your employees are offered disability coverage and they decide to enroll, it is a good idea to be familiar with the policy provisions in the event of a future claim. If a claim must be filed with the insurance company, understanding the terms should hopefully help guide the claimant (and the employer) through the process.

Recently, concern for a Long Term Disability (LTD) claim surfaced for an employee of one of our clients and The Bottoms Group (TBG) HelpDesk was notified for assistance. From conversations with the employee, it seemed that the insurance company who was reviewing and processing the LTD claim was lacking in timely follow up regarding the status. Fortunately, the claimant was able to reach out to TBG’s HelpDesk for support, which prompted our team to contact the insurance company right away.

After further research, the HelpDesk found that the Third Party Administrator (TPA) who requests records on the insurance company’s behalf, was not aggressively following up on the status of outstanding items that were requested for this claim. The policy provisions and terms established in this employer’s LTD contract stated that additional records would be required for this type of claim. Each LTD claim is unique and without consistent follow up with each entity tied to the claim, the process can certainly be drawn-out. In this case, the claimant felt uninformed regarding the limited feedback they were receiving from the insurance carrier’s case worker.

Fortunately, our team was able to expedite the process by actively following up with the case worker on a daily basis and checking the status of the requested records with the TPA and with the involved records’ department. This LTD claim was assigned in early July and once our office was made aware that the claim was still pending in late September, the claim was resolved and approved within four days. Our team spoke to the claimant’s spouse the day the claim was approved to share the good news and as we heard the relief in her voice, we hoped she became aware that the HelpDesk is willing and able to step in and provide useful assistance as needed. The Bottoms Group is available and our team strives to resolve issues accurately and quickly for our clients and their employees.

BY BETTY MCGINNIS, SENIOR CLIENT ADVOCATE

bmcginnis@thebottomsgroup.com