Archive for June, 2015

How the Abercrombie & Fitch Religious Discrimination Ruling Affects Employers

A decision by the U.S. Supreme Court on June 1, 2015 has put employers on notice about religious attire and their employment and hiring practices.

The high court held that an employer’s dress code prohibiting all headwear is not a defense against religious discrimination liability, even in cases where an employer suspects – but is not sure – that an applicant’s or employee’s garb is worn for religious purposes.

In this case, a woman who had worn a hijab headscarf to an interview was eventually denied a position with the retailer despite the fact that the interviewer had recommended her for hiring.

An Abercrombie & Fitch assistant manager, who said she suspected the applicant wore the headscarf for religious purposes, opted not to hire the woman because her headscarf violated the company’s ban on any type of headwear.

The interviewer had never asked the applicant if she wore the scarf for religious purposes, but the court ruled that the applicant “need only show that his [or her] need for an accommodation was a motivating factor in the employer’s decision.”

The Supreme Court held that the assistant manager’s mere suspicion that the headscarf was religious in nature could establish intentional discrimination under Title VII because an “employer may not make an applicant’s religious practice, confirmed or otherwise, a factor in employment decisions.”

On that basis, the court reinstated the applicant’s previously dismissed lawsuit and remanded the case for further proceedings.

With this ruling in mind, you as an employer must ensure that your company dress code, as well as other policies, is religiously neutral. In most cases concerning clothing it’s likely that accommodating an employee is reasonable, unless there are health and safety concerns, like a loose hajib getting caught in machinery and posing a danger to the employee or others.

The legal news website has the following advice for employers:


Don’t ask about religion – Attorneys told Law360 to never ask about an applicant’s or employee’s religion first. At the same time, don’t ignore any conflicts with your dress code or if they have special scheduling requirements because of their religion.

During interviews, you should instead focus on company policies and make essential job requirements clear if you suspect there is potential for a conflict with their religious beliefs. Once you’ve done that, you can ask them if these requirements and policy would bring up personal conflicts for them.

If they answer that it would bring up conflicts, then you can ask why and have a discussion based on what the interviewee discloses. In other words, don’t be the first to bring up religion.

While you likely won’t have to do this with most applicants, if someone shows up to an interview dressed or groomed a certain way, you should be prepared to make clear your firm’s requirements.


When in doubt, summon HR – In the Abercrombie & Fitch case, the interviewer spoke with her supervisor and didn’t seek advice higher up the food chain, like the human resources department. Had the interviewer taken that step, the entire legal conflict may have been avoided and you might not be reading this.

Also, if an employee or applicant does make a request for accommodation, the issue should be immediately taken to HR.


Train managers, supervisors – Train your managers and supervisors in the above two points, especially that they take any questions to HR.

Training is especially important if managers and supervisors don’t always have access to your HR office. And training works, as evidenced by the decline in harassment cases after most firms institute training.

To be thorough, you should school them in the requirements of Title VII and the requirements of other anti-discrimination laws on the books.


Don’t be hung up on a “look” – Attorneys interviewed by Law360 said that companies should steer clear of “image-based” policies, that aim to present a cookie-cutter workforce. These kinds of policies can lead to accusations of discrimination – and the Equal Employment Opportunity Commission taking action against your organization.

Abercrombie & Fitch had such a policy, dubbed “The Look,” which went to extremes, according to the website, including at one point requiring that:

  • Fingernails be no more than a ¼ inch beyond the tip of the finger, and preferably unpolished,
  • “Sunkissed” highlights were okay, but no “extreme styles” and “hair styles and hair color should reflect your natural beauty.”
  • No facial hair.
  • Makeup must look “natural” and match skin tone.


Consider accommodation – Title VII bars refusing to hire an applicant because of the need for a religious accommodation that could be provided without causing the employer “undue hardship.” That means “more than a de minimis cost or burden on business operations.” This bar is lower than what constitutes “hardship” under the Americans with Disabilities Act.

For the most part, it’s a safe bet that most religious attire would be okay in the workplace, particularly a hijab.


Insurance Finally, you should have in place, Employment Practices Liability Insurance, which will cover your company in case you are sued for any type of discrimination or other employment issues. Call us for details.


Specialty Drugs Raising Concerns for Employers, Employees

While rapidly rising drug costs are starting to raise concern among employers, one major driver of health care costs is drug spending that’s not even part of the pharmacy benefits you offer your staff.

Most health plans never anticipated including in their drug benefits packages specialty drugs – a new class of pharmaceuticals that are tailored to individuals based on their genetic makeup or other factors.

The problem is that they typically have high price tags that can exceed $100,000 a year, and the costs are often difficult to detect since the cost is often listed as a medical billing, rather than as a pharmaceutical.

Specialty drugs – also called biologics – which treat serious and complex conditions such as cancer and rheumatoid arthritis, make up about 17% of employers’ total drug costs, even though just 1% of the workforce takes them.

The new medicines are prompting a rapid escalation in the cost of drugs and have become one of the biggest concerns facing employers and their employees in terms of their health care costs.


Unequal pricing

It’s not uncommon for specialty drugs that treat multiple sclerosis, cancer or heart disease to cost $50,000 to more than $100,000 a year. And because they are often administered in clinics or hospitals and not dispensed from pharmacies, they fall under medical benefit claims 47% of the time, according to data in a brief by Health Affairs.

These drugs have risen to the radar nationally thanks to the often shocking prices that have shown up on bills. <i>Forbes</i> recently had an article looking at the drug Harvoni, which completely cures the majority of people with the most common type of hepatitis C. But the maker, Gilead Sciences, charges $94,500 for the 12-week treatment, or about $1,000 a pill.

Prices for specialty drugs in the United States far exceed prices for the same drugs in other countries. Another Hepatitis C drug, Sovaldi, costs $84,000 in the U.S. per treatment. The same drug is priced at $900 in Egypt and $51,000 in France.

New drugs to treat common conditions are also driving up costs. For example, U.S. costs for powerful new cholesterol management drugs called PCSK9s are expected to be $7,000 to $12,000 per patient per year, compared with about $1,000 on average for conventional drug therapies.


Murky numbers

Unfortunately, employer-sponsored plans are often not able to get a clear picture of what those costs are, due to the complexities of billing for such drugs.

The Minnesota Health Action Group, a coalition of big businesses, municipalities and some government agencies in Minnesota, is trying to change that.

One of the group’s committees has been studying the issue of specialty drug costs in an effort to find a working solution for the problem. At this point it’s not even clear how much of health care dollars is spent on these drugs.

The Action Group is working with Minnesota employers and providers to identify the codes for specialty drug payments and get a better understanding of what is being spent on specialty drugs on the medical benefit side.


A political solution

The Action Group said it might be necessary to turn to legislators to bring price information to the public.

That’s already happening in some states. For example in California, the state Legislature is considering a bill, AB 339, that would cap the price that employees in employer-sponsored plans would pay for specialty drugs.

The legislation comes on the heels of Covered California, which, beginning in 2016, will cap at $150 or $250 the maximum amount silver, gold and platinum plan enrollees will pay for a prescription each month. Those with bronze plans will pay a maximum of $500 per month per prescription. The change is set to be reviewed in a year.

The Minnesota Health Action Group also plans to push for price transparency of specialty drugs, for health insurers to adopt coverage and benefit policies that encourage appropriate use of the drugs.


Call to action

The Action Group has formed a Specialty Pharmacy Learning Network to assist employer members find solutions to the specialty drug quandary.

The group recommends that employers:

  • Start by understanding their current specialty pharmacy drug spend, including the 50% of spend that is administered by health plans as part of their medical benefit.
  • Ask their health plans and pharmacy vendors to project specific future costs given their company’s population and drugs that are currently in the pipeline.
  • Evaluate their health plans and pharmacy benefit plan designs to make sure the plans aren’t inadvertently driving employees to higher-cost sites of care (like clinics, instead of hospitals) for specialty drug treatments.
  • If possible, work with their health plans to contract with providers who administer high-cost drugs on a fixed-fee basis.

Court Lets Injured Workers Sue for Their Opioid Addictions

A new state supreme court decision allowing patients to sue doctors and pharmacies for contributing to their opioids addiction could spill over to the workers’ comp arena, legal experts say.

Workers’ comp experts told the trade publication <i>Business Insurance</i> that insurers and employers should put measures in place to reduce the chances of overprescribing of the highly addictive and potent painkillers to injured workers.

In the case at hand, 28 people filed eight lawsuits in West Virginia, alleging that medical centers and doctors had prescribed and dispensed drugs that led them to abuse and become addicted to opioids, according to court documents.

The doctors allegedly prescribed drugs like Lortab, Oxycontin and Xanax to the plaintiffs, who had been injured in automobile accidents or at work.

The state’s Supreme Court of Appeals ruled that plaintiffs could sue the medical centers and the physicians for contributing to their addictions to prescription opioids.

Interestingly, the court made the decision despite the fact that the patients admitted to abusing these drugs prior to going to these medical centers, and that they had engaged in “illegal activities associated with the prescription and dispensation of controlled substances.”

The defendants had filed a motion for summary judgment asking that the cases be thrown out based on the “wrongful conduct” rule, which states that a person can’t sue “when his or her unlawful conduct or immoral act caused or contributed to their injuries.” The court rejected the argument.

While the decision opens up the clinics, doctors and pharmacies to lawsuits, experts say that it could have an effect on workers’ comp payers. If injured workers who are addicted to painkillers and are overprescribed can sue as well, it could make settling their claims more difficult and costly.

And it could open up employers to lawsuits outside the workers’ comp system. If that is the case, employers could be swept up in legal disputes that their workers’ comp insurance may not cover.

Besides the new threat of lawsuits, opioids can often have a detrimental effect on workers’ comp claims in general. It’s been noted in a number of studies that the opioids can interfere with an injured worker’s recovery.


Why You Should Be Concerned

  • Opioids account for 23% of all prescriptions in California workers’ comp cases, according to the California Workers’ Compensation Institute (CWCI).
  • Opioid prescriptions account for 24% of all prescription costs in California, according to the CWCI.
  • The average cost of claims with a short-acting opioid (Percocet, for example), is $39,000, compared to just $13,000 for claims without an opioid prescribed, according to the National Council on Compensation Insurance (NCCI).
  • The average claim cost with a long-acting opioid – e.g., OxyContin – is $117,000 (900% above the average), according to the NCCI.
  • Between 2001 and 2008, narcotics prescriptions as a share of all drugs used to treat workplace injuries jumped 63%, according to the NCCI.
  •  When prescriptions for certain opioid painkillers were included in workers’ comp claims, it was nearly four times more likely that a catastrophic claim would develop. This is according to the study “The Effect of Opioid Use on Workers’ Compensation Claim Cost in the State of Michigan.”
  • Claims involving long-acting opioids were 3.94 times as likely to have a total cost of $100,000 or more compared with claims without any prescriptions.



What you can do

If you have an injured worker who is being prescribed opioids by the treating physician, you should work with us, the insurer’s claims adjuster and the doctors to make sure that the physician is using a prescription drug monitoring program, in order to see whether other doctors are also prescribing opioids to the same worker.

If the treating physician is not accessing an abuse database, they are failing to abide by best practices for deterring opioid abuse.



The Most Prescribed Opioids*

  • Vicodin (hydrocodone with acetaminophen)                    46.1%
  • Ultram (tramadol)                                                                         14.7%
  • Percocet (oxycodone with acetaminophen)                      13.6%
  • OxyContin (oxycodone)                                                                8.3%
  • Tylenol with codeine (acetaminophen with codeine)        3.8%
  • All others                                                                                            13.5%


Source: Express Scripts Inc.

* 2013


Reporting Claims Later Can Double the Cost, Report Finds

A new report has found that when employers are late in reporting workers’ comp claims to their insurers, the cost of the claim often jumps by 50%.

The report by the National Council on Compensation Insurance found that claims for workplace injuries that were reported four weeks after the incident, ended up costing $19,936 on average, compared to $13,210 for claims reported one to two weeks after the injury. That’s a jump of 51%.

Interestingly, claims that were reported between one day and a week after the injury cost $13,844 on average. Claims filed three to four weeks after an injury cost $17,785.

The NCCI, which helps set rates in more than 30 states, found that claims that were reported more than two weeks after an incident were characterized by:

  • A lower medical share of total claims costs.
  • More attorney involvement.
  • More use of lump-sum settlement payments.
  • Claims that stay open longer, and that have a lower closure rate at 18 months after injury.


“These characteristics suggest that claims with a delay of more than two weeks are more complex to settle, take longer to close, and involve a longer period before the injured worker can return to work,” the NCCI wrote in its report.

Claims in which a worker’s injury was reported on the day of the accident had an average cost of $17,298 per claim, according to the NCCI.

The study said immediate reporting likely reflected higher costs because such claims tended to have “very severe injuries that require immediate medical attention,” as well as require extensive medical care and extended recovery times.

Involvement of attorneys becomes more common as the reporting lag increases. Claims reported immediately involve an attorney 13% of the time. This increases to 32% for claims reported after week four.

Claims that were delayed by more than four weeks had an average cost of $19,251, the NCCI said.


The takeaway

Delays in reporting claims will increase your costs and the potential for litigation.

Prompt reporting ensures your employee gets the proper medical care in a timely manner and can return to work more quickly, improves morale, and is effective cost management.

When you become aware of a workplace injury, you should start the claims reporting process as soon as possible. The longer you wait, the costlier the claim will be and the more chance your injured worker will enlist an attorney. Once that happens, the claim is likely to drag on for longer than usual and, as it stays open longer, the costlier it will become.

Establish a reporting protocol so all employees understand what their responsibility is when there is a workplace injury. Every employee should know to immediately report any work-related injury, no matter how small and regardless of whether they think they need medical treatment.

Every employee should know to whom they should report their injury, and there needs to be a system in place to ensure that report gets to the proper person so the next step can be determined.

If all employees are responsible for reporting injuries to their supervisor, every supervisor needs to know what their responsibilities are.



Employee Theft Hits Small Firms Hardest: Study

The majority of employee thefts are occurring in organizations with 500 employees or less and the median loss is $280,000, according to a new report.

The main types of theft are outright theft of cash and check fraud, with rogue employees writing checks to acquaintances and trying to cover their tracks in the firm’s accounting system, according to the “2015 Hiscox Embezzlement Watchlist” by the specialty insurer Hiscox.

More than half of employee thefts were perpetrated by individuals in senior positions in the company, and the median age of perpetrators was 50, the report states.

Hiscox based the findings of its report on employee theft cases active in U.S. federal courts in 2014. Among its findings in the latest report:

  • More than 60% of employee theft involved women.
  • The median age of employees who committed theft was 50.
  • Employees not in the finance or accounting sections of the company committed over half of the tallied thefts.
  • Retail and health care companies sustained the largest average losses – at $606,012 and $446,000, respectively.
  • 21% of employee theft in companies with fewer than 500 employees took place in the financial services industry – banks, credit unions and insurance companies. Financial services organizations dealt with average employee theft losses of $271,000.
  • Non-profits dealt with average employee theft losses of $202,775.
  • Nearly 75% of total losses included direct theft of cash or misuse of bank deposits or transfers.


Crime snapshot

Rotten Gatekeeper

In some cases, the fraud starts where the buck stops: the CFO. In one such action in New Jersey, the accused CFO was suspected of diverting more than $6 million from the company to pay a host of personal expenses such as real estate taxes, motor vehicle costs and credit card bills.

For a full seven years, the CFO designated his own business as a company vendor, cutting checks for services that were never performed, which he deposited into his personal bank accounts. He was asked for copies of the invoices, prosecutors said, but he informed colleagues he kept the invoices in his office.


What you can do

“Although risk mitigation strategies such as background checks will add a layer of protection, no organization can completely insulate itself from employee theft. Organizations can, however, take proactive measures to minimize the likelihood of theft and the impact of losses,” Doug Karpp, national underwriting leader for Crime & Fidelity at Hiscox, said in a prepared statement.


For small business owners, Hiscox recommends: 

  • Sending bank statements directly to your home for a review to ensure they can’t be falsified prior to reconciling accounts;
  • Periodically reviewing payroll reports to look for anomalies; and
  • Signing all of the checks yourself, or keeping the signature stamp under lock and key.


For all organizations, Hiscox recommends:

  • Establishing best accounting practices in accounting. Businesses should mandate dual signatures or dual review on disbursements (checks and wires). It is also important to create separation in key business processes.
    For instance, separate the money from record-keeping so that no single employee can control a process from beginning to end, and don’t let the accounts payable person reconcile bank accounts.
  • Bringing fraud deterrence into the light. Provide a short training session for all employees to illustrate the damaging impact of fraud and abuse and provide practical advice on how to spot fraud.
  • Setting the ‘tone at the top’. Have everyone from management, audit and the leadership team talk about fraud prevention. Be sure employees are aware of internal controls and ask them if they know of any weaknesses in the controls and how to improve them.
    Hotlines are an excellent way to promote reporting of misconduct and reflect a culture of integrity. According to the Association of Certified Fraud Examiners, more than 40% of all cases were detected by a tip, nearly half of which came from employees.
  • Conducting comprehensive audits that specifically look for fraud. Surprise audits are particularly effective because fraudsters will not have time to alter, destroy or misplace records and other evidence.


The insurance solution

If you don’t have it already, your firm should seriously consider buying employee theft insurance, or employee dishonesty coverage. Employee theft coverage applies to loss or damage to money, securities or other property that results from theft committed by an employee.

Coverage applies whether or not you can identify the specific employee that committed the act, and whether the employee perpetrated the theft alone or in collusion with other people.



Flood Insurance Is Wise Choice, Even in Drought Areas

The recent flooding in Austin and surrounding areas has hit local businesses hard as they try to recover and clean up, costing them money for the clean-up process and lost business.

Few of the businesses in the up-until-now drought-stricken area carried flood insurance according to local news reports, and they’ll end up footing the bill themselves. The flooding in Texas shows that it can happen anywhere, and that some areas in most states are prone to flooding, including California.

But there is a stark reality with every flood: 40% of businesses affected by a natural or human-caused disaster never reopen. By preparing your company now for a potential disaster later, you can help reduce the impact any catastrophe will cause and ensure your business recovers quickly.

Federal law requires homes and buildings in flood plains to carry flood insurance, but only if they have a mortgage from a federally regulated or insured lender, according to the National Flood Insurance Program (NFIP). Those living outside of high-risk flood plains are typically not required to carry it.

Typically, homeowners can only buy flood insurance through the NFIP, but businesses do have other choices.

The best way to keep your business afloat after a flood is to be prepared in advance for the unthinkable. You can start by:

  1. 1.     Understanding your risk. Your local county should have on its website a list of areas identified as flood plains and floodways, as defined by the Federal Emergency Management Agency (FEMA). By knowing which areas are prone to flooding, you can better understand how your business might be affected in the event of a large rainfall.


2. Purchasing flood insurance.  Most commercial property insurance policies may not include flood coverage as part of the package. Talk to us so that we can explain what these policies entail and how you would be covered. There are two options for flood insurance:

  • The NFIP, which will insure a commercial building up to $500,000, and the contents of the building up to the same amount. Insurance premiums vary depending on the location of the property and its risk of flooding.
  • A flood policy from an insurance company. These policies will often provide larger limits, as $500,000 is often not enough for most businesses should they be hit by a flood. Call us for details.


3. Establishing an emergency plan.  Establish an emergency plan that details how things will proceed in the event that your facility is forced to close due to flooding. Consider the following and include them in your plan:

  • Will your employees work remotely, and do they have the resources to do so?
  • Who will be coordinating with your staff during an emergency?
  • What procedures must you put in place to keep your business functioning?
  • How will you communicate and share information with your team?
  • Will affected employees be given time off? If so, how much?
  • Do you have a backup of essential files and records?
  • What will you do if your building is closed for a long period of time?
  • Do you have alternative sites to move inventory to, and from which to work?

Share this plan with employees so that everyone knows what to expect.


4. Taking advantage of community resources. Familiarize yourself with community resources in place to help businesses during emergency situations.

In the wake of many floods, the U.S. Small Business Administration has set up business recovery centers to assist companies trying to recover.

Also, if you need to, you can apply for federal assistance on FEMA’s website, where you can also find information on other recovery resources.


Wright & Kimbrough Insurance Services can help you decide if a commercial flood policy might be in your best interest. Call us!



Health Savings Account Limits Set for 2016

The IRS has released the inflation adjusted amounts for Health Savings Accounts (HSA) for 2016.

The new HSA limits for deductibles, out-of-pocket limits, and annual contributions will be of particular interest to employers with high deductible medical plans and those considering implementing high deductible health plans.

But even employers that do not have high deductible medical plans for their workers need to know just how much their employees can set aside for medical expenses.


The 2016 HSA limits are:

Self-only coverage              Family coverage

Out-of-Pocket Maximum                  $6,550                                   $13,100

Minimum Annual Deductible           $1,300                                   $2,600

Maximum Annual Contribution*    $3,350                                   $6,750

*Does not include the additional $1,000 catchup contribution available to individuals age 55 and older.


The Patient Protection and Affordable Care Act (“PPACA”) has limited the out-of-pocket maximum employers sponsoring non-grandfathered medical plans may use since 2014. For 2014, the limit was equal to the out-of pocket maximum for HSAs.

However, beginning in 2015, the maximum out-of-pocket limits for non- grandfathered medical plans and high deductible health plans began to diverge.

That divergence will continue in 2016 when the out-of-pocket maximums for high deductible health plans will be $6,550 for self-only coverage and $13,100 for other than self-only coverage.

The out-of-pocket maximums that may be used under a non-grandfathered health plan in 2016 will be $6,850 for self-only coverage and $13,700 for other than self-only coverage.


Cadillac Tax Gets Push-back from Employers, Benefits Consultants

Even though the “Cadillac tax” on high-cost health plans is due to take effect in 2018, employer groups and benefits consultants have asked the IRS to postpone the implementation.

They say that employers need time and flexibility to implement changes to health benefit plans and their internal administrative systems to prepare for the 40% tax on group health care premiums.

Under proposed regulations, starting in 2018, the IRS will tax at a rate of 40% the portion of any plan that exceeds $10,200 in premium for individual coverage and $27,500 for family coverage. These thresholds are predictions. There is a formula in place for calculating the threshold based on a number of statistics, which change year to year.

The excise tax rules require health insurers to pay the tax, which they are expected to pass on to employers.

Benefits consultants are also asking that some health benefit costs not be included when tabulating the premium for purposes of the Cadillac tax.

In a letter to the IRS, international consulting firm Mercer LLC urged the agency:

  • To exclude in its forthcoming proposed regulations non-core medical benefits – such as workplace wellness programs and on-site medical clinics – from the calculation of coverage costs.
  • To provide employers with enough flexibility to calculate coverage costs consistent with reasonable actuarial principles, and
  • To postpone its implementation of the excise tax, or at least provide a “good faith” compliance period.


Meanwhile, an employer benefits lobbying group known as the ERISA Industry Committee has asked for a two-year transition period to allow employers time to restructure their health benefit plans, administration systems and employee communications to comply with the reform law.

It also asked for exemption from the excise tax for programs designed to lower health care costs, such as health savings accounts, on-site medical clinics and wellness programs.


How Cadillac tax works: examples based on current threshold amounts


Self-only coverage

A $12,000 individual plan would pay an excise tax of $720 per covered employee:

 $12,000 – $10,200 = $1,800 above the $10,200 threshold

Tax due: $1,800 x 40% = $720


Family coverage

A $32,000 family plan would pay an excise tax of $1,800 per covered employee:

 $32,000 – $27,500 = $4,500 above the $27,500 threshold

Tax due: $4,500 x 40% = $1,800