Archive for November, 2016

Commercial Auto Insurance Rates Trending Higher

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You should prepare for increases in your commercial vehicle insurance coverage for 2017 as accidents, injuries and costs rise for the first time in decades and insurers make up for years of low pricing.

Commercial auto insurance premiums have been trending between 6 and 10% higher since early this year and, if you’re policy comes due Jan. 1 or during next year, you may see your premiums increase. Experts say that rates are increasing in nearly all commercial auto segments – but trucking is feeling it more acutely.

The reason for the increase is that there are more accidents taking place on the roads and the costs of the claims – everything from vehicle repair to medical costs – are increasing for various reasons.

Auto insurance rates are rising at the fastest rate in almost 13 years, according to the Insurance Information Institute. The effects are being felt harder in the commercial auto insurance market than in the personal market.

That’s because commercial insurance rates have been stable for many years, barely budging despite rising costs. And now some insurers have left the market, reducing the supply of insurers in the segment, which has reduced competition and bumped up pricing.

The premium hike therefore essentially boils down to two factors: more accidents and rising claims costs.

 

Higher accident frequency

The increase in accidents, and in vehicular injuries and deaths, is the result of:

  • More people on the road due to cheaper fuel.
  • More people on the road because the economy has improved and more people are driving.
  • An increase in accidents due to distracted driving (mostly from texting using a smart phone or talking on the phone while behind the wheel).

 

One of the main contributing issues is risky behavior, which studies have found to be widespread. About 87% of drivers surveyed by the AAA Foundation for Traffic Safety in February 2016 reported that they had engaged in at least one risky behavior while driving in the past month, including using their phone or not wearing a seat belt.

 

Rising claims costs

According to the Insurance Research Council, the average cost of a liability claim increased 32% from $11,738 in 2005 to $15,506 in 2013. In 2014, it had reached $16,600, up 7% from the year prior.

Meanwhile, the average cost of personal injury protection claims (often referred to as no-fault claims) increased by 38.2% – from $5,802 to $8,017 – between 2005 and 2013.

Factors that are increasing costs:

  • The cost of medical care for injured parties is increasing, particularly in the commercial auto segment, as victims of car or truck crashes tend to take longer to recover.
  • As cars have become more high-tech, it has gotten more expensive to repair them. Also, more commercial vehicles than ever are being totaled, meaning the insurer has to pay out for the market value of the vehicle, because designs are often being altered to meet fuel and weight standards.
  • Prices have been suppressed in the commercial market, and there are now fewer players in the market.

 

What you can do

While base rates are rising and out of your control, you can double down on safe-driver training for your employees.

If you can educate your driving employees in safe-driving best practices, you will reduce your accident rates, which will be reflected in the premium you pay.

For example, motor carriers that are very safe and have good “Compliance, Safety, Accountability” scores from the Federal Motor Carrier Safety Administration, are finding premium renewal rates that are consistent.

You can also adopt advanced technology like telematics and dashcams, both of which have been shown to improve overall driver safety.

Cameras also assist insurance companies when adjusting claims.

New Overtime Pay Rules Put on Ice

Alarm clock stand over money

A federal judge in Texas has issued an order temporarily blocking the Department of Labor’s new white-collar overtime rules from taking effect on Dec. 1.

The sudden move is likely to throw a monkey wrench into many employers’ plans to either increase employees’ salaries or prepare to implement more stringent adherence to schedules in order to avoid paying overtime.

The preliminary injunction blocks the implementation of rules requiring employers to pay overtime to workers who make less than the new threshold of $47,476. So for now, the current $23,660 annual salary threshold will remain.

This close to implementation, the injunction is bound to confuse HR and payroll plans to implement the new rules in just a few days. Since many companies have already informed employees of pay raises or new work guidelines to fit within the new threshold, it may be hard to turn back.

Whatever you decide to do, you should move not make any rash moves. While you may decide to hold off on any adjustments, you should still be prepared for their eventual implementation.

It may be difficult to reverse those changes, and making any quick moves may also damage employee morale.

 

What happened?

The lawsuit that U.S. District Judge Amos Mazzant issued the preliminary injunction for argues that the Fair Labor Standards Act does not allow the DOL to rely solely on the salary threshold to decide who is eligible for overtime pay.

The suit contends that any overtime pay revision must also address the duties test that defines who qualifies for the FLSA’s executive, administrative and professional exemptions.

Mazzant wrote that the new overtime rules’ “significant increase to the salary level creates essentially a de facto salary-only test.” The new rules explicitly left the duties test unchanged.

 

What to tell employees

Seyfarth Shaw, an employment law firm, urges employers to communicate honestly and openly with those employees while they decide what to do next. It suggests informing them about the decision and that for now you’ve suspended any plans depending on how the lawsuit proceeds.

In a blog, the law firm recommended using this sample language:

“A federal court in Texas has issued an order that makes it uncertain how the FLSA’s overtime pay exemptions apply to employees who would be impacted by the new rules that were to go into effect on December 1. Because of the court’s order, those rules will not go into effect as expected. To ensure that it is able to follow the laws that govern how employees are paid under the FLSA, the company has revised its plans and will be reporting back to you soon about how this will impact you.”

 

Keep Safe When Decorating the Workplace for Holidays

holiday-decorations

As the holiday season rolls around again, your business will have new safety considerations to confront.

From holiday parties and risk of electrical shock to fires and trips and falls, companies have a set of safety and risk management challenges that may not be present during most of the year.

If you are hanging Christmas lights, you have to be aware that they pose a danger of both shock and fire. Also, when you add holiday decorations in the workplace, you increase the chances of trips and falls both when putting up the decorations and after they’ve been put up.

Christmas lights cause electric shocks or fire because of two main things. One is choosing the wrong kind of lights or a product that is of poor quality. The other is the improper use and maintenance of the lights.

As for falls, we all know how pretty it is to have Christmas lights twinkling and blinking from trees and roofs, buildings and windows that are a couple of floors up. That’s why it’s not hard to imagine this type of accident striking anyone during this colorful season, while it is especially true for employees working for businesses that celebrate Christmas with festive decorations.

 

Safety while decorating

Keep all relevant OSHA regulations in mind when decorating your workplace: both when in the process of decorating and making sure you don’t create new safety hazards that will last for the duration of the month.

Without proper planning, holiday decorations can result in dangerous tripping hazards. Avoid placing Christmas trees, gifts or freestanding decorations in heavily trafficked areas where people might run into or trip over them.

It’s also essential to make sure that your holiday décor in no way compromises the ability of workers and visitors to exit the workplace in the event of an emergency.

When members of your staff are decorating the office, ensure that they stick to the same safety guidelines that they would otherwise follow:

  • Ladder safety – Make sure that your staff doesn’t stand on tables, desk or rolling desk chairs when hanging lights or other decorations. Insist that they use ladders and that they have a partner to hold the ladder when they are working on high.
  • Keep walkways unobstructed – You may have boxes of Christmas decorations that you bring out every year, or you may purchase new decorations too. When employees are decorating, make sure they keep all walkways free of wires, cords, boxes or any of the material you are putting up. When people are working in a disorderly fashion, they can easily trip and fall.
  • Install wisely – Also make sure that your staff does not put up decorations in a way that can impede movement of your workers or office visitors, or create trip hazards or expose staff to getting caught in the decorations.
  • Unobstructed exits – Do not place any type of decorative items in exit corridors or on sprinklers. It’s essential to verify that none of your decorations block exit signage or fire safety equipment.

 

Christmas trees

  • Consider an artificial tree, which poses less risk than a live one.
  • If you have a live tree, make sure that it is properly watered so it doesn’t dry out, which is a fire hazard.
  • Live trees can be safer when sprayed with flame retardant.
  • Put your tree in an area that doesn’t impede foot traffic or movement of workers.
  • Don’t put live trees near heat sources such as space heaters, where they can dry out and pose a greater fire hazard.

 

Lighting safety

  • Use LED lights. Not only do they burn cool, they are also more economical because they only use 10% of the electricity consumed by other bulbs.
  • Use lights that are recommended by a reputable testing laboratory. Such lights are usually labeled “UL” or “ETL”.
  • Prior to use, inspect lights and extension cords for defects or damage. Check for loose connections, cracked or broken sockets and bare or frayed wires. Workers should report all defects to their supervisor.
  • Immediately replace burned-out bulbs with ones that have the same wattage. Unplug Christmas lights when replacing bulbs.
  • Make sure you don’t create a maze of wires, cords and plugs when plugging in Christmas lighting.
  • Never use outdoor lights indoors.
  • Make sure Christmas lights and other electrical outdoor decorations are plugged into a ground-fault circuit interrupter. This device helps prevent electric shock and fire.
  • Never use nails or tacks to secure cords of lights. Also, don’t run strings of lights through hooks.
  • Never pull on a string of Christmas lights.
  • Always turn off Christmas lights before leaving the business premises. Never leave them on overnight.

 

Affordable Care Act Future Uncertain

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Now that we will have Donald Trump as president and the GOP retaining control of Congress, all bets are off on the future of the Affordable Care Act.

It’s likely that Trump will hand over the health insurance reform portfolio to Speaker Paul Ryan, who along with the House leadership in July published a blueprint for how they would like to repeal and replace the ACA.

Trump assailed the ACA during the campaign, saying he would abolish it. But that may be easier said than done as Democrats in the Senate would certainly mount filibusters to keep some legislation from passing the upper house.

And it could turn out to be extremely unpopular now that 20 million more Americans have health coverage than before the law was enacted.

There’s a chance that Trump and congressional Republicans will push to end the individual and employer mandates, eliminate ACA insurance reforms such as minimum essential benefit packages, and pare back and restructure the premium subsidies.

But those moves would send tremors through the market, unraveling the ACA system and could lead to millions of people losing coverage.

This is what we know about the president-elect’s plans for America’s health care. He has proposed:

  • Eliminating public health insurance exchanges.
  • Setting up free health savings accounts for people with high-deductible insurance plans.
  • Setting up state-based high-risk pools for people with medical conditions that make it hard to get coverage on their own.
  • Allowing insurers to sell coverage across state lines to “boost competition and drive down prices.” This idea may yield the benefits some think as insurers would have to set up doctors networks in other states.
  • Eliminating the “Cadillac” tax on high-priced health plans. This, however, could lead to a tax on the funds that employees use to pay their premiums. Currently most employees pay their premiums with income earned before it is taxed.

 

He has not specifically mentioned the employer mandate. Some observers have said that if the ACA is repealed that he would retain the employer mandate but at the highest threshold of 100 full-time employees and no the current 50.

 

 

The House Plan

The House plan includes the following:

  • Expanding the use of health savings accounts linked to high-deductible health plans, so that patients can direct their treatment and “shop around” for the best deal for procedures.
  • Supporting coverage portability, whereby individuals would purchase a health care plan that they can take with them from job to job. The plan would include a universal, advanceable and refundable tax credit for individuals and families.
  • Only allowing employees to pay for their premiums on a pre-tax basis up to a certain level (meaning that above a certain premium level, they would have to pay for the premium using income that’s already been taxed).
  • Allowing small businesses to pool together to buy health insurance, in order to garner economies of scale – and thus less expensive coverage.
  • Allowing consumers to buy insurance across state lines.
  • Preserving employee wellness programs.
  • To tackle costs, the plan includes reforming medical liability laws to reduce large awards for medical malpractice.

 

The unknown

The big question mark is how far the appetite will go for an outright appeal of the ACA, as it would be a major market disruption, particularly for the millions of people who now have coverage through their jobs or health insurance exchanges.

Just eliminating exchanges would leave a huge hole in the market and something viable would have to replace it.

Any attempts to repeal the ACA will also be met with stiff resistance from Democrats, who could mount a filibuster to keep legislation from advancing. However, if the changes are embedded into the budget, the filibuster rules would not apply and the Republicans could push it through on a simple majority vote.

Finally, because an outright elimination would strand millions of Americans without health insurance, it is unlikely that Republicans would try to repeal it without a replacement.

The best strategy for our clients now is to stay the course and continuing complying with the law. No changes will be immediate and we will keep you informed of changes here as they occur.

 

Pot’s Legal. What Does It Mean for Your Business’s Anti-drug Policies

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Now that Californians have overwhelmingly voted to legalize the recreational use of marijuana, many employers may be wondering where they stand if they want a drug-free workplace.

Fortunately, Proposition 64 included a number of safeguards for employers, allowing them to have anti-drug workplace rules in place. In fact, these safeguards were built into the initiative to the point that the California Chamber of Commerce took a neutral stance on the measure.

Prop. 64 would allow Californians who are 21 and older to possess, transport, buy and use up to an ounce of cannabis for recreational purposes, and allow individuals to grow as many as six plants.

But that doesn’t mean that you must allow workers to spark up at work.

Under the measure:

  • You can still conduct pre-employment drug tests and have policies barring from hire any applicants who test positive for marijuana.
  • You can fire workers who test positive when they are tested for permissible reasons, like if they may be at fault in a workplace accident.
  • You can bar use or consumption of marijuana at work.
  • You can bar possession, transfer, display, transportation, sale or growth of marijuana in the workplace.

 

Accommodation

Fortunately, there is already precedent for employment issues that may arise when someone is using medical marijuana, and employment law experts say the same precedent would apply to recreational pot as well.

In 1996, California passed the Compassionate Use Act, which allows “seriously ill Californians” to use marijuana for medical purposes with a doctor’s recommendation.

But some employers were sued for having in place drug-testing policies in light of the law.

In 2008, the California Supreme Court tackled the issue in the case Ross vs. RagingWire Telecommunications Inc., opining that the Compassionate Use Act does not apply to employment and that marijuana, even for medical use, is still illegal under federal law.

The court ruled that California employers can require pre-employment drug tests and take illegal drug use into consideration in making employment decisions.

Essentially, Prop. 64 codifies that ruling.

 

Likely legal action

Wrongful termination cases in California have subsided dramatically since the RagingWire decision, but some employees still sue their employers alleging they didn’t have a right to drug test them.

Under Prop. 64, however, these suits would have no merit.

According to a report in the San Francisco Chronicle, the more typical actions these days are ones filed by employees who got high during a lunch hour or break and after returning to work caused an accident or harassed a colleague.

In those cases, it’s the victims who may sue the company, accusing it of not monitoring workers for intoxication or condoning the use of medical marijuana in the workplace.

Orange County employer defense attorney Todd Wulffson told the Chronicle that employers may want to consider:

  • Having drug and alcohol policies in place.
  • If you plan to drug test, having policies stating that “for purposes of drug testing, marijuana is an illegal drug.”
  • Ensuring that employees read your drug and alcohol polices carefully and understand under which conditions they may be tested.
  • Having someone on your human resources staff who is trained to spot drug intoxication.
  • Having a zero-tolerance policy for being high on the job.
  • Requiring that managers refer signs of drug use to human resources.

 

The law

These are the current rights of California employers:

  • Employers can conduct pre-employment drug testing as long as they test all applicants.
  • Employees can only be tested if there is a reasonable suspicion they are under the influence, or after an accident – unless there is no way the employee could have caused it – or if it is required under federal law.
  • Random testing is generally only allowed for safety-sensitive jobs, including construction, driving and any other jobs that can put employees or the public in harm’s way.

Avoiding the Risks Inherent in Your Firm’s Social Media Presence

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More and more companies are developing a social media presence to increase their exposure and reach new clients.

Typically, an organization will put a person in charge of the company’s social media accounts and making posts to Facebook, LinkedIn, Twitter and other sites. If managed properly, your organization can reap significant benefits from a creative online presence, but if you mismanage it, the risks can be significant.

The dangers that you face include libel risk, reputational damage from posting controversial or misleading material, cyber security risks and copyright infringement risk.

To avoid any of these issues, you should have in place policies that require reviews of posts, only allowing certain individuals access to your organization’s social media accounts, and other safeguards.

Let’s look at some of the main risks you face with an online presence.

 

Libel

Libel refers to written defamation that hurts someone’s professional reputation. Slander is the spoken version of libel. While you might think that you could never do this in a social media post, many small businesses have been sued for this very offense.

For instance, any time you tweet about someone else or another company that could be reasonably construed as negative, you risk being accused of libel. Or if you start or participate in a thread and accuse a competitor of shoddy workmanship, that business could file a libel claim against you.

 

To meet the libel standard:

  • The statement must be false.
  • Must be made publicly.
  • Must have caused harm to someone’s professional reputation.

 

What to do: Create an approval process involving a senior leader for any social media communication. Do not give a junior person full control, as their inexperience could cause irreparable damage.

 

Copyright infringement

This refers to the use, distribution, display or derivation of copyrighted work without the creator’s permission. Copyrighted work usually includes:

  • Music
  • Art
  • Photography
  • Film
  • Writing

 

Most typically, this risk would arise if your designated social media manager posts someone else’s graphic design and claims it as your company’s own on your social media page. Your firm could be sued for damages in these circumstances.

 

What to do: Before posting images that aren’t your own on your social media pages, ensure that they aren’t subject to copyright.

 

Reputational risk

Poorly managed social media that creates negative publicity can hurt your company’s reputation.

 

What to do: As in libel management, create an internal approval process.

 

Security issues

There is always a risk of your organization being hacked, or its database being infiltrated by a botnet, spyware, ransomware and a host of other cyber nasties. There are all types of cyber traps floating around social media awaiting someone to click on a rogue link to set off an attack on their computer system.

 

For businesses, the risk is mainly the potential of confidential company information being leaked outside the company.

 

What to do: Have your IT department or outside IT professional ensure that all of your accounts have the proper privacy and security settings. This can protect confidential information, and reduce the chances of having your account hacked or falling victim to cyber theft.

The larger your company, the greater the need for more sophisticated security systems.

 

Monitor posts by third parties

One of the biggest risks to your company is having outsiders post on your social media page, particularly if they disparage or complain about your company or one of its products or services.

 

What to do: Monitor all of the social media platforms you operate on, so you can quickly identify negative feedback and address it before it gains support. If somebody is posting blatantly offensive material or is extremely critical of your company, you can block them from your page.

 

 

Why You Need ‘Key Man’ Insurance

Double exposure, businessman wearing toxic protection mask with dead trees environment, concept of pollution and global warming effects from industry business

If you are operating a small business, you are likely relying on a small staff to get the job done.

Many employees in small firms have to wear many hats and if one of them or an owner should die, the business could suffer greatly from that sudden loss of talent. If you don’t have “key man” insurance, that setback could be devastating to the viability of your operations, whereas coverage would provide you with extra funding that you would need while recovering from the loss.

Key man insurance is simply life insurance on the key person in a business. In a small business, this is usually the owner, the founders or perhaps a key employee or two. These are the people who are crucial to a business – the ones whose absence would sink the company. You need key man insurance on those people.

 

Key man insurance basics

Before purchasing coverage, give some thought to the effects on your company of possibly losing certain partners or employees.
In opting for this type of coverage, your company would take out life insurance on the key individuals, pay the premiums and designate itself as the beneficiary of the policy. If that person unexpectedly dies, your company receives the claim payout.

This payout would essentially allow your business to stay afloat as you recover from the sudden loss of that employee or partner, without whom it would be difficult to keep the business operating in the short term.

Your company can use the insurance proceeds for expenses until it can find a replacement person, or, if necessary, pay off debts, distribute money to investors, pay severance to employees and close the business down in an orderly manner.

In other words, in the aftermath of this tragedy, the insurance would give you more options than immediate bankruptcy.

 

Determining whom to cover

Ask yourself: Who is irreplaceable in the short term?

In many small businesses it is the founder who holds the company together – he or she may keep the books, manage the employees, handle the key customers, and so on. If that person is gone, the business pretty much stops.

 

Determining amount of coverage

  • The amount of coverage depends on your business and revenue.
  • Think of how much money your business would need to survive until it could replace the key person, come up to speed and get the business back on its feet.
  • Buy a policy that fits into your budget and will address your short-term cash needs in case of tragedy.
  • Ask us to get some quotes from different insurers.
  • Check rates for different levels of coverage ($100,000, $500,000, etc.)

Appeal Promptly if You Get Notice of Staff Receiving Exchange Subsidies

audit

More employers have been receiving notices from their state health insurance exchange, informing them that one of their employees has received subsidies to purchase insurance on the exchange and that the employer may be subject to a penalty for not offering employees a health plan that complies with the law.

The notices are not calls to pay a fine – only the IRS can do that – but employers need to respond with documentation to show that they did in fact offer affordable coverage that meets the minimum value requirements of the Affordable Care Act.

If you receive a notice, you will need to file an appeal promptly. If you don’t, or if your appeal is eventually rejected, you could receive a demand for payment from the IRS.

You can appeal the finding if you believe the employee was ineligible for the premium subsidy.

Individuals whose employers offered them affordable coverage that meets the minimum value requirements are not eligible for premium subsidies under the ACA.

If they do receive a subsidy and you did offer them compliant coverage, there will be a conflict on your form 1095-C that you have to file with the IRS. That could prompt the IRS to either go after you for a penalty, or go after the employee, from whom it would demand repayment of the subsidy.

 

Penalties and the law

First off, there could be some innocuous reason for receiving the notice, such as one of your part-time employees who was not offered coverage may have been eligible for a subsidy on the exchange.

There should only be two reasons that an employee for a large employer that is subject to the employer mandate receives a subsidy on an exchange:

  • The plan does not provide minimum value (defined as covering 60% of all health costs).
  • The plan is not affordable (less than 9.66% of the employee’s income in 2016, and 9.69% in 2017).

 

The applicable fine would be $3,240 per full-time employee receiving a subsidy or $2,160 per full-time employee (minus the first 30).

 

Appeal problems

Some employers who have gone through the appeals process report problems. According to the National Association of Health Underwriters’ (NAHU) Compliance Cornered blog:

  • One employer submitted proof that it had offered coverage to the employee that met minimum value and was affordable. But the hearing officers countered, requesting proof of this offer in the form of the employee’s response to the offer.
  • An NAHU review of several decision letters found that decisions often cite “insufficient information” as the basis for the decision to reject the appeal.
  • Still other employers have received a letter while an appeal is under review that asks for more information to support the appeal.

 

What you can do

The NAHU recommends that employers develop a checklist of materials that they will provide to ensure that appeals are not lost for want of more information.

The following documents could be pertinent:

Proof that employee was offered coverage:

Form or letter confirming the employee’s election of benefits.

Employer-sponsored coverage declaration form or notice.

Employee’s benefits summary chart.

Letter from health insurer stating that the employee is enrolled in employer-sponsored coverage.

 

Proof of income and payments:

Copies of employee pay stubs.

Payroll ledger or worksheet.

Previous year’s W-2 form.

 

Proof of affordability:

Rate sheet of employer-sponsored coverage.

Summary of Benefits and Coverage sheet.

Pay stubs showing premium deductions.

 

Proof of minimum value:

Summary of Benefits and Coverage sheet.

Report of Minimum Value Certification from an actuary.

 

Remember: Appeal decisions don’t automatically trigger IRS penalties, but a successful appeal would be helpful for you if the IRS tries to penalize you.

 

Employees More Confused about Coverage than Ever

One of the biggest challenges for employers who offer their workers health insurance benefits is that the majority of U.S. workers are really in the dark about how insurance works, according to a new survey.

Despite employers’ best efforts to provide as much education as possible to their workers before and during open enrollment, it seems the finer points are not sinking in, according to United Healthcare’s “Consumer Sentiment Survey.”

Here are the main findings:

  • A mere 7% of those surveyed had a full understanding of all four basic insurance concepts: plan premium, deductible, coinsurance and out-of-pocket maximum.
  • More than 60% of respondents could define plan premium and deductible.
  • 36% could define out-of-pocket maximum.
  • 32% could define coinsurance.

 

These deficiencies result in more people spending more on coverage than they may actually need to.

Another study, carried out earlier this year by the Kaiser Family Health Foundation, concluded that not having the correct information can lead to dissatisfaction when employees discover they’ve signed up for a plan that doesn’t meet their needs.

The Kaiser survey revealed that employees are most confused when it comes to understanding these factors:

  • How to calculate out-of-pocket costs once health insurance claims are processed.
  • The concept of providers who are in network vs. out of network at an in-network hospital.
  • Understanding deductibles and out-of-pocket annual limits for their plans.
  • What a health insurance formulary is (concerning prescription coverage amounts).

 

What you can do

So, as open enrollment nears, you may want to consider focusing on the foregoing areas to better educate your workers. Also, it’s recommended that you approach the education process with a multi-pronged approach employing technology, meetings and the offers of one-on-one time to cater to people’s different learning styles.

It’s important for your employee morale and their pocketbooks that they understand what their choices are and what they’re buying. The more light you can shine on the process and the more stress you can reduce, the better off your employees will be.

This is especially true in light of one other finding in the United Healthcare study: One-fourth of respondents said they would rather file their annual income taxes than select a health plan.