Pension Plan Dilemmas

Corrections or additions?

These stories by Jeff Lippincott were published in U.S. 1 Newspaper on

December 9, 1998. All rights reserved.

Getting the Right Health Plan Fit

Looking around for an individual or small employer


benefits plan? You will want to attend the next meeting of the WEB

Network of Benefits Professionals when Wardwell Sanders,


director of the New Jersey Individual Health Coverage and Small


Health Benefits Program, moderates a discussion on "Small Employer

Health Insurance: Finding a Policy That Fits and Wears Well."

The meeting is Tuesday, December 15, at 8 a.m. at Smith, Stratton,

Wise, Heher & Brennan, 600 College Road East. Cost: $30. Call


The past decade has seen radical changes in the health plan


"Ten years ago most of the coverage available for small group

employers was indemnity based (a traditional fee for service plan

that allows the user to choose their physician or hospital) not


care. Now in the small employer market in New Jersey, and this


a national trend, probably 95 percent of it is managed care, either

HMO or POS (point of service)," says Sanders.

POS plans and PPOs (preferred provider organizations) represent the

middle of the health plan spectrum with HMOs being the most


and traditional indemnity plans being the least. Both POS and PPO

plans allow the choice of utilizing in or out-of-network providers.

In-network services typically require a small co-payment from the

user. However, unlike HMOs, should the user desire to see an out of

network provider they are free to do so. The price for that freedom

is a higher out of pocket expense in the form of deductibles and


"These hybrid plans have become very popular in the small employer

market," said Sanders.

The New Jersey Individual Health Coverage and Small Employer Health

Benefits Program is affiliated with the Department of Banking and

Insurance. The state legislature in 1992 created two separate boards

for the regulation of individual and small employer health insurance

markets as a result of the "reform legislation."


from the Department of Banking and Insurance, the Department of Health

and Senior Services, HMOs, the AFL-CIO, Blue Cross and Blue Shield

and indemnity health insurance carriers, along with consumer and


representatives, make up the boards.

In approaching the individual and small employer health

coverage marketplace, "the first step is to on arm yourself with

information and the best way to do that is to get the buyer’s guides

that are available from the state," said Sanders, whose agency

has produced buyer’s guides to help sort out coverage choices. There

are two, one for individuals and one for small employers. The guides

spell out exactly how to obtain coverage, list all the companies in

the market, who is eligible, what the delivery system is like and

what the benefits are among the various options. A list of carriers

with phone numbers is provided along with a spread-sheet outlining

the premiums associated with all the options.

Call 800-838-0935 to obtain a copy of the buyer’s guide for the


health coverage and 800-263-5912 for the small employer guide. Both

guides and other information about the plans are also available at

The four key components of health plan reform in New Jersey are


benefits, guaranteed issuance, guaranteed renewal, and specific loss

ratio requirements.

Standardized benefits mean that the benefit levels among the various

carriers for the specific programs are the same. "The idea is

to help people shop around especially in these markets where a small

business with five employees is not going to have a full time benefits

manager," says Sanders.

Guaranteed issue/guaranteed renewal means that an eligible person

or small employer can never be denied coverage or renewal. "That

means that no employer can be turned down due to type of


said Sanders. Individuals with a history of health problems are no

longer be faced with what Sanders terms "job lock" or the

inability of an individual to advance his or her career due to their

ineligibility for coverage in a prospective new employer’s health


Loss ratio refers to the ratio of benefits paid to dollars received

in premiums. A carrier participating in the IHC or SHE is required

to pay out 75 cents in benefits for every dollar received in premium.

If this minimum loss ratio of 75 percent is not met, the carrier must

refund some portion of the premium to the policyholder.

Sanders sees a correlation between the drop in the rate of health

plan premium increases and the market migration to managed care.


30, 40 and 50 percent rate increases that were common for employers

in the late ’80s and early ’90s have dropped off. It’s largely because

of the shift to managed care and other factors such as the marketplace

becoming friendlier with guaranteed access to coverage that came with

reform. This enabled employers to keep coverage and also allowed other

employers who previously didn’t offer coverage to do so," said


The number of covered lives in the small group market in New Jersey

has increased from 690,000 at the point of the implementation of


plan reform in 1994 to its present level of about 870,000 lives.


terms both the individual and small employer marketplace, "very

healthy, competitive" with 24 different carriers participating

in the individual and around 50 carriers in the small group market

(2 to 50 employees).

Sanders, an administrator with the program since 1994, joined the

state in 1991 as a deputy attorney general. Previously he worked at

the International Center, a Washington, D.C., foreign policy think

tank specializing in human rights work. Sanders has a degree in


from Franklin and Marshall College and a law degree from Villanova.

On the new legislation front, the so-called "mental health parity

bill," S86, which the Senate has passed and that is now before

the Assembly, would require all insurance carriers doing business

in the state to cover mental health benefits the same as any other

illness. The caveat for such benefits is that the mental health


covered would have to be "biologically based." The text of

the bill defines "biologically based" as "a mental or

nervous condition that is caused by a biological disorder of the brain

and results in a clinically significant or psychological syndrome

or pattern that substantially limits the functioning of the person

with the illness, including but not limited to, schizophrenia,


disorder, major depressive disorder, bipolar disorder, paranoia and

other psychotic disorders, obsessive compulsive disorder, panic


and pervasive development disorder or autism."

Should the mental parity bill become law, there may be an effect on

a company’s bottom line. "Mandated benefit bills that require

certain coverage cut both ways. There may be a good public policy

reason to make sure this kind of coverage is covered at a certain

level, but whenever you are adding benefits you are probably adding

cost," says Sanders.

Jeff Lippincott

Top Of Page
Pension Plan Dilemmas

While the number of workers and retirees covered by

a 401(k) pension plan has jumped by a third since 1982, recent survey

data reveals that employers and employees are not maximizing the


of such plans. How employers can better inform employees about the

benefits of contributing to a 401(k) program is the subject of a


sponsored by the Employers Association of New Jersey (EANJ) on Friday,

December 11, at 11 a.m. at the Sheraton Tara Hotel in Parsippany.

Cost: $35. Call 973-239-8600.

EANJ executive director John Sarno says the seminar would


employers who are thinking about establishing a pension plan as well

as those who would like to get maximum employee utilization. Sarno,

a lawyer, will moderate a discussion with representatives from Wheat

First Union.

"A big problem for employers that have a pension plan is that

employees are not sufficiently informed on making investment decisions

for their retirement," says Sarno. When employees are not educated

as to the value of pension plan participation, they don’t participate.

In some cases, especially if employees have never been exposed to

a 401(k) type program, they will view it in a positive light but not

understand that they need to have an active role on their own


planning. Employees may view retirement plans in the same light as

health insurance, in that it’s nice to have but it’s something they

don’t think about it until it’s time for utilization.

"It’s easier for employees to visualize being sick than thinking

about retirement," said Sarno, "Ultimately, it’s the employee

that takes responsibility for making investment choices."

A 401(k) plan, like social security, is a "forced savings"

plan. And unlike in our forefathers’ day, modern America does not

like to save. "Americans save about one per cent or less of their

income — an all time low," says Sarno. A recent Wall Street

Journal article declared that more people probably know which eight

states border Tennessee than what the returns on their 401(k)


were last year.

About one third of EANJ’s member firms responded to a survey (339

of 1,005), and they were equally divided between manufacturing and

non-manufacturing companies. The vast majority (97 and 98 percent)

provided some kind of a retirement plan. For just under one-third

of the firms, this was a defined benefit plan, and about one-fifth

of the firms had a defined contribution plan. This compares with the

80 to 93 percent of the companies that had 401(k) plans.

EANJ is a Verona-based non-profit, comprised of over 1,000 employers,

dedicated to encouraging sound and responsible human resource


( It was established by manufacturers

seeking self-help strategies to cope with labor unrest and violence.

Sarno, 42, is married and has two daughters, ages six and three. He

went to Ramapo College, with a law degree from Seton Hall. He


law in Bergen County and had been an administrator and instructor

at Ramapo College. He has been executive director of EANJ for three


Sarno feels that employers and employees can play a meaningful role

regarding retirement policy in the United States. The Social Security

system is expected to have to pay out more than it brings in by 2013,

according to an article in the EANJ publication "Employers


And according to some national reports, it will run out all together

by 2030. This is because the 76 million strong "baby boom"

generation will be followed by just 59 million so-called



If employers do their part in encouraging plan participation


"maybe the retirement system can be fixed without onerous mandates

in the future," says Sarno. "Raising social security taxes

is a short term fix, it’s not a long term solution."

Jeff Lippincott

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