You have a great group of employees working with you and your business is thriving. For many small-to-mid-sized businesses that success is due to key employee with both skills, experience and connections that would be difficult to replace.
But what if one of your personnel were injured and out of work for a while, or even worse, suppose they died unexpectedly? Would your business survive without this key person’s involvement in your operations?
If this were to happen, you’d likely immediately have to find and train a replacement, but getting the right person for the job would require a substantial amount of training and building on-the-job knowledge. During this transitional time, you could face losing business if you are unable to fulfill all of your orders or contractual obligations or if delivery time starts slowing.
Fortunately, there are two products that would provide your organization with additional funds to weather this uncertain time: key person life insurance and key person disability insurance.
Key person life insurance
Generally, your business purchases a life insurance policy on a key employee, pays the premiums and is the beneficiary in the event of the employee’s death. As the owner of the policy, the business may surrender it, borrow against it and use either the cash value or death benefits as the business sees fit.
However, coming up with a dollar value on a key employee’s economic worth can be challenging.
There are no specific rules or formulas to follow, but there are several guidelines that can help.
The appropriate level of coverage might be the cost of recruiting and training an adequate replacement.
Or, the insurance amount might be the key employee’s annual salary times the number of years a newly hired replacement might take to reach a similar skill level.
Finally, you might consider the key employee’s value in terms of company profits. The level of insurance coverage might then be tied to any anticipated profit or loss.
Premiums for key employee life insurance are not a tax-deductible business expense for federal income tax purposes, since your business is the recipient of the benefits. For the most part, the death benefits your company receives as the beneficiary of the policy are not considered taxable income.
However, if your business is a C corporation, the death benefits may increase the corporation’s liability for the alternative minimum tax. You should consult a tax professional for information on your specific circumstances.
Key employee disability insurance
The death of a key employee isn’t the only threat to your business. What if a key employee is injured or becomes ill and is out of work for an extended period of time? Disability insurance on such a key employee is another way you can protect your business against any resultant financial loss.
A crucial part of key employee disability insurance policies is the definition of disability.
Typically, these policies define disability as the inability of the employee to perform his or her normal job duties due to injury or illness. As with life insurance, your business buys a disability insurance policy on the employee, pays the premiums, and is named as the beneficiary.
If the employee becomes disabled, the insurance coverage pays monthly disability benefits to your business. These benefits can equal a certain percentage of the key employee’s monthly salary, up to either a maximum monthly limit or 100% of their salary.
The benefits may be used to pay the operating expenses of the business and to cover the expense of finding a temporary or permanent replacement for the key employee.
The disability policies typically offer elimination periods (i.e. the waiting period between the disability and when the benefits begin) ranging from 30 to 365 days.
Depending on the policy, your business may receive benefits for 6 to 18 months, which would be long enough to allow the key employee to return to work or for the company to replace the key employee.
Depending on the type of coverage purchased, the premiums you pay for the key employee disability policy may or may not be a tax-deductible business expense. If the policy is considered business overhead expense insurance, then the premiums are a deductible expense.
While the business would be responsible for paying taxes on any disability benefits received, the business expenses the policy indirectly pays for would result in an offsetting deduction.
The takeaway
Planning ahead can help secure your company’s financial future. Key employee insurance can help assure families, employees, creditors, suppliers and customers that the future of the business is secure.
By purchasing life and disability insurance on the owner(s) and/or key employees, you can are ensuring peace of mind in the event that a tragedy should befall one of your most important personnel.
Employers that have decided to offer their staff individual healthcare reimbursement accounts to purchase health insurance on their own have been encountering administrative headaches.
Simply tracking whether workers in an ICHRA plan have secured coverage can be complicated, but employers need to contend with other compliance issues too. As a result, more firms have turned to third party plan administrators or insurers to simplify enrollment for ICHRAs, which adds to the costs of administering these plans.
ICHRAs are still foreign to most employers and their workers. They became a viable option for funding health insurance for employees in 2020. Since then, they have grown in popularity as they provide another option for businesses to help fund employees’ coverage. Younger and healthier workers have been most responsive to these plans, as the arrangements provide a way for them to secure low-cost coverage on their own.
Employers can contribute a specific amount to an ICHRA each year or each month. Participating employees must use those funds to purchase individual health insurance coverage on an Affordable Care Act marketplace or in the open market.
Employers can offer an ICHRA as a stand-alone benefit or alongside a group health insurance policy. For example, an employer could offer group coverage to full-time employees and an ICHRA to part-time employees.
However, employers who offer ICHRAs may face various administrative challenges:
Documentation —Employers are required to comply with IRS reporting rules, just as they would if they provide health insurance.
Reimbursements —Employers must track reimbursements and verify that participating employees secure and maintain their coverage.
Compliance—ICHRAs must comport with IRS, Department of Labor, ERISA and COBRA regulations.
Employee understanding —Employees may be unfamiliar with ICHRAs and need help understanding eligibility and benefits. This requires additional training as well as one-on-one meetings.
Setup—Employers must navigate setup requirements, determine administrative methods and educate employees.
Other considerations for employers include:
Loss of premium tax credits —Employees eligible for affordable ICHRA coverage lose access to ACA premium tax credits, which reduce their premium on exchanges, resulting in higher costs for them. They lose this credit even if they decline the benefit.
Coverage and family limitations—ICHRA funds cannot be applied to spousal group plans. As a result, family members need to secure coverage from another source, like a group plan for the other parent, or purchasing a plan on the ACA marketplace.
Employee backlash —Since these are still relatively new products, forcing workers to shop for health coverage on their own could create resentment in the ranks.
What employers can do
One benefit of these plans is that they often pull young, healthy workers back into the risk pool. However, older staff with health conditions that increase health plan usage are not likely to go for an ICHRA. Likewise, staff with families needing coverage are likely to balk at the option.
Employers considering offering employees ICHRAs and looking to reduce administrative and other burdens may want to hire a third party administrator specializing in ICHRAs.
Some of these administrators function as a bridge between employers and health insurance companies, facilitating the enrollment process for employees choosing individual health plans. Administrators can manage communication, ensure compliance and streamline the selection of plans available through different insurers.
Companies who prefer not to outsource these functions can:
Use software tools to streamline processes.
Train personnel to manage reimbursements and compliance.
Provide clear communication and training to employees.
Offer support to help employees navigate eligibility requirements.
Work with us to stay up to date on compliance requirements.
Use detailed consolidated invoicing to simplify the billing process.
President Donald Trump, while campaigning, promised his administration would ensure invitro fertilization treatments were either covered by insurance or directly paid for.
However, his recent executive order, issued on Feb. 18, stops short of outlining specific policies to accomplish this. Human resources executives are taking a wait-and-see approach to the order, as it directs the assistant to the president for domestic policy to within 90 days.
IVF is a costly procedure, with a single cycle typically ranging from $15,000 to $20,000.
While some employers — primarily large corporations — have expanded fertility benefits, many workers still lack access.
More than 20 states have laws requiring certain health plans to cover some fertility treatments, but these mandates exclude self-funded employer plans, which cover 61% of insured workers.
As a result, only a small percentage of employees benefit from these requirements. Some large employers have turned to third party fertility benefit providers, which operate outside traditional health plans, to offer IVF coverage.
Actions taken at the legislative level
According to legal experts, Congress would have to pass legislation to mandate broader health insurance coverage for IVF.
Recent legislative efforts have stalled. In 2023, the Right to IVF Act was introduced after the Alabama Supreme Court ruled embryos should be considered children, a decision that temporarily disrupted IVF access.
The bill, which aimed to protect IVF access, was blocked in Congress. Another bill, the bipartisan HOPE with Fertility Services Act, sought to amend the Employee Retirement Income Security Act to require insurers to cover infertility treatments, including IVF, but it died in a House of Representatives committee in 2024.
What HR leaders should watch
While this executive order signals a federal focus on IVF access, it does not provide immediate solutions. Employers should monitor policy recommendations expected within 90 days and potential legislative efforts that could mandate insurance coverage.
Still, there are a few points to consider for employers:
Cost management — The order’s emphasis on reducing out-of-pocket and health plan costs for IVF treatments may require employers to review and potentially adjust their health plans to comply with new regulations or recommendations that emerge from this order. This could involve negotiating with insurance providers to cover IVF treatments more comprehensively.
Cost reduction — The order calls for a reduction in the costs of IVF and employees’ out-of-pocket costs. Reallocating cost away from an employee’s out-of-pocket expenses to the health plan would make the entire employer health plan more expensive.
Regulatory compliance — Businesses will need to stay informed about any new policies or regulations that arise from this order. Ensuring compliance with these changes will be crucial to avoiding legal issues.
Recruiting and retention — Enhancing access to IVF treatments could be a significant benefit for employees, potentially improving employee satisfaction and retention. Corporations might consider promoting these benefits to attract and retain talent.
Chronic health conditions are a growing problem for workers, damaging their well-being, productivity and job satisfaction, according to a new study.
The “U.S. Employee Perspectives on Managing Chronic Conditions in the Workplace” poll by the Harvard T.H. Chan School of Public Health and the de Beaumont Foundation found that 58% of U.S. employees report having a physical chronic health condition such as hypertension, heart disease, diabetes or asthma. Among them, 76% need to manage their condition during work hours, yet 60% have never formally disclosed their health issues to their employer.
This lack of disclosure can create issues for both the employer and worker, affecting productivity, job satisfaction and overall workplace well-being.
Implications
Each year, chronic conditions account for $1.1 trillion in health care costs and $2.6 trillion in lost productivity, including $36.4 billion in employee absences, according to Kaiser Permanente.
Employees with chronic health conditions may be keeping mum for a variety of reasons, including:
Fear of stigma,
Concerns about missed work opportunities, and
Negative performance reviews.
As a result, employees are forced to make difficult choices:
36% have skipped medical appointments or delayed care to avoid interfering with their job.
49% felt unable to take time off or even a break despite needing one for their health.
33% reported missing out on additional work hours or projects due to their condition.
25% believe they have been passed over for a promotion because of their health issues.
Unaddressed chronic health conditions contribute to:
Absenteeism,
Decreased performance, and
Increased turnover.
Beyond managing their own health, many employees also care for family members with chronic conditions. One-third of workers have had to help a family member with a chronic illness in the past year, and 45% of those caregivers needed to do so during work hours.
The case for employer support
In a tight labor market, businesses that take proactive steps to support employees with chronic conditions can maintain a healthy workforce and gain a competitive advantage.
A minority of employees feel their workplaces are supportive of their needs:
44% say their employer is very supportive of allowing breaks or paid leave.
37% report strong employer support for flexible scheduling.
Only 27% say their employer is very supportive of remote work, even when the job allows for it.
How employers can help
According to the Centers for Disease Control and Prevention, many chronic conditions are linked to modifiable behaviors, including:
Tobacco use and secondhand smoke exposure,
Poor diet, including high sodium and saturated fat intake with low fruit and vegetable consumption,
Not being physically active, and
Excessive alcohol consumption.
Here are several ways for employers to support staff with chronic conditions:
Promote open dialogue—Create a culture where employees feel safe discussing their health needs confidentially. Help them access necessary accommodations without fear of judgment or career repercussions.
Encourage regular testing and doctor’s visits—Encourage your staff to take advantage of their health plans’ benefits, like annual blood work and health exams, and to follow physician-recommended regimens.
Offer flexible scheduling and remote work options—Allow employees to adjust their schedules or work from home when needed. This can help them manage medical appointments and symptoms more effectively.
Improve paid leave policies—Provide paid leave to help employees address their own or their family’s health needs.
Promote wellness programs—Offer resources such as health coaching, on-site screenings and wellness incentives that encourage employees to prioritize their health. Offer programs focused on tobacco- and alcohol-cessation programs.
Train managers to support employees with chronic conditions—Educate supervisors about chronic illnesses and workplace accommodations to help create a more inclusive and understanding environment.
There is a general truth in the health insurance sector: If Medicare and Medicaid are given the green light to cover a certain drug, insurers in the group health and individual health insurance market usually follow suit.
The Centers for Medicare and Medicaid Services (CMS) typically allows Medicare drug plans and Medicaid to cover a drug once the Food and Drug Administration approves it for specific conditions. However, despite the FDA’s approval of popular yet pricey GLP-1 drugs like Ozempic and Zepbound for weight loss, these programs do not cover them due to a long-standing rule to not cover so-called “cosmetic” drugs.
However, the comment period for a proposed CMS regulation that would allow Medicare and Medicaid to cover GLP-1s and other drugs specifically for weight loss recently ended, and the industry is waiting to see if the Trump administration will finalize the rule.
If the CMS finalizes the rule, will group health and individual health insurers follow suit?
Current Medicare GLP-1 coverage
Medicare, through Part D drug plans, and Medicaid already cover GLP-1s for certain conditions, including:
Type 2 diabetes, and
Cardiovascular disease.
After the government programs began covering the medications for the above conditions, private insurers have largely done the same.
The drugs approved for these conditions include:
Ozempic,
Mounjaro,
Rybelsus, and
Wegovy.
The fine print
Experts say that if the CMS approves GLP-1s for weight loss, private health insurers would likely do the same. However, this does not mean they would cover them outright. Each plan’s copays, deductibles and coinsurance would still apply, as they do for all other drugs.
The list price of these drugs is around $1,000 a month or more. Since GLP-1s are expensive specialty drugs, insurers would likely put them in their pharmaceutical fee schedule’s most expensive tier, meaning that enrollees would pay higher copays and/or coinsurance for than for lower-tier drugs.
Additionally, health plans that decide to cover these drugs may require plan enrollees to first try less expensive treatments and/or lifestyle changes before approving a GLP-1 prescription.
Effect on costs
The rising cost of specialty drugs are contributing to overall premium inflation.
In 2023, health insurance outlays for prescription drugs increased by 10.8%, compared to 2.6% for all medical expenses, according to the U.S. Department of Health and Human Services. This increase was driven by brand name and specialty drugs, particularly those used to treat diabetes and weight loss, such as GLP-1 drugs. If more insurers start covering these popular drugs, it would likely affect premiums.
However, there could be offsetting cost benefits. Consider that:
These drugs often result in a significant drop in blood-sugar levels, reducing the risk of diabetes-related complications.
GLP-1s yield an average weight loss of 15 to 20%, and about one-third of users lose approximately 10% of their body weight, according to a study.
Multiple studies have shown that they can reduce the risk of cardiovascular events, including heart attack, stroke and death.
The drugs may help people cut back on drinking, according to a study published in JAMA.
A final word
It’s still unclear if the Trump administration will finalize this proposed rule. Much will depend on the new Robert F. Kennedy Jr., the new secretary of the HHS. He has stated his intention to “make America healthy again,” but he has also been critical of vaccines and other medications in in the past.
Each year, mental health issues such as depression and anxiety lead to a staggering 12 billion missed workdays globally, according to a new study by Resolute Psychiatry, an online platform that provides virtual counseling.
This absenteeism not only affects personal well-being but also results in significant financial losses. Employees who are struggling with their mental health can be less productive and may have lapses in concentration that can lead to poor performance and even workplace accidents.
Production and financial losses due to missed workdays, for any reason, cost the U.S. economy $1 trillion each year.
The compounding effects of these health challenges — fatigue, poor concentration, detachment, stress and physical symptoms — are obviously a serious challenge for businesses. Fortunately, there are steps that companies can take to provide mental health support in the workplace.
Access to mental health resources
One of the best ways to support staff dealing with depression and anxiety is to implement an employee assistance program. EAPs offer confidential services, including counseling, wellness workshops and access to mental health apps.
These programs can reduce barriers to seeking help and they address a range of issues such as substance abuse, occupational stress, relationship problems, emotional distress and major life events, providing employees and their families with essential support.
One issue, though, is that EAPs are often limited in the amount of sessions that an employee can attend without out-of-pocket costs. A typical EAP limits counseling appointments to around three to six sessions per issue per year.
Train managers on mental health support
Equipping managers with the skills to recognize and address mental health challenges is vital for fostering a supportive workplace culture. Training should focus on:
Recognizing signs of mental health challenges: Managers should be trained to identify indicators such as changes in behavior, decreased productivity, increased absenteeism, and signs of stress or withdrawal.
Initiating supportive conversations: Managers need guidance on how to approach employees sensitively and confidentially, expressing concern and offering support without judgment.
Providing resources and referrals: Training should include information on available mental health resources, both within the organization (like EAPs) and externally, enabling managers to guide employees toward appropriate help.
Encourage staff to use their health plan
All Affordable Care Act-compliant health plans cover nearly all mental disorders, as well as substance use disorders and treatment for alcohol and chemical dependency.
In addition, federal law requires that mental health and substance use disorder benefits are covered in the same way as most medical and surgical services. This means that things like deductibles, copays and insurance must be the same for mental health and substance use as for other medical benefits.
Offer flexible work options
Developing flexible work arrangements, such as remote work opportunities, adjustable hours and designated mental health days, can significantly aid employees in managing their mental health. These arrangements can allow workers to take time off to take care of errands and other matters, or to attend counseling sessions.
These options help reduce stress, improve work-life balance and enhance overall job satisfaction. If you have an employee who is struggling with depression or anxiety, you may want to consider:
Adjusting roles and responsibilities, or
Moving to a different role or department if the current job negatively impacts their mental health.
The takeaway
Since the COVID pandemic, mental health issues have risen to the fore and employers have experienced the effects on their workers. Many Americans are dealing with growing stresses in their lives, particularly with the cost of living having skyrocketed during the last few years, the tenor of national discourse and global problems.
By integrating the above strategies, organizations can create a more supportive environment that addresses mental health proactively, benefiting both employees and the company’s bottom line.
