Report: Higher-Priced Drugs Added $2.1B to 2011 Workers' Comp Pharmacy Costs

Who is paying for these drugs?

When the insurance company foots the bill, some people tend to treat themselves to higher cost medicine.  If the insurance company is paying, why not get the name brand?  

I'm not blaming people for going for the higher cost meds because it is human nature to perceive a better quality from a higher priced product.  The consumer needs to realize though that the system can't sustain such high prices without them being passed on to the consumer.

Employers must pay the premiums for workers' comp, but when people take advantage of the system, we all pay for it.  It might result in higher medical insurance costs, higher prices to make up for business owners' increased over head, and higher prices for over the counter and prescription drugs.
Take a look at some of these statistics from a study highlighted in the Claims Journal's article below:

• $2 billion of waste resulting from use of higher-cost medications when therapeutically equivalent, lower-cost alternatives are available.

• $107 million of waste through use of out-of-network pharmacies and third-party billing.

• $40 million of waste from use of higher-cost delivery channels such as retail pharmacies instead of home delivery for long-term medications used by injured workers.

Its in all our best interests (insurance companies included) to keep workers' comp premiums down.  Hopefully, we can find a way to curtail useless spending and price gouging by pharmaceutical companies.

To read the full article, click the link below:
Report: Higher-Priced Drugs Added $2.1B to 2011 Workers' Comp Pharmacy Costs:

'via Blog this'

Insurance Implications of a Double or Triple Net Lease

You've saved up your pennies and invested in a commercial building.  You find a nice tenant and start leasing the space.  You decide to do a triple net lease to keep your overhead down.  

Photo by Margan Zajowicz

Why that wasn't such a good idea:

1. This is one of your biggest assets, wouldn't you want to make sure it's covered properly?  Tenants don't have skin in the game when it comes to your building and are going to do the least possible to adhere to your requirements.  They are already paying you rent and see the insurance as an additional cost.
2. Your tenant could forget to pay the premium and you could be on vacation when the warning of cancellation comes in the mail.  The policy cancels, there's a fire, and you don't have coverage.



 Photo by  Alex Patru   

3. Crimes committed by the named insured (your tenant) are excluded.  For instance, your tenant could purposely burn down the building (commit arson) and the insurance company would deny the claim.  Yes, this would be the worst case scenario, but a disgruntled tenant who vandalizes your building would also leave you with uncovered property damage.

Please consider the three points above when insuring your commercial property.  

Disclaimer:

This blog post is not a substitute for professional legal advice. This blog does not create an insurance agent-client relationship, nor is it a solicitation to offer legal/insurance advice. Seek the advice of a licensed insurance agent in the appropriate jurisdiction before taking any action that may affect your rights.

  

Disability Insurance Vs. Workers' Compensation

I have often been asked by business owners:  

Instead of getting a disability policy, can't I just add myself onto my workers' compensation policy?

While it is possible to add yourself onto a workers' compensation policy, the benefits are not the same as a disability policy.

Was this paper cut work related?  

Here are some of the similarities:

• Both may pay medical bills if you are hurt
• Both may pay disability and lost wages
• Both may pay a portion of your lost income
• Both will cost you based on your current income

Here are some differences:

• Workers' Compensation only pays for on-the-job injuries
• Workers' Compensation will only pay at most 2/3 of your stated income
• Workers' Compensation may only pay based on your stated payroll (even if you take a draw or have other forms of compensation)
• Workers' Compensation is based on the rate for your specific class code and you pay per $100 of payroll.  Disability is based on many factors.

When does it make sense to add yourself to your workers' compensation?

• If you can't qualify or afford disability insurance
• If you are in a 'low risk' field such as computer programming and the rate per $100 is relatively affordable.  
• As an additional protection in case you get hurt on-the-job
• If you have an abnormally high deductible for your health insurance
• If you are prone to accidents

If you are truly worried about losing your income from getting hurt then nothing will suffice for a good disability policy.  Many people buy life insurance and feel like they have taken care of their family, but if have a bad accident and you don't die then your family can't collect.  

Don't forget that not all disability policies are created equal either.  Make sure to read the small print because in some policies you may not be able to collect if you are able to do any other job.  If you are a doctor, you aren't going to like it if the company stops paying because you can get a job as a barrista.  

Please note:

When employers make workers' compensation claims against themselves, it's a red flag for claims adjusters.  This is because it is easier for an employer to exaggerate a claim than an employee, so be ready to defend any over the top expenses for your medical treatment.  

Disclaimer:

This answer is not a substitute for professional legal advice. This answer does not create an insurance agent-client relationship, nor is it a solicitation to offer legal/insurance advice. If you ignore this warning and convey confidential information in a private message or comment, there is no duty to keep that information confidential or forego representation adverse to your interests. Seek the advice of a licensed insurance agent in the appropriate jurisdiction before taking any action that may affect your rights.  

How to Save Money on Insurance For Start-Ups

The biggest mistake start-ups make is being too optimistic.  Of course, you wrote in your business plan that demonstrates to your investors that you are going to make $1,000,000 in the first year and turn a profit by year three, but that's not what you should be telling your insurance agent.  

As a start-up, cash will make or break your business. CASH IS KING.  You will often have to accept 60-90 terms to get orders, your vendors (and insurance company) will want cash upfront.  Here are a few tips to keep your insurance overhead as low as possible so you can turn your start-up into the business of your dreams:

Since its first store opening in 2005, Pinkberry has nearly 100 locations throughout the United States, Mexico and the Middle East...(11/30/2011: Pinkberry Website)

Be Conservative on Sales and Payroll Estimates

You don't know how much you are going to make the first year.  Your numbers are based on estimated sales based on estimated customers based on research and industry benchmarks.  Insurance policies are generally based on either annual sales or payroll, so the higher you estimate the larger monthly bill you are going to have during that crucial first year.   

How conservative should you be?  

It really depends on your business.  After the first year the insurance company will do a review (nice way of saying audit) with you and will adjust the yearly premium based on your actual sales or payroll.  Go here for a great FAQ on audits.  If you estimated sales of $50,000 per year and you end up doing that in the first quarter, you need to call your agent to adjust the policy so the payments will be spread more evenly.  The last thing you want is to estimate a super low sales or payroll figure, have a great year and have an extremely large bill when the insurance company audits you.  The idea here is to increase cash flow and lower overhead.  

Look at all your options with your independent agent when starting an insurance policy.  Keep in mind that your personal assets could be at risk even if you incorporate, so price shouldn't be the only factor in choosing your policy.  Don't know where to start?  Check out this blog post: Insurance 101 for New Business.

What Insurance Does a Dental Office Need?

I love to work with clients that truly are interested in protecting their business from unforeseen losses.  I can’t say that I have a favorite client, but one that comes to mind is Dr. Solomon Cantwell DMD .  He is a dentist that is truly dedicated to his customers, his staff, and the growth of his practice.  He is committed to keeping up to date with the latest dental technology and making his customers comfortable. 

Solomon and Joe in front of the dental office after talking business insurance.

Business Owners Policy and Workers' Comp

I have worked with him to make sure his equipment, liability, and building are all covered properly on his business owners’ policy.  In addition, we worked together to make sure that his employees had the proper coverage in case they were hurt on the job.

Employee Practices Insurancee (Sexual Harassment Insurance/Wrongful Termination)

We also went over the advantages of two other types of coverage including Employee Practice Liability Insurance (EPLI) and Data Breach Insurance.  EPLI is a coverage that is put in place in case an employee sues for wrongful termination, sexual harassment, or wage disputes.  It’s an important coverage that is often overlooked by many business owners because they don’t know about it or their agent never offered it.  There are actually more EPLI claims per year than General Liability claims per year in California. 

Data Breach

The Data Breach Insurance coverage is a relatively new coverage that was created in order to pay damages caused by loss of client information due to a breach in security (online or offline).  Most data breach policies cover: notifying your customers of the breach, paying an organization to monitor clients’ credit, repairing damaged PR, and even paying government fines for non-compliance.   Take a look at California's penal code relating to a breach.


Malpractice
Malpractice is for mistakes that the dentist makes when working on a patient.  An example would be doing a root canal on the wrong tooth.  Most dentists already have this coverage when we start working because it is often a requirement for working as a dentist, but there are many programs that can offer malpractice at competitive rates.  

Sizzling Insurance Tips for Restaurants and Bars

What kind of insurance do restaurants need?
Restaurants have unique risks that create some interesting exposures.  Depending on the size and services a restaurant may offer, there are different insurance products that the restaurant may consider purchasing.

General Liability
If a customer trips and falls or even if a customer spills hot coffee on herself (review of famous McDonald's case here); liability insurance would pay for such a claim.  Other claims include: choking, food poisoning, burns, etc.

Quick savings tip: To save on restaurant liability insurance, it's possible to find companies that rate on square footage instead of sales.  If you are a smaller restaurant that has a high volume of sales, then you could be paying too much.

Don't let restaurant insurance upset your stomach

Property Insurance
This is insurance for your equipment, improvements, and building if you own it.  If you are a tenant, then you need to review your lease to see what you are responsible for in case of a loss.  For example, maybe the last tenant installed a kitchen, but the lease may still state that the only thing the owner is responsible for is the four outside walls. If there is a total loss, you will have to pay to create an entirely new kitchen.

Quick savings tip: It is often less expensive to rate tenant improvements and restaurant equipment (anything bolted down) separately from business personal property.  That way you get the building rate instead of the rate for the things that can be stolen easily.

Business Income  
If your restaurant has to shut down due to a fire or a covered loss, you need this coverage to cover your costs and to pay you what you would have made (minus expenses that you don't incur during the loss such as payroll).  It's important to have at least 12 months coverage, but 18 or 24 months is ideal.  In case of a total loss, you may need to wait for building permits, construction delays, and negotiations with the insurance companies to be settled.  For more info on this business interruption, see this blog I wrote on it.

Quick tip:  Watch out for long delays in getting paid.  Often policies will include a 72 hour waiting period before this coverage can take affect.  Can you afford to lose three days of business?  What if that's a Friday or Saturday night?

Workers' Compensation
This coverage is mandated by California law, meaning you have to buy it even if you only have one employee.  The premium is a percentage of total payroll.  Restaurant premiums are currently between 2% - 6% based on the size, loss experience, and other discount factors.  Click here for more information on workers' comp.

Quick savings tip: In California tips are excluded from workers' compensation, so make sure you don't add them to your payroll report.

Stay tuned for my next blog that will highlight some more advanced coverage for restaurants.  Here are some examples of some other coverages that restaurants should think about including: sexual harassment, assault and battery, delivery driver coverage, and more.

How Insurance Helps Keep Your Business Going

Disability is important to many companies, especially one where the business owner is the main money maker. For example, a dentist or a doctor both may lose their practices if they were sick for six months. Many owners mistake Workers' Comp as a viable replacement, but workers' comp is only for on the job injuries or sicknesses.

If you come down with cancer and its not work related, then there is no coverage. under workers' comp. In addition, claims where an owner claims workers' comp against himself are looked at in greater scrutiny because there is more of a chance of fraud. Also, workers' comp only pays about 2/3 the wage you pay yourself. Many owners will pay themselves a low wage, but get most of their income from draws from company profits. Those draws won't be considered as part of the wage.

In addition, going without key coverages like workers' comp and liability insurance is a good way to get shut down as well. Workers' Comp is mandated by the state if you have employees, but many business owners tend to go with out it. If one is caught without it, your business could get shut down until you can prove you have it. Also, there is a fine for $1,000 per employee up to $100K.

Without the proper liability coverage, you can get sued once and lose everything on just paying legal bills. Insurance is the first defense from lawsuits. Even if you have an LLC to protect your personal assets, if the business is your main stream of income you could end up losing everything anyway.

Lastly, business income is a great way of protecting your company in case of a covered loss. Business Income is an important coverage that every company should have that can pay your lease, expenses, overhead, and even key employees in some cases. See my blog on business income for more information.