Brown & Brown advises clients on health-care reform, adds employees

SYRACUSE — Brown & Brown Empire State, a unit of Florida–based Brown & Brown, Inc. (NYSE: BRO), has added employees to its Syracuse office in the past nine months. And the firm is also guiding its employee-benefits clients on dealing with the national health-care reform law.

The Central New York Business Journal (CNYBJ) spoke separately with two company officials on its hiring and health-reform law issues. The officials were Nicholas Dereszynski, president of Brown & Brown Empire State and regional vice president for parent company Brown & Brown,  and Jeffrey Wittig, senior vice president of Brown & Brown Empire State’s employee-benefits group.

Q&A

CNYBJ: How is the implementation of the health-care reform law affecting Brown & Brown Empire State and your customers?

Jeffrey Wittig: I think it’s affecting our customers in a number of ways. In 2013, it’s affecting customers from an administrative perspective. For example, the customers we work with that issue more than 250 W-2s are required to report that [the cost of coverage on under an employer-sponsored group-health plan] on their employees’ W-2 forms. So, from an administrative standpoint, that is one of the new requirements under the legislation. We’re often asked, does that mean it’s taxable income? Well, not yet, it’s not taxable. It’s hard to say what the future will bring, but it is a requirement for the larger end of the mid-segment market employers.

There’s also some reporting requirements and some notification requirements for employers such as the summary of benefits and coverage (SBC), which is part of the new regulation. The SBC requires employers to distribute the employees’ planned benefits in a glossary of terms in a uniform template. And so, that uniform template has been provided by the insurance carriers and then we work with the employer to provide them with that summary of benefits and coverage. We actually help facilitate them getting that and distributing that to their employees as well as helping them incorporate that into their orientation packets for new hires because part of regulation is to provide that notification to employees.

The other employee notification is related to the upcoming health-insurance exchange and was originally set for March, but that’s been delayed. Employers will be required to provide notification to employees regarding the New York state exchange [called the New York Health Benefit Exchange], and that has been delayed to late summer or early fall. We would anticipate that [notification] being, at the latest, by Oct. 1 because that is the date at which [New York’s exchange] is going to begin accepting applications for a Jan. 1 effective date.

More importantly, though, is the impact the legislation will have beginning on Jan. 1, 2014.

CNYBJ: Tell us about that.

Wittig: An employer over 50 employees is potentially subject to penalties, as it relates to health-care regulations. If an employer is going to continue offering insurance to employees, they’re still subject to potential penalties if they don’t meet large-group requirements as it relates to the definition of offering insurance to an employee who works 30 hours per week. The plan also has to meet a minimum-value requirement, secondly, and, thirdly, the plan has to meet an affordability test … An individual cannot pay more than 9.5 percent of their income toward insurance or they would be considered not being offered affordable insurance.

If an employer meets those requirements, then they are not subject to the $3,000 penalty (or it can be a $2,000 penalty, whichever is less according to the regulations). However, if they do have some employees who don’t meet the affordability test (these could be lower-income wage employees who are paying more than 9.5 percent of their income toward their health insurance) the employees could be eligible to purchase their coverage through the exchange in 2014, and if the workers do so, the employer, or our client, is then subject to a $3,000 penalty — if, and only if, the employee enrolls in the New York exchange.

The second part of that … employers can also decide not to offer insurance and that’s referred to as (the “pay” part of the “pay or play” model).  The pay part is the employer deciding not to offer insurance anymore and paying the $2,000 penalty (after the first 30 employees), and at that point, permitting the employees to purchase their coverage through the individual exchange. So, there’s a lot of planning, a more strategic look at the current structure, and then how employers could be impacted by those penalties, and whether they should consider not offering insurance at all.

There are a number of implications to consider if an employer decided to pay the penalty and not offer insurance. On the surface, if you look at employer’s monthly contribution to an employee’s health coverage … the $2,000 penalty for most employers, they’re actually going to be able to save money by not offering insurance and paying the $2,000 penalty. However, there are implications in doing that and those implications can impact employees because going to the exchange … only certain employees are going to get a subsidy or credit for purchasing their coverage through the exchange. Some will get more of a credit than others. Some may not get a credit at all. And that purchase through the exchange is also not pre-tax the way it is in today’s environment, so there are tax implications for both the employer and the employee by doing that.

 When employers look beyond just the $2,000 penalty and look at the retention and recruitment of employees and … at what the subsidies will look like for their employee base, that will certainly help employers make an informed decision about how they deliver health insurance to their employees going forward.     

CNYBJ: You wanted to add a few remarks about new fees and taxes. Proceed.

Jeffrey Wittig: There are new taxes and fees that are associated with the health-care reform regulations. There’s a health-insurance fee or tax. There’s what’s referred to as the PCORI (the Patient Centered Outcomes Research Institute) tax or fee, and then there’s a reinsurance tax or fee. Those are three very important components that are being implemented in January that, unfortunately, have a negative impact on our clients and our employers because those fees and taxes are being passed through in the premium and those fees and taxes can have a negative impact on upcoming premiums and renewals before any other factors are applied, so I think that’s another important thing that needs to be considered…. Those fees could have an impact of about four to five percent on an upcoming renewal.

The Central New York Business Journal also spoke with Nicholas Dereszynski, president of Brown & Brown Empire State, about the firm’s plans to hire more people.

CNYBJ: Upon returning to Syracuse last August, you had mentioned that hiring and recruiting talented salespeople was a priority for Brown & Brown Empire State.  How has that process unfolded?

Nick Dereszynski: We’ve hired five individuals here in our Syracuse office. A couple of those individuals would be on the employee-benefits side, and a couple would be on our commercial-insurance side. We continue to look for high-quality individuals, both in sales, but also in our claims division and claims support. Being an advocate for our clients is critical to our success long term. And so we are investing in our talent internally, and again, that’s both internal folks and individuals that are client facing on a day-to-day basis, so that we have the best product and service in this marketplace for our clients.

CNYBJ: Are the people that you’ve hired sales agents or in other areas of the company?

 Dereszynski: Of the folks we’ve hired thus far, we’ve hired four new sales agents, and we’ve hired one operations manager in our employee-benefits division, and, again, we would continue to look in those areas but also in our policy-holder services and our claims division.

  CNYBJ: You’ve mentioned that Brown & Brown, Inc. wants to grow its annual revenue level to $2 billion. Is that part of the reason why the firm is pursuing new hires?

 Dereszynski: That’s correct. Whether you look at it on a corporate level … we’re a $2 billion company at the corporate level. We have approximately 6,300 employees around the country in 38 states, or whether you look at that on the upstate New York basis. In upstate New York, we’re approximately $40 million in revenue in total [including Brown & Brown, Inc.’s other units]. We’re probably 200, 250 employees in upstate New York, so, yes our goal is to double, and so that means we need double the teammates, whether it’s on a local basis or a national basis. We believe that the way to get there is through attracting, developing, and retaining talent, which will enhance our client base.

CNYBJ: The Brown & Brown Empire State unit has generated $20 million in revenue in both 2012 and 2011.  What is the company’s projection for 2013?

Dereszynski: Our revenue projection for 2013 would be to increase 5 percent. So $21 million is our target. Our business is very much a microcosm or a mirror of the general broad-based economy, and so, as the economy continues to bump along, we do believe that it’s trending in the right direction, and so, as economic factors get better, that does support our business. There’s also pressure on insurance premiums for our customers. We advocate for our customers, but premiums and rates are continuing to trend upwards. So that, from a business model standpoint, does give us a lift in our revenues as well.

Contact Reinhardt at ereinhardt@cnybj.com