American Granby seeks growth in Canada

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CLAY — American Granby Inc. has a new pipeline into Canada. It’s a line laid on March 20, when American Granby owner John Lowe acquired a group of five Canadian companies based in Burnaby, British Columbia, near Vancouver. The Canadian firms will give American Granby, a Clay–based distributor, access to an enlarged distribution network north […]

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CLAY — American Granby Inc. has a new pipeline into Canada.

It’s a line laid on March 20, when American Granby owner John Lowe acquired a group of five Canadian companies based in Burnaby, British Columbia, near Vancouver. The Canadian firms will give American Granby, a Clay–based distributor, access to an enlarged distribution network north of the border.

Lowe will run the newly acquired firms separately from American Granby, as its sister companies. But the businesses have similarities, according to Gary Palley, American Granby’s vice president of sales and marketing.

“The product portfolios are close,” he says. “We do differ because our direction and the markets we serve are different.”

American Granby distributes pump, well, pool, spa, irrigation, plumbing, and heating components. The Canadian companies manufacture and distribute products for use in plumbing systems as well as heating, ventilation, and air-conditioning systems.

Their main member is CB Supplies Ltd., which handles distribution in Canada. Other members are Seymour Industries Ltd., the group’s U.S. distribution arm, Vanguard Pipe and Fittings Ltd., a plastic piping manufacturer, Canfit Industries Ltd., which makes plastic fittings, and Canip Industries Ltd., a producer of metal nipples — pipes with threading on both ends.

Palley declined to disclose the financial terms of the companies’ acquisition. The acquired firms’ former owners decided to sell primarily because they were growing older, he says.

American Granby will use CB Supplies’ distribution network in Canada to expand its sales in that country, according to Palley. In addition to its headquarters in British Columbia, CB Supplies has warehouse space in Calgary, Alberta, in Montreal, and in Mississauga, Ontario, near Toronto, he says.

American Granby’s only current Canadian distribution location is a small warehouse operation in Toronto, Palley says. That warehouse, which has about five employees, will merge with the Mississauga warehouse, he says.

“What it basically allows for is movement from one distribution center to four,” Palley says. “We’ll make American Granby products available through the entire CB Supplies network.”

Plans for distributing the Canadian companies’ products in the United States are not as firm. Their U.S. distribution arm, Seymour Industries, does not have a physical presence in the country, Palley says. Instead, it coordinates distribution through sales and stocking representatives and ships directly to wholesalers, he says.

Seymour Industries could be merged into American Granby, according to Palley. But no discussions about a merger have taken place yet, he says.

“It’s all in the works right now in terms of making those decisions,” he says. “Within the next six to 12 months, a lot of these decisions will be made.”

Local plans

Palley doesn’t anticipate American Granby moving from its current headquarters at 7652 Morgan Road in Clay. That building, which the company owns, is about 100,000 square feet.

He also does not believe there will be any changes in American Granby’s staffing levels. The company employs 45 workers at its headquarters and has seven people on the road in sales.

“I doubt seriously you’ll see any head-count change in the United States,” Palley says. “We can handle more with the existing personnel that we have. We’ve made a commitment to the [Clay] location.”

Palley declined to disclose revenue totals for American Granby. He projects revenue growth between 5 percent and 7 percent in 2012, up from growth between 3 percent and 4 percent in 2011.

However, the 2012 growth projections do not take into account distribution opportunities coming from American Granby’s new sister companies. The firm does not yet have projections that include the potential for increased Canadian distribution, Palley says.

About 80 percent of American Granby’s sales are in the United States, he says. The remaining 20 percent are in Canada.

CB Supplies has a similar sales ratio — except most of its sales are in Canada, according to Warren Lowe, the firm’s vice president of corporate development. About 80 percent of CB Supplies’ sales are in Canada, and 20 percent are in the United States, says Warren Lowe, who is also John Lowe’s son.

The five recently acquired Canadian companies employ a total of about 100 people, Warren Lowe says. He declined to share revenue totals or growth projections for the firms.

But he did say that he expects CB Supplies’ U.S. sales to grow while American Granby’s Canadian sales expand.

“We think they will be able to sell to each other’s customers and distribute each other’s products,” Warren Lowe says. “Between American Granby and CB Supplies, we have some of the same customers. We’re just excited about the opportunity to be able to grow on both sides of the border.”

John Lowe also owns Monarch-McLaren, Ltd., based in Elkhorn, Wis. That firm manufactures industrial leather

seals.

Currier Plastics ready to start expansion in Auburn

Construction, Design & Real Estate, Manufacturing & Engineering, Subscriber Only

Plans to add 50 new jobs over three years AUBURN — Currier Plastics, Inc. is moving forward on a 55,000-square-foot expansion project that was in limbo at the end of last year. The project is nearing a groundbreaking after Empire State Development awarded the Auburn manufacturer a $750,000 Economic Transformation Grant — a grant

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Plans to add 50 new jobs over three years

AUBURN — Currier Plastics, Inc. is moving forward on a 55,000-square-foot expansion project that was in limbo at the end of last year.

The project is nearing a groundbreaking after Empire State Development awarded the Auburn manufacturer a $750,000 Economic Transformation Grant — a grant plugging a funding gap left last year by New York’s Regional Economic Development Council initiative.

In November, the Central New York Regional Economic Development Council recommended the state give Currier Plastics a $750,000 capital grant. But that grant was not included when New York announced regional council funding Dec. 8.

“Everybody kind of agreed that they wanted to nail down what New York State could do,” says John Currier, president and majority owner of Currier Plastics. “It’s difficult to bring this project together at one time.”

The expansion project, which has a total price tag of about $21 million, will nearly double the size of the headquarters Currier Plastics owns at 101 Columbus St. in Auburn. The facility, which is currently 65,000 square feet, will grow to 120,000 square feet after work is finished. Nearly all of the new space will be dedicated to manufacturing, Currier says.

Currier Plastics, which specializes in custom designs, injection molding, and extrusion blow molding, will acquire 9 acres of adjacent land to make way for the new construction. It also plans infrastructure improvements, including new water lines, roadways, parking, and traffic patterns.

“It’s a big logistical improvement for us,” Currier says. “Right now we have trucks and passenger cars coming in the same entrance.”

The new building and infrastructure will cost about $8 million, he says. Crews could break ground by the end of the spring, and
Currier Plastics would like the structure to be complete by Nov. 1.

Construction and infrastructure improvements are only part of Currier Plastics’ planned improvements. The company will also invest about $13 million in new equipment over five years.

The manufacturer will use the $750,000 state grant to help pay for the project, along with private financing from First Niagara Bank. It is also in line to receive $1 million in Excelsior Jobs Program tax credits through the Regional Economic Development Council initiative.

That’s because Currier Plastics expects to hire more workers as a result of the expansion. The company currently employs 100 people full time and 20 temporary workers. It plans to add 50 more full-time employees over the course of three years, according to Currier.

“We’re pretty maxed out right now,” he says. “Our guys have done a really good job of finding new work, securing it, and, most importantly, doing a lot of growth with our existing customers.”

The Currier Plastics project may also receive some funding through the city of Auburn. In addition to working on a local incentive package, the city applied for $1 million in Economic Transformation Program funding from the state to put toward the project. Currier Plastics does not yet know if it will receive that funding, Currier says.

“We’re working with the city right now,” he says. “We are holding out hope for that.”

The manufacturer has not yet selected a general contractor or architect for the expansion project. It is currently bidding the
project, Currier says.

Currier Plastics generated $24 million in revenue in 2011, up 17 percent from the prior year, Currier says. The company is predicting 15 percent revenue growth in 2012, a rate it is on pace to meet through the first quarter of the year, he adds.

Before receiving the latest $750,000 in state funding, Currier Plastics looked at potential relocation sites in Central New York and in other states. The company also purchased new equipment for its Auburn headquarters to keep up with demand.

In April, it spent $1.75 million to purchase three extrusion blow-molding machines. Currier Plastics used its own cash and financing from First Niagara to pay for that equipment.

John Currier is the son of Raymond Currier, who founded the manufacturer in 1982.

New York manufacturing conditions improve in May

Manufacturing & Engineering, Subscriber Only

Business activity on New York’s factory floors picked up in May, according to a monthly survey from the Federal Reserve Bank of New York. The general business conditions index in the New York Fed’s May Empire State Manufacturing Survey jumped 10.5 points to 17.1. That indicates manufacturing activity expanded at a “moderate” pace, according to

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Business activity on New York’s factory floors picked up in May, according to a monthly survey from the Federal Reserve Bank of New York.

The general business conditions index in the New York Fed’s May Empire State Manufacturing Survey jumped 10.5 points to 17.1. That indicates manufacturing activity expanded at a “moderate” pace, according to the New York Fed.

It also means the index has largely rebounded from a drop last month. The index skidded 13.3 points in April.

May’s survey results show that 40.5 percent of manufacturers reported improving general business conditions. Another 23.4 percent said conditions worsened, and 36.1 percent indicated conditions remained the same as last month.

“Most companies are doing very well,” says Robert Trachtenberg, the president and CEO of the Central New York Technology Development Organization (TDO), a not-for-profit consulting and training organization that focuses on helping manufacturing and technology companies.

“They’re exceeding previous performance,” Trachtenberg says. “It’s not the current business conditions that are concerning them.”

New orders picked up speed, with the survey’s new-orders index climbing 1.8 points to 8.3. And shipments spiked, as the shipments index sailed up 17.7 points to 24.1.

The unfilled orders index rose slightly, increasing 2.4 points to -4.8. The negative result shows that more manufacturers had a lower number of unfilled orders in May than had higher unfilled orders.

Delivery times fell, according to the delivery-time index, which dropped 4.8 points to 0. Inventories grew, as reflected by the inventories index increasing 3.6 points to 4.8.

Manufacturers continued to report increases in the prices they pay and the prices they receive. However, both the prices-paid index and prices-received index dropped in May, showing that the rate of price hikes slowed.

The prices-paid index dipped 8.4 points to 37.4. The prices-received index slid 7.2 points to 12.1.

Hiring stepped up slightly, according to the number-of-employees index. It rose 1.2 points to 20.5 in May. Employees also worked slightly longer hours than last month, as May’s average employee-workweek index moved up just over 6 points to 12.1.

Future expectations

Manufacturers slowed their production of optimism for the future, according to the survey’s forward-looking indicators, which measure expectations for a time six months into the future.

The survey’s future general business conditions index tumbled 13.9 points to 29.3. Even so, more respondents expected improved business conditions in six months — 47.6 percent — than anticipated worse conditions — 18.3 percent. The remaining 34.1 percent of survey respondents predicted conditions will be about the same as they are now.

Manufacturers also pulled back on predictions for higher orders and shipments. The future new-orders index skidded 15.7 points to 30.1. The future shipments index sank 19.3 points to 25.3.

The future unfilled-orders index eroded 9.6 points to 0, and the future delivery-time index crept up 1.2 points to 2.4. The future inventories index plunged into negative territory, losing 15.7 points to -10.8, showing that manufacturers predict lower inventories in six months.

Prices will still be climbing in six months, according to the survey. The future prices-paid index rose 7.2 points to 57.8, while the future prices-received index registered 22.9, unchanged from last month.

Survey respondents predicted increased hiring in six months, but cut back on their projected staffing increases from previous survey results. The future number-of-employees index shed 15.7 points to 12.1. Meanwhile, the future average employee-workweek index dipped 2.4 points to 8.4.

Staffing is becoming more difficult for manufacturers, according to Trachtenberg.

“The skills available and the skills required just don’t seem to match each other,” he says. “Getting unskilled workers is not a problem at all. But getting math skills and engineering skills is getting very competitive.”

Planned capital expenditures took a hit as well. The future capital-expenditures index descended 12.1 points to 19.3. And the future technology-spending index declined 6 points to 12.1.

“That has to do with the uncertainty of the economy,” Trachtenberg says. “A lot of companies right now are doing well, but they’re nervous about the future, so they’re holding back on some of their high-tech investments.”

Year-to-year price changes

This month, the New York Fed asked survey respondents to compare prices on a yearly basis.

Manufacturers reported that the prices they pay have increased by an average of 3.6 percent in the last 12 months. That’s lower than the increases they reported in May 2011, when they said prices had climbed an average of 8.1 percent in the previous 12 months.

Prices will likely continue to rise at the same rate in the next year, according to the survey. Manufacturers predicted the prices they pay will rise an average of 3.5 points in the next 12 months — down from an average 5.6 percent increase they predicted in May 2011.

Selling prices haven’t gone up as quickly, manufacturers said. They reported their average selling prices have increased by an average of 1.7 percent over the last 12 months, down from a 1.9 percent average reported in May of last year.

Manufacturers also said they expect their selling prices to jump 2.1 percent, on average, in the next 12 months. That’s lower than the predictions they made in May 2011, when they said their prices would probably rise 3.6 percent.

The New York Fed polls a set pool of about 200 New York manufacturing executives for the monthly survey. About 100 executives typically respond, and the Fed seasonally adjusts data.

Going for the Gold

Business Mentors, Subscriber Only

What do these things have in common? Social Security. Disability. Windmills. Food stamps. A state’s low taxes. Big contributions to politicians. These are linked by a basic ingredient of our nature. We go for the gold. What prompted this thought was the number of Americans who recently signed up for Social Security disability payments. As

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What do these things have in common? Social Security. Disability. Windmills. Food stamps. A state’s low taxes. Big contributions to politicians.

These are linked by a basic ingredient of our nature. We go for the gold.

What prompted this thought was the number of Americans who recently signed up for Social Security disability payments. As people lost jobs in this lousy economy, millions more became disabled — disabled enough to claim Social Security should send them checks every month. Within a few years, “we the people,” became “we the afflicted.” By the millions we did. Our backs acted up. Migraines felled us. Shoulders froze.

Of course, a big percentage of us did not suddenly become disabled. Out of work, millions simply saw the gold and went for it. Millions more than before.

This is why outrageous percentages of firemen and police retire disabled. In cities and states where their contracts allow generous early retirements, we see huge numbers retire early. With bad backs, migraines, etc. Too many simply smell the gold. And they go for it.

This is why green ventures popped up like mushrooms in manure in this country. The government held out billions in loans and grants for green projects. Guys who planned to put their money into hotels switched to solar-panel ventures. And windmills. What the hell, they figured. If government wants to give us a few hundred million dollars, let’s go for it.

This explains why so many of these ventures crashed and so few thrived. Basically, they did not fire up the venture for the money in the marketplace. They did so for the gold offered by the government.

Studies tell us most food stamps are undeserved. You don’t have to be a wizard economist to know food stamps go to millions who need them. And to millions who do not. The latter sell them for cash for drugs and booze. They use food stamps for a few necessities. So they can then afford the highly nutritious necessities like cheese puffs and ice cream.

The lust for gold explains why states with high taxes lose people and businesses to states with low taxes. People work hard for their money. They want to keep more of it. Low-tax states offer them the chance to keep more. So they go for it.

You know big hitters give big money to big politicians. Do you suppose this is out of the goodness of their hearts? Do you suppose their generosity springs from a belief in the goodness of the candidates? Nah. They want something. They want laws that favor their businesses. They want contracts. They want loans and grants. It is no accident that most of the green loans of the last few years went to guys who contributed big time to the president’s last campaign. When they contributed, these birds knew what they were doing. They were going for the gold.

We go for more than just the gold. Many times, I have seen millionaires at conferences push and shove to collect free t-shirts. They demand extra bars of hotel soap to pop into their Gucci suitcases. The way they covet them, you would think they were bars of gold.

From Tom…as in Morgan.

Tom Morgan writes about financial and other subjects from his home near Oneonta, in addition to his radio shows and new TV show. For more information about him, visit his website at www.tomasinmorgan.com

Tax Filing Follow-Through

Business Mentors, Subscriber Only

At the risk of sounding like a CPA, I advise you not to fall into the trap of complacency now that the April tax deadline is behind you. Your attention is still needed. Whether you are looking to next year, or still gathering data from the past year, there are important points to consider. Filing your

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At the risk of sounding like a CPA, I advise you not to fall into the trap of complacency now that the April tax deadline is behind you. Your attention is still needed.

Whether you are looking to next year, or still gathering data from the past year, there are important points to consider. Filing your tax return is a complex business and you should make every effort to take all the deductions to which you are entitled, but remember that documentation is absolutely essential to upholding those deductions should your return be reviewed by a taxing authority.

The IRS is highly focused on preventing fraud, which is on the rise, and has implemented several methods to weed out the bad apples. IRS computers detect potential fraud by comparing many items in each return to certain “standards.” If your data falls outside of the parameters, it increases your chances of being audited.

The “red flags” are what one might expect — self-employed workers filing Schedule C, artificially low salaries, unreported income, and exceedingly high charitable-contribution deductions, high levels of income, and home-office deductions are tops on the list. Some taxpayers have been said to be banking on the idea that a smaller budget and fewer employees at the IRS would result in fewer audits this year.

To a quality-minded CPA, this sounds a bit like roulette, and not a great overall approach.

I can’t help but think that a smaller number of audits means a drop in federal revenue, and fewer IRS employees translates into less help for taxpayers seeking assistance. And what about controlling identity theft and complex changes in tax law? Doesn’t it stand to reason that if all the non-filers and dishonest filers paid their dues, perhaps tax rates could be lowered for everyone?

If you have already completed filing your return and believe there was an error, you could file an amended return to reflect the correction and stop the clock running on certain additional charges. If you are one of the procrastinators or have a complex tax situation that needs to be attended to, do so now. By waiting to pay tax balances due, additional charges for interest and penalties can add up quickly.

If you’re flirting with the idea of not turning in your taxes at all, you may want to think again before using what the IRS considers to be “frivolous” tax-evasion arguments, like claiming that tax forms are an invasion of your privacy or that your state isn’t technically part of the United States. The IRS does not find these amusing, and you could end up going to court and being slapped with significant penalties.

Want my advice? Buckle down and get the filing beast behind you to ensure you have covered all your bases from a deductions perspective and that all income is properly reported to your CPA.

Gail Kinsella is a partner in the accounting firm of Testone, Marshall & Discenza, LLP, and serves as the president of the New York State Society of Certified Public Accountants. Contact Kinsella at gkinsella@tmdcpas.com

Seminar: Uncertainty remains regarding health-care reform

Employee Benefits & Human Resources, Health Care, Law, Accounting & Taxes, Subscriber Only

Employers have plenty of changes to keep track of this year due to the 2010 federal health-care reform law, even though it faces an uncertain future, according to speakers at a health-care seminar May 11 in Syracuse. “Two years into it, we’re still left with a lot of uncertainty and a lot of court challenges,”

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“Two years into it, we’re still left with a lot of uncertainty and a lot of court challenges,” says Maureen Pelose, vice president for employee benefits at insurance brokerage firm Brown & Brown Empire State. “It’s going to be a challenge for health plans and employers.”

Brown & Brown Empire State, which has its Syracuse office in Suite 200 at 500 Plum St., held the seminar at the Genesee Grande Hotel at 1060 E. Genesee St. in Syracuse. About 90 people attended the seminar, which was titled, “Health Care Reform — What it Means to You and Your Business.”

The federal reform law faces an uncertain future, as the U.S. Supreme Court heard arguments on its constitutionality in March. The court is expected to issue a decision in June that will either keep the law in place, invalidate parts of it, or throw out all of it.

Elections in 2012 add another layer of uncertainty to the law’s future — Republicans have signaled they want to unravel at least part of the reform package if they win more power in Washington, D.C. this fall, Pelose said.

Even so, Pelose briefed employers on issues that are arising as the law’s reforms roll out. One of those changes has to do with the W-2 forms employers issue to their workers. Forms that large employers distribute for 2012 will have to include the aggregate cost of most employer-sponsored health benefits.

“This only applies if you’re filing a W-2 for 250 of your employees,” Pelose said. “If you’re under that amount, you’re excused from that filing for the 2012 deadline.”

Employers should also know about Summary of Benefits and Coverage (SBC) documents, Pelose said. Insurers have to start providing SBCs, which present information about insurance plans in a standard format, for employees in new and renewing plans starting Sept. 23.

Some tax changes are on the way as well, Pelose said. Starting in 2013, the Medicare hospital-insurance payroll tax for employees is slated to rise for single taxpayers with wages exceeding $200,000 and married taxpayers with wages over $250,000. The rate is currently 2.9 percent, and the new tax will tack on an additional 0.9 percent.

Fully insured and self-funded plans ending after Sept. 30, 2012, will also be subject to a premium tax, according to Brown & Brown. That tax is $1 per covered life for the first year and jumps to $2 per covered life for later years.

Additionally, Pelose mentioned an excise tax on high-value “Cadillac” health plans that is scheduled to take effect in 2018. The tax, which will be 40 percent, is supposed to kick in on single plans with an aggregate value over $10,200 and family plans with an aggregate value of more than $27,500.

Although few plans have that value today, price increases could make the “Cadillac” tax a possibility for more plans by the time it takes effect, Pelose said.

“It’s not something that we should just brush off,” she said. “We’re watching it.”

Looking further ahead, 2014 will bring an employer mandate requiring companies with more than 50 full-time workers to offer health insurance or risk paying a penalty, Pelose added. The penalty, which is $2,000 per full-time employee per year, will be levied if an employee who wasn’t offered health insurance through work purchases insurance on New York State’s planned individual health-insurance exchange — and that employee is eligible for an income-based premium credit.

The insurance exchange is another part of the health-care reform package that should be on employers’ minds, Pelose said. In addition to an exchange where individuals can purchase insurance, there will be an exchange that is a place for small businesses to shop for coverage for their employees, she said.

The exchanges will be web-based, according to Todd Muscatello, senior vice president of Rochester–based Excellus BlueCross BlueShield, who also spoke at the seminar.

“Has everyone used Expedia?” he said. “At its highest level, that’s what an exchange is. It’s a website where you will be able to go as an individual or a small employer and compare health-insurance options.”

The exchange will likely increase the number of health insurers a small business must interact with, Muscatello said. That’s because employers who use exchanges to offer their workers insurance won’t select a specific insurer. Instead, they will pick a benefit level and employees will be able to log on to the exchange and choose between insurance companies offering plans at that level, he said.

“In today’s world, as a small employer, you likely offer only one product, maybe two, but usually with the same company,” Muscatello said. “In tomorrow’s world, that would likely not be the case.”

Muscatello recommended staying tuned as New York constructs its health exchange. The state is only starting to build the exchange, since Gov. Andrew Cuomo ordered its implementation in April, he added.

“We’re still a little bit away from understanding how this is really going to work,” Muscatello said. “As you go forward, the best you can do is stay abreast of it. It’s going to impact you in some way.”

Brown & Brown Empire State is a full-service insurance brokerage firm that also specializes in employee benefits, estate planning, and surety bonding. In addition to Syracuse, it also has offices in Endicott and Clifton Park. It is a unit of Brown & Brown, Inc. (NYSE: BRO), headquartered in Florida.

Venture Forum draws 300 to Buffalo

Employee Benefits & Human Resources, Manufacturing & Engineering, Small Business, Technology

More than 30 companies from around the state participated this week in the 2012 Venture Forum in Buffalo. The event, which took place Wednesday and

MVP expands self-funded insurance offerings to mid-sized businesses

Employee Benefits & Human Resources, Health Care, Insurance & Financial Services, Subscriber Only

MVP Health Care, Inc. has seen plenty of interest after launching a self-funded insurance option for mid-sized businesses, according to the Schenectady–based insurer’s vice president of corporate affairs. The mid-sized self-funded insurance option, which MVP launched in March under the name SelectSuite, targets companies with between 51 employees and 149 employees. MVP hadn’t previously offered

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The mid-sized self-funded insurance option, which MVP launched in March under the name SelectSuite, targets companies with between 51 employees and 149 employees. MVP hadn’t previously offered a self-funded product for companies of that size, although it had helped larger firms self-fund, according to Frank Fanshawe, vice president of corporate affairs at the not-for-profit MVP.

“A lot of businesses are talking about this,” Fanshawe says. “There is significant interest in the market.”

Companies that self-fund their workers’ health insurance pay directly for employees’ covered claims. They typically contract for administrative services like customer service, claims processing, and network management.

MVP will be providing those services under SelectSuite. Mid-sized employers in Central New York and upstate New York
wanted the option to self-fund, Fanshawe says.

“There’s certainly been a demand for this type of product,” he says. “We’re responding to the market demand.”

It’s too early to share the number of companies that have expressed interest in SelectSuite, Fanshawe says. MVP is focusing on trying to teach companies about the benefits of self-insuring — benefits that can include lower costs, he adds.

“There’s a significant focus on wellness and preventive care,” he says. “This self-funded arrangement can present the most direct financial benefit when you talk about the impact [of wellness programs] on the amount that a business spends on self coverage.”

Self-funded plans also will not be subject to a tax on health-insurance premiums that is scheduled to start in 2014 under the 2010 federal health-care reform law, Fanshawe says. And they aren’t subject to a separate New York State Premium Tax.

The New York State Premium Tax is 1.75 percent, according to MVP. The company estimates that its federal health-insurance premium tax will be about 3 percent when it starts in 2014. However, the federal government will levy that tax based partially on market share, so MVP doesn’t know its exact rate, Fanshawe says.

SelectSuite will mirror benefit packages MVP offers through its traditional insurance business. Companies will be able to choose from a variety of plan types, including high-deductible plans.

Mid-sized businesses choosing to self-insure with MVP generally won’t have as many benefit options as larger businesses, according to Fanshawe. If they did, they might be overwhelmed, he says.

“When you get into the large-group segment, those groups tend to seek very specific benefit-design packages,” he says. “The medium groups don’t have the ability to do that. That segment of 51 to 149 employees can’t dedicate the internal resources to developing their own plan.”

MVP plans to charge a flat fee for administering SelectSuite plans. It will charge $55 per employee per month for firms with between 51 employees and 99 employees. It will charge $50 per employee per month for companies with between 100 employees and 149 employees.

Although MVP is aiming SelectSuite at companies with 51 employees to 149 employees, the insurer will work with slightly larger firms who are interested in the product. So if a company with 200 employees felt it didn’t have the manpower to customize its own plan design, it could use SelectSuite, Fanshawe says.

MVP would also consider administering self-funded insurance for businesses with 50 employees or fewer, he says. But firms of that size don’t generally have the financial resources to make that a good option, he adds.

MVP provides fully insured and self-funded health-benefit plans, dental insurance, and ancillary products like flexible-spending accounts in New York, Vermont, and New Hampshire. The company has more than 600,000 members, with 41,000 in Central New York, according to the 2012 Book of Lists. It has 1,800 employees, 65 of which are in Central New York.

The company’s Syracuse office is located at AXA Tower 2 at 120 Madison St. It also has offices in Utica and Endwell.

Study: CDHP growth could save $57.1 billion per year

Employee Benefits & Human Resources, Subscriber Only

Enrollment growth in consumer-directed health plans (CDHP) could trim national health-care spending for the non-elderly by $57.1 billion per year, according to a new study from the RAND Corporation. Those savings would come if CDHPs grew to account for half of all employer-sponsored health-insurance plans in the country, according to the study, which was published

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Enrollment growth in consumer-directed health plans (CDHP) could trim national health-care spending for the non-elderly by $57.1 billion per year, according to a new study from the RAND Corporation.

Those savings would come if CDHPs grew to account for half of all employer-sponsored health-insurance plans in the country, according to the study, which was published in the May edition of the journal Health Affairs. CDHPs made up 12.4 percent of employer-sponsored plans in 2010, the study’s baseline.

It’s not out of the question for half of the country’s employer-sponsored plans to be CDHPs one day, according to Amelia Haviland, an associate professor of statistics and public policy at Carnegie Mellon University and an adjunct senior statistician at the RAND Corporation who was the study’s lead author.

“A little bit more than half of [surveyed employers] are offering these CDHP types of plans,” she says. “We had a good distribution of enrollment rates across our employers. There were plenty that had 50 percent enrolling, 40 percent enrolling.”

The $57.1 billion cost-savings estimate would represent a 4.2 percent spending decrease for the entire non-elderly population, including those who are not insured through their employers. It would be a 7.1 percent decrease for the population in employer-sponsored health plans.

CDHPs are high-deductible health plans coupled with tax-exempt personal-health accounts like health-reimbursement arrangements (HRA) and health savings accounts (HSA).

The RAND study’s estimated $57.1 billion savings assumes half of high-deductible plans are paired with an HSA and half are paired with an HRA. But the projected savings would be slightly higher if more employers paired plans with HSAs, according to the study.

If 100 percent of high-deductible plans were combined with HSAs, health-care spending would drop by $73.6 billion, the study found. If all plans were paired with HRAs, savings would be $41.1 billion.

That’s because employees seem to have more incentive to cut spending with HSAs, according to Haviland.

“HRAs are owned by employers, but you typically forfeit money if you leave the employer,” she says. “There’s a different kind of incentive to save with an HSA. If employees change jobs, the balance moves with them.”

The CDHP savings would come from patients using less health care and spending less when they do seek care, the study found. About two-thirds of estimated savings would result from fewer episodes of care, and one-third would come from lower spending per occurrence.

The lower spending per incident is a result of patients using fewer brand-name drugs, visiting specialists less, and going to the hospital less often than patients in traditional health plans. It also comes from patients undergoing fewer preventive services — something that the study authors found concerning.

“We picked out different kinds of preventive care we don’t want to go down,” Haviland says. “All of them went down. They didn’t go down a lot — 3 to 5 percentage points — but they went in the wrong direction.”

For example, preventive care for cervical cancer for females over age 20 dropped 4.7 percent in CDHPs, the study found. Preventive care for colorectal cancer for adults over age 50 fell 2.8 percent.

That’s troubling because many types of preventive care can actually save money in the long run by helping patients avoid expensive problems in the future, Haviland says.

“It means we would have a short-term drop in costs, but it wouldn’t be sustainable,” she says. “We could see costs rise down the line.”

The dip in preventive-care use comes despite the fact that CDHPs sometimes pay for such services — even if patients have not reached their deductibles. Consumers need to be made more aware of which preventive services their plans cover free of out-of-pocket costs, the study suggested.

“These plans are placing all of the responsibility for making care choices on your employees, and they need help with making those decisions,” Haviland says. “If employers are going to offer these plans, they have increased responsibilities to help their employees understand these plans and to engage insurance companies about providing top-notch cost and quality information to their employees.”

The 2010 federal health-care reform law is likely to encourage future growth in CDHPs, the study said. They are relatively inexpensive, allowing employers to avoid penalties that will be levied against firms that do not offer low-cost health insurance. And they typically include comprehensive benefits the act requires.

The RAND Corporation study examined claims from 59 large employers across the United States from 2003 to 2007. Researchers cannot disclose companies that participated in the study, but they included automobile manufacturers, telecommunications providers, consulting firms, retailers, and businesses in the food industry, Haviland says.

The RAND Corporation is a Santa Monica, Calif.–based nonprofit organization that aims to improve policy by providing research and analysis. Its CDHP study was funded by the California HealthCare Foundation and the Robert Wood Johnson Foundation.

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