Self-Insurer Dec 2010 by SIPC

December 2010

Survival

CourSe for SuperviSorS

What will you feel like when you offer Sun Life’s catastrophic claim forgiveness?

ABigKahuna Sun Life is one of the nation’s leading providers of medical stop-loss. We understand that large claims happen. Our No New Lasers at Renewal product comes with a Renewal Rate Cap. We don’t impose new or higher deductibles. And we pool renewal rates for price stability. Think of it as catastrophic claim forgiveness. For more details about how we can make things easier for employers, contact your local Sun Life stop-loss specialist or call 866-683-6334.

G ro u p L i fe • G ro u p D i s a b i l i t y • G ro u p D e n t a l • M e d i c a l S t o p - L o s s • Vo l u n t a r y B e n e f i t s

Group insurance policies are underwritten by Sun Life Assurance Company of Canada (Wellesley Hills, MA) in all states, except New York, under Policy Form Series 93P-LH, 98P-ADD, 02P-STD TDBPolicy-2006, 02-SL, 07-SL, and 01C-LH-PT. In New York, group insurance policies are underwritten by Sun Life Insurance and Annuity Company of New York (New York, NY) under Policy Form Series 93P-LH-NY, 06P-NYDBL, 02P-NYSTD, 98P-ADD-NY, 02-NYSL, 07-NYSL, and 01NYC-LH-PT. Group insurance policies are underwritten by Sun Life and Health Insurance Company (U.S.) (Wellesley Hills, MA) in all states under Policy Forms Series GP-A and GP-D (or appropriate state edition). Product offerings may not be available in all states and may vary depending on state laws and regulations. ©2010 Sun Life Assurance Company of Canada, Wellesley Hills, MA 02481. All rights reserved. Sun Life Financial and the globe symbol are registered trademarks of Sun Life Assurance Company of Canada. Visit us at www.sunlife.com/us. SLPC 22507 10/10 (exp. 10/12)

Siia oFFiCerS Chairman of the Board* Armando Baez, Vice President Global Benefits Group Foothill Ranch, CA president* Freda Bacon, Administrator Alabama Self-Insured WC Fund Birmingham, AL vice president operations* Alex Giordano, Executive Vice President / Chief Marketing Officer Starr Global Accident & Health Greenwich, CT

December 2010

FeaTureS

James E. Burkholder, President/CEO TPABenefits, Inc. San Antonio, TX

a Survival Course for Supervisors By Steven J. Link Executive Vice President Midwest Employers Casualty Co.

John Jones, Partner Moulton Bellingham PC Billings, MT Daniel Lebish, President & CEO HM Insurance Group Pittsburgh, PA

Siia CoMMiTTee CHairS Chairman, Alternative risk Transfer Committee Kevin M. Doherty, Partner Burr & Forman LLP, Nashville, TN

reporTS Stop Loss Carrier Over Efforts to Achieve Piecemeal Adjudication of Multiple Claims

Siia DireCTorS

Steven J. Link, Executive Vice President Midwest Employers Casualty Company Chesterfield, MO

Volume 28

8 From the Bench: Federal Court Chastises

vice president Finance/CFo/ Corporate Secretary* Robert Repke, President Global Medical Conexions, Inc. San Francisco, CA

Les Boughner, Executive Vice President & Managing Director Willis North American Captive and Consulting Practice Burlington, VT

2011 SIIA Committtees

ART Gallery: Captive Domiciles: Delaware

PPACA, HIPAA and Federal Health Benefit Mandates: Practical Q&A

Mather’s Grapevine

From the Desk of Erica Massey

DeparTMenTS Technology & Forward Thinking By Evan Dumas Project Coordinator - Senior Data Analyst The Phia Group, LLC

2 President’s Message 30

Chairman’s Report: Why SIIA Works!

Chairman, Government relations Committee Jay Ritchie, Senior Vice President HCC Life Insurance Co. Kennesaw, GA Chairwoman, Health Care Committee Beata A. Madey, Senior Vice President, Underwriting HM Insurance Group Pittsburgh, PA Chairman, international Committee Liz Mariner, Executive Vice President Re-Solutions Intermediaries, LLC Minneapolis, MN Chairman, Workers’ Compensation Committee Skip Shewmaker, Vice President Safety National Casualty Corporation St. Louis, MO

December 2010 The Self-Insurer (ISSN 10913815) is published monthly by

Self-Insurers’ Publishing Corp. (SIPC), PO. Periodical Postage Rates paid at Tustin, California and at additional mailing offices. Postmaster: Send address changes to The Self-Insurer, P.O. Box 1237, Simpsonville, SC 29681 The Self-Insurer is the official publication of the Self-Insurance Institute of America, Inc. (SIIA). Annual dues are $1495. Annual subscription price is $195.50 per year (U.S. and Canada) and $225 per year (other country). Members of SIIA subscribe to The Self-Insurer through their dues. Copyright 2010 by Self-Insurers’ Publishing Corp. All rights reserved. Reproduction in whole or part is prohibited without permission. Statements of fact and opinion made are the responsibility of the authors alone and do not imply an opinion of the part of the officers, directors, or members of SIIA or SIPC. Publishing Director - James A. Kinder Managing Editor - Erica Massey Editor - Gretchen Grote Design/Graphics - Indexx Printing Contributing Editor - Tom Mather and Mike Ferguson Director of Advertising - Justin Miller Advertising Sales - Shane Byars Editorial and Advertising Office P.O. 1237, Simpsonville, SC 29681 • (864) 962-2201 Self-Insurers’ Publishing Corp. Officers (2010) James A. Kinder, CEO/Chairman Erica M. Massey, President Lynne Bolduc, Esq. Secretary 2010 Editorial Advisory Committee John Hickman, Attorney, Alston & Bird David Wilson, Esq., Wilson & Berryhill P.C. Randy Hindman, Deloitte & Touche, LLP Jason Davis, Global Excel Management, Inc.

The Self-insurer P.O. Box 184, Midland, NC 28107 Tele: (704) 781-5328 • Fax: (704) 781-5329 e-mail: ggrote@sipconline.net. The Self-Insurance Institute of America, Inc. (SIIA) is the world’s largest trade association dedicated exclusively to the advancement of the self-insurance industry. Its goal is to improve the quality and efficiency of self-insurance plans through education and to create a general acceptance in the public and business communities of this viable alternative to conventional insurance. Founded in 1981, SIIA represent the interest of self-funded employers, independent administrators, utilization review companies, managed care companies, underwriting management companies, insurance companies, reinsurers, agents, brokers, CPAs, attorneys, financial institutions, manufacturers, trade associations, retail and service companies, municipalities, and others. SIIA designs and implements programs and services for the benefit of its members, the industry, and the general public to increase the general level of knowledge about self-insurance plans, achieve greater professionalism in the industry, and enhance the general well-being and mutual interests of its membership. SIIA achieves its goals and objectives through several means: n International/national conferences and industry forums which provide educational opportunities, with substantial discounts on the registration fees offered to SIIA members. n Distributed monthly, The Self-Insurer, features useful technical articles as well as updates on topical issues of importance to the self-insurance industry. n The Self-Insurance Educational Foundation (SIEF) conducts statistical research regarding the industry and grants educational scholarships to promising students whose studies focus on the self-insurance industry. SIIA enjoys federal representation in our nation’s capital through counsel and staff on key legislative and regulatory issues. SIIA is the only national voice encompassing the whole self-insurance industry. If your company is involved or interested in self-funding risk for workers’ compensation insurance programs, employee benefit plans, or property and casualty exposures, then it should be a member of the association serving the industry - the Self-Insurance Institute of America, Inc.

The Self-insurer

December 2010

PRESIDENT’S MESSAGE

ormer NY Yankee and Baseball Hall of Famer Yogi Berra once commented, “If you don’t know where you are going, you might end up someplace else”. If you think about these words, said certainly in jest at the time, they have a certain ring of truth. The 2010 year has been extraordinary for not only the self-funding industry, but the entire nation. Sweeping healthcare reform earlier this year, troubles in the financial services industry, unprecedented unemployment, and in case we haven’t forgotten, a 10-year war that affects someone in almost every family in America, have caused an outcry from our citizens for direction. The voters of our great country sent a loud and clear message to Congress and to state governments that change was not only necessary, but required. How the new leadership will react to these directives, only time will tell. With a fulltime presence in our nation’s capital, along with the representation of SIIA’s membership, we will have a unique opportunity to engage our elected officials.

as the industry leader in self-insurance, alternative risk transfer and worker’s compensation, Siia is poised and ready to guide, educate and advocate our association’s clear message on the value and importance of our mission.

The leadership of SIIA, its committee members, and SIIA’s staff recently met to prepare for not only educational conferences to be held in 2011, but also the initiatives and clear statements we will carry to Washington. It is with this volunteer leadership base, and SIIA’s professional staff, that I feel confident our voice will be heard. As we come to the end of year, I want to thank all of you for your support during my term as President of SIIA. It is has been an incredible honor and privilege to serve the membership, and I look forward to 2011 as your Chairperson. As always, I count on each and every one of you for your guidance and assistance in making sure we all wind up in the right place. Sincerely,

Freda Bacon President

www.siia.org

December 2010

The Self-insurer

December 2010

Survival

CourSe for SuperviSorS By Steven J. Link, executive vice president - Midwest employers Casualty Company

www.siia.org

December 2010

administrator. Time must also be spent investigating the accident. Productivity drops as a result of the curiosity of other workers surrounding the accident and the well being of their associate. Equipment may be left idle due to the injured worker’s absence. There are numerous consequences businesses suffer as a result of a job injury. These indirect or soft costs are typically three to five times the cost of the claim itself.

Should an accident occur, supervisors must be taught to respond quickly and appropriately. Their first priority should be to secure medical attention for the injured worker. Sometimes, first aid can

an ideal position to follow up with the injured employee and family members on an ongoing basis. They can also help a worker transition back into the workplace following an injury.

be rendered on site whereas other accidents dictate the injured employee is transported to a hospital. The supervisor must know the proper procedures ahead of time.

Supervisors are clearly the cornerstone of a successful self-insurance program.The importance of their training and education cannot be overstated. By developing comprehensive training tools for supervisors, companies can assure that their supervisors will be effective team players in the cost management process. n

How to Know What actions to Take Supervisors must understand what specific actions are required of them with respect to workers’ compensation. One of the more common responsibilities of supervisors is to maintain a safe workplace environment. This starts with setting and communicating safety objectives to their employees, making sure employees keep their workspaces neat and clean, and utilizing personal protection equipment. Equipment and machinery must be properly maintained and fully functional. Supervisors are responsible for removing hazards from the workplace such as empty boxes that pose a low level-tripping hazard or frayed electrical cords that increase the risk of shock or fire. Because of their familiarity with both the workplace and the employees, supervisors are in an excellent position to conduct self- inspections of the job site on a regular basis. Supervisors should be constantly vigilant in safety matters. Correcting hazardous situations and enforcing safety protocols should happen instantaneously and become second nature to the supervisor. Educating employees on doing the job safely and correcting employees engaged in unsafe behavior must be consistent, timely and documented.

How Supervisors Should Handle post accident 6

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December 2010

It is usually the supervisor’s responsibility to complete the first report of injury and file the proper paperwork with the claims administrator. Early reporting of claims is critical to managing claims costs. The supervisor is most likely to be in the best position to conduct an accident investigation. They have a thorough understanding of the job site and tasks to be performed. Working with employees, they can often determine how to prevent future occurrences by finding and correcting the “root cause” of the accident. Supervisors must have strong communication skills and they should treat all claims as legitimate and act with compassion and concern toward the injured party. Supervisors are in

Steven J. Link is one of the founders of Midwest Employers Casualty Company (MECC). Mr. Link is responsible for: the development of MECC’s marketing and branding initiative and the enhancement of the company’s “Client Service Strategy”. Since its formation in 1986, MECC has focused exclusively on providing Workers’ Compensation Excess insurance products to individual employers and groups across the country. For more information on MECC visit their website and sign up to receive MECC’s self-insured bulletins. MECC is a member company of W.R Berkley Corporation.

The Self-insurer

December 2010

Bench from the

By Thomas Croft

Federal Court Chastises Stop loss Carrier over efforts to achieve piecemeal adjudication of Multiple Claims (Bekaert Corp. v. Standard Security Life Insurance Company of New York, Inc., No. 5:09 CV 2903, in the United States District Court for the Northern District of Ohio, October 8, 2010) Comment: Standard Security Life Insurance Company of New York (“SSLICNY”) had a great time saving idea. The plaintiff group didn’t much care for it. The Court, well, really didn’t like it, and went to great lengths to explain why. This case illustrates that sometimes Court scheduling orders are best left alone. Factually, the case involved four claims: the primary one, for Participant “A,” totaled $474,455 from the ground up,” meaning prior to the application of any deductibles. The other three, for Participants “B,”C,” and “D,” were $237,094, $225,542, and $289,517, respectively—also from the ground up. The stop loss policy had a $200,000 specific attachment point and a $111,500 aggregating specific deductible, referred to by the Court (and perhaps in the policy) as a “one-time Self-Funded Liability.” Kindly tolerate a short digression on this terminology, which I find to be a bit “off.” Self-insured plans are entirely self-funded, so there is no such thing as a “one time self-funded liability,” unless there is only one claim under the Plan in a given year. In other words, everything is self-insured, it’s just a question of when the stop loss reimbursements begin, which is typically determined by the amount of the specific attachment point or deductible. The specific deductible happens all

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December 2010

the time – that is, as to each stop loss claim. These are “self-funded liabilities” too. The separate aggregating specific deductible happens only once, and is essentially an across-the-board additional specific deductible applying to the whole group. Calling the aggregating spec a “one time SelfFunded Liability” implies none of the other group’s liabilities are self-funded, and that there is only one “self-funded liability” under the policy, neither of which is accurate. Anyway, back to the story. It is impossible to tell what the underlying dispute in the case involves on the merits, because the opinion is not about the merits. Instead, it is a twelve page discussion of the

The Court had entered a Scheduling Order which called for completion of discovery by September 30, 2010, completion of discovery from expert witnesses by November 12, 2010, the filing of dispositive motions (such as motions for summary judgment) by November 19, 2010, and trial on February 28, 2011. In the same Order, the Court specified that each party would be entitled to file only one summary judgment motion. On September 10, 2010, SSLICNY filed a motion for partial summary judgment, apparently only as to the Participant “A” claim. Shortly thereafter, the Court issued an order directing SSLICNY to: 1) certify that the “Participant “A” motion was the only dispositive motion that it intended to file in the case; or 2) withdraw the motion; or 3) explain “The necessity and propriety of filing the motion at this early date and to seek leave to do so.” SSLICNY opted for the third alternative, and filed a motion seeking leave to file its partial summary judgment motion. Concurrently, SSLICNY filed a motion to stay (i.e., halt) discovery until such time as the Court ruled on its motion for partial summary judgment.

delay resolution of the case, and that SSLICNY clearly intended to file a further dispositive motion as to the remaining claims once the primary claim issues had been decided. Further complicating things, the Court interpreted one of plaintiffs arguments to be that the aggregating spec had actually been applied to two of the Participant B, C, or D claims (two of which SSLICNY had apparently paid), such that they had been underpaid, if it was determined that the primary claim was eligible. Plaintiff further vigorously resisted the motion to stay discovery, arguing that there would not be sufficient time to finish discovery on the remaining claims before the existing cutoff date for filing dispositive motions, ultimately resulting in a delay of the trial schedule. The Court resolved the matter by denying SSLICNY’s motion to file more than one motion for summary judgment and1denying SSLICNY’s to Stay VHN_SelfInsurer_4.5x6.75_bw:Layout 6/24/09 11:40Motion AM Page 1 Discovery, but ultimately extending discovery and the related deadlines for filing

briefing schedule, precipitated by SSLICNY’s effort to achieve a summary judgment ruling on the primary claim before presenting the issues involving Participants B, C, and D to the Court. SSLICNY’s basis for doing so was articulated in terms of the Participant A dispute as being the crux of the case, which, if resolved early on, might lead to a settlement of the entire matter.

YOU SAY,

“I could use a creative way to attract new health-plan business.” WE SAY,

“We crafted a lower-priced PPO network. How’s that for creativity?”

Then ensued briefing on whether or not the Court should allow the filing of the motion – briefs in support by SSLICNY, briefs in opposition by the plaintiff group, and reply briefs by SSLICNY. The plaintiff argued, among other things, that isolating the primary claim would actually complicate and

When a client wants to self-insure for the chance to keep the insurer’s profit, VHN PLUS provides the opportunity. For the client’s employees, it provides over 12,000 healthcare professionals and 80-plus hospitals in network. To learn more, including how to use VHN PLUS through fully insured carriers, please visit www.vhn.com/plusnetwork; or contact Jim Gore at jgore@vhn.com or 800-989-3837 ext. 105. And put our creativity to work for you. 7400 B EAU FONT SPR I NGS DR IVE, SU ITE 505 R I C H M O N D , V I R G I N I A 2 3 2 2 5 • www.vhn.com

The Self-insurer

December 2010

motions by approximately 30 days each. The trial date was likewise postponed, but only by about two weeks. In doing so, the Court expressed its obvious frustration with the whole process by which SSLICNY had attempted to “save time and judicial resources” by its filings: Labor can revoke the safe harbor and seek enforcement. Finally, the regulatory safe harbor does not preclude unhappy participants or beneficiaries from suing. Finally, the Court feels the need to comment on the notion that these two motions and the Proposed Motion for Partial Summary Judgment in any way served the interests of judicial economy. This Court has now spent an inordinate amount of time considering these two motions and, in order to do so, also reading the entire proposed dispositive motion in its poorly-filed condition, which was a significant and time-consuming challenge. This has amounted to “satellite litigation” for no good reason… Ouch. The “poorly-filed condition” of the carrier’s brief was further addressed by the Court in this footnote: [T]his motion…completely ignores the requirements of electronic filing with respect to attachments to motions. Rather than separately filing each attachment/exhibit, with a proper description of the attachment for easy reference by the Court, defendant simply scanned all the documents into a single attachment that is 139 pages long and contains no exhibit stickers, bates

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December 2010

numbers, or any other identifying information. Both parties are placed on notice that any document filed in that manner in the future will be stricken from the record and the offending filer will have to show good cause why the Court should permit re-filing. So much for those composite .pdfs. To be fair, SSLINY’s idea was not a particularly unusual one. Some courts are often willing to entertain modifications to their scheduling orders for good reason, especially where the parties consent. But when they do not, there is the risk of drawing the ire of the Court in the manner illustrated above. A former partner of mine once told me that federal judges, like gorillas, “sleep where they will.” Indeed they do. n

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Administrative and Outsourcing Services Benefit Solutions Administrative and Outsourcing Services Self-Funded Plans Benefit Solutions Self-Funded Plans The Self-insurers publishing Corp. All rights reserved.

The Self-insurer

December 2010

2011 SIIA COMMITTEES alTernaTive riSK TranSFer CoMMiTTee CHAIRPERSON Kevin Doherty Partner Burr Forman Nashville, TN Donald McCully Roundstone Washington, DC andrew Cavenagh Senior VP, Group Captive Division Berkley Accident & Health, LLC Hamilton Square, NJ linda Hennemann Senior Underwriter Mgr., Programs Safety National Casualty Corp. St. Louis, MO Steven a. McFarland Director of Underwriting Medical Excess Indianapolis, IN Cori M. Cook Vice President and General Counsel EBMS Billings, MT eric Kinzer Head of Product Development A&H Ctr of Excellence Zurich North American Commercial Parsippany, NJ Julie Mcpeak Attorney Burr Forman Nashville, TN

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December 2010

JoĂŤl Thompson President AuclairRe International, Inc. Florham Park, NJ

Stephen DiCenso Consulting Actuary, Boston Casualty Practice Milliman Wakefield, MA Christopher l. Kramer Director of Marketing - Captives ULLICO Washington DC

Ted Hall President CHSI Captive Insurance Managers Las Vegas, NV lisa Marecki Supervising Managing Director Discover Re Farmington, CT

Don rousso President Alta Holdings, LLC Irvine, CA

Beth Turbitt Vice President of Business Development QBE the Americas New York, NY

Keith Fawcett President Brentwood Reinsurance Intermediaries, Inc. Brentwood, TN

GovernMenT relaTionS CoMMiTTee

Greg lang Senior Vice President Munich Re America Princeton, NJ

CHAIRPERSON Jay ritchie Senior Vice President HCC Life Insurance Company Kennesaw, GA

Glenn D. Saslow, Cpa Audit Partner & Dir., Ins. Practice Group Saslow Lufkin & Buggy, LLP Avon, CT Marcia Giesler Specialty Sales, Alternative Risk Sedgwick Claims Management Services, Inc. Dublin, OH James leroy Senior Vice President Bus. Development Meadowbrook Insurance Group Bloomington, MN

Bob Clemente President Specialty Care Management, LLC Warren, NJ Karin James Assistant VP, Stop Loss Operations Sun Life Financial Windsor, CT andrea Balogh Senior V.P. and General Counsel Prodigy Health Group, Inc. Amherst, NY

Michael Fry Executive Vice President Symetra Financial Bellevue, WA

Brian rotty Executive Director, TPA Services MMSI Rochester, MN

Jim Hoitt Vice President of Sales R.E. Moulton, Inc. a OneAmerica ® Co. Danvers, MA

anthony Mistretta Attorney HM Insurance Group Pittsburgh, PA

Thomas Cardwell Executive Director, Account Management The TriZetto Group Naperville, IL

Catherine Stowers Senior Attorney Kreig DeVault LLP Indianapolis, IN

Tom Belding President Professional Reinsurance Marketing Edmond, OK

richard Hare Executive Director Tri-County Schools Insurance Group Yuba City, CA

Horace Garfield President AEGON Alliances, Inc. Louisville, KY

Debbie Schultz Executive Vice President J. Smith Lanier & Co. Deluth, GA

Mark nichols Managing Director Markel Accident & Health Glen Allen, VA

Jerry Castelloe Vice President CoreSource, Inc. Charlotte, NC

Bruce Bigsby President & CEO Global Care Alpharetta, GA

philip Healy Executive Director A.W.A.N.E. Peterborough, NH

Gerald Gates President Stop Loss Insurance Services Worcester, MA laura ross Vice President MphasiS/Eldorado Phoenix, AZ

Mike Sullivan President HM Insurance Group Pittsburgh, PA

HealTH Care CoMMiTTee

Gary D. D’orsi Director, Sales and Marketing Pequot Healthcare Mashantucket, CT robert Melillo National Sales Consultant Sun Life Financial Windsor, CT Heidi Svendsen Vice President, Clinical Programs OptumHealth Care Solutions Minneapolis, MN Denise Doyle President Stop Loss Insurance Brokers, Inc. Boston, MA elizabeth Midtlien Senior Vice President, Sales StarLine USA, LLC Minneapolis, MN Steven Touché President Mountain States Administrative Services Tucson, AZ

Mollie Brown President Coalition America, Inc. Atlanta, GA

CHAIRPERSON Beata Madey Senior Vice President, Underwriting HM Insurance Group Pittsburgh, PA

Jim Farley President & CEO The J.P. Farley Carporation Westlake, OH

ashley Gillihan Attorney Alston & Bird LLP Atlanta, GA

arlene Cayetano VP of Underwriting Chartis-Medical Excess Indianapolis, IN

Donald napier Senior Vice President, COO POMCO Syracuse, NY

The Self-insurer

December 2010

David angelone Partner One Hundred Years, LLC New York, NY

David Grider SVP, Marketing HCC Life Insurance Company Kennesaw, GA

Michael Feighan Vice President Worldwide Underwriting Chubb Accident + Health Whitehouse Station, NJ

Mark Carney President & CEO HCC Medical Insurance Services Indianapolis, IN

Chacko Kurian President & CEO Complete Health Systems, LC Warrenville, IL

Mark Hopkins Sr. Director, Compensation, Benefits & HRIS Mohawk Industries, Inc. Calhoun, GA

Joseph antonell President, Bill Review Services Health Systems International, LLC Miami, FL

Gary McGeddy Executive Vice President Fairmont Specialty, a Div. of Crum & Forster Eatontown, NJ

Dominic Hagger Director - RFIB Non Marine RFIB Group Limited London, United Kingdom

Guillaume Deyback President & CEO Europ Assistance Holdings Ltd. Bethesda, MD

patrick leroy CEO, Europ Assistance Holdings Ltd. West Sussex, United Kingdom

Steven Jacobson CEO Olympus Managed Health Care Miami, FL

David rennie VP Development for North America Global Excel Management Toronto, Ontario, Canada Kevin Hall Manager, Marketing HealthFirst TPA, Inc. Tyler, TX adam russo Chief Executive Officer The Phia Group, LLC Braintree, MA James Hamilton CEO, Accident & Health North America AXIS Global Accident & Health Chicago, IL Bob Shupe President ESPinc Brentwood, TN

Greg arms Global Head, Employee Benefits Practice Marsh Inc. New York, NY

inTernaTional CoMMiTTee

Domenic Herberz BDAE Hamburg, Germany

CHAIRPERSON liz Mariner Executive Vice President Re-Solutions Intermediaries, LLC Minneapolis, MN

John M. lord Senior Vice President Zurich Accident & Health Framingham, MA

CHAIRPERSON Skip Shewmaker Vice President Safety National Casualty Corporation St. Louis, MO

David Boucher President & CEO Companion Global Healthcare, Inc. Columbia, SC

Joe Burgess Sr. Executive Vice President CHSI Reno, NV

Judy Hines President Hines & Associates, Inc. Elgin, IL

Tom Hebson Sr. Vice President and Regional Executive Heffernan Group Chesterfield, MO

luis alexandre Chicani President Bencorp Säo Paulo, Brazil naz Farrow Executive Vice President Colonial Medical Insurance Co. Ltd. Hamilton, Bermuda

peter lozier Exec.V.P. Sales/Mktg & Provider Relations CMN, Inc. Thornhill, Ontario, Canada

Juli Warren Senior Manager Blue Cross Blue Shield of FL Jacksonville, FL

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December 2010

anita Messal COO Optum Health International Minneapolis, MN

WorKerS’ CoMpenSaTion CoMMiTTee

Duke niedringhaus Vice President J.W. Terrill, Inc. Chesterfield, MO

ed Costner President Casualty Actuarial Consultants, Inc. Brentwood, TN

Charlie Caldwell President & CEO Midlands Management Corp. Oklahoma City, OK

Steve Kokulak Vice President, Workers’ Comp. MagnaCare New Brunswick, NJ

John Herzfeld Consulting Actuary Milliman Wakefield, MA Jeff norman President Employer’s Claim Management, Inc. Montgomery, AL Kimble Coaker CEO AL Trucking Association Fund Montgomery, AL

Jim poerio Managing Shareholder Poerio & Walter Inc. Pittsburgh, PA lori Daugherty Divisional President - Pharmacy PMSI Tampa, FL Shawn Mackey Assistant Vice President - Sales Midwest Employers Casualty Co. Tulsa, OK

Mark Jackson Vice President Paradigm Management Services Concord, CA

David D. price Vice President Business Development POMCO Group Syracuse, NY

Christine novak Director of Client Services, NC Brentwood Services Administrators, Inc. Charlotte, NC

Carol Dipietro Regional Vice President Meadowbrook TPA Associates Andover, MA

Chris Mason Chief Operating Officer USATPA, Inc. Syracuse, NY Michael Schroeder President Roundstone Management, Ltd. Westlake, OH Keith Tagman Partner Shores, Tagman, Butler & Co. P.A. Orlando, FL Celia Winchell Vice President - Product Development Broadspire Dallas, TX Stu Thompson Fund Manager The Builders Group Eagan, MN Mike Zucco Director of Program Development AL Self-Insured Workers’ Comp Fund Birmingham, AL

The Self-insurer

December 2010

TeCHnoloGy&

>>>Forward Thinking By evan Dumas, project Coordinator - Senior Data Analyst, The phia Group, LLC

www.siia.org

December 2010

ow many of us have a Smartphone or a GPS? How many of us utilize the internet in some capacity on a daily basis? These technological innovations have dramatically changed the way we live, interact, socialize, conduct business and even the way we think. Geographical boundaries are no longer restricting the flow of information, rapidly giving way to the electronic blitzkrieg of global communication. People and systems are connected in ways and numbers like never before. There is one omnipresent commonality in each of these new connections: Data. Whether we’re thinking of text or images, movies, or even pure binary or hexadecimal code: rest assured that something, somewhere, can read, interpret, and display it. That being said, if data can be read, then it can be analyzed. Within the next few years, we can expect exponential advances upon the innovations of the last decade. How do we prepare for this? While it is nearly impossible to be ahead of the curve, we CAN attempt to keep up with these advances by embracing the technology available to us and cultivating a more forward thinking approach when it comes to the analysis of medical claim data. Subsequently, the self insured community will develop a competitive advantage over our fully insured counterparts. There are developers out there in other fields that have already embraced the tenet of forward thinking; the web/software developers, the game designers, among others. These technophiles have created a series of input/output, data crunching, logic constructs known as engines. Metaphorically, there could not be a more proper term as it relates to the way WE evaluate data. The increased utilization of these engines will no doubt be the driving force in the way we will come to analyze claim data. One of the most important engines in regard to data analysis is also the most commonly used. A Search Engine is a system designed to retrieve information stored on a computer system or network, providing the user with an interface that enables them to specify search criteria and desired output or display settings. The methodology among search engines may vary, but typically the use of GUI (graphic user interface) software allows for these queries to be set by the combined use of text fields, drop-down menus, or by clicking on selected parameters. The engine will then find items of interest algorithmically based on similarity and relevance, based on the parameters set forth by the user. Additionally, Boolean Logic can be utilized to ensure specific search results. Each of these methods allows the user to concentrate on data that may have a higher priority, and prevent Information Overload. For our purposes, the search engine works in tandem with Databases and Software Engines. Statisticians have been using these programs for years, capturing and assessing data in a multitude of diverse job fields. Government agencies and news organizations utilize statisticians on a constant basis. When sports broadcasters rattle off player or team stats and how they relate to the game at hand, it is a statistician that provides them with this information. In comparison, anyone who analyzes and evaluates claim data should have a mindset akin to that of a statistician. If enough statistics are calculated and collected, patterns begin to emerge. The proper analysis of these patterns can have a profound impact on the way a company operates. If the patterns show that certain data is valuable or that other data is essentially useless, it becomes possible to further refine the analytical process. Demographics play an important role in the evaluation of medical data. For instance, we can make certain assumptions based on key demographics such as age, location, etc. However, it is the data buried deeper in a claim set that provides the most telling information. We need to cater data sets to suit our specific needs. The optimization of a data set is a cumulative process. The exclusion of unnecessary data is achieved with a “filter” mentality. Large amounts of data are whittled down and filtered out to produce an end result that reflects any client-specific thresholds or criteria.

If arbitrary claim data can be easily eliminated from a data set under certain criteria, it is no longer necessary to analyze it under others. For instance, if we are catering our data set to exclude younger claimants, and to exclude physical therapy claims, we will not have to analyze both the Date of Birth and ICD headers for redundant information. If a young claimant has been removed from our data set, then that claimant’s corresponding physical therapy claims will no longer be present for us to waste time reviewing. Once again, the focus remains on relevant data. In addition to the analysis and optimization of claim sets, custom reports can be incredibly useful, as they can provide a multitude of valuable records and statistics. This information also allows us to identify trends as they are forming. We can compare historical reports to those that were recently created, and judge whether any augmentation is necessary. It is a combination of resources that makes this all possible. Software and logic routines work in tandem with their human counterparts, the Data Analysts. It is an analyst’s responsibility to recognize patterns that may be unique to a particular data set. The user interface of any claim analysis software is a key element in achieving this goal. An analyst needs to be able to quickly and efficiently alter a data set in response to specific trends and information. Until computer systems start thinking for themselves, it is up to us to make these decisions, whether planned for or on-the-fly. While medical data may be a 1’s and 0’s representation of a person’s well-being, the analysis of this data is hardly so “black and white”. Logic routines do not have the ability to make judgment calls, software can’t always decide on the best possible course of action. All the programming in the world cannot plan for every scenario. Buried deep within a claim set, there are tales just waiting to be told. Using certain software applications, similar claims can be grouped and dollar amounts can

The Self-insurer

December 2010

be aggregated together to reveal the potential value of a set of treatments. Based on this collection of grouped claims, we can begin to piece together the different elements of these tales. Based on Provider data alone, we can come to some conclusions as to what may have transpired in a certain member’s history. We can make the reasonable assumption that some providers have a greater likelihood of “providing” services that are more indicative of incidents with potential third party liability. Categorically defining Provider Types allows us to shift our focus to providers such as Ambulance or Med-Flight companies. In contrast, there are a multitude of conditional indicators that signify a person’s proclivity for certain injuries or ailments. Knowing this, we can use the logic process to treat claims that contain these indicators differently than those that do not. What does the future hold? Through the use of technology, we can adapt our current processes to allow more in-depth trend analyses. For instance, we can track member or group medical history. We

will be able to determine if the frequency of provider visits has increased or decreased over time. We can determine the ratio of office visits to specialists, surgery to lab work, etc. Armed with this information, companies can rework their procedures and rewrite their plan documents to reflect these trends. Pharmacy data that is stored in Data Warehouses can be analyzed to identify key demographics. It can tell us what individuals, visit which pharmacies, for which medications. We will be able to determine what plans these individuals have and how excluded or generic medications affect their prescription purchases. Pharmacies and other healthcare providers could potentially use this information for advertising purposes. Pharmaceutical companies can use this data to decide when and where to distribute their free samples to providers. Fewer dollars spent on advertising, stocking, and site scouting will allow these providers to keep their costs down, potentially charging insurance carriers less for their products and services. If we can cultivate these relationships, we will again be more competitive with the fully insured market. In an increasingly paperless world, we can foresee that plan members under certain policies may be given access to Web-based e-mail or medical mailboxes, where they can review ALL their medical information in one place, including medical records. With the utilization of laptops and internet capable Smartphones, patients can have access to their records on-the-go. Applications can be built to display and forward pertinent medical information such as emergency contacts, allergies and PcP information to hospitals or other providers. Knowing that internet connectivity is ever increasing, we can work with our clients to implement a purely electronic questionnaire system, thereby eliminating the need for paper and postage. Accident questionnaires and EOBs (Explanation of Benefits) can be e-mailed directly to the intended recipient.This will not only lessen the burden on mailrooms across the country, but HIPAA compliance can be more easily regulated and monitored through

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December 2010

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the use of password protected access. Until that time arrives, we can continue to keep costs down by optimizing data sets before questionnaires are mailed. Preliminary analysis of the data ensures that a “quality over quantity” approach is utilized. This not only cuts down on the cost of postage, but improves member relations as well. By “going green” and keeping costs down, companies will find that the “green” that we’re talking about, is in the form of plan dollars that can be reallocated into their group funds. The utilization of Claim Modeling Software will enable us to catalog and track viable cases, identify key components of the associated claims, and build a claim model to then compare to our database. We will be able to identify certain claim scenarios that were similar to previously viable cases. For instance, if we see that a member shows a certain treatment frequency, or treats at his PcP, a specialist and then a subsequent rehab facility, we can build a claim model of these associated treatments and see if other members’ claims show similar characteristics. Again, the appropriate use of technology allows for faster identification of third party liability and subsequent recoveries. This level of customization makes it possible to identify potential accidents based solely on the claim data itself, thereby increasing the probability of recovery. The more sophisticated that technology becomes, the easier it is to plan for, and react to changing environments. Forward thinking can keep us ahead of the curve.

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Our driving metaphor is now taking shape. In this case, software will serve as our vehicles. Within these vehicles lie the engines, fed by fuel in the form of high octane, optimized claim data. Data analysts will be our drivers and IT personnel will serve as our mechanics, maintaining these various components. If recovery serves as our destination, then forward thinkers will serve as the GPS navigation.

capabilities with the recent

In this era of exponential innovation, we must breed a culture of multidimensional leadership and implement a management strategy to reflect this ideology. The proper use of technology will allow the Self Insured community to utilize their employees more effectively. If we can further refine our process to allow for faster identification of recovery potential and a faster, more accurate exchange of information, companies can focus more on the recovery process itself.

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More recoveries, more often, bring us closer to our ultimate goal of curtailing the rising cost of healthcare through the reimbursement and proper allocation of funds. If we can cultivate the embrace of new technology, generate revenue streams through a mutually beneficial relationship with providers, encourage forward thinking and streamline our efforts to eliminate waste; inefficiency will give way to proficiency. Status quo will give way to status pro, and the individuals that subscribe to this school of thought will find that their passion for technology is mirrored by their passion the self-insured industry. n

11:08 AM

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The Self-insurer

December 2010

arT GALLERY By Dick Goff

Captive Domiciles: Delaware First State enjoys Fast Start in Captives

chool kids know Delaware as the First State because it was first to ratify the U.S. constitution. Business managers think of Delaware first to incorporate – the state currently is home to two-thirds of the Fortune 500, half of the companies traded on NYSE or NASDAQ and about a million businesses in total.

about,” she says. She included a captive insurance plank in her successful run for the commissioner’s office in 2008, and the Department of Insurance Bureau of Captive and Financial Insurance Products was established the next year. With a deep private sector background, Commissioner Stewart invested to hire lawyers and MBAs experienced in insurance to run the new bureau. “I brought in the top professionals I could find and really stuck my neck out that it would work,” Commissioner Stewart says. “Now we are a success story, and we’re interested in global business, not just being one among many U.S. domiciles.”

Now the ART world will know Delaware as one of the fastest growing captive domiciles. Delaware currently has 64 captives with 23 having been licensed since its Captive Bureau was formed in 2009. “Captive growth here is about what Delaware does best, and that is corporate law,” says Insurance Commissioner Karen Stewart. “You can’t argue against the fact that Delaware gets it. Business comes first here, it’s our bread and butter,” says the enthusiastic commissioner who is deeply committed to the success of this captive domicile and its licensees. As a deputy commissioner in earlier years, Commissioner Stewart was mystified that Delaware was letting the captive business slide by, considering the depth of its regulatory and legal infrastructure. “This is a state where you can argue the fine points of insurance and the judges know what you are talking

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December 2010

With the state’s deep experience in corporate law, it was easy for Delaware’s captive bureau to create an innovative structure identified as Delaware Series Entities. This is a new twist on incorporated cell captives in which a limited liability company or trust may serve as the special purpose captive to any number of Series LLCs providing a variety of coverages. The series business units (SBU) are allowed special purpose captive flexibility, may be set up with no individual capital and surplus requirements, and the entire structure pays one premium tax. “The serialized LLC or statutory trust captive structure is unique among captive domiciles in the U.S. or offshore,” says Ed Ianni, the bureau’s director of strategic development. Ianni took that message to the World Captive Forum held at Scottsdale, Arizona, last month with a presentation titled “The New Frontier: Innovative Captive

Strategies in the Converging Space of Capital and Risk Management.” He cited the convergence of captive risk management, business capital strategies and trust and estate planning as comprising “The Delaware Advantage.” Commissioner Stewart targeted employee benefits captives as one strategic focus of the bureau. “In my experience in the private sector and with insurance departments of other states it was clear that benefits ranks highest among organizational risk management concerns,” she says. “We want to offer reasons employers may want to consider a captive for benefits in ways similar to Coca-Cola and Columbia Energy.” She noted that captives can provide relief to overburdened balance sheets because they can take over some required accruals. By last month Delaware had licensed nine benefits captives. The commissioner pointed out the bureau’s strong infrastructure of

actuaries and examiners managed by John Tinsley, special deputyexaminations. “As we also regulate 140 traditional insurance companies, we maintain a strong backup staff,” Commissioner Stewart says, adding that even with the current flow of applications the department can maintain a timely pace in reviewing companies for licenses. The Delaware Department of Insurance is developing a continuing education program in conjunction with the University of Delaware to support the state’s captive program. A work group is now designing the program and classes are scheduled to begin in summer 2011. “This initiative by the commissioner’s office is to develop an interdisciplinary professional education program that will address all aspects of captive risk management,” says Mary Jo Lopez, director of business development for the Department of Insurance.

Ms. Lopez points out that the department is considering financial support for tuition for Delaware residents and employees of Delawarehoused companies. “We feel this program will serve the educational needs of the market and also promote economic development in the state,” she says. As the continuing education program becomes successful additional courses will be added in the future. “Our message to the risk management industry appears to be working,” says Steve Kinion, director of the bureau. “We aren’t just paying lip service to advanced captive structures or educational programs – you can tell we’re serious about captives.” n Dick Goff is managing member of The Taft Companies LLC, a captive insurance management firm and Bermuda broker at dick@taftcos.com.

The Self-insurer

December 2010

PPACA, HIPAA AND FEDERAL HEALTH BENEFIT MANDATES:

Practical

The Patent Protection and Affordable Care Act (PPACA), the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and other federal health benefit mandates (e.g., the Mental Health Parity Act, the Newborns and Mothers Health Protection Act, and the Women’s Health and Cancer Rights Act) dramatically impact the administration of self-insured health plans. This monthly column provides practical answers to administration questions and current guidance on PPACA, HIPAA and other federal benefit mandates. Attorneys John R. Hickman, Ashley Gillihan, Carolyn Smith, and Johann Lee provide the answers in this column. Mr. Hickman is partner in charge of the Health Benefits Practice with Alston & Bird, LLP, an Atlanta, New York, Los Angeles, Charlotte and Washington, D.C. law firm. Ashley Gillihan, Carolyn Smith and Johann Lee are members of the Health Benefits Practice. Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner’s situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation. Readers are encouraged to send questions by E-MAIL to Mr. Hickman at john.hickman@alston.com

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December 2010

Q&A

Health Care reform Guidance update: new prescription requirement for oTC Medicines and Drugs and Guidance on Waiver process for “Mini-Med” plans

n Friday, September 3, two new pieces of guidance were issued relating to requirements under the Patient Protection and Affordable Care Act (PPACA):

• The IRS issued Notice 2010-59 (the “OTC Notice”), which clarifies the limitation imposed by the PPACA on the eligibility of over-thecounter (OTC) drugs and medicines for tax-free reimbursement under an employer-sponsored health plan.

• The Department of Health and Human Services (HHS) issued guidance for employers regarding how to obtain a waiver from the restricted annual limits imposed under PPACA. The guidance is issued in the form of a memorandum posted on the HHS website at http://www.hhs.gov/ociio/regulations/patient/ ociio_2010-1_20100903_508.pdf. This article addresses the impact that this guidance will have on group health plans and what actions need to be taken now in response to the guidance.

that the prescription identify the name and quantity of the drug, and that it be signed (if in writing) and issued by certain medical praticitioners (e.g., a physician, physician assistant or nurse midwife). If all of the applicable state law requirements are satisfied, Bob can be reimbursed for the aspirin under his FSA plan. Practice Pointer: The OTC Notice prerequisite that state law requirements for a prescription be satisfied is somewhat awkward in that it requires application of state rules for tax purposes that are NOT required to be satisfied for an individual to purchase a medication – since the medicine is available OTC, after all. Most TPAs are not accustomed to monitoring, and ensuring compliance with, the prescription rules applicable under each state’s laws. Nevertheless, the OTC Notice provides a substantiation solution that will ease administration of this otherwise burdensome compliance requirement. See “What substantiation is required for OTC drugs or medicines” below for more details.

What substantiation is required for OTC drugs or medicines (other than insulin)? The OTC Notice indicates that proper substantiation is provided if the participant provides either of the following: • a receipt from the pharmacy that identifies the purchaser (or the individual to whom the prescription was issued), the date, the amount and the Rx number; or • any other “traditional” manual substantiating documentation without an Rx number (e.g., a sales receipt that identifies the medicine or drug, amount and date purchased), provided the prescription from an authorized issuer is provided. The first method of substantiation, consistent with prior informal IRS advice, allows the TPA to use the Rx number as a proxy for eligibility under Section 213. Under the latter method, the participant can apparently pick up the OTC and pay for it at the front of the store with no pharmacist interaction, but then the burden falls on the TPA to ensure that that the prescription satisfies the applicable requirements for a prescription in the state in which the expense was incurred. In either case, the physician must actually prescribe the drug, but in the latter case the prescription apparently need not be “filled” by a pharmacist. Practice Pointer: TPAs may find it difficult, if not impossible, to track “prescription” requirements in each state. Therefore, many TPAs may decide to limit approved substantiation to a receipt from the pharmacy with the Rx number unless other ways to ensure that the prescription meets applicable state requirements can be found.

What is the impact of the OTC Notice on use of debit cards to purchase OTC drugs or medicines? Currently, health debit card systems allow for the purchase of eligible medical expenses (including OTC medicines and drugs) under two alternate adjudication systems. First, arrangements that satisfy IRS requirements for point-of-sale adjudication (so-called “IIAS,” or Inventory Information Adjudication Systems) can be employed by any merchant, regardless of whether it is a health care merchant. Alternatively, certain merchants that qualify as “90% Merchants” can allow for health debit card use without an IIAS system. A 90% Merchant would include any drug store or pharmacy whose gross receipts for medical care (including eligible

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December 2010

OTC items) during the prior taxable year equals or exceeds 90% of the store’s gross receipts (determined on a location-by-location basis). As noted below, whether a merchant is a 90% Merchant or any other merchant that employs an IIAS compliant system makes a huge difference under the OTC Notice. The OTC Notice states that current health debit card systems are “not capable of substantiating compliance with the [new OTC requirement].” As a result, the Notice concludes that health FSA and HRA debit cards may not be used to purchase OTC medicines or drugs on and after January 1, 2011 (subject to the January 15 transition period discussed below). These comments start with the premise that current IIAS arrangements are unable to determine whether a valid prescription was issued. However, the OTC Notice solicits comments “on new designs for debit card systems that could provide substantiation that an over-the-counter medicine or drug was prescribed.” Thus, an electronic debit card point-of-sale system (IIAS or otherwise) that requires proof that a valid prescription has been issued prior to releasing funds should be acceptable to IRS. More guidance on this issue would be welcome. In the interim, participants may continue to use health debit cards for eligible OTC medical items other than medicines or drugs under an IIAS system. In addition, compliant cards can continue to be used at drug stores and pharmacies that qualify as 90% Merchants, since such stores are not currently required to substantiate medical items at the point of sale or otherwise use an IIAS system. Moreover, in determining whether a store is a 90% Merchant, otherwise eligible OTC medicines and drugs continue to count as eligible medical

expenses, regardless of whether a prescription has been issued. Practice Pointer: The OTC Notice indicates that the IRS will not challenge the use of debit cards for OTC drugs and medicines through January 15, 2011, provided the other requirements set forth in the applicable debit card guidance (e.g., Notice 2006-69) are satisfied.

What is the effective date of the new OTC Rule? The new rule applies for OTC medicines or drugs (other than insulin) incurred on or after January 1, 2011, without regard to the plan year of the plan. Thus, a plan with a fiscal plan year must begin complying with the rule mid-plan year. Example: ABC sponsors a health FSA with an October 1 through September 30 plan year. Bob purchases Claritin on December 1, 2010, without a prescription. He submits his reimbursement request and is subsequently reimbursed. On January 2, 2011 (same plan year), Bob again purchases Claritin without a prescription. He submits his request for reimbursement, but this time, it is denied because he did not obtain a prescription. Practice Pointer: Can Bob change his health FSA election as a result of the new rule? Although the OTC Notice does not specifically address election changes, a literal interpretation of the existing change rules and recent, informal remarks from Treasury officials would suggest that Bob could not change his election solely as a result of the rule change. Also, expenses for OTC drugs and medicines incurred during the two-anda-half-month grace period following the end of a 2010 calendar plan year must be accompanied by a prescription.

Practice Pointer: OTC drugs purchased prior to January 1, 2011, may be reimbursed tax-free on or after that date. Thus, if an HSA participant purchases OTC drugs or medicines in 2010 without a prescription, but does not take an HSA distribution for such expenses until 2011, the distribution in 2011 is still tax-free (so long as the expenses were otherwise for medical care).

Do cafeteria plans and HRAs need to be amended? The OTC Notice states that plans that previously covered OTC drugs or medicines must be amended to reflect the new OTC Rule. Fortunately, the OTC Notice allows plans to be retroactively amended effective January 1, 2011 (or January 15, 2011, with regard to debit card purchases), so long as the amendment is adopted no later than June 30, 2011.

What Steps Should Be Taken at This Time in light of the new oTC rule? Even though the new OTC Rule is not effective until January 1, 2011, plan sponsors and administrators should take steps now to ensure a smooth transition. Steps to undertake include: • communicating the new OTC Rule to participants prior to 2011 enrollment (and likely again in December) to ensure that participants take the new OTC Rule into consideration when making their new elections; • checking with TPAs and health debit card processors to ensure that OTC medicines and drugs will not be reimbursed starting January 1, 2011 (January 16 for health debit card purchases eligible for the transition rule), unless the prescription

requirement is satisfied; • implementing new processes and procedures to ensure that every claim for an OTC medicine or drug has a valid Rx number or an accompanying prescription that satisfies all of the requirements of state law; and • adopting plan amendments (prior to January 1, 2011, if possible) to implement the new OTC Rule.

application process for Waiver from restricted annual limits Section 2711(a)(2) of the Public Health Service Act (PHSA) as added by PPACA provides that for plan years beginning on or after September 23, 2010, and before January 1, 2014, group health plans may impose “restricted” annual limits on the dollar value of essential health benefits (as defined in section 1302(b) of PPACA) as determined by the Secretaries of HHS, Labor and Treasury (collectively, the “agencies”). For plan years beginning on or after January 1, 2014, no annual dollar limits on essential benefits may be imposed. These rules apply to grandfathered group health plans, as well as new group health plans. “Restricted” Annual Benefits and Limited Benefit Plans The maximum “restricted” annual dollar limit that may be imposed on essential benefits was set forth in interim final regulations (IFR) published by the agencies on June 28, 2010, as follows: • For plan years beginning on or after September 23, 2010, but before September 23, 2011 – $750,000; • For plan years beginning on or after September 23, 2011, but before September 23, 2012 – $1.25 million; and

The Self-insurer

December 2010

• For plan years beginning on or after September 23, 2012, but before January 1, 2014—$2 million. These annual limitations are problematic for a class of health plans that provides limited coverage, typically referred to as “limited benefit” plans or, sometimes, “mini-med” plans. These plans are used by employers to provide some form of low-cost health insurance to certain employees, such as part-time employees and seasonal workers. For such employees, a “limited benefit” plan or “mini-med” plan may be the only affordable health coverage available to the employee. Applying the annual limits to such plans could mean that the coverage is no longer affordable, and could result in a loss of coverage. [Note: Mini-med plans should not be confused with limited hospital indemnity and specified disease coverages, which often are completely exempt from PPACA as excepted benefit coverage.] In recognition of this issue, the IFR provided that these restricted annual limits may be waived by the Secretary of HHS if compliance with the IFR would result in a significant decrease in access to benefits or a significant increase in premiums. The preamble to the IFR further provided that guidance from HHS regarding the scope and process for applying for such a waiver would be issued in the near future. The memorandum issued by HHS on September 3, 2010 (the “HHS memorandum”), provides such guidance. The HHS memorandum does not provide details about the standards that will be applied in determining whether waivers are granted; for example, the memorandum does not indicate what the HHS will consider to be a “significant” increase in premiums. The HHS memorandum does, however,

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December 2010

set forth the timing for applications, the information that must be included and deadlines by which HHS will process the applications.

Waiver process What plans are eligible for the wavier? Waivers are available only for plans that were in existence before September 23, 2010.

When does the waiver application have to be submitted? For plan years beginning before November 2, 2010, the waiver application must be submitted at least 10 days in advance of the start of the year. Otherwise, the application must be submitted at least 30 days before the beginning of the plan year. 3 The regulatory agencies have not yet defined “essential health benefits.” In the absence of further guidance, the agencies have stated that for enforcement purposes, the agencies will take into account good faith efforts to comply with a reasonable interpretation of the statute. 4 The restrictions on annual dollar limits do not apply to grandfathered individual market policies.

When will HHS process the wavier application? HHS will process complete requests generally within 30 days of receipt, but for plan years beginning before November 2, 2010, HHS will process the application no later than five days in advance of the year.

If granted, for how long will a waiver apply? Waivers will be granted initially only for the first plan year beginning between September 23, 2010, and September 23, 2011. New waiver applications must be submitted for later years and HHS may change the approval process in the future.

What information must be included in the application? The application must include the following information: • the terms of the plan for which a waiver is sought; • the number of individuals covered by the plan; • the annual limit(s) and rates applicable to the plan; • a brief description of why compliance with the IFR on annual limits would result in a significant decrease in access to benefits for those currently covered by the plan, or significant increase in premiums (or contributions in the event of a self-funded plan) paid by those covered by the plan, along with any supporting documentation; and • an attestation, signed by the plan administrator or chief executive officer of the issuer of the coverage, certifying (1) that the plan was in force prior to September 23, 2010; and (2) that the application of restricted annual limits to the plan would result in a significant decrease in access to benefits for those currently covered by the plans, or a significant increase in premiums paid by those covered by the plan. The plan administrator or CEO should retain documents in support of the application for potential examination by HHS. n

MATHER’S GRAPEVINE

s I reflect upon the recent elections it occurs to me that there is a great similarity between those elections and the events we saw in the mid-term elections in 1994 and as you might suspect, there are also some great differences as well. In that year the Republicans took control of the House of Representatives with a 54 seat swing, the first majority by that party since 1954. The Senate races saw the Republicans take control of the Senate, gaining 8 seats and the majority leadership. President Bill Clinton’s National healthcare plan took a nose dive along with numerous other losses for the Dems. The defeat of what we then referred to as “HillaryCare” certainly was cause for celebration amongst the many SIIA members who took part in the lobbying efforts that brought it down. The previous year leading up to the elections, I personally made eleven trips to the Capital, along with most of our Board Members, our management firm, our lobbyists, and dozens upon dozens of our members. Along with our merry celebrations, we were warned that it would come again. And it did. The Patient Protection and Affordable Care Act, commonly referred to as “ObamaCare” was signed into law by the President in March of 2010 after a short battle in the Senate which passed it in late 2009 and a long battle in the House, ending in late March, 2010 with a vote of 219 for and 212 against. During all of this time SIIA worked diligently to stop this from happening, not unlike our 1993-4 battle, but alas, the powers that be in

Washington managed to get it done in a midnight session of questionable circumstances on March 21 of this year. The President signed it three days later. So it’s 1994 all over again, but this time around we are in what could be described as the loser’s seat. There are other factors that may come into play down the line. There are several movements to reverse the passage of this bill in both the House and the Senate, and several reasons why we should.

I had occasion recently to view a tape by Dr. Robert Steel, at a public hearing in Saline, Michigan that contained interesting factors found in the Bill, which he and numerous other practicing physicians violently object to. The 2000 page bill, understood by few of the people who voted for it and virtually none of the population that it affects, contains moves to form Rationing Boards, with appointed National Coordinators, that will direct physicians to perform or not perform medical treatment regardless of the physician’s desires regarding patient needs and based primarily on cost issues. Dr. Steel goes on to say that there are severe financial penalties of up to $100,000 in fines for first offences if the doctor goes forward with his wishes and even jail time for offences down the line. Dr. Steel predicts that as many a 46% of physicians in the United States in the business of providing healthcare in family practices will be out of business either for financial reasons or by their own choice. While I might question his estimates somewhat, I too think that this will have a serious affect upon our population receiving good medical care and also seriously affect the number of our college students leaning toward entering the medical profession in the immediate future. I personally have a problem with seeing a doctor, being diagnosed with an ailment and having a government employee decide which form of treatment I will receive regardless of the physician’s determinations. Even scarier at my age, being offered end of life counseling by a government employee instead of medical treatment, another possibility also hidden in the pages of the ObamaCare Bill. The fight is not over, just like it wasn’t in 1994. There’s a possibility that this thing can be reversed. That will occur only if we get the message across to our representatives and senators in Washington. Get on the bandwagon with SIIA in this effort. Not doing so may result in a very grim future for our health care system. n

The Self-insurer

December 2010

inSiDer INFORMATION Sun life Financial launches “you” enrollment campaign for employees WELLESLEY HILLS, MA – The Employee Benefits Group division of Sun Life Financial, Inc. announced the launch of the “YOU” enrollment marketing campaign created to help employers educate and engage their employees during voluntary benefit enrollments. The campaign’s theme, “It’s time for you to take control of your benefits,” is designed to present product features and benefits to employees in plain language, free of acronyms and insurance jargon. ”We’re excited to launch this new campaign for our voluntary employee benefits products. This is a great way to extend our brand by more clearly demonstrating benefit choices and the value of these benefits to employers and employees,” said Ann Powell Hibbard, assistant vice president, U.S. Marketing. “This campaign provides an avenue for us to show employees that it’s easier to make voluntary benefit decisions with Sun Life as a partner.” In addition to the new campaign, Sun Life ramped up enrollment efforts by expanding their enrollment organization, enhancing on-line enrollment, personalizing enrollment booklets, and conducting their second annual voluntary enrollment survey. The Voluntary Benefits: Key Factors Influencing Employee’s Choices Study examines employees’ decision-making process when electing voluntary benefits at work. Results of the study showed that the more time employees spend reviewing and understanding benefits information, the more likely they are to purchase the benefit. In addition, employees are more likely to enroll in a plan when there’s a face-to-face experience with an enroller. For a copy of the findings, visit www.sunliferesearch.com. Medical malpractice claims frequency declining, severity stabilizing, according to Zurich report SCHAUMBURG, IL – Data collected from 1,600 hospitals in report years 1997 through 2007 reveals that health care organizations’ medical malpractice claim frequency is slightly declining and severity is leveling off, according to a report released by Zurich, one of the leading insurers of hospitals and health care organizations in North America. The report indicates that claims severity, or the average amount per claim, has stabilized over the past several years.

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December 2010

The average annual rise over the past 11 years is four percent. Additionally, Zurich reports that teaching and children’s hospitals have higher claim severity than acute care community hospitals and outpatient facilities. Non-profit hospitals have the lowest severity; and among non-profits, faith-based institutions have the lowest severity of all. Leo Carroll, head of HealthcareSpecialty Products, Zurich North America Commercial, noted that the most severity prone states continue to be New York, Illinois, and Pennsylvania. “We’re continuing to monitor the impact to claim activity by changes in tort reform, patient safety initiatives, and use of technology to improve quality of care,” he said. For further information contact Brett McKenzie Wood at (847) 605-8826 or brett.wood@zurichna.com. Medlink and Thrasys announce Formation of the new york Health information network NEW YORK, NY – MedLink, a leading provider of health information technology solutions to the medical community announced today the formation of the New York Health Information Network as a collaboration with Thrasys, Inc. a provider of next-generation health information technology and solutions. The New York Health Information Network (NYHIN) will be the first of many regional health information networks to be deployed by MedLink and Thrasys under a Connected Healthcare initiative launched by the two companies earlier this year. Connected Healthcare and regional health information networks will enable communities of physicians, patients, service centers, and health plans to coordinate care, manage costs, increase revenues, improve outcomes and enhance patient experience. Scott Einiger, Senior Partner at Abrams Fensterman, a leading New York healthcare law firm commented, “The New York Health Information Network will enable physicians to level the playing field and have access to core health care products and services critical to success in this rapidly evolving healthcare landscape. As physicians join this Network, the quality of the products and services will expand exponentially making available the best of breed applications and services due to substantial Vendor commitment to grow within the Network. I expect this network to grow

beyond NY State and become a nationally connected Network enuring to the benefit of patients and physicians alike and greatly enhancing our federal government’s health law reform initiative”. For more information contact Jameson Rose at (631) 342-8800, or ir@medlinkus.com. Carewise Health® introduces new Capabilities in Health programs for employers LOUISVILLE, KY – Louisville, KY Carewise Health officials today introduced three major new capabilities in the company’s comprehensive suite of health management programs for employers. These enhancements are aimed at helping people achieve and sustain better health, thereby strengthening the companies and organizations for which they work. The new advances are: • Gaps in Care Management – Carewise Assist employs advanced analytics to identify gaps in care that are then resolved by highly trained clinicians who work in partnership with members and their physicians. Through effective identification and resolution of gaps in care, it also helps employers mitigate health risks and manage healthcare costs. • Worksite Wellness – You First is a suite of worksite programs that helps employers build a culture of health and boost employee engagement by using Carewise Health’s advanced analytics to identify location-specific issues and create targeted strategies to address them. • Health Literacy – Carewise Health makes several improvements in advancing the knowledge and health management skills of members through a comprehensive health literacy strategy. The engaging curriculum is designed to build motivation and confidence, and prepare members to effectively manage chronic illness and improve their health status. Carewise Health Executive Vice President of Growth and Innovation Krishnan Sastry said the company will soon be announcing the launch of a new health portal that will improve how employees use online tools to manage their health. For more information visit www. carewisehealth.com. n

2011 Calendar of Events Self Insurance Tour of India January 29-February 5, 2011

The Self-Insurance Institute of America, Inc. (SIIA) has partnered with DaoAsia a leading company specializing in helping American business executives learn how business is done in India for a special “Self-Insurance Tour of India”. If you have ever thought seriously about self-insurance/alternative risk transfer business opportunities in the Indian marketplace but didn’t know where to start in evaluating such opportunities, then this is the perfect tour.

25th Annual Legislative/Regulatory Conference

March 14-16, 2011 • Washington Marriott at Metro Center • Washington, DC

SIIA’s Annual Legislative and Regulatory Conference is your opportunity to hear directly from the policy-makers who will shape the health policy agenda in 2010 and beyond. Experience the political process first hand by participating in SIIA’s popular “Walk on Capitol Hill.” Meet with your federal legislators in their Capitol Hill offices and let your voice be heard. SIIA staff will set up your appointments, provide you with “talking points” and lobbying materials in advance of your meetings.

TPA & MGU/Excess Insurer Executive Forum

April 13-15, 2011 • JW Marriott Desert Springs Resort & Spa • Palm Desert, CA

The TPA & MGU/Excess Insurer Executive Forum provides a focused learning and networking environment for Third Party Administrators and Stop-Loss/Excess Insurer professionals seeking solutions that enhance productivity, collaboration, communications and profitability. The forum will feature sessions designed to bring you up-to-date with the latest developments in the alternative risk transfer industry as well as the legislative/regulatory areas directly impacting your company’s business operations.

Self-Insured Workers’ Compensation Executive Forum May 10-12, 2011 • Charleston Place Hotel • Charleston, SC

SIIA’s 13th Annual Self-Insured Workers’ Compensation Executive Forum is the country’s premier association sponsored conference dedicated exclusively to self-insured Workers’ Compensation funds. In addition to a strong educational program focusing on such topics as excess insurance and risk management strategies, this event will offer tremendous networking opportunities that are specifically designed to help you strengthen your business relationships within the self-insured/alternative risk transfer industry.

International Conference

June 7-9, 2011 • Marriott Toronto Downtown Eaton Centre • Toronto, Ontario, Canada

SIIA’s International Conference provides a unique opportunity for attendees to learn about how companies are utilizing selfinsurance/alternative risk transfer strategies on a global basis. The conference will also highlight self-insurance/ART business opportunities that are now emerging in key international markets. Participation is expected from countries all over the world.

31st Annual National Educational Conference & Expo

October 9-12, 2011 • JW Marriott Desert Ridge Resort & Spa • Phoenix, AZ

SIIA’s National Educational Conference & Expo is the world’s largest event dedicated exclusively to the self-insurance/alternative risk transfer industry. Registrants will enjoy a cutting-edge educational program combined with unique networking opportunities, and a world-class tradeshow of industry product and service providers guaranteed to provide exceptional value in four fastpaced, activity-packed days.

CHAIRMAN’S REPORT Armando Baez

Why Siia Works!

his report marks my last official act as Chairman of the Self-Insurance Institute of America. It has been an honor and a privilege to have served this association in a number of roles these past 27 years. From being a rookie member to serving as Chairman, I count my years with SIIA among some of the most rewarding moments in my career. SIIA is the right vehicle for our industry for many reasons. In this, my last official message to you, I want to tell you why I think SIIA is essential and why it must be protected at all costs. SIIA works because it is a non-profit member run association with broad plan sponsor and industry support. Let me break that down: • Non Profit. SIIA’s dues and income are totally devoted to managing the day-to-day business of the association, staging our conferences, conducting our state and federal lobbying efforts and funding our educational outreach. Our budget, income and expenses are monitored by the Board of Directors and are transparent. Who else can say that? • Member-run association. While SIIA retains a highly qualified and professional management staff, the activities of this staff are monitored by the Board. Our Association policy direction is set through our four standing committees. In these committees, over 70 members participate in many on site and telephone conferences to review and vote on policy positions and statements. • plan Sponsor Support. Our association membership represents companies that either manage a self-insured program or would like to learn how to do so. These “plan sponsors” bring to the association their issues and concerns for support and resolution. It is this plan sponsor participation that gives us the legitimate right to speak in our state capitols and in Washington DC as the “Voice of Self-Insurance”. • industry Support. Self-Insurance would not be possible without the support and participation of so many companies providing advice, services and reinsurance support to our plan sponsor members. SIIA serves as a unique forum bringing together all participants as equals for a round table style airing of issues and concerns and a sharing of experiences. No single constituency grouping can achieve the results SIIA delivers to our entire industry year after year. SIIA works because it is ours! It belongs to its members, its participants, its officers and directors, its committee chairs and committee members. SIIA belongs to plan sponsors, their insurers, reinsurers, administrators and consultants. Most important of all, SIIA belongs to the millions of plan beneficiaries and their families that rely on self funded plans for protection from accidents and sickness, occupational health events and accidents as well as their companies who rely on self-insurance for risk management protection. Many have tried to imitate SIIA. All have failed. Many have tried to make

www.siia.org

December 2010

money from stealing our ideas and initiatives. Most have failed. Others want to weaken our association in the hopes of eliminating the strongest voice in support of our right to self-insure our most predictable risks. They too will fail. I plan on continuing to be a proud member of SIIA and its most vociferous defender. Join me!

a look back at a great Conference! I just returned to Shanghai from Chicago where I attended what was, arguably, the best and highest attended National Conference and Expo in SIIA’s history. While there have been many great conferences and highlights in the past, this had to have been the “best ever” in all categories. After attending 27 out of the last 30, I can confidently state this was the best! Why? Well, let me state the obvious: 1. This year we had a series of presentations from two great keynote speeches to individual track sessions that laid out for us the reasons why self-insurance has grown so much and is spreading from health to comp to ART and, thanks to the work of the International Committee, to other countries around the globe. 2. The participation from all levels of our industry, all states in the Union and even from far away places like Singapore, Brazil, London and Costa Rica was self-evident. Selfinsurance knows no boundaries and speaks all languages! 3. The enthusiasm for self-insurance and the bright future it has was

clear from the many new faces and younger attendees from corporate plan sponsors, brokers, insurers, administrators, service providers, and reinsurers/ MGUs. This year I could truly say “Why, I don’t know half these people!” But I tried to. 4. The exhibit hall was sold out early on and included many traditional players and many new service providers. Any company could design, build, reinsure, fully administer and manage a self-funded plan in any category solely with the help from the exhibitors who participated this year. 5. The relief shared by all for SIIA’s political work was palpable. After all, we saved self-insurance from the clutches of the single payer advocates.Yet, we seemed to have learned our lesson. Never again will we sit by quietly while single payer proponents threaten our right to self-insure and self-administer our own risks. I could sense a growing militancy among our membership and this alone may have accounted for the great turnout. Participation builds strength.

SIIA New Members REGULAR MEMBERS voting representative/ Company name Bradley Dumbauld, Vice President, Gregory & Appel, Indianapolis, IN Gene Miller, President, ModernMed, Inc., Scottsdale, AZ

EMPLOYER MEMBERS voting representative/ Company name James P. Hallberg, President, United National Insurance Group, Bedford Park, IL

CONTRIBUTING MEMBERS voting representative/ Company name 6. The conference hotel itself. The Sheraton Hotel & Towers is uniquely suited for SIIA. We filled the venue with active discussions, re-acquaintance encounters, business meetings and impromptu mini conferences. The events manager noted, “This crowd kept our bars and restaurants busier and open longer than any group in a long time.” They want us back!

Mary Alice Avery, Vice President, Wilmington Trust Company, Wilmington, DE

My thanks to everyone who made this event so great:You, our members, our board of directors, our officers, committee chairs and members and exhibitors! And, I can’t let this pass without saying, “Congratulations for a job well done” to our professional staff so ably led by Erica Massey and Mike Ferguson.You all made me proud to be a member of SIIA. My thanks, too, to all of my friends and colleagues within our industry who made my participation in SIIA possible. I am grateful for your support and encouragement, your advice and counsel and your help, so freely given, when called upon to help our association. This is not “good bye”. This is “Hasta la Vista”! n

The Self-insurer

December 2010

FROM THE DESK OF

ERICA MASSEY

Greetings!

s 2010 comes to a close, SIIA looks towards a prosperous and successful 2011. SIIA Elected leadership, committee chairs and members recently met to wrap up 2010 projects and set the agenda for 2011, which promises to be yet another challenging year for our industry. Let me take this opportunity to provide a brief overview of the committee meetings recently held in Las Vegas on November 8-10, 2010. GOVERNMENT RELATIONS COMMITTEE: Jay Ritchie, Chair of the GRC, reviewed activities of 2010, however the majority of their time was spent on planning for 2011 and the importance of day-to-day membership involvement in the political process. In response to the passage of PPACA and the recent November election results, SIIA will be again expanding the government relations staff in Washington, D.C. to be certain the self-insurance voice is heard and our positions are supported. HEALTH CARE COMMITTEE: The Health Care Committee had a full agenda with a good portion of their time spent finalizing the SelfInsurance Success Stories publication. In addition, they began working on subject matter and potential speakers for the 2011 TPA/MGUExcess Insurers Executive Forum scheduled for April 13-15, 2011 in Palm Desert, California. Members interested in suggesting topics and/ or speakers are encouraged to send their suggestions to Mike Ferguson at mferguson@siia.org.

www.siia.org

December 2010

ART COMMITTEE: SIIA’s COO Mike Ferguson updated the ART committee on his meeting with Senator Tester and other key legislators regarding the expansion of Risk Retention Act, to include property insurance and modernization of the act with more protection for RRG’s operating on a multiple state basis. It is anticipated the legislation will be reintroduced with language promoted by SIIA. The committee also received a report from member Julie McPeak regarding her attendance at the recent NAIC meeting where amendments to the NAIC Model Law for RRG’s which would require states to adopt Corporate Governance Standards or forfeit the state’s NAIC accreditation. This is an issue that could conflict with Federal Law especially in light of the proposed legislation to modernize the Liability Risk Retention Act discussed above. The ART Committee will be watching this issue closely. Look for additional reports on this subject in SIIA email updates on Government Relations activities. WORKERS’ COMPENSATON COMMITTEE: The Workers Comp Committee concentrated on developing a short list of publications to be produced in 2011 to provide additional resources for those associated with managing self-insured workers compensation programs, both for single entities, as well as group self-insured funds (SIG’s). The first of a series of publications in the works includes a white paper on Fiduciary Duties & Responsibilities for Directors of SIG’s and a suggested “Model” for SIG’s. In addition, the committee started work on developing educational sessions and suggested speakers for the 2011 Conference to be held May 10-12, 2011 in Charleston, South Carolina. INTERNATIONAL COMMITTEE: The International Committee held their meeting during the Annual Conference and started work on developing the 4th International Conference to be held in Toronto, Canada June 7-9, 2011. In addition, SIIA’s affiliate organization, Self-Insurance Educational Foundation, (SIEF) met to begin planning their 2011 fundraising events for the Foundation’s educational and scholarship programs. The SIEF Board of Directors also named Heidi Svendsen, President of SIEF for 2011. Heidi is Vice President of Clinical Services for Optum Health. To learn more about SIIA Committees, opportunities to service on the Committees or to send suggestions on issues they should consider addressing, don’t hesitate to contact the committee chair, Mike Ferguson or me at any time. A complete list of all 2011 Committee members can be found on pages 12-15. I hope the balance of 2010 is productive for you and your organization. n Until next time... Erica M. Massey, Executive Vice President, SIIA President/Managing Editor, SIPC

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