Self-Insurer July 2013 by SIPC

July 2013

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RISING HEALTHCARE COSTS: A Deeper Look Into Catastrophic Claims

ASSEnT Medical Cost Management

July 2013

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JULY 2013 | Volume 57

July 2013 The Self-Insurer (ISSN 10913815) is published monthly by Self-Insurers’ Publishing Corp. (SIPC), Postmaster: Send address changes to The Self-Insurer P.O. Box 1237 Simpsonville, SC 29681

FEATURES

ARTICLES 10

From the Bench: Musings About Stop Loss Insurance and the Non-PPACA-Compliant Plan: A Walk in the Wilderness

ART Gallery: What To Do About Risks Beyond Our Reach

Been Down So Long It Looks Like Up to Me by Wayne Schuh

Innovations Include Pain Validity Testing

Editorial Staff PUBLISHING DIRECTOR James A. Kinder MANAGING EDITOR Erica Massey

SENIOR EDITOR Gretchen Grote

Rising Healthcare Costs: A Deeper Look Into Catastrophic Claims by Stacy Borans, MD

DESIGN/GRAPHICS Indexx Printing

Self-Insured Johns Hopkins Hospital Cuts Workers Comp Costs by Half by Nelson Hendler and Dick Goff

CONTRIBUTING EDITOR Mike Ferguson DIRECTOR OF OPERATIONS Justin Miller DIRECTOR OF ADVERTISING Shane Byars Editorial and Advertising Office P.O. 1237, Simpsonville, SC 29681 (888) 394-5688

Workers’ Compensation Executive Forum RECAP

INDUSTRY LEADERSHIP 32

2013 Self-Insurers’ Publishing Corp. Officers

SIIA President’s Message

James A. Kinder, CEO/Chairman Erica M. Massey, President Lynne Bolduc, Esq. Secretary

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RISING HEALTHCARE COSTS: A Deeper Look Into Catastrophic Claims by Stacy Borans, MD, Chief Medical Officer, Advanced Medical Strategies

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t comes as no surprise to anyone that healthcare costs continue to rise. We are all aware of the common conditions that result in catastrophic claims: cancers, premature babies, spinal surgeries, end-stage renal disease, and diseases requiring transplants. The list is seemingly endless. This article’s focus is on overlooked conditions, their treatments and associated catastrophic claims costs (which often times are much higher than the aforementioned common conditions).

Paroxysmal Nocturnal Hemoglobinuria Paroxysmal Nocturnal Hemoglobinuria (PNH) is a rare blood disorder. The disease is characterized by destruction of red blood cells (hemolytic anemia), blood clots (thrombosis), impaired bone marrow function, and a 3 to 5% risk of developing leukemia. PNH affects only 1-2 people per million of the population, striking mostly young adults. The median age at diagnosis is 3540 years of age. PNH is very closely related to aplastic anemia and often evolves from that disease. The median survival for patients with this disease is approximately 10 years although many can live for much longer periods of time with only minor symptoms. The classic symptom is bright red blood in the urine (hemoglobinuria) although many patients notice their urine is a dark tea-color. Typically, hemoglobinuria will be most noticeable in the morning, and clear as the day progresses Treatment for this disorder will depend on the severity of the symptoms and the degree of marrow dysfunction. Allogenic bone marrow transplant had been the mainstay of treatment for many years – it is risky, fraught with complications, and

most patients were unable to find a donor. This form of treatment is currently reserved for severe cases of PNH with aplastic anemia or those whose conditions transform to leukemia, both of which are life-threatening complications. Allogenic bone marrow transplant is very costly: 2011 Milliman reported billed costs for this are $800k. In 2007, the FDA approved Soliris (eculizumab) for the treatment of PNH. This is currently the standard of care for therapy for this disorder. Soliris is a monoclonal antibody that ultimately stops the destruction of red blood cells and alleviates the symptoms of PNH. Soliris does not correct the underlying genetic defect responsible for PNH; it simply improves the symptoms, improves quality of life, and eliminates many of the complications of PNH. Hence, Soliris is a life-long therapy (unless the patient achieves spontaneous remission, which only occurs in 10% of cases). Soliris is given via intravenous infusion. The current dosing schedule for PNH is: 600 mg weekly for the first 4 weeks, followed by 900 mg for the fifth dose 1 week later, then 900 mg every 2 weeks thereafter. Soliris only comes in 300 mg vials. Average wholesale price (AWP) for the vial is $6,830. AWP for the first 4 weeks of treatment is $54,640; for subsequent doses, $20,490;. for a full year of therapy, approximately $550,000. As a general guideline, I use 200% of AWP for assessing the reasonableness of a charge. Based on that, reasonable charges for a full year of Soliris therapy are $1.1M. However, actual costs could be significantly higher depending on the inflation of the drug. At 400% of AWP, one year of Soliris therapy would be 2.2M and it is not unusual to see that degree of drug inflation (or more).

Atypical Hemolytic Uremic Syndrome Soliris is also used in the treatment of another disorder: atypical hemolytic uremic syndrome (aHUS). This is another rare disease that primarily affects kidney function. aHUS is characterized by three major features related to abnormal clotting: hemolytic anemia, thrombocytopenia (low platelets), and kidney failure. The disease mainly affects children and has an incidence of1 in 500,000 per year. There is a clear distinction between hemolytic uremic syndrome and aHUS. Hemolytic uremic syndrome is caused by particular strains of the bacterium E.coli producing Shiga toxins while aHUS has a genetic component similar to the one in PNH. aHUS may become a chronic condition and patients may experience repeated attacks of the disorder. When children with Shiga toxin producing HUS recover from the lifethreatening initial episode, they are likely to respond well to supportive treatment and to make a good recovery. Children with aHUS are much more likely to develop chronic serious complications. In the past, treatment required plasma exchange/ plasma infusion and many patients still progressed to end-stage renal disease, prompting dialysis – the costs of which can exceed well over $400-$500k per year. Soliris has eliminated the need for plasma exchange/infusion and dialysis while also normalizing blood counts and preventing further clotting episodes. So, let’s talk numbers. Solaris dosing for aHUS is: 900 mg weekly for the first 4 weeks, followed by 1200 mg for the fifth dose 1 week later, then 1200 mg every 2 weeks. Average wholesale price for the first 4 weeks of treatment is $81,960; AWP subsequent doses, $27,320;. a full year of therapy is approximately $737,640. As noted previously, I use 200% of AWP for assessing the reasonableness of a charge. Based on that, reasonable charges for a full year of Soliris therapy for aHUS are

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July 2013

approximately $1.5M. Should the drug inflation be closer to 400%, one full year of therapy approaches $3M. The outcomes for patients are significantly better with Soliris, but it does come at a very high price.

Cystic Fibrosis Cystic fibrosis (CF) is another genetic childhood disorder that carries significant morbidity and mortality. Patients are often diagnosed as infants (6-8 months). The disorder’s main affected organ is the lungs. These patients produce thick, viscous secretions and respiratory failure is the main cause of death. CF is caused by a mutation in the gene for the protein CFTR (cystic fibrosis transmembrane conductance regulator). This protein is required to regulate the components of sweat, digestive fluids, and mucus. While most people have two working copies of the gene, in CF patients both copies

of the gene are dysfunctional. Though there is no cure for CF many patients do live well into adulthood with current modalities. Treatment is often supportive, directed at limiting and treating the lung damage caused by the secretions and pulmonary infections. Lung transplantation is required when pulmonary function reaches critical deterioration. CF patients must have both lungs transplanted as both lungs are affected. Additionally, should there be infection/bacteria in one lung, that could affect a newly transplanted lung causing rapid failure of the organ. A pancreatic or liver transplant may be performed at the same time in order to alleviate liver disease and/or diabetes. 2011 Milliman reported billed charges for double lung transplant are $797,300; $289,400 for pancreas transplant; $577,100 for liver transplant. Should all three transplants be done, claims for that CF patient would easily approach $2M.

Unstable and end-stage CF patients are not the only ones who incur large claims. In 2012, the FDA approved Kalydeco (ivacaftor) as a drug designed to help improve the defect in the CFTR gene. One study observed lung function improvement at 2 weeks that was sustained through 48 weeks. The study also observed improvements in risk of pulmonary exacerbations, patient-reported respiratory symptoms, weight gain, and concentration of sweat chloride. Kalydeco is indicated for patients who are 6 years of age or older and who have the G551D mutation of the CF gene. It is not indicated for other mutations in the gene. The drug is oral and patients take one 150 mg tablet every twelve hours. Average wholesale price for a 30 day supply of the tablets is $30,724. Using my previous calculations, reasonable charges for one full year of therapy would be approximately $738k. Specialty pharmacies may be able to

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reduce costs to under 200% of AWP but these patients will still have high yearly charges. This is due both to the medication and complications that are seen with the disorder.

Malignant Melanoma Finally, there is malignant melanoma. Patients usually present with skin lesions that have changed in size, color, contour, or configuration. The main cause of malignant melanoma is sun exposure. Most stages of melanoma have lower overall claims costs. Even at Stage III, patients are treated with Interferon alfa whose costs rarely exceed $50k for a full year of therapy. However, there are drug therapies available for advanced melanoma which have significantly raised claims costs for this disease. The first is Yervoy (ipilimumab) which was FDA approved in 2011. It is indicated for patients with either unresectable or metastatic melanoma. In a clinical trial, patients treated with Yervoy survived a median of 10 months (versus 6 months in patients treated with other therapies). Yervoy did not work for every patient in the trial and these patients had failed previous conventional therapies. The drug is dosed based on weight as follows: 3 mg/kg IV over 90 min. It is given every 21 days for a total of 4 doses. Assuming a standard weight of 75 kg, a typical Yervoy dose would be 225 mg. A single 200mg vial of Yervoy has an AWP of $29,678;. the full course of treatment would be approximately $120k. Reasonable charges would be $240k for the Yervoy but could certainly be higher. There is only a single course of therapy for this drug. In addition to melanoma, Yervoy is undergoing clinical trials for the treatment of non-small cell lung cancer, small cell lung cancer, and metastatic hormone-refractory prostate cancer.

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The other drug utilized in metastatic melanoma is Proleukin. It was FDA approved in 1998 but appears to be utilized much more in the past few years. Proleukin requires inpatient care for each course and has a complicated dosing regimen as follows: 600,000 U/kg IV every 8 hours (maximum 14 doses); following 9 days of rest, repeat for another 14 doses (maximum 28 doses per course, as tolerated). This constitutes one course of treatment. The patient can receive further courses of therapy as long as disease regression is documented. Although the average wholesale price of Proleukin is very reasonable at under $2,000 for 22 million IU, claims for each course often approach $300-$350k. Each course of therapy should be separated by a rest period of at least 7 weeks from the previous hospital discharge. A full year of therapy has the potential to exceed $2M.

directed educational seminars for claims professionals. Dr. Borans is currently the outsourced medical director for several companies within the stop-loss industry. In addition to her vast medical management experience on the payor side, Dr. Borans has overseen medical and quality management, appropriateness of care and peer review programs in over 50 hospitals spanning 7 states. n

Each new therapy developed is poised to take claims costs even higher. Claims that reached $5M were once considered to be rarities – in the not-too-distant future they will be commonplace. It’s a sad fact that good medicine does not come cheaply to those who are in desperate need of it. Dr. Borans is the Chief Medical Officer and Founder of Advanced Medical Strategies (AMS). Advanced Medical Strategies was founded with the purpose of combining clinical expertise and experience with financial sensitivity and understanding to give clients highlevel cost containment insight and guidance. Dr. Borans has worked with Managing General Underwriters, Third Party Administrators, stop loss carriers and managed care plans to assess both clinical and financial questions on catastrophic claims. She has assisted in cost projection analysis for underwriting risk, reviewed medical necessity and experimental concerns as well as

July 2013

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July 2013

Bench From the

by Thomas A. Croft, Esq.

Musings about Stop Loss Insurance and the Non-PPACA-Compliant Plan: A Walk in the Wilderness (Plus: A Porcine Metaphor Update….)

ne of the advantages of this column is the absolute precondition to its writing: it ain’t legal advice. So, I can wander around with those questions that occur to me and mull them over – in print--without fear of being wrong or misguiding someone. This month’s column reflects just such a sojourn – a nomadic excursion into what has been – and will especially be, come January 2014 – a confounding world of non-compliant PPACA Plans, and the stop loss carriers who have issued and who will issue policies incorporating them. The market imperative requires that stop loss policies get issued, whether or not the universally incorporated-by-reference Plan Document complies with PPACA or not. Human (and thus corporate) nature such as it is, there will be plenty of stop loss contracts sent out the door effective January 1, 2014, which incorporate Plan Documents that do not, by their terms, reflect the mandates of PPACA as to required benefits effective that date. That this will be so is testament to the often feckless power of deadlines, governmentally imposed or otherwise, and the backlog and inertia which attends TPAs and their clients timely amending Plan Documents to get them compliant. Not to mention the paramount incentive for stop loss underwriters, brokers, and their clients to get a deal done, regardless. It’s just how things work, and we are going to have to deal with it. So, the question arises as to whether a non-PPACA-compliant Plan Doc

July 2013

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incorporated into a stop loss contract presents any potential problems. Let’s take a somewhat simple hypothetical example: a stop loss policy effective 1/1/2014 is issued based on the underwriting of a Plan Document last updated in 2013. The Plan Document provides for a dependent’s coverage through age 26, unless he or she has coverage available from his or her employer. Because the Plan was in existence before March 23, 2010, the Plan is “grandfathered” for PPACA purposes, and the “unless he/she has coverage available from his/her employer” language is valid, but only through 12/31/2013. In mid-2014, a very large claim comes in astonishingly above the spec.

for a 24 year old dependent who at all relevant times had coverage available from his/her employer, though he/ she did not opt into it. All the dates of service are post 1/1/2014. What to do? First, let’s look at the Plan’s (i.e., the TPA’s) dilemma. The Plan Document, by its terms, makes the claim ineligible. But what about PPACA? Didn’t it require coverage of such claims as of January 1, 2014? Well, to my mind, no, it didn’t. PPACA is not self-executing; that is, it does not swoop down at the stroke of midnight on 12/31/13 and “amend” all the Plan Documents out there, so that, regardless of what they say, they magically provide benefits in accordance with the law as the ball drops in Times Square on New Year’s Eve. No, instead, PPACA provides various penalties to Plans that are noncompliant as the ball hits bottom and the new year begins. The terms of the Plan do not change. But, in addition to the potential monetary penalties for non-compliance, the practical effect of New Year’s Eve ball dropping will be to force any non-compliant Plan to pay claims as if the terms of the Plan had been amended. This results from PPACA’s incorporation of the enforcement mechanisms available under ERISA to participants and beneficiaries. See generally, Jennifer Staman, Cong. Research Serv., R41624, Enforcement of Private Health Insurance Market Reforms under the PPACA (2011), available at www.ppsv.com/assets/ attachments/crsreport.pdf. Simply put, I think a Plan that denies a claim that PPACA says must be covered will be sued, and will lose, regardless of what the Plan actually says. So – since the Plan is likely to pay the hypothetical claim we are considering, what happens when it gets submitted to the stop loss carrier for reimbursement? The traditional methodology for determining whether a claim is payable under a contract of medical stop loss insurance is a two-step process: first, the claim must

be payable under the terms of the Plan Document, and second, it must be covered by – and not excluded under – the terms of the stop loss policy. Indeed, MGUs have fiduciary duties arising out of their administrative agreements with their carriers not to pay claims that do not pass these two tests. And, in turn, stop loss carriers have duties to their reinsuring treaty partners not to pay claims that fail either (or both) of these tests as well. The root of the trouble in our hypothetical is that the “contract documents” which together comprise the stop loss contract (the Plan Document and the Stop Loss Policy Form) clearly show that this claim is not reimbursable, because it does not fall within the “four corners” of the deal that was struck between the group and the stop loss carrier. An unfair and wrong result? As with all good hypotheticals, they get better when you season them with some additional facts. Let’s add, for example, that, at underwriting time, the carrier or MGU noted that the plan document they were underwriting for the 2014 Plan Year was not PPACA complaint for various reasons, including the exclusion of coverage for dependents less than 26 who have coverage available to them through their employers. The TPA for the group acknowledged this, and told the MGU/carrier that a new, PPACA Compliant, Plan was in the works and would be ready before year-end 2013. (Anybody ever heard that one before?). And further assume that, as things sometimes go, the end of the year draws nigh, and no new Plan Document is forthcoming. The TPA says that it looks like the new Plan Document isn’t going to be available until 2Q 2014, and asks that the quote be issued using the existing Plan Document. Not wanting to derail a deal, the MGU/carrier quotes the coverage based on the existing Plan Document, the group accepts it, and, a few weeks after the first of 2014, the

stop loss policy is issued, identifying the Plan as the one currently on file. Do these facts mitigate the unfairness of a denial of our hypothetical claim? The MGU/carrier’s point: we tried. We told you that your Plan Document needed to be amended for 2014, you said you’d get us a new one, you didn’t, and then asked that we use the old Plan for our quote. We did, and you accepted it. We did our underwriting using the “old” Plan at your request. We can’t be expected to issue stop loss contracts for Plans that don’t yet exist. Sorry. The group/TPA’s point: give me a break. We all knew that PPACA was coming with changes for 2014, and we knew and you knew what those changes were going to be. If you didn’t build in the PPACA changes in your underwriting for a 2014 contract, that is your problem. Pay the claim. The MGU/carrier’s response: The contract we negotiated with you clearly shows that that this claim isn’t covered. Sorry. The group/TPA’s counter-response: See you in Court. [Hopefully, one or the other of these parties will have called me by now, but I digress…] Let’s spice up our hypothetical further. Let’s assume that, buried in the “old” Plan document is a paragraph in the “General Provisions” section that says, in effect, “this Plan will be deemed to be automatically amended to conform as required by any applicable law governing the provisions of this Plan, including, without limitation, stated maximums, exclusions or limitations. In the event that any law causes the Plan Administrator to pay claims which are otherwise limited or excluded under this Plan, such payments will be considered as being in accordance with the terms of the Plan.” Are we having fun yet? I think the “automatic amendment” paragraph in the “old” Plan might well win the day for group, the argument being

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July 2013

that the carrier “signed up for” a stop loss contract that included a provision which created a “floating” Plan Document – one which was indeed amended by its own terms as the ball dropped in Times Square. But wait. The stop loss contract has a provision clearly stating that any amendments to the Plan Document must be first submitted to and then approved by the carrier before they become effective. This is a very typical provision, designed to prevent a Plan from changing its benefits mid-stream and then seeking to bind the stop loss carrier to new, more generous, terms without an opportunity to adjust premium. Where does this take us? To the end of this small, dreamlike sojourn. But these kinds of issues are not going to remain in the mind of this writer; they will play out in the marketplace, and perhaps in the courts, before long.

stoplosslaw.com/images/stories/wrestlepig.pdf). Recently, I’ve come across some other “piggy” allegories that are both apt and inspire a chuckle. One is the familiar (at least here in the South) notion of “buying a pig in a poke.” (“Poke” is Southern for a “bag” or a “sack”). The pig is for sale, but the buyer decides to purchase seeing only the sack – not the pig itself inside. This, for example, might apply where a stop loss carrier decides to issue a policy even though there were incomplete or ambiguous answers to one or more Disclosure Statement questions. The “pig,” or risk, is “purchased” by the carrier through issuing a policy without insisting on clear and complete answers to the questions on the Disclosure Statement. Another is the inscrutable observation by some Southern (particularly Texan) lawyers that “the hog ate the cabbage.” The first time I heard this one, I was stumped. Roughly translated, it means “my client finally broke down and decided to take your inadequate and insultingly low settlement offer.” Apparently – and I have absolutely no first-hand knowledge of any of this – farmers low on cash sometimes resort to feeding their swine cabbage, in lieu of their regular diet of corn, or God knows what. The pigs turn up their collective noses at the unsavory vegetables for days, weeks – who knows how long – and then, one day, they succumb to the imperative of hunger and eat the cabbage. And so it is with some settlement negotiations.

Porcine Metaphor Update:

And then there is the truism that “pigs get fat, but hogs get ate” (or, in sophisticated parlance, “slaughtered”). I think this one is a commentary on greed and its attendant risks, and counsels against trying to over-reach as a plaintiff in settlement negotiations. It begs the question, though, of the difference between a “hog” and a “pig.” Google suggests that hogs are pigs that weigh more than 120 pounds. So there we have it.

Those of you with long memories will recall that I have likened disclosure issue litigation to “Mud Wrestling with a Pig” (Self-Insurer, January 2005, www.

There is charm and wisdom in these colloquialisms, and they make the otherwise sterile and intellectual practice of law – well, just plain more fun. Why so many of them revolve around pigs, I have no earthly idea. There are many more, but for now, I’ll stop, lest I cast too many pearls before swine. n

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ART GALLERY by Dick Goff

What To Do About Risks Beyond Our Reach

ome questions just seem beyond the reach of ordinary people. Such as how to achieve world peace, what to do about Lindsay Lohan or whatever happened to rock and roll? For business organizations, the impossible questions often center on the unique and specialized risks that the enterprise could face. That’s why enterprise risk management (ERM) has taken on a life of its own as a corporate specialty. Big companies may face risks of weather, war or warped reputations. But enterprise risks are not limited to the great and large. Small to midsize companies can be even more vulnerable to quirky risks because just one adverse event can put them out of business. ERM has emerged as a vital strategic function of the C-suite rather than just another assignment for the businessas-usual risk management staff department.That’s because of two vital differences from ordinary risk: first, major enterprise risks can only be managed on an organization-wide basis and, second, you can’t usually protect against such risks by dialing up your traditional insurance broker. For the kinds of risks I’m citing, conventional insurance is unavailable or only available at massively exorbitant premiums.

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ART offers defense against enterprise risks. I know of captive programs protecting against each of these examples:

business or is otherwise interrupted by a catastrophic event.

Regulatory risks – All kinds of emerging government regulations can cause a business to lose or reallocate capital. In a recent KPMG survey of corporate executives 70 percent said regulatory changes have caused either substantial or moderate changes in their risk profile in the past two years. The fear of regulators (now cited as the “fourth branch” of government with little or no accountability or oversight, but that’s another column) is widespread among the industries of healthcare (see ACA), manufacturing, technology, energy and many others. Reputational risks – All kinds of companies find themselves in the crosshairs of snipers in both mainstream and do-it-yourself media, and the public appears more gullible than ever in believing the worst. A company doesn’t have to do anything wrong to have lies circulated about it on websites and social (some would say anti-social) media. Managing a company’s reputation has become vastly more complex in recent years, according to a recent presentation by Business Insurance magazine. In addition to possible loss of sales, reputational damages include legal and public relations defense costs that can quickly escalate to the millions. Supply chain interruption – A manufacturer that depends on key specialist suppliers would face high losses if one of them goes out of

Government contracts – Somewhere in most government contracts for goods or services is fine print indicating that the issuing agency may cancel the contract at any time. This vulnerability to agency reneging on promised purchases has plagued organizations and has sent more than a few young companies into bankruptcy. Judicial and administrative game changers – At anytime, your customer that is regulated by a federal or state agency, or subject to the precedent of legal proceedings, can be forced to change its way of doing business, and leave you to comply despite additional unrecoverable costs. Loss of license/certification – This is an obvious enterprise risk that can affect all organizations that rely on government sanction to do their business. Loss of contract – In one tragic example, an entertainment promoter contracted for a performance by Mexican-American singer Jenni Rivera, but the performer and her troupe died last December in an air crash following her concert in Monterrey, Mexico. The promoter was covered by a captive insurance policy and recovered $300,000. A captive insurance plan is really the only way to cover the specialized, unique risks that can plague any organization, with the smaller enterprises being the most vulnerable. Without ART intervention, every potential risk faced by any organization is either covered by an insurance policy

– very unlikely! – or is self-insured by default. An organization that goes bare through the risk minefield will pay its own losses through depletion of either its capital or its entire enterprise. Preparing for risks does not include losing sleep at night worrying about them because that never does any good. For most of the kinds of risks I have cited, an actuarially sound captive program is the only lifeline. In a future column I’ll discuss the step-by-step process to protect against risks that seem impossible to cover. As always, I welcome all feedback and opinions. Please feel free to comment to me personally via e-mail or send it in article form to our editor at ggrote@sipconline.net. n Dick Goff is managing member of The Taft Companies LLC, a captive insurance management firm and Bermuda broker at dick@taftcos.com.

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Been Down So Long It Looks Like Up to Me by Wayne Schuh This article originally appeared in the CapVisor Spring 2013 Newsletter.

some of these gains, but at the expense of lower yields in the future. The dim investment income prospects will challenge insurers to change the way

here would appear to be no relief in sight for insurance carriers. Many insurance investment officers,

investment advisors and fixed income portfolio managers are beginning to identify with the song sung by the great bluesman Furry Lewis in 1928, the title of this article. The Federal Reserve has stated it plans to hold interest

that capital is deployed. This article will explore ways in which insurers can respond to the challenging and volatile investment outlook.

Transformations In Banking Practices Produce Income Opportunities For Insurers Insurers seeking higher yields by accepting increasing levels of rate risk and credit risk over the past five years may find a thoughtful approach to illiquidity risk can produce much higher risk-adjusted returns. Market volatility, regulatory changes and increases in capital requirements have

rates at current low levels until at

driven banks, world-wide, to deleverage their balance sheets. This process has

least mid-2015. In the short-term, the

involved wholesale exits from certain businesses, asset sales, and transferring certain

low interest environment has created

risks. The implosion of bank financing appetite in real estate and infrastructure

significant unrealized gains in older

projects has provided insurers opportunities for higher yields and superior risk-

insurer bond portfolios. While this has

adjusted returns in these non-traditional credit-related assets.

a positive impact on surplus, it has little

impact from an earnings perspective. Some insurers have opportunistically realized

July 2013

The Self-Insurer

This illiquidity risk premium will be fueled by the potentially improved regulatory

treatment of illiquid assets when held

month after adjusting for common risk

of low interest rates to support the

against certain specific liabilities of

banking industry have also created

insurers. Other opportunistic credit

factors- market, size and value factors. The illiquidity premium is about twice

assets such as high-yielding bank loans

higher in emerging markets than it is in developed markets.

inventory levels of high yield bonds.

and collateralized loan obligations (CLOs) should also be evaluated by

unprecedented demand and low In response to these tight market

Banks need to be invested in

thoughtful investment officers and their

“high quality” liquid assets issued

advisors seeking predictable cash flows.

by Central Banks with their implicit

conditions, there has been strong demand from US insurers for emerging market debt. Insurers remain

Global Financial Institutions Group,

government guarantees. Consequently, inventory levels for investment grade

predicts that insurers will begin to

credit remain low and fragmented.

and will find both higher yields and

increase their exposure to the illiquidity

Corporate bond inventories are

beneficial geographic diversification in

risk premium by setting “illiquidity

down 77%1 from their peak in

emerging market debt- both sovereign

risk budgets”. This will in part be

October, 2007. Central bank policies

and corporate bonds.

David Lomas, head of BlackRock

underinvested in this asset class

a response to a larger regulatory initiative that will require a more riskbased approach. This approach will recognize that a constant investment strategy should consume very different amounts of regulatory capital at different points in the market cycle. The National Association of Insurance Commissioners (NAIC) adopted in late 2012 the Risk Management and Own Risk and Solvency Assessment (ORSA)

AssistAnce for stop Loss coverAge

Model Act for larger insurers, with an effective date of January 1, 2015. Although ORSA applies to larger insurers, several states lead by the New York State Department of Financial Services have already moved to enact regulations to require Enterprise Risk Management (ERM) practices for all insurance companies. There has also been a clear movement toward risk-based exams conducted by state regulators.

Sovereign Risk and Uncertainty in Developed Markets Create Attractive Investment Opportunities in Emerging Markets Liquidity is priced in a majority

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of international equity markets. The illiquidity premium is 1.04% per

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The Self-Insurer

July 2013

In addition to emerging market debt, international equity markets are projected to produce superior risk-adjusted returns. Once again, as in opportunistic credit markets, several recent studies2 have empirically demonstrated a significant excess return resulting from an illiquidity premium. Liquidity is valuable to market participants and they are demanding higher expected return for less liquid stocks. Consequently, stock illiquidity is positively priced worldwide with average returns significantly higher. By comparison, idiosyncratic risk is negatively priced. The magnitudes of the illiquidity premiums are statistically and economically meaningful. The mean of the illiquidity premium return per month is 1.04%, being 1.51% and 0.71% for emerging and developed markets, respectively. Certain measurable factors impact the illiquidity premium- better information disclosure and better rule of law reduce the illiquidity premium, while greater opacity raises the premium. Also, higher income countries tend to have lower illiquidity premiums. David Swenson, Yale Chief Investment Officer has stated:“Investors prize liquidity… unfortunately liquidity tends to evaporate when most needed. Investors should pursue success, not liquidity. In public markets, as once illiquid stocks produce strong results, liquidity increases. In contrast, if public liquid investments fail, illiquidity follows as interest dries up. Portfolio managers should fear failure not illiquidity.”

Identifying Attractive Alternative Investments for Insurers Absolute return investing consists of inefficiency-exploiting marketable securities positions exhibiting little or no correlation to traditional stock and bond investments. Absolute return positions provide equity-like returns with powerful diversifying characteristics. Diminished investment income inhibits producing a satisfactory return on equity and maintaining competitive product rates. While insurers are struggling to maintain or grow investment income, outside sources of non-traditional capital are boosting investments in the insurance business. Hedge funds are launching new

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July 2013

The Self-Insurer

reinsurance firms. Catastrophic bonds are expanding securitization of risk with insurance-linked instruments. These sources of capital can allow insurers to offload some of their more extreme underwriting risks. Insurers in their search for higher yields are analyzing various alternative asset classes such as real estate, private equity, hedge funds, commodities and oil and gas assets. These alternatives all provide negative correlations to traditional investments, provide important asset diversification, and often deliver the illiquidity premium previously discussed.

to-maturity to mitigate the income statement volatility of potential mark-to-market accounting treatment. Allocations to non-credit alternatives- emerging markets, real estate, hedge funds, commodities and master limited partnerships (MLPs) while providing the potential for higher risk-adjusted returns , will generate higher tax expenses- both realized and deferred. Insurers, working with their advisors, should seek to optimize alternative asset returns on an after-tax basis, by utilizing private placement tax-preference insurance structures widely prevalent in the insurance industry. Currently, more than 120 insurance companies have allocated more than $15 billion to these placements. All the alternative asset classes are available in the private placement and are managed by best-of- class institutional managers selected by the insurer and his advisors. The background and discussion of the private placement insurance structure was discussed extensively in Vol. _ Issue _ of the CapVisor Associates, LLC Quarterly Newsletter. The chart below illustrates that the amount of absolute tax drag generated to the right of the dotted line is eliminated by the insurance placement, thereby significantly increasing absolute returns on alternative asset allocations. n

Smaller insurers, working with their investment advisors, can identify and outsource alternative investment management to third-party alternative asset managers. Investment advisors working with their insurer clients can develop more sophisticated portfolio and risk management strategies that seek an acceptable balance between maximizing total returns versus assuming additional risk and capital requirements.

Tactical Responses to Increasing Asset Allocations to Alternative NonTraditional Assets Non-traditional and less liquid credits may be designated as hold-to-maturity, while other alternative asset classes should be placed in tax-efficient private placement structures prevalent in todayâ&#x20AC;&#x2122;s marketplace. Insurers are reevaluating their core asset strategies for the day when rates begin their inevitable rise. But with real returns on core fixed income portfolios near negative territory, how are insurers responding to the effects of historically low rates?

ICOLI Drag @ Portfolio Maturity

REFERENCES 1.

Bloomberg as of November 2012.

The Illiquidity Premium: International Evidence, Amihud, Hameed, Kang and Zhang, December 29, 2012, SSRN; Understanding Commonality in Liquidity Around the World, Karolyi, Lee and VanDijk, Journal of Financial Economics, 2011.

We have discussed the strategic and tactical movement to nontraditional credits. Many of these less liquid credits could be designated as hold-

The Self-Insurer

July 2013

WORKERS’ COMPENSATION Executive Forum

RECAP

Gateway to Relationships

CHASE PARK PLAZA HOTEL ST. LOUIS, MO • MAY 29-30, 2013

July 2013

The Self-Insurer

IIA held its annual Workers’ Compensation Executive Forum May 29-30 at the Chase Park Plaza Hotel in St. Louis, Missouri. One of the prevailing themes of the conference was the importance of medical treatment and cost, specifically how significant selecting the right doctor is in the process of treating an injured worker. The first session “Good, Bad and Ugly,” was a panel discussion with Michael Banahan, J.D., Senior Partner, Defense Attorney, Evans and Dixon, James Coyle, M.D., Spinal Orthopedic Surgeon, Lyndon Gross, M.D., Ph.D., Orthopedic Surgeon, Patricia Hurford, M.D., Physical Medicine & Rehabilitation, Cheryl Kane, B.A., BJC Workers’ Compensation Administration, John Krause, M.D., Orthopedic Surgeon, and John J. Larsen, J.D., Plaintiff Attorney, Larsen & Hess. The group discussed several case scenarios depicting aspects of a workers’ compensation claim that most industry experts would view as a “Bad or Ugly” decision, report, medical evaluation, treatment, etc. They gave an overview on the “Bad or Ugly” scenario and discussed what should have been done (“The Good”).

excess carrier can help not only for catastrophic claims, but by identifying early strategies to utilize for claims that may have adverse loss development. “Don’t Let Age Become a Statistic: What Every Employer Needs to Know About Older Employees and Loss Prevention” presented by Risk Innovator Award Winner Gary T. Anderberg, PhD, Practice Leader, Analytics and Outcomes, for Broadspire discussed how injury and cause of loss profiles change dramatically as employees become older. Where younger people have strain and overexertion injuries, older employees have slip, trip and fall injuries. Even the predominant causes of motor vehicle accidents change with age, and as accident frequency declines with age, severity increases. The session outlined how to develop age sensitive loss control, safety training, and career development programs, highlighting three specific case studies. In “Let’s Talk Tornadoes - The Destruction and Recovery of Joplin,” Reba Snavely, the Former Director of Human Resources and Risk Management of the City of Joplin shared her experiences and personal photos from the days following the May 22, 2011 tornado that devastated the City of Joplin. She emphasized the importance of practicing emergency plans, and gave 5 lessons needed in recovery including effective communication, preparing yourself mentally, don’t forget your own, coordination and follow through. One of the conference highlights was the session “Different Expert Perspectives on Opioids and Workers’ Compensation, ” sponsored by PMSI. The session started with an individual telling the compelling story of how she became heavily dependent on opioids after a back injury and the affect it had on her life. The session continued with Marco Iglesias, M.D., Medical Director for Midwest Employers Casualty Company identifying opioids, discussing the scope of the problem and how we got to this point. He continued by detailing some of the adverse effects and

“Excess Work Comp Carrier Claim Partnerships: Don’t just make a 911 call for a catastrophic claim, make them your new BFF” was a claims panel discussion with Mark Sidney, Vice President of Claims for Midwest Employers Casualty Company, Mitch Neuhaus, Vice President – Claims for Safety National, Mary Faith Green, AIC, AIM, Assistant Vice President- Senior Claims Consultant with Lockton Companies, and Lynn Rogers, RN, CCM, Area Manager II with Broadspire FCM that discussed strategies for claim managers to leverage their excess carrier partnership beyond the required claim reporting requirements. Approximately 90% of all excess Work Comp claims slowly develop over 5-10 years, and the panel showed how your

The Self-Insurer

July 2013

safety concerns with opioid dosages, the uses of opioids in chronic pain, and the concerns with necessity and effectiveness, and concluded his presentation with risk identification and mitigation. “Is It Worth It to Construct and Maintain a WC PPO Network or Should Self Insurers Identify and Try to Avoid Cost Intensive Providers?” was sponsored by MedMetrics and presented by Edward J. Bernacki, M.D., MPH, Professor of Medicine, Director, Division of Occupational Medicine at Johns Hopkins University, School of Medicine and Executive Director, Health, Safety and Environment for The Johns Hopkins Health System and University. This session highlighted Workers Comp program leaders that have engaged strategies that drive improved total claim costs by engaging outcome based medical analytics, resulting in the reduction of total costs while providing high quality care and

treatment for employees and achieving better total cost outcomes.

potential to make a huge impact on claims costs.

The conference concluded with several breakout sessions including: “Healthy Employees Mean Healthier Productivity” with Randy Gardner, 4G Biometrics, discussing how chronic diseases, such as diabetes, heart disease and obesity can affect your Workers’ Compensation program. Telehealth technology combined with the “human touch” can decrease your combined health and Work Comp costs, reduce absenteeism, and increase productivity.

“Union Carve Out and other Unique Programs” with Donald McCully, Vice President Sales, Roundstone Management, Ltd and Marc R. Poulos, Executive Director and Counsel for Indiana, Illinois and Iowa Foundation for Fair Contracting discussed how in several states, unions have been collectively bargaining with management to employ carve out ADR programs. Some of these unions have even been agreeable in sharing in the cost of the program, citing one captive program. The speakers gave an overview of the history, operation, and success of these programs, and how these programs may be of even greater value to the self-insured employer.

“Taking Your Claims From Good to Great,” Mark Walls, Senior Vice President, WC Market Research Leader with Marsh USA, Inc. provided insight into the practices and innovations that can make a big impact on claims outcomes. Mr. Walls shared his opinion on the best practices on a number of claims handling functions and discussed some innovations that have the

“Tips and Tactics - A Guide to Executive Safety Management” with John Primozich, CSP, ARM, Loss Control Manager for The

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The Self-Insurer

July 2013

Group Health World?” with Jennifer Christian, M.D., MPH, President of Webility Corporation, David Iskowe, Founder and Chairman of EnableComp and Robert Jackson, COO of Stratose, Inc. was a panel discussion on the tremendous innovation taking place within the self-insured group health care marketplace, that has resulted in significant cost savings for plan sponsors. While workers’ comp programs differ from group health plans in many ways, there are numerous things workers’ compensation selfinsurers can learn from their largely Builders Group of Minnesota and Terry S. Buckhout, Regional AVP Risk Control, Meadowbrook/TPA Associates explored what it takes from Top Management in order to initiate and lead an engaging and successful safety effort. They provided useful tips and tactics to make a more of an impact within the organization and make safety consistent from top to bottom. “Self Insured Group Panel Discussion” with Terry Duke, AgComp Self Insurance Fund (SIF), David G. Johnson, Esq., Corporate Counsel of Self Insured Solutions, and Edward G. Wright, New York Lumbermen’s Insurance Trust Fund discussed their personal experiences and some of the biggest issues facing SIG’s today, including adverse loss development, competing in a changing market, surviving significant regulatory issues in New York and California, Joint and Several collection and board governance. “Solutions are Plentiful, Leadership is Scarce” presented by Frank Pennachio, The WorkComp Advisory Group showed participants actions they can take immediately to improve the quality of care for injured employees, increase productivity, and reduce costs. “What can Self-Insured Workers’ Comp Payers Learn from the Self-Insured

more sophisticated “cousins.” The panel identified key group health plan cost savings strategies that can used to control the costs of workers’ compensation claims. “Captive Insurance Strategies for Group Health Risks” presented by Donald McCully, Vice President Sales of Roundstone Management, Ltd gave an overview of how captive insurance can be used in conjunction self-insured group health plans, both on an individual and group basis, to help control costs while allowing for more robust benefit offerings. n

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July 2013

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July 2013

Innovations Include Pain Validity Testing

Self-Insured Johns Hopkins Hospital Cuts Workers Comp Costs by Half by Nelson Hendler and Dick Goff

s workers’ compensation

system to achieve these savings was the

costs spiraled out of

For the program, Dr. Bernacki

requirement that all workers injured

control, a renowned

was presented the Innovations in

at the hospital be treated by “a small

medical center developed

Occupational and Environmental

network of clinically skilled health

a claims management and safety

Health Award from vthe Occupational

system that reduced the self-insured

and Environmental Health Foundation

institution’s workers comp claims costs

in 2003.

by 54 percent during 2002-2012. Edward Bernacki, associate

For the ten-year period the system achieved a reduction in the number of

care providers” (1) at Johns Hopkins Hospital. While 26 states allow for employer-insurance directed care, the Hopkins results were obtained “in an environment in which the employer paid the full cost of medical care and

professor and executive director of

temporary/total cases of 61 percent,

health, safety and environment of the

permanent/partial cases of 63 percent

Johns Hopkins University and Hospital

and administrative costs of 48 percent.

in Baltimore, designed the program

Most importantly, Johns Hopkins

that allows claims to be tracked and

Hospital was able to achieve total

processed more easily. It is linked to

savings of 54 percent with a reduction

percent of chronic pain patients were

safety so that hazardous situations,

in medical costs of 44 percent.

misdiagnosed by physicians outside the

once reported, can be promptly

corrected to prevent future accidents.

July 2013

The Self-Insurer

the claimant had the free choice of medical provider at all times (1).” Concurrently, a group of Hopkins hospital staff members published articles showing that 40 to 67

A key factor allowing the Hopkins

Hopkins system (2,3,4).

Two teams of Hopkins researchers found that 71 to 80 percent of patients referred by physicians around the country with diagnoses of complex

for two-year-old cases to 19 percent for workers’ comp cases and 62% for auto accident cases (7). The resulting cost savings ranged from $20,000 to $175,000 (8). In addition to saving money on actual case treatment, companies that self-

reflex sympathetic dystrophy (RSD)

insure workers’ compensation can improve their cash position by more accurately reserving their workers’ compensation claims. The authors of this article were asked to review 260 workers’ compensation cases for a large bus operation and leasing

really had nerve entrapment syndrome

company with 90,000 employees (14).

regional pain syndrome (CRPS) or

(4,5). Motivated by the alarmingly

All of the cases were six months old or older. Each chart was reviewed for

high rates of misdiagnosis from other

the type of diagnosis that was reported by the treating physician, which served

physicians and by the success of the

as the basis for paying a claim. The company, just like nearly every other carrier or

controlling workers’ compensation costs at their own hospital, a group of

company, made no effort to check the quality of the diagnosis and just paid the claim based on reports from the treating doctor. Of the 260 cases, 126 (48%) were

staff members developed two unique

sprains or strains.

tests to evaluate individuals’ validity of pain on the Internet. (Researchers included Donlin Long, MD, PhD, at the time professor and chairman of the Department of Neurosurgery of the JHU School of Medicine, and his colleagues including James Campbell, MD, professor of neurosurgery and past president of the American Pain Society; Reginald Davis, MD, former chief resident of neurosurgery and assistant professor of neurosurgery; this article’s coauthor Nelson Hendler, MD, former assistant professor and past president of the American Academy of Pain Management; and John Rybock, MD, associate professor of neurosurgery and associate dean of Johns Hopkins University School of Medicine.) One of the Internet-based tests is the Diagnostic Paradigm, which has a 96 percent correlation with the diagnoses of Hopkins Hospital staff members (6). This test also provides a list of the proper tests and treatments for each of the now correct diagnoses, which is a Treatment Algorithm (3,6). One clinic used this technique and reduced the use of medication 90 percent and reduced doctor visits 45 percent while increasing return to work rates from the typical one percent

In order to put this study into perspective, it is important to understand the nature of a sprain or strain. A sprain is over-stretching a ligament, which is the sinew in the body that holds bones together. A strain is overstretching a muscle. In medical textbooks and in publications from the Department of Health and Human Services, a sprain or strain is defined as a self-limiting disease with 7.5 days of restricted activity, two days of bed disability and 2.5 days of work loss (9). Therefore, all of these cases were misdiagnosed since a sprain or strain can’t last six months. The oldest 15 cases of this study cost a total of $3,733,882 with an average cost of $248,925. Some of these cases were open for 10 to 20 years. One case had been open 26 years with the “diagnosis” of “lumbar strain.” The 126 cases of “sprain or strain” six months old or older cost a total of $12,365,366 with the average cost being $98,137. Yet, with proper diagnosis, these lumbar sprain and strain cases could be converted into diagnosis of facet syndrome, or disc disruption, which could be definitively diagnosed and treated for $15,000 to $45,000 per case (2,3,8). Special cases such as CRPS or RSD are far more expensive. PICA, the malpractice insurance carrier for podiatrists, reports that CRPS-RSD cases

The Self-Insurer

July 2013

represent less than one percent of their claims but account for 20 percent of their

REFERENCES

payments. A number of workers’ compensation insurance carriers place a reserve

1. Bernacki, E. and Tsai, S. J. of Occupational and Environmental Medicine, 2003, 45:508-516. http:www.slideshare.net/ DiagnoseMyPain/bernacki-j-occ-enviro-med.

of as much as $1,000,000 for CRPS-RSD cases. However, as mentioned earlier, 71 to 80 percent of these cases are really nerve entrapments (4,5), which most insurance carriers reserve for $50,000. So accurately diagnosing a single CRPS-RSD case will free up $950,000 in reserve money at least 71 percent of the time that the Diagnostic Paradigm is applied. The group of Johns Hopkins physicians also developed the Pain Validity Test to detect fraudulent claims. This test can predict with 85 to 100 percent accuracy which claimant will not have any medical testing abnormalities, thereby detecting fakers and malingerers (7, 10, 11). The Pain Validity Test costs $300 and has stood up in court in multiple states compared to other methods of fraud detection which cost $5,000 or more and don’t stand up in court (12,13,14). While very few organizations that self-insure workers’ compensation will have the medical resources of a Johns Hopkins Hospital, each can take advantage of modern diagnostic and pain validity testing to seek savings in their workers comp programs. Both of the cited Internet tests are available at www. MarylandClinicalDiagnostics.com and the authors may be consulted for additional information. Dr. Hendler may be reached at DocNelse@aol.com and Dick Goff may be reached at Dick@Taftcos.com. n

2. Hendler, N., Bergson, C., Morrison, C.:“Overlooked Physical Diagnoses in Chronic Pain Patients in Litigation, Part 2.” Psychosomatics.Vol. 37, No. 6: 509-517. November/ December 1996. 3. Long, D., Davis, R., Speed,W., and Hendler, N., Fusion for Occult Post-Traumatic Cervical Facet Injury, Neurosergery. Q.Vol. 16, No. 3, pp 129-135, Sept. 2006. 4. Dellon, AL., Andronian, E., Rosson, G.D., CRPS of the upper or lower extremity: surgical treatment outcomes, J. Brachial Plex Peripher Nerve Inj, Feb 20: 4 (1):1, 2009. 5. Hendler, N:“Differential Diagnosis of Complex Regional Pain Syndrome.” Pan Arab Journal of Neurosurgery. Oct. pp. 1-9, 2002. 6. Hendler, N., Berzosky, C. and Davis, R. J. Comparison of Clinical Diagnoses Versus Computerized Test Diagnoses Using the Mensana Clinic Diagnostic Paradigm (Expert System) for Diagnosing Chronic Pain in the Neck, Back and Limbs, Pan Arab Journal of Neurosurgery, pp 8-17, October 2007. 7. Hendler, N.:“Validating and Treating the Complaint of Chronic Back Pain:The Mensana Clinic Approach.” Clinical Neurosurgery.Vol. 35, Chap 20: 385-397, eds. Black, P., Alexander E., Barrow, D., et al,Williams and Wilkins, Baltimore, 1988. 8. http://www.slideshare.net/DiagnoseMyPain/patient-costsavings-documented-with-letters. 9. DHHS, #PHS, 87-1592, 1987. 10. Hendler, N., Mollet, A.,Talo, S., Levin, S.:“A Comparison Between the Minnesota Multiphasic Personality Inventory and the ‘Mensana Clinic Back Pain Test’ for Validating the Complaint of Chronic Back Pain.” Journal of Occupational Medicine.Vol. 30, No. 2: 98-102, February 1988, http://www. slideshare.net/DiagnoseMyPain/pvt-n83. 11. Hendler, N., Cashen, A., Hendler, S., Brigham, C., Oxborne, P., LeRoy, P., Graybill,T., Catlett, L., Gronblad, M. A Multi-Center Study for Validating the Complaint of Chronic Back, Neck and Limb Pain Using “The Mensana Clinic Pain Validity Test.” Forensic Examiner,Vol. 14, #2, pp. 41-49, Summer 2005. http://www.slidehare.net/DiagnoseMyPain/pvt-forensicexaminer.

Can you measure the results of your wellness services?

12. http://www.slideshare.net/DiagnoseMyPain/fraud-detectionwhich-stands-up-in-court. 13. http://www.slideshare.net/DiagnoseMyPain/pvt-used-incourt-in-word. 14. Goff, D.,Workers Comp Can Be A Big Pain,The Self-Insurer, p. 26, July 2010.

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July 2013

The Self-Insurer

July 2013

SIIA PRESIDENT’S MESSAGE Les Boughner

SIIA Coordinates with Its Educational Foundation to Develop Valuable Industry Resources

’d like to use this opportunity to highlight the excellent collaborative work of SIIA’s Workers’ Compensation Committee and the Self-Insurance Educational Foundation (SIEF).

Last month at a very successful Workers Compensation conference in St. Louis, SIEF published an updated version of “Understanding Self-Insured Workers’ Compensation Funds,” which contains basic reference information along with profiles of successful funds. It is the only industry publication focused on these self-insured programs which are an increasingly important option for smaller and mid-sized employers grappling with rising workers’ compensation insurance costs. The content for the publication was developed by SIIA’s Workers’ Compensation committee under the leadership of Duke Niedringhaus, which is comprised of many of the industry’s top experts on self-insured workers’ compensation programs. This is latest example of collaboration between SIIA and its affiliated educational foundation. Over the past two years, SIIA volunteer committees have developed detailed publications for self-insured group health plans and captive insurance companies. All of these publications are available on-line at www.siia.org, or by calling 800/851-7789. Watch for additional SIEF-produced publications in the future. In the meantime, I would like to personally thank all of those who have supported the foundation, as well as the many volunteer SIIA committee members who have generously shared their extensive experience and intellectual talents. n Sincerely,

Les Boughner

July 2013

The Self-Insurer

July 2013

SIIA would like to recognize our leadership and welcome new members Full SIIA Committee listings can be found at www.siia.org

2013 Board of Directors

Committee Chairs

CHAIRMAN OF THE BOARD* John T. Jones, Partner Moulton Bellingham PC Billings, MT

CHAIRMAN, ALTERNATIVE RISK TRANSFER COMMITTEE Andrew Cavenagh President Pareto Captive Services, LLC Conshohocken, PA

PRESIDENT* Les Boughner Executive VP & Managing Director Willis North American Captive + Consulting Practice Burlington, VT VICE PRESIDENT OPERATIONS* Donald K. Drelich, Chairman & CEO D.W. Van Dyke & Co. Wilton, CT VICE PRESIDENT FINANCE/CHIEF FINANCIAL OFFICER/CORPORATE SECRETARY* Steven J. Link Executive Vice President Midwest Employers Casualty Company Chesterfield, MO

Directors Ernie A. Clevenger, President CareHere, LLC Brentwood, TN Ronald K. Dewsnup President & General Manager Allegiance Benefit Plan Management, Inc. Missoula, MT

CHAIRMAN, GOVERNMENT RELATIONS COMMITTEE Horace Garfield Vice President Transamerica Employee Benefits Louisville, KY CHAIRWOMAN, HEALTH CARE COMMITTEE Elizabeth Midtlien Senior Vice President, Sales StarLine USA, LLC Minneapolis, MN CHAIRMAN, INTERNATIONAL COMMITTEE Greg Arms New York, NY

SIIA New Members Regular Members Company Name/ Voting Representative

Rose Frieri, Director of Human Resources, Captive Resources, LLC, Schaumburg, IL Christine Walch, President, Comprehensive Care Services, Inc., Eagan, MN Daniel Palestrant, CEO, par8o, LLC, Cambridge, MA

Affiliate Members Kathleen Smith, Managing Director, Spartan Recoveries, LLC, Holbrook, NY

CHAIRMAN, WORKERS’ COMPENSATION COMMITTEE Duke Niedringhaus Vice President J.W. Terrill, Inc. St Louis, MO

Elizabeth D. Mariner Executive Vice President Re-Solutions, LLC Wellington, FL Jay Ritchie Senior Vice President HCC Life Insurance Company Kennesaw, GA

| Self-Insurer The Self-Insurer July 2013 | The

Confidence to thrive in ever-changing conditions

Grow with proven insights in risk management. Success comes from nurturing what’s possible. It takes a balanced approach to risk management, along with confidence to act on the guidance from trusted partners with demonstrated expertise. Your clients rely on you. And at HM Insurance Group, we help you deliver. As a national leader in Stop Loss, HM helps you achieve results through smart innovations and decades of experience in the growing field of self-funding. Grow with confidence. Find out if self-funding with HM Stop Loss makes sense for your growth-focused clients at hmig.com/confidence/7 HM PRODUCT PORTFOLIO:

STOP LOSS

WORKERS’ COMPENSATION | CRITICAL ILLNESS | ACCIDENT | DISABILITY INCOME | TERM LIFE

The Self-Insurer

July 2013

WHAt MAKES A LEAdEr IN HealtHcare cost MaNageMeNt?

tS Produc AN M r o F r E P

cE SHIP PArtNEr

At PHX, we offer a comprehensive solution that’s tailored to fit your business – take advantage of our suite of innovative Products and outstanding Performance while building a long-term Partnership. >> 888.311.3505 | PHX-online.com

July 2013

The Self-Insurer