Self-Insurer Mar 2014

March 2014

www.sipconline.net

BIG

INSURERS

Eyeing

Self-Funded Solutions

Virtues, Caveats Seen Across Ever-changing Market Landscape

2

March 2014 | The Self-Insurer

© Self-Insurers’ Publishing Corp. All rights reserved.

www.sipconline.net

MARCH 2014 | Volume 65

March 2014 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

12 ART Gallery: Another NY Law – Another ART Opportunity

Editorial Staff

14 Are the Benefits Provided Truly Tax Free?

by Cori M. Cook, J.D.

PUBLISHING DIRECTOR James A. Kinder MANAGING EDITOR Erica Massey SENIOR EDITOR Gretchen Grote CONTRIBUTING EDITOR Mike Ferguson

6

Big Insurers Eyeing

Self-Funded Solutions Virtues, Caveats Seen Across Ever-changing Market Landscape

Lynne Bolduc, Esq. Secretary

Benefit Mandates: Departments Issue New ACA FAQs on Preventive Services, Cost-Sharing Limits, Fixed Indemnity Insurance, Wellness Programs and Expatriate Health Plans

on the Offense in Washington, DC

Association Leverages Member

Involvement to Expand Political Influence

by David Kirby

Editorial and Advertising Office P.O. 1237, Simpsonville, SC 29681 (888) 394-5688

Erica M. Massey, President

36 SIIA Puts Self-Insurance Industry

DIRECTOR OF ADVERTISING Shane Byars

James A. Kinder, CEO/Chairman

20 PPACA, HIPAA and Federal Health

by Bruce Shutan

DIRECTOR OF OPERATIONS Justin Miller

2014 Self-Insurers’ Publishing Corp. Officers

ARTICLES

28

Global Healthcare Opportunities Available to Employers and Benefits Brokers: The Growth of Medical Travel as an Employee Benefit

by David Boucher

© Self-Insurers’ Publishing Corp. All rights reserved.

INDUSTRY LEADERSHIP 4 SIIA Chairman’s Message

The Self-Insurer | March 2014 3

SIIA CHAIRMAN’S MESSAGE 2014 Educational Programs and Networking Opportunities

S

IIA is delighted to bring you another great year of meaningful educational events and networking opportunities. Our committees have been working tirelessly to develop topical agenda’s and interesting speakers and panels.

We kick off 2014 with the Self-Insured Health Plan Executive Forum (formerly known as the TPA/MGU Excess Insurer Executive Forum) in Charleston, South Carolina March 24-26th. Corporate benefit directors, third party administrators, brokers/consultants, stop-loss insurance carriers/ MGUs, captive managers and industry service providers should attend. This year’s theme is “Preserving Employers Choice to Self-Fund,” and sessions planned include “Building a Better Self-Funded Team – Don’t Forget About Employers and Employees,” “Building a Better Self-Funded Team – Getting Service Providers on the Same Page,” “Stop-Loss Market Trends Post ACA,” “Putting Claims Data to Work – Innovative Plan Design Case Studies,” “Private Exchanges vs. Public Exchanges vs. Cafeteria Plans,” “Brokers and the SelfFunded Marketplace – Part 1 (The Brokers’ Perspective)” and “Brokers and the Self-Funded Marketplace – Part 2 (The Self-Funded Marketplace Perspective).”

SIIA’s 28th Annual Legislative/Regulatory Conference will be held April 23-24th in Washington, DC. The legislative/regulatory environment for companies involved in the self-insurance marketplace continues to be fluid and unpredictable, so it’s more important than ever to attend. This event gives you the unique opportunity to directly here from policy-makers and influencers who play key roles in deciding what rules self-insurance industry stakeholders need to play by. Make sure to sign up for the “Walk on the Hill” and SIIA staff will make appointments for you to meet with your elected representatives.

The 16th Annual Self-Insured Workers’ Compensation Executive Forum, May 20-21st in Miami, FL, is the country’s premier association sponsored conference dedicated exclusively to self-insured Workers’ Compensation. 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-insurance/alternative risk transfer industry.

June 9-11th, the SIIA International Conference in Miami, FL will focus on globalization, one of the most significant business trends over the past several years. Self-insurance/alternative risk transfer solutions are being developed to respond to the specific needs of companies whose operations reach beyond specific geographic borders. The industry’s top experts will share their knowledge on helping companies with international risk management needs understand the self-insurance solutions available to them.

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March 2014 | The Self-Insurer

Les Boughner

The SIIA National Conference & Expo is the world’s largest event focused exclusively on the selfinsurance/alternative risk transfer marketplace, typically attracting more than 1,700 attendees from throughout the United States and from a growing number of countries around the world. This year the conference will be held October 5-8th at the very popular location of the JW Marriott Desert Ridge Resort and Spa in Phoenix, AZ. There are many exhibiting and sponsorship opportunities still available. Take advantage and give your company the most exposure to the who’s who of the self-insurance/ alterative risk transfer industry.

For more information on all upcoming 2014 SIIA events, please visit www.siia.org. I look forward to seeing you in 2014! n

© Self-Insurers’ Publishing Corp. All rights reserved.

HELP YOUR CLIENTS

TO THE BENEFITS OF STOP-LOSS. He has a new heart. His employer has peace of mind.

With stop-loss coverage from Sun Life, your clients are protected against catastrophic claims. And they get the benefit of an independent point of view from one of America’s leading stop-loss providers. In the past three years alone, we processed 68,000 claims—over $1.3 billion in payouts. Why not put our expertise to work for you? Ask your Sun Life rep how.

Life’s brighter under the sun

sunlife.com/wakeup Stop-loss insurance policies are underwritten by Sun Life Assurance Company of Canada (Wellesley Hills, MA) in all states, except New York, under Policy Form Series 07-SL. In New York, stop-loss insurance policies are underwritten by Sun Life and Health Insurance Company (U.S.) (Windsor, CT) under Policy Form Series 07-NYSL REV 7-12. Product offerings may be subject to state variations. © 2014 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.

PRODUCER USE ONLY.

SLPC 24843 11/13 (exp. 11/15)

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The Self-Insurer | March 2014

5

BIG

INSURERS

Eyeing

Self-Funded Solutions

by Bruce Shutan

Virtues, Caveats Seen Across Ever-changing Market Landscape

6

March 2014 | The Self-Insurer

© Self-Insurers’ Publishing Corp. All rights reserved.

P

evco has manufactured, sold and installed pneumatictube systems for 35 years – a growing family owned operation that has always offered health insurance and about 99% of customers, in fact, are in the health care industry. But the company is barely a year into a self-insured solution provided by one of the nation’s largest health insurance carriers.

impact of the Affordable Care Act (ACA) coming and believed, rightfully so, that there would be some interest in self-funding for smaller groups, not as an escape, but as a better financial alternative to what people might find in some of those smaller marketplaces across the country,” he explains.

A close review of Pevco’s health care data over the past two years revealed “phenomenal” renewals relative to the national average, but also an opportunity to save money, according to Debbie Johansen, the company’s director of HR. The switch took effect for the current plan year, which begins May 1, and has been seamless to the company’s covered lives, which are split nearly even at 54 and 55, respectively.

A huge caveat to consider is that insurance carriers “don’t necessarily have a stake in the game of keeping costs low,” opines Arthur Hall, CEO of Emerson Reid & Co., a large brokerage firm, who believes “they would be thrilled to see the health care costs go up 10% for them and 12% for everybody else.” By the same token, he says any tax burden on fully insured plans under the ACA will simply be passed through to payers.

After being fully insured with Cigna for nearly four years, Pevco decided to pursue self-insurance with the carrier’s assistance – appreciating its track record of claims being paid on time and a comprehensive provider network. It also was encouraged by the small firm’s broker a few years ago.

Fierce competition, no doubt, is driving large carrier involvement in the area of providing self-insured solutions. “The reason why Blue Cross, United, and Cigna are in this game is because Assurant, Trustmark, and every Tom, Dick, and Harry TPA in the market are going to be in this game,” Hall bluntly explains. “It’s 20% or 30% of the market, and it’s a big delta for those 20% to 30%.” He says carriers are motivated to muscle in on the self-insured market because higher taxes and more regulation make it increasingly attractive to a subset of employers.

What’s a big insurer doing helping such a small employer with a selffunded product? And is it in the best interest of the customer to embark on this path instead of the traditional route? The answer, of course, depends on who’s doing the talking.

Most large carriers have taken a dim view of self-insurance and wouldn’t sell funds under 100 employee lives, says Kevin Schlotman, a VP with Benovation, which is both a broker and TPA. He believes any intention to now court smaller employers is an attempt to protect their market share. “They, along with many others, saw the

His concern is whether these carriers are capable of the hand-holding challenges inherently associated with self-funding for smaller groups, or able to provide adequate administrative support through their own TPA model that mirror the ASO marketplace for large groups. But Schlotman cautions that even those arrangements can involve a significant delay in claims and that it’s also a struggle to round out information for groups of fewer than 100 employee lives in the face of HIPAA.

Few would argue that their strategy is based on a pragmatic view of how the private health insurance market could evolve under health care reform. “The ACA seems to be serving up a new kick in the actuarial gut for insurers almost every week, and the millions of new customers they envisioned getting via exchanges may not actually be coming, or at least not in a favorable actuarial mix,” notes a veteran industry observer who spoke on background purposes.

One speaker at SIIA’s 33rd annual National Education Conference & Expo in Chicago who declined to be interviewed for this article was particularly cynical about decisions by Cigna, UnitedHealthcare and other large carriers to aggressively sell self-insured plans down market to as few as 10 lives. She dismissed those strategies as nothing more than a ploy to reveal to state regulators the potential pitfalls of self-funding.

The speaker went on to say brokers are motivated to stick with commoditized, fully-insured arrangements because of their generous commissions.

With groups under 200 lives, she said brokers who were only accustomed to serving fully insured groups have too steep of a learning curve on self-funding, which essentially amounts to unchartered territory.

“There’s a huge market for groups that are looking for alternatives,” she said, offering a bullish forecast of the potential to convert fully insured employers into self-insured plan sponsors.

Brand-name recognition In some instances, Schlotman admits it may be more palatable for an employer to self-insure through a large health insurer if brand recognition and

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The Self-Insurer | March 2014

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AIG Benefit Solutions

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• Supplemental Medical Solutions for more complete health coverage • Protection Solutions including life, accident and disability plans • Employer Risk Solutions including stop-loss and captive arrangements

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• Multi-Product Solutions like ProtectPakSM to simplify benefit offerings

Visit aigbenefits.com to learn more about what AIG Benefit Solutions can do for your business.

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March 2014 | The Self-Insurer

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the breadth of network provider access are important enough points to employees and their dependents.

This is particularly true if employees are scattered across multiple locations.

“Some employers may say, ‘I value what I perceive to be the strength and stability of a major national insurer,’” he says.”Ultimately, our goal is to put clients in the best position to win, period.”

Most of the arrangements Schlotman has seen involve a levelfunded product that funds to the maximum claim amount and refunds anything that’s leftover at the end of the year. The key difference between these contracts and the independent TPA model is that “most of the carriers are holding back a part of that refund for themselves,” he adds.

One advantage a large insurance carrier like Cigna has relative to traditional TPAs is an “ability to bring all the parts of the self-insured product to an employer” in one fee rather than involve multiple service providers, according to Lauren Stoddard, a manager in Cigna’s Select product segment.

about 20 years alongside fully insured options in order to broaden the choices available to customers for managing their health benefits. There’s about a 50-50 split between selffunded and fully insured arrangements, Stoddard reports, with smaller group market growth seen.

The carrier’s key messaging around self-insurance emphasizes not only greater employer control and flexibility over their health plans, but also more transparent claims data that allows for better decisions about plan designs and wellness programs.

Stoddard acknowledges that selffunding may not be the right fit for smaller firms that aren’t equipped to handle financial risks or cash-flow requirements.

But for others like Pevco, it’s a tremendous opportunity. “We are very in tune with our employees about wellness and really understanding how the system is becoming more

consumer-driven,” explains Johansen.

The firm’s health benefits strategy includes making employees and their families aware of a 24-hour nurse hotline, as well as imploring them not to use the ER as their primary doctor.

Decentralized operations also influenced the decision to go with self-insurance. “We have employees in various states,” she says, “so it’s very difficult when you’re looking at different insurance companies and what’s available because you’ve got to be able to encompass everybody. You can’t just go with a regional company.

It just worked out to be the best choice for us.”

Scrutinizing the bundled model Schlotman isn’t sold on the advantages of a one-stop shop.

“Traditionally, when you work with an independent TPA, everything is

“We have an integrated system that allows us to trigger funds from the stop-loss policy and provide immediate reimbursement on those high-dollar claims, which you don’t always get with a third-party administrator arrangement,” she says.

Stoddard says it’s also important to be clear on the consistency between various contracts. One pitfall, for example, would be to find that there is some benefit maximum on a certain type of transplant under the stop-loss policy that isn’t under the medical policy that the employer wasn’t aware of when the self-funding arrangement began.

Cigna has been offering self-funded plans to all types of employers for

© Self-Insurers’ Publishing Corp. All rights reserved.

The Self-Insurer | March 2014

9

out there in the open for you to see,” he notes. “When you bundle everything together, that’s when things get a little bit murkier.”

Hall also has his doubts about economies of scale bearing out, which he believes “will get eaten up by profit and/or bundling charges of the big carriers.”

Put another way, brand recognition allows for higher fees to be built into stop-loss or admin services. So while these carriers could offer a better branded product or significant network cost differentials, he doesn’t think the service will be more competitive than traditional TPAs, which can always rent their networks to clients.

Insurers may be intrigued with self-insurance as another means of mining revenue, but it’s unlikely that they will abandon their bread-and-butter businesses.

“A bundled, fully insured solution is always going to have more top-line revenue,” Hall says, “and these carriers are in the risk business, so they shouldn’t be adverse to that, and I don’t think they are. No carrier is adverse to risk. They want a price war to manage risk. So I don’t foresee them ever wanting to get out of the fully insured business.” n Bruce Shutan is a Los Angeles freelance writer who has closely covered the employee benefi ts industry for 26 years.

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March 2014 | The Self-Insurer

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I just want to fly

Whether it’s life insurance, annuities or employee benefits, Symetra has been helping people reach higher and fly farther—for over 50 years. Learn more at Symetra.com/fly. And take flight.

Photo of Oz Sanchez, Paralympic Gold Medalist and 5-time World Champion

Life insurance and annuities are issued by, and employer and employee benefits are insured by, Symetra Life Insurance Company (est. 1957), 777 108th Ave NE, Suite 1200, Bellevue, WA 98004 and are not available in all U.S. states or any U.S. territory. In New York, life insurance and annuities are issued by, and employer and employee benefits are insured by, First Symetra National Life Insurance Company of New York, New York, NY (est. 1990), mailing address P.O. Box 34690, Seattle, WA 98124. Symetra Life Insurance Company, not a licensed insurer in New York, is the parent company of First Symetra National Insurance Company of New York. Each company is responsible for its own financial obligations. Symetra® is a registered service mark of Symetra Life Insurance Company.

Photo credit: Tiffany Brown/Las Vegas Sun

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The Self-Insurer | March 2014

11

ART GALLERY

by Dick Goff

Another NY Law – Another ART Opportunity

T

he state of New York recently enacted legislation that combines two current national issues, a liberalized minimum wage and enhanced health benefits endowed by the Affordable Care Act (ACA). In a football game this play would be flagged for piling on – with New York business owners at the bottom of the pile.

The law singles out home health care services as the object of its attention, but we think it could be just a stalking horse for similar laws that could in the future apply to broader occupations in larger industries.

And if it plays in New York, can California and many other states be far behind?

The New York Home Care Worker Wage Parity Act raises total compensation for workers to $14.09 per hour, with at least $10 to be paid as regular wages and the remaining $4.09 to be applied to a higher wage or a range of paid-for benefits that may include leave time or others such as health education and disease prevention services. But whatever the benefits menu, each employer of protected workers is on the hook for the entire $14.09.

This seemingly benign act could be overlooked or dismissed as a legislative anomaly.

I mean, are there really enough home health care workers in

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March 2014 | The Self-Insurer

New York to raise the concerns of corporate America? But that isn’t even the point here. This could be just the tip of the camel’s nose poking under the tent, with the hump and all about to follow.

Some forward-thinking ART practitioners have already reflected on this law with the conclusion that such a burden on employers could be turned into an opportunity for them to generate revenue through ownership of some of the risk of such new coverage. Of course I’m talking about captive insurance companies.

“This law on its face places a giant financial burden on employers of home health care workers,” says Jeffrey Simpson, attorney with Gordon, Fournaris & Mammarella, P.A., of Wilmington, Delaware. My longtime SIIA colleague, Jeff is a leading legal expert in the ART camp. “ART can help convert that burden into a revenue opportunity,” he continues.

I sketched out to Jeff my concept of providing coverage for the preventive care elements of the New York mandate through a recognized commercial insurer that could take a reinsurance contract with the captive and cede back all or a portion of the risk and associated underwriting profits. “Assuming ownership of the captive could be structured to comply with the New York law, this is a natural captive opportunity,” he observed.

In an example program, coverage would include the educational and preventive care services plus vision, dental and discount pharmacy services. The primary health coverage for employees and dependents would be provided by an employer’s selfinsured or fully insured health benefits plan.

Such a program would produce healthier people in the long run. Preventive services would include health- and life-saving screenings for conditions such as

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aortic aneurysm, cardiovascular disease, blood pressure, cholesterol, colorectal, diabetes and effects of tobacco or alcohol as well as gender-specific tests. In addition, employees’ children could receive four complete health assessments between birth and age 17.

This is just another example of the ability to convert an expense into a profit center through application of ART. Captives could take broader coverage across the health care spectrum to include such services as traditional dental and vision services, short term disability, medical stop-loss and complete wellness services.

A captive could be set up as a member of a series LLC structure, a stand-alone incorporated captive or a protected cell of a larger captive.

Whichever flavor an employer may prefer, it’s clear that an alternative risk transfer solution could turn burdensome regulation such as the New York act into a profit center, with also the important consideration of a healthier workforce.

I used my visit with Jeff Simpson to note his leadership role on SIIA’s ART Committee as he takes responsibility for a greater emphasis on 831(b) captives at next fall’s National Conference.That form of captive, of course, provides coverage and additional financial benefits to owners of business and professional organizations.

“I have always thought that the 831(b) structure lacked an institutional voice to the greater business world,” Jeff told me. “I think SIIA could step into that role, and this year’s conference could be the start of that.” n

UpcomingEVENTS Self-Insured Health Plan Executive Forum March 24-26, 2014 • Charleston, SC • Charleston Place Hotel The Self-Insured Health Plan Executive Forum (formerly known as the TPA/MGU Excess Insurer Executive Forum) will be held March 24-26, 2014 in Charleston, SC. The educational focus for this event will be to address the interests of plan sponsors, in addition to third party administrators and stop-loss entities.

28th Annual Legislative/Regulatory Conference April 23-24, 2014 • Washington, DC • Marriott Metro Center 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 2014 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.

Self-Insured Workers’ Comp Executive Forum

May 20-21, 2014 • Miami, FL • Eden Roc Hotel Miami Beach SIIA’s Annual Self-Insured Workers’ Compensation Executive Forum is the country’s premier association sponsored conference dedicated to self-insured Workers’ Compensation employers and group funds. In addition to a strong educational program focusing on such topics as analytics, excess insurance, wellness initiatives 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 9-11, 2014 • Miami, FL • Eden Roc Hotel Miami Beach SIIA’s International Conference provides a unique opportunity for attendees to learn how companies are utilizing self-insurance/alternative risk transfer strategies on a global basis. The conference will also highlight self-insurance/ART business opportunities in key international markets.

Participation is expected from countries all over the world.

34th Annual National Educational Conference & Expo Readers who wish to comment on this column or write their own article may contact Editor Gretchen Grote at ggrote@sipconline.net. Dick Goff is managing member of The Taft Companies LLC, a captive insurance management firm and Bermuda broker at dick@taftcos.com.

October 5-8, 2014 • Phoenix, AZ • JW Marriott Desert Ridge Resort and Spa 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.

© Self-Insurers’ Publishing Corp. All rights reserved.

The Self-Insurer | March 2014

13

Are the Benefits Provided Truly Tax Free?

by Cori M. Cook, J.D., CMC Consulting, LLC

I

t should be no surprise that self-insured health plans, cafeteria plans, and dependent care assistance programs (DCAPs) are subject to nondiscrimination requirements under the Internal Revenue Code. This has been the case for some time. More recently, PPACA established non-discrimination

requirements, as set forth in the Public Health Service Act (PHSA) section 2716, for fully insured health plans and this renewed focus on non-discrimination has creating a testing frenzy in the marketplace.

The non-discrimination requirements are premised on the fact that if an employer (may require controlled group analysis) wishes to provide tax-free benefits to its employees, the employer must ensure that in doing so it does not unduly favor those employees that would be deemed highly compensated and/or key personnel, and if a plan fails to comply with these requirements there may be adverse tax consequences for these employees.

With regard to fully insured plans, section 1001 of PPACA added section 2716 to the PHSA which prohibits fully insured non-grandfathered group health plans from discriminating in favor of highly compensated individuals in accordance with the principles set forth in Code section 105(h) that were previously only applicable to self-insured health plan. However, the IRS has postponed

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March 2014 | The Self-Insurer

enforcement until further guidance can be provided, and at this time, there is little to no indication that the guidance is forthcoming any time soon.

Nonetheless, for self-insured health plans, cafeteria plans and DCAPs it is status quo - testing is required and discrimination is prohibited.

Although these plans (as well as HRAs and FSAs) are all subject to nondiscrimination testing, the tests are not identical and some of the applicable definitions differ. For instance, section 105(h) prohibits discrimination in favor of Highly-Compensated Individuals (HCIs) and section 125 prohibits discrimination in favor of Highly-Compensated Participants and Individual (HCEs) and Key Employees.

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HCIs For section 105(h) testing purposes, an HCI is an individual who is: • one of the employer’s five highest paid officers; • a shareholder owning more than 10% in value of the stock of the employer; or • among the highest paid 25% of all non-excludable employees.

Section 105(h) allows the exclusion of the following individuals from the highest paid 25%: • employees who have not attained the age of 25; • employees who have not completed three years of service; • part-time or seasonal employees; • non-resident aliens; and • collectively bargained employees.

HCEs For section 125 testing purposes, HCEs on the other hand include the following: • employees owning more than 5% of the voting power or value of all classes of stock of the employer during the current or preceding plan year; • officers; • highly compensated; or • a spouse or dependent of an individual set forth above.

Section 125, under certain circumstances, allows the potential exclusion of the following individuals from the eligibility and participation requirement: • employees who have not attained the age of 21; • employees who have not completed one year of service; • non-resident aliens; or • collectively bargained employees.

Key Employee For section 125 testing purposes,

a Key Employee is any employee who, during the plan year, was: • an officer of the employer with an annual compensation in excess of a specified dollar threshold; • more than a 5% owner of the employer; or • more than a 1% owner of the employer with an annual compensation in excess of a specified dollar threshold.

For years, many employers have merely paused to assess whether their plan(s) satisfies the non-discrimination requirements. However, the nondiscrimination requirements are complex and require a more thorough analysis to make this determination.

The general components of the self-insured health plans, cafeteria plans and DCAP testing requirements can be narrowed down to eligibility, benefits, availability and utilization.

Self-Insured Health Plans Eligibility and benefits are considered in the analysis of a self-insured health plan. The plan must satisfy one of the following three tests in order to satisfy the eligibility component: 1. 70% or more of all nonexcludable employees benefit under the plan; 2. 80% or more of all eligible employees, if 70% or more of all non-excludable employees are eligible to participate under the plan; or 3. the plan benefits a classification of employees which the IRS finds to be non-discriminatory.

Likewise, the plan must satisfy the benefits test by providing similar benefits to the HCIs and non-HCIs. The maximum benefit level cannot be

© Self-Insurers’ Publishing Corp. All rights reserved.

based on compensation, age, or years of service, and the type of benefits must be identical for all participants without differing waiting periods.

Cafeteria Plans Eligibility, benefits, availability and utilization are considered in the analysis of a cafeteria plan.

The plan must satisfy all three of the following eligibility requirements: 1. it must benefit a nondiscriminatory classification of employees; 2. the employment requirement must be the same for all employees with no more than three years of employment needed for all employees to be eligible to participate; and 3. eligibility cannot be later than the first day of the plan year after the employment requirement is met.

With regard to availability and utilization in a cafeteria plan, the requirements will be satisfied if: ‘reasonable’ classifications do not discriminate in favor of HCIs; ‘similarly situated’ employees are treated the same; non-taxable benefits are not disproportionately elected by HCIs; HCIs are not favored in the actual operation of the plan; and qualified benefits provided to key employees do not exceed 25% of the total of all such benefits provided for all employees under the plan.

Dependent Care Assistance Programs (DCAPs) Eligibility, benefits and utilization are considered in the analysis of a DCAP plan.

Again, ensuring that the benefits offered benefit employees who qualify under a classification that does not The Self-Insurer | March 2014

15

discriminate in favor of HCEs. The ‘reasonableness’ test for the cafeteria plan is utilized, however, here an HCE is defined as an employee who owns more than 5% during the current or preceding year or the employees compensation during the preceding year exceeded $115,000 for 2012, 2013, and 2014.

Benefits cannot favor HCEs and no more than 25% of the amount paid for DCAP benefits during the year can be provided to individuals (including spouses and dependents) that have more than 5% ownership.

With regard to utilization, the average DCAP benefits provided to non-HCEs must be at least 55% of the average benefits provided to HCEs. Many times, non-HCEs don’t understand the value in electing DCAP benefits and plans often end up with more HCEs utilizing the benefits which may cause the plan to fail. Some employees may be excluded

from the test as set forth above, however, it is important to run the test so the employer knows for sure whether the plan passes the test.

A common question is always “when should I test?” If a plan has never tested before they should test now! Ideally, a plan should test mid-year and at the end of the plan year. However, plans that have not been testing should perform a test now for the 2013 plan. If the test(s) fails then they will likely have some modifications to make now for 2014. If the test(s) passes and there were not many changes made for 2014, they may be safe waiting until the end of the current plan year. If changes were made then a mid-year test would be

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March 2014 | The Self-Insurer

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The Self-Insurer | March 2014

17

prudent and recommended. Some circumstances that could significantly impact results, employers have little control over. Something as simple as a disproportionate number of HCIs electing coverage or more importantly, and more likely, a disproportionate number of non-HCIs not electing coverage may cause a plan to fail and unlike 401(k) testing, employers are not afforded the opportunity to do cleanup from a failed test after the end of the plan year.

If you have not already done so, this would be a good opportunity to educate your clients, provide a service offering, and/or encourage your clients to seek legal/compliance assistance.

I would encourage you to also review your Administrative Service

Agreements and see how it addresses the testing requirements. For plans that have not had testing on their radar, now would be a good time to start, and depending upon the results, they may need to review their plan documents and consider potential plan modifications.

The reality is, we don’t have a lot of guidance on section 105(h) testing and for most folks, the regulations themselves might as well be written in Latin. However, with the focus now on the fully insured plans as a result of PPACA, there is no doubt that there is going to be a renewed spotlight on the self-insured plans. n This article is intended for general informational purposes only. It is not

intended as professional counsel and should not be used as such. This article is a high-level overview of the non-discrimination requirements applicable to certain health plans. Please seek appropriate legal and/ or professional counsel to obtain specific advice with respect to the subject matter contained herein.

Cori M. Cook, J.D., is the founder of CMC Consulting, LLC, a boutique consulting and legal practice focused on providing specialized advisory and legal services to TPAs, employers, carriers, attorneys, associations and providers, specializing in healthcare, PPACA, HIPAA, ERISA, employment and regulatory matters.

Cori can be reached at (406) 647-3715, via email at cori@corimcook.com, or at www.corimcook.com.

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NOT BEES. At Safety National, we believe in relationships built on long-term commitment to our clients. As a result, our personal interests tend to suffer. Thanks to the dedication of employees like Tammy, we are the longest-operating and leading provider of Excess Workers’ Compensation to self-insured employers nationwide. We have yet to build the same rapport with bees.

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The Self-Insurer | March 2014

19

PPACA, HIPAA and Federal Health Benefit Mandates:

Practical

The Affordable Care Act (ACA), the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and other federal health benefi t 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 ACA, HIPAA and other federal benefi t mandates.

Q&A

Departments Issue New ACA FAQs on Preventive Services, Cost-Sharing Limits, Fixed Indemnity Insurance, Wellness Programs and Expatriate Health Plans

O

n January 9, 2014, the Departments of Labor (“DOL”), Health and Human Services (“HHS”), and the Treasury (collectively, the “Departments”) issued Part XVIII of the Frequently Asked Questions (“FAQs”) on Affordable Care Act (“ACA”) and Mental Health Parity Implementation. The Departments’ ACA Implementation FAQs have been important sub-regulatory tools for divining regulatory intent on complicated, and continually evolving, issues. This Advisory addresses FAQs Part XVIII related to ACA implementation, including guidance regarding preventive services, cost-sharing limitations, fixed indemnity insurance, wellness programs, and expatriate health plans as they relate to group health plans.1

Preventive Services (FAQ 1) Public Health Service Act (“PHSA”) § 2713 and the interim final regulations thereunder require non-grandfathered group health plans and health insurance coverage offered in the individual or group market to provide benefits for, and prohibit the imposition of cost-sharing requirements with respect to, various

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March 2014 | The Self-Insurer

© Self-Insurers’ Publishing Corp. All rights reserved.

preventive care services. The FAQs reiterate the position in the regulations that if the recommendation or guideline does not specify the frequency, method, treatment, or setting for the provision of that service, the plan or issuer can use reasonable medical management techniques to determine any coverage limitations.2 FAQ 1 provides updated guidance on the US Preventive Services Task Force (“USPSTF”) “B” recommendation from September 24, 2013 regarding breast cancer. The USPSTF recommendation was that providers “engage in shared, informed decision making” with women at increased risk for breast cancer about medications to reduce their risk, and offer to prescribe risk-reducing medications (such as tamoxifen or raloxifene) for women at increased risk for breast cancer and low risk for adverse side effects. FAQ 1 provides that for plan or policy years beginning on or after September 24, 2014, non-grandfathered group health plans and non-grandfathered health insurance coverage in the individual or group market are required to cover such medications for affected individuals without cost sharing, subject to reasonable medical management.

Cost-Sharing Limitations (FAQs 2–5) PHSA § 2707(b) provides that a non-grandfathered group health plan must ensure that any annual costsharing imposed under the plan does not exceed the limitations in ACA § 1302(c)(1) (relating to maximum outof-pocket, or “OOP,” costs) and ACA § 1302(c)(2) (relating to deductibles, for small group market plans).3 Transition Rule for Separately Administered Benefits in Prior FAQs This OOP requirement has caused some administrative issues where a

group health plan or group health insurance issuer utilizes more than one service provider to administer benefits that are subject to the annual limitation on OOP costs. A previous FAQ (Part XII, FAQ 2) provided guidance on this issue for the first plan year on or after January 1, 2014. In that FAQ, the Departments indicated that they would consider the annual limitation on OOP costs to be satisfied if: • The plan complies with the requirements with respect to its major medical coverage (perhaps excluding prescription drug or pediatric dental coverage), and • To the extent that the plan or any health insurance coverage includes an OOP maximum on coverage that does not consist solely of major medical coverage (such as a separate OOP for prescription drug coverage), that OOP maximum does not exceed the dollar amounts set forth in ACA § 1302(c)(1).

The updated guidance in FAQs Set XVIII does not extend this transition rule. Instead, the Departments have included guidance on the definition of essential health benefits, a discussion of how the OOP limit may be applied separately to different benefits, , and clarifications on how the OOP max applies to out-of-network (OON) items and services and OOP costs for non-covered items or services.

FAQ-2 Essential Health Benefits The OOP maximum applies with respect to essential health benefits (“EHBs”). Plans are not required to apply the annual OOP maximum limit to benefits that are not EHBs. Large group plans and self-funded plans are not required to cover EHB, thus raising a question as to the definition of EHB that applies with respect to such plans for purposes of the OOP maximum.

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FAQ 2 specifies that the Departments will consider selfinsured group health plans or large group health plans to have used a permissible definition of EHB if the definition is one that is authorized by the Secretary of HHS (in other words, a state benchmark plan).4 In addition, the Departments state that they intend to use their discretion and work with large-group market and self-insured plans that make a good faith effort to apply an authorized definition of EHB. Note: this is the same approach that the Departments indicate will apply with respect to large group and selffunded plans with respect to applying the prohibition on annual and lifetime dollar limits on EHB. FAQ-3 Dividing the OOP Limit FAQ 3 clarifies that plans may divide the annual limit on OOP costs across multiple categories of benefits, rather than reconcile claims across multiple service providers, as long as the combined amount of any separate OOP limits applicable to EHBs under the plan does not exceed the annual OOP limit for that year under ACA § 1302(c). For example, plans may apply a separate limit to medical coverage and a separate limit to prescription drug coverage, as long as the total limits do not exceed the maximum.

In contrast, the one-year transition rule described above allows multiple types of coverage to independently meet the OOP maximum (for the 2014 plan year only). The FAQ makes it clear that there is some flexibility for plan sponsors to ensure that the OOP limits are met, without necessitating complicated monitoring of various service providers. Note however, health plans must be careful not to implement separate OOP limits for different benefits in a way that violates the mental health parity rules.5 The Self-Insurer | March 2014

21

FAQ-4 Out-of-Network Benefits Under applicable regulations, in the case of a plan with a network of providers, the OOP maximum applies only with respect to in-network services. FAQ 4 provides that a plan may, but is not required to, count OOP spending for out-ofnetwork items and services towards the plan’s annual OOP limit. Thus, plans with a network may choose whether or not to count out-of-network items or services against the OOP limit. In any case, however, in-network cost-sharing cannot exceed the OOP limit.

FAQ-5 Non-Covered Services The term “cost-sharing” for purposes of the OOP maximum does not include spending for non-covered services, so such spending is not required to be counted against an OOP limit. Finally, FAQ 5 states that a plan may choose to count OOP spending for non-covered services towards the plan’s annual maximum OOP costs.

FAQ-11 Fixed Indemnity Insurance Fixed indemnity insurance provided under a group health plan meeting certain requirements is considered to be an excepted benefit under PHSA 2791(c)(3) (and the comparable Code and ERISA provisions), which makes it exempt from the ACA market reforms.6 The FAQs note a “significant increase” in the number of policies labeled as fixed indemnity insurance. The Departments have expressed concern that some insurers are attempting to label too many types of policies – which, in the Departments’ view, are effectively health insurance benefits – as fixed

22

March 2014 | The Self-Insurer

indemnity coverage, thus avoiding many of the rules the ACA was intended to implement. In an effort to address these concerns, the Departments stated in previous guidance (Part XI, FAQ 7) that in order for a fixed indemnity policy to be considered an excepted benefit, it must pay benefits on a per-period basis. Under this FAQ a fixed indemnity policy that pays on a per-service basis does not meet the criteria for excepted benefits.

Note that this limitation would not necessarily apply to other supplemental coverage such as accident or disability coverage (which is an excepted benefit under PHSA 2791(c)(1), limited scope vision or dental coverage which is an excepted benefit under PHSA 2791(c) (2) or specified disease (e.g., cancer or some critical illness) coverage which is also an excepted benefit under PHSA 2791(c)(3).

FAQ 11 modifies the earlier FAQ,

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by clarifying that insurance labeled as fixed indemnity that provides benefits other than on a per-period basis may qualify as excepted benefits under current law. Specifically, group health coverage that does not meet the definition of fixed indemnity excepted benefits may nonetheless qualify as supplemental excepted benefits coverage if it supplements other group health plan coverage.7 This type of coverage includes Medicare supplemental (or “Medigap”) coverage, TRICARE supplemental coverage, and “similar supplemental coverage” provided under a group health plan that is specifically designed to fill gaps in primary coverage, such as coinsurance or deductibles.8 In addition, according to FAQ 11, HHS intends to propose amendments to 45 CFR § 148.220(b)(3)9 to allow fixed indemnity sold in the individual health insurance market to be

considered an excepted benefit if it meets the following conditions: • It is sold only to individuals who have other health coverage that is minimum essential coverage within the meaning of section 5000A(f) of the Code; • There is no coordination between the provision of benefits and an exclusion of benefits under any other health coverage; • The benefits are paid in a fixed dollar amount regardless of the amount of expenses incurred and without regard to the amount of benefits provided with respect to an event or service under any other health coverage; and • A notice is displayed prominently in the plan materials informing policyholders that the coverage does not meet the definition of minimum essential coverage and will not satisfy the individual responsibility requirements of section 5000A of the Code.

© Self-Insurers’ Publishing Corp. All rights reserved.

If these requirements are satisfied, fixed indemnity insurance would no longer have to pay benefits solely on a per-period basis to qualify as an excepted benefit.

FAQ 11 notes that until HHS finalizes this change, HHS will treat fixed indemnity coverage in the individual market as excepted benefits for enforcement purposes if it meets the above conditions, in states where HHS has direct enforcement authority.

HHS also encourages states with primary enforcement authority to treat such coverage as an excepted benefit, and will not consider a state to be not enforcing the individual market requirements if it does so.

Wellness Programs (FAQs 8-9) The Departments issued final regulations regarding nondiscriminatory wellness programs on June 3, 2013.10

The Self-Insurer | March 2014

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March 2014 | The Self-Insurer

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Among other changes, these final regulations increased the maximum permissible reward under a healthcontingent wellness program offered in connection with a group health plan from 20 percent to 30 percent of the cost of coverage, and to 50 percent for wellness programs designed to prevent or reduce tobacco use. The final regulations also addressed reasonable design of health-contingent wellness programs and reasonable alternatives that must be offered to satisfy the rules. The new FAQs do not make any significant changes to these rules, but clarify the Departments’ thinking on how often opportunities to enroll in the wellness plan must be presented, alternatives suggested by physicians, and the language that must be provided to participants.

program (in the FAQ, tobacco cessation) at the beginning of a plan year and qualify for the award, the plan is not required to provide another opportunity to avoid any surcharge until renewal or reenrollment for coverage for the next plan year. However, a plan may choose to allow rewards, including pro-rated rewards, for mid-year enrollment in a wellness program.

FAQ 8 confirms that if a participant is provided a reasonable opportunity to enroll in a wellness

FAQ 6 provides that for purposes of this temporary transition relief, an insured expatriate health plan is an insured group health plan that limits enrollment to primary insureds for whom there is a good faith expectation that such individuals

FAQ 9 states that in the case of a participant whose physician deems an outcome-based wellness program to be medically inappropriate, the plan does not have to provide the specific alternative suggested by the physician. Instead, the plan must provide a reasonable alternative standard that accommodates the recommendations of the physician with regard to medical appropriateness.

This FAQ notes that many programs may be reasonable for this purpose, and a participant should discuss various options with the plan.

Finally, plans and issuers may modify the sample language provided in the final regulations, provided that the notice includes all of the required content.11

Expatriate Health Plans (FAQs- 6-7) FAQ 1 of FAQs Part XIII provided guidance and transition relief regarding whether expatriate health coverage is subject to the ACA. The recent FAQs provide clarification on the definition of “insured expatriate health plan” and extend the transition relief for another year.

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The Self-Insurer | March 2014

25

will live outside of their home country (or outside of the U.S.) for at least six months out of a year (not necessarily within a single plan year), along with any covered dependents. An insured expatriate health plan includes group health insurance coverage offered in conjunction with the expatriate group health plan.

FAQ 6 also clarifies that the Departments will consider title I, Subtitle D of the ACA to be satisfied if a plan and issuer of an insured expatriate health plan complies with the pre-ACA version of PHS Act title XXVII; previous guidance had only mentioned ACA title 1 subtitles A and C. Finally, FAQ 6 notes that coverage provided under an insured expatriate health plan is generally considered to be minimum essential coverage under Code § 5000A. Finally, the Departments state in FAQ 7 that any new regulation or guidance that is more restrictive with respect to plans or issuers will not be applicable to plan years ending on or before December 31, 2016, and plans may continue to rely on the temporary transitional relief of Part XIII, FAQ 1 at least through that time. n Attorneys John R. Hickman, Ashley Gillihan, Johann Lee, and Carolyn Smith provide the answers in this column. Mr. Hickman is partner in charge of the Health Benefi ts Practice with Alston & Bird, LLP, an Atlanta, New York, Los Angeles, Charlotte and Washington, D.C. law fi rm. Ashley Gillihan, Carolyn Smith and Johann Lee are members of the Health Benefi ts 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 email to Mr. Hickman at john.hickman@alston.com.

Would you go on a hike without a map?

References

The FAQs may be found at www.dol.gov/ebsa/faqs/faq-aca18.html

1

See 26 CFR 54.9815-2713T(a)(4), 29 CFR 2590.715-2713(a)(4), and 45 CFR 147.130(a)(4).

2

3 For plan or policy years beginning in 2014, the annual limit on OOP costs is $6,350 for self-only coverage and $12,700 for other than self-only coverage. This amount is increased for later plan or policy years based on increases in average health insurance premiums, as determined by the Secretary of HHS in accordance with ACA § 1302(c)(4).

4 45 C.F.R. § 156.100 provides that each state may select an EHB-benchmark plan according to various standards; it also states which plan is the default plan if the state does not make a selection.

The list of benchmark plans can be found at Appendix A of 78 FR 12834, February 25, 2013, available at https://federalregister. gov/a/2013-04084.

5 Regulations implementing the Mental Health Parity and Addiction Equity Act of 2008 prohibit a group health plan or health insurance coverage in the group or individual market from applying an OOP maximum to mental health or substance use disorder services in a classifi cation that accumulates separately from any such maximum established for medical/surgical benefi ts in the same classifi cation.

Thus, plans and issuers may not impose an annual OOP maximum on all medical/surgical benefi ts in a classifi cation and a separate annual OOP maximum on mental health and substance use disorder benefi ts in the same classifi cation.

6 Parallel citations are ERISA § 733(c)(3)(B) and IRC § 9832(c)(3)(B).

Such coverage is exempt from the requirements of PHSA title XXVII (requirements relating to health insurance coverage), ERISA part 7 (HIPAA and other healthcare-related provisions), and IRC chapter 100 (group health plan requirements).

7 This includes PHSA § 2722(c)(3) and 2791(c)(4); ERISA § 732(c) (3) and 733(c)(4); and IRC § 9831(c)(3) and 9832(c)(4).

8 26 CFR § 54.9831-1(c)(5); 29 CFR § 2590.732(c)(5); 45 CFR § 146.145(c)(5).

9 This regulation addresses coverage only for a specifi ed disease or illness (such as cancer), and hospital or other fi xed indemnity coverage, as long as the coverage meets certain requirements regarding non-coordination of benefi ts.

For more in-depth information about the fi nal wellness regulations, see Alston & Bird’s Employee Benefi ts and Executive Compensation Advisory from October 23, 2013, at www.alston.com/advisories/ ACA-update/.

10

11 45 CFR § 146.121(f)(6) (sample language); 45 CFR § 146.121(f) (3)(v) and (f)(4)(v) (required content for activity-only or outcomebased wellness programs, respectively). Additional sample language is located at 45 CFR § 146.121(f)(4)(vi).

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March 2014 | The Self-Insurer

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www.ECHOHealthInc.com The Self-Insurer | March 2014

27

Global Healthcare Opportunities Available to Employers and Benefits Brokers:

The GROWTH of

Medical Travel as an Employee Benefit

by David Boucher

28

March 2014 | The Self-Insurer

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I

n an article published in 2012 in The Self-Insurer, it was reported that most Americans who will seek surgical destinations in overseas locations will do so for improved safety, top notch service, and significant financial savings opportunities (in that order), while most Canadians might travel for care internationally to avoid queues. For years, patients in developed countries have travelled to regional, national, and international locations for specialty services, such as transplants and cancer treatments. Now, with the significant milestone of the individual mandate of the Patient Protection and Affordability Act (PPACA) in the rear view mirror, there is increasing likelihood and evidence that medical travel, both domestic and international will continue to be adopted by self-insured employers as a benefit option.

This emerging, potentially disruptive, innovation of Americans visiting their local airports rather than their local hospitals for major surgical procedures continues to gain momentum. Put aside the overzealous hype spewed at some medical tourism conferences that want us to believe tens of millions of Americans are already travelling each year for care. The fact is that an increasing number of employers are adopting medical travel options in their benefit plans.

Increasing demand for healthcare will continue. As The Economist Intelligence Unit recently reported, “Global healthcare spending should pick up in 2014, not just because of the U.S. reforms, but also thanks to access to better healthcare in developing markets... This growth will be driven partly by rising population, increasing life expectancy, and expanding wealth... Several countries are also trying to step up investment in healthcare provision, not just for locals but to attract medical tourism.” The same Economist report also noted that 61% of respondents in their recent survey believed that, “International health tourism will become a major source of competition between providers.” Further, 78.1% of respondents in the same survey believed that, “Developing / emerging market firms will see their share of global health and pharma markets rise substantially [emphasis added].”1 Employers might want to consider that the most expensive medical care does not necessarily mean the best quality. Transparency is improving, but unfortunately many employees currently have limited knowledge of outcomes data at hospitals.

They tend to trust wherever their surgeon has admitting privileges. To its credit, the Centers for Medicare and Medicaid posts information on US hospitals on its Hospital Compare site; however the data is limited and may not provide an accurate picture. As Dr. John James wrote in the September, 2013 issue of the Journal of Patient Safety it now appears more deaths are due to preventable harm than was previous estimated. James cited approximately 440,000 deaths due to preventable adverse events from care in hospitals which adds up to roughly onesixth of all deaths that occur in the United States each year. An October 31, 2013 HealthLeaders article by Cheryl Clark noted this was more than four times the amount estimated by the 1999 Institute of Medicine’s report, To Err Is Human.2 As expensive as US healthcare is, many rational Americans might expect better.

So, the table is set. That is, with 30 million insureds added as a result of PPACA, already overworked medical providers are even more burdened. Now, many overseas countries are, “Programmed to Receive”. From a quality and credentialing perspective, there are now almost 400 hospitals outside of the United States accredited by the international arm of the Joint Commission. Governments in

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nations such as Malaysia, Turkey, South Korea, and Thailand are expending resources to make sure that more potential travelers know they are open for business. It is not uncommon for these nations’ ministries of health and / or tourism to recognize the job creation potential in luring medical travelers from developing and developed countries.

There is also a spike in wellness travel due to the emergence of premier wellness services that prevent and heal. Part of this increasing demand is due to the aging populations of a number of developed countries which have both opportunity (time) and resources (available funds).

Some employers are including spa and other wellness services in their valueadded benefit package.

It was also speculated and wellreported by the popular media way, waaaay back in 2007 that American employers would increasingly turn to medical travel as a way to help them mitigate their benefit cost curve. Many of these employers first attempted Preferred Provider Organizations (PPO) discounts, disease management programs, then wellness programs… only to see their employee medical expenses increase 10-15% year over year over year. Over the past couple of years, several large marquis employers like Lowes, Wal-Mart and PepsiCo began directing their employees and dependents to a limited number of domestic hospitals.

Whether their intention was to do so or not is left to be determined, but these developments signal that maybe, just maybe, the safest and most affordable surgical care might just be via an employee’s local airport rather than at their local hospital!

The aforementioned are not small mom and pop companies: The The Self-Insurer | March 2014

29

three corporations noted above are representative by over 1.5 million members. And an increasing number of American employers feel comfortable about having their employees consider overseas hospitals as well. For a specific demonstration of this trend, direct your attention to a Facebook page entitled, “Kevin’s New Knee”. This single traveler’s testimonial/ blog illustrate why he decided to travel abroad for surgery. His employer’s benefit plan waived his > $4,000 personal health plan out-of-pocket financial responsibility, so he was ‘all-ears’ when it came to considering leaving the United States for a total knee replacement. Kevin took his time – spending several months and considering many options before he selected Ramsay Ara Damansara / Sime Darby Medical Center in Kuala Lumpur, Malaysia for his care in October, 2013. A medical travel facilitator was engaged to coordinate all of his medical travel plans... and off he went. He saved his > $4,000 personal out-of-pocket expense, his self-insured employer saved at least $10,000 on the procedure, and he’s back to biking long distances only months after his surgery. “Kevin’s New Knee” chronicles the rest... on Facebook!

There are a lot of examples like Kevin’s. The process of Americans travelling abroad for surgery with their employer’s assistance is, in fact, happening... and it will occur with increasing frequency if patient wait times elongate in the U.S., local supplies of medical services struggle to keep up, and expenses mount. Travel abroad (or to a distant American city) is not for every employer, nor every employee. To meet this domestic demand, many medical travel facilitators began offering domestic 30

March 2014 | The Self-Insurer

surgical options as well. The compass, of course, goes in all directions!

The opportunities for benefits brokers and human resource professionals in this market abound, but some level of due-diligence is required as the self-insured employer considers a medical travel benefit. There are few barriers to entry for medical travel facilitators. Some prospective facilitators see an exciting opportunity to travel the world, while they may have limited knowledge in the provision of medical services and are neither licensed nor experienced travel agents. Many facilitators do not visit their network hospitals and can offer limited response when glitches arise. In an effort to offer employers’ members a quality door-to-door experience, employers should really consider a facilitator which handles the vetting of international hospitals and conducts on-site visits. For ethical and other reasons, employers and brokers should only consider facilitators which do not accept marketing/referral fees from their providers. The facilitator will then works directly with the consumer to assist in their destination selection – and this is where there is some level of heavy-

lifting involved; it can take as many as twenty (20) communications with the traveler before they reach the decision point to actually book plane tickets.

Most prospective medical travelers have questions that need answers.

Some facilitators try to handle their customers’ travel itineraries; others utilize experienced travel agencies like Well-Being Travel, a trusted and time-tested premier travel vendor.

Air travel is indicated most of the time and well over 90% of travelers have a companion accompany them.

Hotel bookings are involved in 100% of cases as almost all discharged patients remain in the in-country destination for at least a full week for rehabilitation purposes. But employers fear not! This only minimally delays an employee’s return to work. Remember that even when your employees have a hip replaced locally, they rarely return to work the same day. And it is very common for travelers to seek day excursions; most medical tourism facilitators recommend that patients considering such excursions before their care, however their companions might consider at least half-day outings once most patients are a couple of

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March 2014 | The Self-Insurer

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Waive out-ofpocket costs for select procedures at select hospitals

Wave out-of-pocket costs, PLUS cover travel costs for patient and companion

Waive out-of-pocket costs, cover travel costs, PLUS cover the cost of an individual medical travel policy (e.g. $200,000 coverage)

Wave out-of-pocket costs, cover travel costs for patient and companion, cover an individual medical travel policy, PLUS share savings with beneficiaries (e.g. share up to $500 in Savings with the employee)

Conservative days post-surgical. Normally by the time the employee returns to the

Aggressive most conservative moving to more aggressive from left to right.

It’s no secret that employers are struggling to control costs. Many companies

US, he or she often will have much

working diligently to maximize bottom line results and provide a productive

of the rehabilitation completed.

workforce, so offering options for several episodic, medically necessary

When additional physical therapy

procedures makes sense. Medical travel offers one of the very few opportunities

is recommended, this can easily be

for employers to effectively expand coverage while reducing costs, not to mention

completed after the employee returns.

the opportunity to possibly improve quality and experience. As we are into

Employers and brokers may be

the well-discussed “Experience Economy” many JCI-accredited hospitals offer

wondering how to structure this

additional value well-beyond the excellent care provided via the core surgical

benefit option. As discussed in the

service which includes outstanding patient rooms, food, and all of the amenities.

example of Kevin above, it makes

Employees and their companions can have unique travel opportunities and return

sense to offer an incentive for

with improved health and wellness. A number of patients that facilitators have

employees to consider traveling to

assisted had never previously traveled abroad or had only limited experience

certain hospitals. Above are several

traveling. Medical travel provides that additional value and can improve satisfaction

considerations beginning with the

among employees with their employer, potentially even reducing turnover and

Your Bottom Line is our bottom line

866-762-4455 www.UnitedClaimSolutions.com © Self-Insurers’ Publishing Corp. All rights reserved.

The Self-Insurer | March 2014

33

attracting quality employees. With all of the talk about “Value-based Benefit Design” realizing real value may be as simple as finding the right terminal and gate!

Finally, for stakeholders who inquire about “who” and “how” to sue when something might not go according to plan with the member’s surgery, there is at least one solution. Individual medical travel insurance is available such as that offered by Global Protective Solutions. In the unlikely event of something going wrong, regardless of fault at medical traveler can be made whole.

So 2014 offers exciting times for employers and benefits brokers in the medical travel arena. Happy contrails!! The sky’s the limit! n Since October, 2012, David Boucher has served as President and Chief Operating Officer of UCI Medical Affiliates, Inc. UCI Medical provides management services to 53 urgent care and employer on-site centers under the Doctors Care brand and 21 Progressive Physical Therapy rehabilitation centers in South Carolina and Tennessee, as well as the Doctors Wellness Center in Columbia, SC.

Over the past few years, David has been quoted in over 250 national publications including US News & World Reports, Business Week, Fast Company, The New York Times, Wall Street Journal, The Economist (x3), Good Housekeeping – plus NBC Nightly News and Fox Business News. David has made presentations on medical travel to a number of audiences – including Harvard Medical School, Harvard Business School, Yale University, AARP and AHIP. References 1

www.EIU.com/Industry

www.healthleadersmedia.com/print/QUA-297911/5Scary-Things-About-Healthcare-Quality 2

Beginning in 2008, David Boucher served as President and Chief Operating Officer of Companion Global Healthcare, Inc. Over the past 7 years, David has been able to examine firsthand the best practices in hospital care in over 25 countries.

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March 2014 | The Self-Insurer

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The Self-Insurer | March 2014

35

SIIA Puts Self-Insurance Industry on the Offense in Washington, DC Association Leverages Member Involvement to Expand Political Influence This is the first of a series of periodical articles highlighting SIIA’s government relations work in Washington, DC, particularly involvement by association members. To learn how you can get involved, please contact SIIA Government Relations Coordinator Kevin McKenney at kmckenney@siia.org.

T

by David Kirby

he introduction of the Self-Insurance Protection Act (SIPA) in November of last year was the latest example of how the Self-Insurance Institute of America, Inc. (SIIA) continues to expand its political influence on Capitol Hill.

This industry defense effort is ongoing with an integrated strategy involving the association’s team of professional lobbyists along with an increasing number of SIIA members who are volunteering their time to help educate key members of Congress about the importance of self-insurance.

Another critical part of this strategy is that the association’s political action committee (SIPAC) has focused its contribution allocations to directly support SIPA lobbying activities. The SIPAC contributions budget continues to grow, and this year will represent an all-time high.

SIIA has been alert to legislative/regulatory efforts at the state and federal levels that would restrict the availability of stop-loss insurance for smaller and midsized employers. With regard to a potential federal threat, it is believed that the Administration is considering a rule-making process that would redefine stop-loss insurance as health insurance coverage based on arbitrary attachment point levels.

SIPA (H.R. 3463/S. 1735) is a two-page bill that would amend the definition of “health insurance coverage” under the Public Health Services Act (PHSA) and

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March 2014 | The Self-Insurer

© Self-Insurers’ Publishing Corp. All rights reserved.

parallel sections of ERISA and the Tax Code to clarify that this term does not include stop-loss insurance. It does not amend the Affordable Care Act (ACA).

SIIA President & CEO Mike Ferguson encouraged lawmakers to support the legislation at a February 26 congressional hearing focused on the role of selfinsurance in the health care marketplace since the passage of the ACA. Ferguson clarified that SIIA is not advocating for repeal of the ACA. “We’ll leave it to other groups to debate the future of the law. Rather, our support for SIPA is intended to establish ‘guardrails’ around a segment of the health care marketplace that is currently working.”

Joining Ferguson at the witness table was a SIIA member as well as the general manager of a self-insured public utility, whose participation was arranged by yet another SIIA member.

During the hearing SIIA member Robert J. Melillo, National Vice President, Risk Financing Solutions of USI Insurance Services, and chairman of SIIA’s Health Care Committee, briefed the subcommittee on the benefits of self-insurance to employers of all sizes.

He cited two case studies of employers in Connecticut and Ohio that realized significant savings during the first few years of switching from traditional fullyinsured plans to self-insured plans with the use of stop-loss insurance.

Beyond financial savings, Melillo said, “Many plan sponsors that selfinsure begin investing in the health of employees by implementing programs that educate and incentify healthy habits among their employees” with the result of addressing possible major health issues before they occur.

Perspective by a public sector employer was provided by Wes Kelley, Executive Director of Columbia Power & Water Systems, Columbia, Tennessee, who told the

Robert J. Melillo, National Vice President, Risk Financing Solutions of USI Insurance Services, and chairman of SIIA’s Health Care Committee, briefs the subcommittee on February 26, 2014.

Congressional panel that by switching to a self-insured plan in 1993, “Enough money was saved in the first year of self-funding to establish a solid financial reserve that has continued to build to this day.” He cited improved employee health benefits that “are provided without the employees contributing to the cost.”

He said that self-funding has been successful for Columbia Power because of factors that “perhaps most importantly” include affordable stop-loss insurance that protects the financial solvency of the plan.

Mr. Kelley’s participation was arranged by SIIA member Bob Shupe, president of ESPinc in Brentwood, Tennessee. “We hope to bring some reality to Congress on how the SIPA bill would protect self-insurers,” Shupe said. “It’s especially important for SIIA members to serve as a conduit for self-insuring employers to make these connections to their Congressional representatives.”

While the congressional hearing was a high profile public event, SIIA lobbyists and members have been

© Self-Insurers’ Publishing Corp. All rights reserved.

busy behind the scenes promoting the association’s legislative agenda.

During the same week of the hearing, multiple lobbying meetings were held with key House democrats, including Reps. John Barrow (D-GA), Ron Kind (D-WI) Tim Bishop (D-NY), John Yarmuth (D-KY), Adam Smith (D-WA) and Ed Perlmutter (D-Co), all members of the Energy & Commerce Committee, another committee of jurisdiction for SIPA. The meetings were organized by SIIA lobbyist Bart Stupak, who is a former member of Congress with close ties to the House Democratic caucus. Joining Stupak and Ferguson for the meetings was Horace Garfield, vice president of Transamerica Benefits and Chairman of the SIIA Government Relations Committee, and Jerry Castelloe, regional president of CoreSource and a SIIA board member.

Given the importance of selfinsurance to hundreds of self-insured union health plans across the country, SIIA believes it makes sense to reach out specifically to congressional Democrats and labor officials in order to forge bipartisan support for SIPA. The Self-Insurer | March 2014

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SIIA board member and CEO of Specialty Care Management Bob Clemente also traveled to DC that week to watch the hearing and participate in meetings with Rep. Phil Roe (R-TN) plus senior staff members of the Senate Finance and Health Committees.

Benefits Division of Symetra, also in Bellevue, met with Rep. Adam Smith (D-WA) to express the importance of the self-insured marketplace.

In addition to all of this DC activity, SIIA has been connecting its members with their elected representatives in their home states/districts.

Commenting on the association’s proactive approach, Snodgrass said no other source of political advocacy than SIIA would be able to so vigorously support the self-insurance industry. “SIIA is increasingly filling a unique and highly important role and I think there’s some real power there.”

William Burke, President of HCC Insurance Holdings, Inc., the parent company of SIIA Member HCC Life Insurance Company, represented the Self-Insurance Political Action Committee (SIPAC) at a reception event for Congressman Gene Green (D-TX) in Houston. Rep. Green has been identified as a moderate House Democrat who may inclined to be a self-insurance advocate.

During his conversation with Burke, Rep. Green noted that he is aware of many self-insured employers in his district.

Another SIIA member executive who knows that stop-loss insurance restrictions would severely damage his industry, Michael Sullivan, President of HM Insurance Company, paid a call early in the SIPA campaign to Rep. Mike Doyle (D-PA), where he specifically noted the importance of stop-loss insurance to HM’s self-insured corporate and union plans. Accompanying him to the meeting was a representative of the self-insuring Pittsburgh bricklayers union.

“This is absolutely the most important issue for SIIA at this time,” Sullivan said.

“Our industry has never had as much federal and state encroachment on our business as in the last few years.”

Two members from the state of Washington teamed up to visit their Congressman. David Snodgrass, President and CEO of Healthcare Management Administrators of Bellevue and Michael Fry, Executive Vice President of the

Another advocacy strategy pursued

by SIIA has been to mobilize large business and labor organizations to become active on self-insurance issues such as SIPA. Consistent with this objective, SIIA last year formed the SelfInsurance Defense Coalition (SIDC).

The group includes the U.S. Chamber of Commerce, the National Association of Manufacturers, the Council of Insurance Agents and Brokers, the National Association of Wholesaler-Distributors, the National

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The Self-Insurer | March 2014

39

Do you aspire to be a published author? Do you have

any stories or opinions on the self-insurance and alternative risk transfer industry that you would like to share with your peers?

Wes Kelley, Executive Director of Columbia Power & Water Systems, Columbia, TN giving his perspective on self-insurance on February 26, 2014.

Retail Federation, the Heating, Air-Conditioning & Refrigeration Distributors International and the National Electrical Contractors Association.

The coalition has issued a joint letter of support of SIPA, with individual members also writing to Congress.

In a letter to Congressional leaders, R. Bruce Josten, Executive Vice President of Government Affairs of the U.S. Chamber of Commerce, swung the weight of the “world’s largest business federation” solidly to the support of SIPA. He noted that SIPA would guarantee that employers would continue to be able to self-insure employee benefit plans because “this clarification of the law will make certain that federal regulators cannot redefine stop-loss insurance as traditional health insurance.”

This integrated advocacy campaign is expected to further intensify and expand in the months ahead as SIIA plays the “long game” in working to defend the self-insurance industry. Calling all members! n David Kirby is an editorial contributor for the Self-Insurer Magazine.

We would like to invite you to share your insight and submit an article to The Self-Insurer!

SIIA’s official magazine is distributed in a digital and print format to reach over 10,000 readers around the world. The Self-Insurer has been delivering information to the self-insurance/alternative risk transfer community since 1984 to self-funded employers, TPAs, MGUs, reinsurers, stoploss carriers, PBMs and other service providers.

Articles or guideline inquiries can be submitted to Editor Gretchen Grote at ggrote@sipconline.net.

The Self-Insurer also has advertising opportunities available. Please contact Shane Byars at sbyars@ sipconline.net for advertising information.

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March 2014 | The Self-Insurer

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The Self-Insurer | March 2014

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

2014 Board of Directors CHAIRMAN OF THE BOARD* Les Boughner Executive VP & Managing Director Willis North American Captive and Consulting Practice Burlington, VT PRESIDENT* Mike Ferguson SIIA Simpsonville, SC VICE PRESIDENT OPERATIONS* Donald K. Drelich Chairman & CEO D.W. Van Dyke & Co. Wilton, CT VICE PRESIDENT FINANCE/CFO* Steven J. Link Executive Vice President Midwest Employers Casualty Co. Chesterfield, MO

Directors Jerry Castelloe Vice President CoreSource, Inc. Charlotte, NC Robert A. Clemente CEO Specialty Care Management LLC Bridgewater, NJ Ronald K. Dewsnup President & General Manager Allegiance Benefit Plan Management, Inc. Missoula, MT Elizabeth D. Mariner Executive Vice President Re-Solutions, LLC Wellington, FL

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March 2014 | The Self-Insurer

Jay Ritchie Senior Vice President HCC Life Insurance Co. Kennesaw, GA

Regular Members Company Name/ Voting Representative Michael Enright, DentaQuest, Mequon, WI Paul Skrtich, Chief Actuary, Equinox Management Group, Inc., Oradell, NJ

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

John Kolb, VP of Litigation Group, Gibson & Sharps, PSC, Louisville, KY

CHAIRMAN, GOVERNMENT RELATIONS COMMITTEE Horace Garfield Vice President Transamerica Employee Benefits Louisville, KY

Daniel Boisvert, CEO, GW Global Holdings, LLC, Marshfield, MA David Stoudt, CEO, StoudtAdvisors, Lancaster, PA

CHAIRMAN, HEALTH CARE COMMITTEE Robert J. Melillo VP Alternate Funding Strategies USI Insurance Services Meriden, CT

Silver Corporate Members

CHAIRMAN, INTERNATIONAL COMMITTEE Greg Arms Chief Operating Officer, Accident & Health Division Chubb Group of Insurance Companies Warren, NJ CHAIRMAN, WORKERS’ COMPENSATION COMMITTEE Duke Niedringhaus Vice President J.W. Terrill, Inc. St Louis, MO

SIIA New Members

Andrew Kuydendall, Bolton & Company, Pasadena, CA

Employer Members Larry Camm, Government Affairs Representative, Schweitzer Engineering Laboratories, Inc., Alexandria, VA

© Self-Insurers’ Publishing Corp. All rights reserved.

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