Self-Insurer Mar 2011

March 2011

IRO’S Shangri-La

or

harbinger of What is to Come?

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

ABigKahuna Sun Life is one of the nation’s leading providers of medical stop-loss. We understand that large claims happen. Our No New Lasers at Renewal product comes with a Renewal Rate Cap. We don’t impose new or higher deductibles.

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

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

Visit us at www.sunlife.com/us.

SLPC 22507 10/10 (exp. 10/12)

Siia OFFiCerS Chairwoman of the Board* Freda Bacon, Administrator Alabama Self-Insured WC Fund Birmingham, AL President* Alex Giordano Bellmore, NY Vice President Operations* John T. Jones, Partner Moulton Bellingham PC Billings, Montana

March 2011 | Volume 30

FeaTureS

arTiCLeS

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

10 From the Bench

Executive Vice President Erica Massey Midland, NC

18

Mather’s Grapevine

Chief Operating Officer Mike Ferguson Simpsonville, SC

20

ART Gallery: Informant says Obamacare fate doesn’t matter

22

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

Siia DireCTOrS Les Boughner, Executive VP and Managing Director Willis North American Captive and Consulting Practice Burlington, VT

4

Settlement Tools to achieve the best Claim Outcome

By David J. Korch

Ernie A. Clevenger, President CareHere, LLC Brentwood, TN Donald K. Drelich, Chairman & CEO D.W. Van Dyke & Co. Wilton, CT Steven J. Link, Executive Vice President Midwest Employers Casualty Company Chesterfield MO Robert Repke, President Global Medical Conexions Inc. San Francisco, CA

Siia COMMiTTee ChairS Chairman, Alternative Risk Transfer Committee Kevin Doherty, Partner Burr Forman Nashville, TN

Siia LeaDerShip

12

irO’S Shangri-La or harbinger of What is to Come?

2 President’s Message 32

Chairwoman’s Report

By D. Douglas Aldeen

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

March 2011 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 The Self-Insurer is the official publication of the Self-Insurance Institute of America, Inc. (SIIA). Annual dues are $1495. Annual subscription price is $195.50 per year (U.S. and Canada) and $225 per year (other country). Members of SIIA subscribe to The Self-Insurer through their dues. Copyright 2010 by Self-Insurers’ Publishing Corp. All rights reserved. Reproduction in whole or part is prohibited without permission.

Statements of fact and opinion made are the responsibility of the authors alone and do not imply an opinion of the part of the officers, directors, or members of SIIA or SIPC. Publishing Director - James A. Kinder Managing Editor - Erica Massey Editor - Gretchen Grote Design/Graphics - Indexx Printing Contributing Editor - Tom Mather and Mike Ferguson Director of Advertising - Justin Miller Advertising Sales - Shane Byars Editorial and Advertising Office P.O. 1237, Simpsonville, SC 29681 • (864) 962-2201 Self-Insurers’ Publishing Corp. Officers (2010) James A. Kinder, CEO/Chairman Erica M. Massey, President Lynne Bolduc, Esq. Secretary 2010 Editorial Advisory Committee John Hickman, Attorney, Alston & Bird David Wilson, Esq., Wilson & Berryhill P.C. Randy Hindman, Deloitte & Touche, LLP Jason Davis, Global Excel Management, Inc.

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

The Self-insurer P.O. Box 184, Midland, NC 28107 Tele: (704) 781-5328 • Fax: (704) 781-5329 e-mail: ggrote@sipconline.net.

The Self-Insurance Institute of America, Inc. (SIIA) is the world’s largest trade association dedicated exclusively to the advancement of the self-insurance industry. Its goal is to improve the quality and efficiency of self-insurance plans through education and to create a general acceptance in the public and business communities of this viable alternative to conventional insurance.

Founded in 1981, SIIA represent the interest of self-funded employers, independent administrators, utilization review companies, managed care companies, underwriting management companies, insurance companies, reinsurers, agents, brokers, CPAs, attorneys, financial institutions, manufacturers, trade associations, retail and service companies, municipalities, and others.

SIIA designs and implements programs and services for the benefit of its members, the industry, and the general public to increase the general level of knowledge about self-insurance plans, achieve greater professionalism in the industry, and enhance the general well-being and mutual interests of its membership.

SIIA achieves its goals and objectives through several means: • International/national conferences and industry forums which provide educational opportunities, with substantial discounts on the registration fees offered to SIIA members.

• Distributed monthly, The Self-Insurer, features useful technical articles as well as updates on topical issues of importance to the self-insurance industry.

• The Self-Insurance Educational Foundation (SIEF) conducts statistical research regarding the industry and grants educational scholarships to promising students whose studies focus on the self-insurance industry.

SIIA enjoys federal representation in our nation’s capital through counsel and staff on key legislative and regulatory issues. SIIA is the only national voice encompassing the whole self-insurance industry.

If your company is involved or interested in self-funding risk for workers’ compensation insurance programs, employee benefit plans, or property and casualty exposures, then it should be a member of the association serving the industry - the Self-Insurance Institute of America, Inc.

The Self-Insurer

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March 2011

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PRESIDENT’S MESSAGE nagging in the old brooklyn style

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n our Italian neighborhood in Brooklyn, we kids always knew whose mothers to watch out for, where doing the right thing was always expected or there would be consequences. I’m not saying those eagle-eyed ladies were wrong, but they could sure put a cloud over the day if any of us were misbehaving.

So I’m going to try to stay on the light side and not become a nag while I discuss the state of the Self-Insurance Political Action Committee (PAC). It shouldn’t be news to you that the PAC was formed a couple of years ago to support SIIA’s lobbying efforts in Washington. And it won’t come as a shock for you to learn that PAC contributions have flowed into the war chest considerably slower than we hoped.

PAC Chairman Tom Belding even put the fun into fundraising this year when he was able to offer the pretty astounding raffle prize of a week for two lucky people at Limin’ House on Tortola in the British Virgin Islands. SIIA board member Don Drelich, CEO of D.W.Van Dyke & Co., donated the prize and deserves our gratitude.

A quick visit to the Limin’ House website lets us know it is a beautiful viewpoint resort of just a few homes overlooking Caribbean sunsets where a week’s luxurious all-inclusive stay for two usually costs a cool five grand. The resort’s name is based on the colloquial phrase to be “limin’,” as in chillin’ out with a lime-laced beverage.

Tickets for a chance on this prize are scaled at a $100 donation to the PAC. That means they must be personal money, not company money, under federal PAC rules.

An optimist would say that

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March 2011

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everybody attending the 25th Annual SIIA Legislative & Regulatory Conference in Washington DC would buy a PAC raffle ticket as an expression of support for SIIA lobbying efforts and with the chance for a fabulous week in paradise.

The optimist would probably be wrong. While SIIA members attend the conference in steady numbers each year, the majority have yet to swipe the dust off their credit cards on behalf of the PAC. Which is kind of amazing to me.

We go to Washington to hear about SIIA’s legislative priorities, to hear a forecast from government figures about likely legislation, and to take the traditional “Walk on Capitol Hill” to visit with our representatives.

Two massively important political issues for us this year are Congressional reaction to selfinsurance studies expected this month from the Department of Labor and the Department of Health and Human Services, and the introduction of a bill to modernize the Liability Risk Retention Act (LRRA) to level the regulatory playing field for risk retention groups.

Either of those – or any important issue yet to arise – is worth the support of SIIA members for lobbying efforts on behalf of our industry and our individual businesses.

We are up against massively financed industry PACs representing traditional health and P&C insurance interests. Even so, SIIA lobbyists have successfully fought above their weight class in defending the interests of selfinsurance and alternative risk transfer.

As Government Relations Committee chair Jay Ritchie has often

said, “our story is right.” But even so, our lobbyists must compete in the financial arena as well as that of business logic. Being able to attend fundraising events gives our lobbyists direct access to members of Congress and their key staff, which improves the chances of our positions being supported.

PAC chair Tom Belding told me that during a visit to the office of a House member he found himself waiting in an area where incoming mail was being sorted. The vast majority of envelopes were being discarded without being opened. The clerks were consulting lists of constituents and donors, and any letter whose return address didn’t appear on one of those lists was tossed.

It was famously said that money is the mother’s milk of politics, and that is truer now than ever. I really don’t understand why SIIA members will spend the money to travel to our DC conference and then not stop by the PAC table to give their fair share for the effort. Not to mention the chance of winning a great vacation.

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

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

The Self-Insurer

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March 2011

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SeTTLeMenT TO ACHIEVE THE BEST TOOLS CLAIM OUTCOME 4

March 2011

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The Self-Insurer

By David J. Korch, JD, AIC, SCLA,Vice President Workers’ Compensation and Medicare Practices EPS Settlements Group, Inc. The Self-Insurers’ Publishing Corp. All rights reserved.

T

he main goal of every settlement is to achieve the best claim outcome for the injured worker and the insurer or self-insured while meeting the needs of the injured worker. What are the needs of the injured worker when settling a worker’s compensation claim? The injured worker is looking for financial security in order to meet their medical needs as well as their loss of income.

So, how can we meet the income and medical needs of the injured worker and show a cost benefit to the insured, insurer or self-insured? If we settle the case at present value, we end up getting them a lump sum, but have we done the best thing for the worker? Should we fund the Medicare Set Aside as a lump sum? Studies have shown that a large lump sum is usually dissipated quickly leaving the worker with a lesser quality of life and, if they spend the Medicare funds for non-Medicare expenses, they would lose their Medicare benefits until they incur medical expenses equal to their Medicare Set Aside which was a lifetime amount. If the injured worker is on full disability they most likely are receiving Social Security disability C benefits. If a lump sum settled their M workers’ compensation claim, how will this settlement affect their Social Y Security disability benefit?

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reduce the set aside to PCV increased the cost of settlements, however, the memo further went on to spell out that funding the settlement via a structured settlement was allowable, creating an opportunity for the insurer to see cost savings.

medical expenses until the next annual payment is made from the structured settlement.

This was a win-win for the insurance industry and injured workers. Since this would allow the carrier to spread out the Medicare funds over the injured worker’s lifetime and allow this to be Medicare recognizes structured funded via an annuity purchased from a settlements as a viable method of life insurance company. By illustrating this funding MSA Accounts and gives specific cost savings to the carrier, it increased instructions for calculating an MSA the possibility for the settlement of using a structured settlement annuity. workers’ compensation claims, allowing They further advise that Medicare will injured workers to see finality to their become the primary payer of medical claims, allowing them to move on with expenses once documentation is Ethicare_Ad factors_01_03.pdf 1 1/5/11 PM their lives outside of the1:04 confines of the provided showing funds were spent workers’ compensation venue. appropriately, and continue to pay

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When Medicare put out its first memo regarding Medicare Set Aside K accounts, the insurance industry thought this would escalate the cost of settlements. The early vendors were putting together allocations that included an inflation factor, then applied a discount rate to reduce the figure to present value (PCV). Later, CMS addressed the inflation factor issue in the October 15, 2004 memo, indicating that the allocations do not need an inflation factor and should not be reduced to PCV. The inability to

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(888)838-4422

www.ethicareadvisors.com

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In a study released by CMS in October, 2008, they indicated that over a three year period they approved lifetime amounts totaling $1,530,538,733 or approximately $510,179,544 per review year. If all had been funded via periodic payment, the resulting savings to the industry would be $234,682,590 per year.

Will an annuity also get a better outcome for everyone when settling the indemnity portion of the claim?

As anyone can realize, spreading lifetime funds over an individual’s life expectancy can result in a lower cost of settling the claim. Numerous individuals have conducted studies concerning the cost differential between the life time lump sum and the cost of funding the MSA via periodic payments. When looking at the different studies they all reach the same conclusion, an average savings of 46%. This percentage is even higher with males after CMS began using non-gender-specific life expectancies.

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Section 224 of the Social Security Act (42 U.S.C.. 424a) places a ceiling on combined Social Security disability benefits and State workers’ compensation benefits. The statute states that Social Security benefits “shall be reduced” by the amount necessary to ensure that the sum does not exceed 80% of the pre-disability average current earnings (ACE). The offset applies until the claimant reaches

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©2009 Virginia Health Network

65 years of age or when payments end. Usually the offset affects low income workers more often, and more dramatically, than higher income workers.

In all but 13 states, Social Security will offset the SSDI benefits based on the workers’ compensation benefits as well as any other disability benefits that the injured worker receives (if the benefit was paid for by the employer). The 13 reverse offset states (states in which the carrier receives the benefit of the offset) are California, Colorado, Louisiana, Minnesota, Montana, Nevada, New Jersey, New York, North Dakota, Ohio, Oregon, Washington and Wisconsin.

The SSDI offset, when settling a WC case, is guided under the POMS (Program Operation Manual System) of Medicare. Chapter DI 52110.001 deals with Annuities and Trusts. DI 52110.001B deals specifically with workers’ compensation awarded as an annuity. This states that where the WC award provides that a worker shall have the option of receiving a lump sum or an annuity in lieu of statutory periodic benefits, the lump sum or purchase price of the annuity (not including interest) is

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off settable according to the normal proration rules. It further indicates that if the worker has no option, (e.g., the carrier’s policy is to pay in a certain manner) the amount of the lump sum or purchase price of the annuity is off settable as of the time the annuity payments are actually received by the party.

When we utilize 52110.001 in our negotiations, we can generate an income equal or greater than the injured worker would receive if they remained on WC. This can be achieved through the use of periodic payments funded through a structured settlement annuity.

Taxation Considerations According to Internal Revenue Code 86(d)(3}, Social Security benefits are taxable while state workers’ compensation benefits are not.

However when Social Security disability benefits are reduced due to receipt of workers’ compensation benefits, federal income tax liability attaches to the full amount of Social Security disability benefit before the offset. The net result is taxation of the WC benefit that would not occur but for the offset.

Remaining on WC, an injured worker, age 50, would receive a maximum between WC and SSDI of $2,667.00. If we settled the case at the PCV ($455,984.00) the settlement language would be formatted to reflect the WC off settable rate at $1,010.60 monthly allowing the injured worker to receive SSDI payments of $1,256.00.

If an annuity is purchased paying the difference between the annuity and the 80% ACE ($1,411.00 monthly) the claimant could receive a lump sum of $210,850, thereby keeping the claimant’s income and lifestyle exactly as it has been while giving him a large lump sum that he can use for other needs. If you increase his ACE level of $3,333 monthly (his gross pay at time of injury), the claimant could receive a lump sum of up to $94,645.00.

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example: Indemnity Settlement: 80% ACE Monthly Social Security Disability: Difference (Maximum Comp) Lump Sum over Life Expectancy:

By utilization of structured settlements to negotiate benefits (not cash) for the injured worker we can meet their needs and achieve a better outcome for the insured, carrier and or self-insured.

$430,844 $2,608.00ii $1,256.00 $1,353.00 $1,238.06 monthly i

Will receive Max SSDI Benefit 80% ACE Monthly Social Security Disability: Difference (Maximum Comp) Lump Sum Settlement Cost of annuity (generate $1,352.00) Lump sum available for cash

partnering with the Structured Settlement Specialist

$2,608.00 $1,256.00 $1,352.00 $430,884 $271,570iii $159,274

This is a great negotiation tool and can help reduce settlement costs. If we can generate the same income level as the claimant is receiving prior to settlement, i.e. the 80% ACE level, for $271,570, you may be able to reduce the cash needed up front to satisfy claimant and attorney fee. Also, the utilization of the rated age would reduce the costs of the annuity thereby having more cash available for up front needs.

As you can see, by using the pro rata offset calculations we can generate the same income to the injured worker plus a lump sum that places him in a better position than if he remains on workers’ comp and leaves his claim open. If the attorney receives 20% fee, there is about $70,000 that can be used to negotiate the lump sum to the claimant.

Structured settlement proposals require a team effort between the claim professional and the structured settlement specialist. The sooner the structured settlement specialist is brought into the claim, the better. By forming a partnership early in the process, the claim professional and structured settlement specialist can begin to gather information and make an informed decision on whether or not the claim is a candidate for a structured settlement.

A meaningful structured settlement meets as many of the claimant’s needs as possible within the settlement range established by the claim professional. It

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is the claim professional’s knowledge of the claimant that allows the proposal to be designed to fit the needs of the claimant and his or her family. As such, the claim professional is responsible for defining each party’s role during the initial strategy sessions. Once those roles are clearly defined, the structured settlement specialist attends all settlement conferences, mediations and meetings the claim professional deems appropriate.

It’s important to note that structured settlement specialists are paid by the life insurance company upon the purchase of an annuity. That means all services offered by the structured settlement specialist are free of charge, which can present claim professionals with an important source of cost savings.

One such service includes the securing of age ratings, a technique designed to maximize annuity payments for the claimant. Other valuable services offered free of charge by structured settlement specialists include providing structured settlement proposals with periodic updates and changes, providing quotes from multiple life insurance companies to maximize the annuity payments and security of the claimant, analyzing economist reports for future damages, analyzing Medicare Set Aside allocation reports, providing present value figures and assisting in the negotiation process by attending settlement conferences, mediations and trials.

Coordinating the Claim Professional’s knowledge of the claimant and the Structured Settlement Specialist’s skills and tools achieve the best cost outcome for the self-insured and the most security and financial benefit for the injured party. n David J. Korch, JD, AIC, SCLA is Vice President of Workers’ Compensation and Medicare Practices for EPS Settlement Group as a national resource for the brokerage staff in the negotiation and settlement of workers’ compensation

claims and third party claims with a workers’ compensation component through the utilization of structured settlements. He has been in the insurance industry for over 30 years as a multiline claim handler, supervisor, claim manager, home office claim consultant and structured settlement broker. He was associated, for over 17 years, as a large loss settlement consultant with structured settlement programs at The Travelers and The Hartford specializing in

the settlement of workers’ compensation claims.

EPS Settlements Group is a company that symbolizes innovation, longevity, service, and premier leadership in the structured settlement industry. As early pioneers in the industry, we are proud to have helped thousands of individuals to receive a structured settlement – providing a future stream of periodic payments to address their essential needs.

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March 2011

9

Bench from the

By Thomas A. Croft, Esq.

Massachusetts Federal Court Tosses Out Suit by broker against Stop Loss Carrier alleging Loss of business Due to Claims practices (Cook & Co., et al v. Matrix risk Mgmt. Svcs., LLC, et al., no.09cv10976, in the united States District Court for the District of Massachusetts, Jan. 24, 2011)

T

his is the first case in the stop loss arena I have seen where a broker that allegedly lost clients due

Some took their business elsewhere,

healthcare plans with Cook Agency

allegedly costing Cook $750,000

as the broker of record for their stop

in “supposed lost revenue from

loss insurance. The stop loss policies

contracts not renewed and new

to the alleged slow pay/no pay claims

were issued through Matrix, the MGU

business never won.”

practices of a carrier sued the carrier

for Companion Life, which had an

and the MGU for damages. This one

exclusive arrangement with Cook for

MGU and the carrier on a variety of

did not survive the summary judgment

the marketing of Companion’s stop

theories, all of which were ultimately

stage, however, which may indicate

loss policies in Massachusetts and

rejected by the Court. The most

that the general viability of such claims

Rhode Island.

interesting of these theories for our

is subject to serious question.

Oversimplifying the facts for

10

Rhode Island operated self-insured

Allegedly beginning in July 2007,

Cook brought suit against the

purposes was Cook’s breach of the

the insured municipalities stopped

stop loss contract theory. Essentially,

purposes of clarity, several municipal

receiving timely payment from

Cook argued that Companion

governments in Massachusetts and

Companion for stop loss claims.

breached the stop loss contracts with

March 2011

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The Self-Insurer

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

the municipalities by failing to timely pay claims. Importantly, the insured municipalities were absent from the case: only Cook was claiming the policies had been breached.

First, Cook argued that it was entitled to enforce the stop loss contracts because, as broker of record, it signed them. The Court was unimpressed with this novel argument, noting that Companion owed no duty of performance to Cook under the policies—only to the insured (and absent) municipalities. “The fact that Cook Agency brokered a contract and signed the agreement suggests only that Companion and the Municipalities abided by the laws of Massachusetts” requiring that insurance policies be signed by a licensed individual. The Court further noted that Companion did not pay the broker for its services but that the Municipalities presumably

did so. The Court granted defendants summary judgment on this “broker may enforce the stop loss contract” theory.

to an intended beneficiary. Therefore, Cook had no legal way to recover for what it alleged was Companion’s breach of the contract.

Second, Cook attempted a thirdparty beneficiary argument. Under the common law, a person not party to a contract can, under limited circumstances, nevertheless enforce that contract in court. However, it must be shown that the two contracting parties clearly intended that their performance benefit the third party—merely deriving a benefit from the contract does not qualify

Readers interested in the more nuanced and complex factual relationships between the MGU and the Cook entities should consult the Court’s opinion for details. But for now, anyway, stop loss carriers can take comfort in the notions that they do not owe performance under their policies to the broker, only to their insureds. n

one as a third party beneficiary entitled to enforce it. The Court noted that Cook presented no evidence that either Companion or the municipalities intended to benefit Cook by their stop loss contract, and held that Cook was merely an “incidental beneficiary”—as opposed

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11

IRO’S

Shangri-La or harbinger of What is to Come?

By D. Douglas Aldeen, Esq., The Phia Group

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March 2011

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The Self-Insurer

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

background

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onsumer demand for all encompassing health insurance coverage has finally arrived via independent review organizations. Or has it? Never before has a self-funded employee benefit Plan entering a new plan year had to address so many issues. In particular, one of the most pressing and confusing questions relates to how internal and external appeals procedures will be addressed within the health plan documents and how these new rules will influence claims processing procedures and ultimately the financial viability of the respective Plan. Employers should not only be concerned about the administrative burden that the regulations implementing PPACA create, but also the long term affect these rules will have on the financial health of the Plan.

The Interim Final Regulations “IFR” is a collection of documents that includes Section 2719 of PPACA and related technical releases from the Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury Department (The Department). The legislative intent of these documents is to protect consumers and provide consistency for health plans through a uniform approach for processing internal and external appeals. It mandates when plans and issuers must comply with applicable state or federal external review processes and the minimum requirements that state external review processes must meet. However, each of the relevant documents comprising the IFR addresses different internal and external appeal requirements. As these are interim final regulations and may potentiallyEthicare_Ad change, the long term financial 1affect these5:13 regulations will have on Love Ethicare_01_2.pdf 2/8/11 PM plans remains to be seen.

internal Claims and appeals PHS Act section 2719 requires Plans to incorporate the internal claims and appeals processes as codified in the DOL’s claims procedure regulation and update the processes pursuant to the standards issued by the Secretary of Labor. Prior to enactment of PPACA, plan administrators for ERISA covered group health plans should have incorporated the internal claims and appeals processes to be compliant with the DOL’s claim procedure regulation.

Moreover, they will only be affected by the new standards as issued by the Secretary of Labor. As we have seen before, the DOL is considering further updates to 29 CFR 2560.503-1 and future regulation expanding internal claims and appeals processes for plans is anticipated.

Here are just a few of the

You’ll Love EthiCare Advisors...

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IF you want to hear all options and expected outcomes when settling claims

IF you enjoy working with experienced professionals that will answer your questions

IF good customer service coupled with low pricing appeals to you

IF you feel that peace of mind in dealing with a professional organization is important

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Start Loving Us Today. We Await Your Call!

• If you would rather deal with a company that has no idea what an MGU, TPA (888)838-4422 350 Clark Dr, Ste 104 or reinsurance is www.ethicareadvisors.com Budd Lake, NJ 07828 • If you don’t want to be like everyone else The Self-Insurers’ Publishing Corp. All rights reserved.

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substantive changes to the DOL’s claim procedure regulation: • New urgent claim timeline (72 hour notification reduced to as soon as possible, but not later than 24 hours); • Plans must provide any new evidence relied upon regarding the appeal and the new rationale; • Stricter conflict of interest rules; • Updated and standardized EOBs; • Strict adherence to the rules is required; and • Provision of continued coverage, pending appeal decisions, is required.

Plans should pay particular attention to the standardization of EOBs. If EOBs need to be amended, plan documents should also be changed and internal claims examiners will need to be trained. In addition, claims adjudication systems will need to be modified to implement the new standards.

external review processes Technical Release 2010-01 (“T.R. 2010-01”) provides the first ever mandatory Federal external review guidance for employer self-insured plans not subject to any state laws. A subsequent Technical Release 2010-02 (“T.R. 2010-02”) provides that the enforcement grace period will run until July 1, 2011. In short, any enforcement agency will not take enforcement action against plans and health insurance issuers that are working “in good faith” to implement specific aspects of the new claims and appeals rules.

Current ERISA claims regulations for self-funded employer health plans provide only for internal claim reviews, not external ones. However, if available, ERISA does permit plan participants to take advantage of state external review procedures. See Rush v. Moran, 536 U.S. 355 (2002). Until now, no uniform mandatory external review for self-funded ERISA employer group health plans was in place.

Presently, certain plans (i.e. fully insured ERISA covered group health plans, fully insured state and local government plans, and fully insured church plans) are required to comply with applicable state external review processes. Not only do states have inconsistent external review processes, some states do not have any established external review processes.

Although ERISA preemption provisions prohibit a state’s external review process to apply directly to an ERISA plan, ERISA preemption does not prevent the state process from applying to nonfederal governmental plans, church plans not covered by ERISA, and multiple employer welfare arrangements (which may be subject to ERISA and state regulation). If a plan is not subject to state insurance regulation, due to its self-funded status, the plan must comply with the Federal external review processes set forth in the Rule and clarified in by T.R. 2010-01. PHS Act 2719 provides for two methods of external review – state or Federal.The regulations outline which process applies for which entity:

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State Non-grandfathered group health plans and issuers must comply with existing state external review processes if they include the consumer protections listed within the Uniform Carrier External Review Model Act as promulgated by the National Association of Insurance Commissioners (“NAIC Uniform Model Act”).

Federal If a state has not established an external review process, or if the process does not provide the protections as outlined within the NAIC Uniform Model Act, the applicable plan will be subject to the Federal external review process.

In summary, T.R. 2010-01 sets forth procedures for standard external review for self-funded group health plans and also an expedited external

review process. The procedures may be broken down into the following: • Request for external review by the claimant (if filed within four months after receipt of the claim denial); • Preliminary review by the plan to see if the claim is appropriate for external review; • Referral of the claim and relevant documentation to the IRO by the plan; and • Notice of the IRO’s decision.

Pursuant to the Federal external review process, plans must have contracts with IROs that provide legal experts, strictly adhere to time deadlines and review all the information timely received.

Confusion in the Marketplace To ensure unbiased and independent decisions, plans in the

states with no state external review laws and those in states that do not meet the minimum standards of the Uniform Health Carrier External Review Model Act after July 1, 2011 must comply with the federal external review process. This process requires those plans to contract with at least three URAC-accredited IROs to conduct an external review.

The Federal External Process applies only to those states without an already established external review process in place. When the IFR was enacted, Alabama, Mississippi, Nebraska, and North Dakota were the only states without external review processes in place, and therefore must follow the federal process.

Self-funded plans have a choice.

They may choose to follow their respective state external review laws or the federal process. Some selffunded plans do not want to submit

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to the external review regulations. To further complicate the situation, many states indicate that they will not allow these plans to follow their external review laws. This makes it difficult to understand the ERISA self-funded plan relationship with IROs. Plans in states with external processes that do not apply directly to them (for example, some state processes only apply to HMOs) may choose to participate voluntarily in the state’s process rather than the federal process – if the state will expand their coverage to include these plan types.

Avoiding Conflict of interest The IFR requires that claims and appeals be decided in a way ensuring the independence and impartiality of anyone making benefits determination.

Under the IFR, conflict of interest is limited to health plans not making any hiring, firing, promoting, compensation

or similar decisions about an individual evaluating a claim, based on the likelihood that that person would deny that claim.

IROs already meet or exceed the strict conflict of issue standards established by URAC and NAIC. In fact, many state regulatory bodies have similar conflict of interest requirements.

By adhering to these standards, IROs also meet the DOL conflict of interest standards, which mandate that a reviewer cannot review a claim where the reviewer has consulted with or worked under someone involved in the adverse benefit determination Most importantly and as outlined above, Plan Sponsors should be troubled at the power that the Technical Release gives IROs to overrule the plan administrator’s reasonable interpretation of plan terms.

In theory, the plan administrator can seek to overturn an improper IRO decision in court under ERISA §502(a)

(3), but the plan must pay the claim before challenging the decision in court.

Even if the plan reverses an erroneous IRO decision in court, the plan may not want to undertake the difficult process of recovering the benefit payment from the claimant or from a service or equipment provider that has not been a party to the proceedings. It is yet to be seen whether courts will follow plan language or the Technical Release in deciding whether to defer to the determination of the plan administrator or the IRO. Since external review is de novo, without deference to the Plan’s prior decision, claimants will have the opportunity to provide additional evidence to the IRO. This is a substantial change from existing rules where so long as a Plan’s process is followed, no new evidence is allowed in court and the court gives deference to the Plan’s decision unless it is arbitrary and capricious. This change may cause Plans to reexamine the structure of their existing claims process. Given de novo external review, there may be little reason for a Plan to maintain the right to review a third party administrator’s

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“rescission” rules, the HHS, IRS, and DOL regulations erode the authority of plan language and the plan sponsor’s ability to control costs and quality through plan design.

More cynical observers of American health care might conclude that our well-meaning friends at HHS, IRS, and the DOL have given us,” a system that is so complex that administrative costs, or litigation expenses, unduly discourage employers from offering welfare benefit plans in the first place.”

Well said. n

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LMC 5585 8/2010 The Self-Insurer | March 2011 17 The Self-Insurers’ Publishing Corp. All rights reserved.

MATHER’S GRAPEVINE

I

n his recent State of the Union Address, our President spent a little over sixty-two minutes outlining the many and varied problems facing the nation as we emerge from the difficult economic times we have all been facing in the recent past.

Jobs, education, development of new industries, competition with other emerging nations, the healthcare crisis, military challenges throughout the world and a few other subjects of importance during the hour long presentation.

Exactly six seconds of the time was devoted to the issue of resolving medical malpractice issues.

We spend roughly three trillion dollars a year in this country in the costs related to healthcare. Of that, over 10% is spent directly or indirectly on malpractice lawsuits and the resultant defensive medical practices by doctors and hospitals that run rife through our system. Curiously this issue is not addressed in the Patient Protection and Affordable Care Act and though a large sum of those dollars are spent on medical malpractice issues much more is spent on the direct and indirect costs of defensive medicine.

In a recent Gallup survey, physicians attributed 34 percent of overall healthcare costs to defensive medicine and 21 percent of their practice to be defensive in nature. Specifically, they estimate that 35% of diagnostic tests, 29 percent of lab tests, 19 percent of hospitalizations, 14 percent of prescriptions and 8 percent of

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surgeries were performed to avoid lawsuits.

Beyond the financial costs, the lack of physician liability reform and the practice of defensive medicine restrict patient access to care from physicians who limit their practices as well as from a decreasing supply of physicians. In one study, 42 percent of responding physicians admit to restricting their practices to avoid risky procedures, patients with complex conditions and those perceived to be of a litigious nature.

Then there is the issue of the growth of television advertisements soliciting plaintiffs for medical malpractice lawsuits. A new study by the U.S. Chamber Institute for Legal Reform has found that television, radio and internet advertisements have increased by 1,400 percent in the past four years! The number of ads increased to more than 156,000 ads by 2009 from 10,150 ads in 2004. The study showed that spending for ads spiked to almost $62 million from $3.8 million in that timeframe.

And of course we now have an ever changing design of Direct to Consumers promotional ads from pharmaceutical manufactures and the direct providers of medical supplies and treatments on television and radio that steps far outside the FDA regulations that are in place to control such approaches, with virtually nothing being done to change those regulations. Last year over $5 billion dollars were spent for these promotional ads and that number is rising.

During the construction of this article I had occasion to sit down with a stopwatch and watch two hours of programming on two different TV channels and time the minutes devoted to both medical malpractice advertising and Direct to Consumer ads for drugs and treatments. Each one hour broadcast devoted between 11 and 13 minutes to these combined issues. More than half of the time devoted to drugs and treatments was spent outlining the possible deleterious effects

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of the usage of those items and the “ask your doctor before using” signoff that is always included.

The conclusion I have drawn from all of this is that we have a problem before us that is considerably greater than the six (6) seconds devoted to it by the President in his address. The need for medical malpractice reform, the practice of defensive medicine, and a broken Federal Drug Administration should be issues that are near the top of the list in our efforts to fix our broken medical delivery system. But of course we also have another problem.

We have the billions of dollars in political contributions from the plaintiff bar side of our legal community and the political reluctance to deal with defensive medical expenses that are raging out of control.

In the meantime, take your pills and don’t worry. Someone will help you sue everybody if they don’t work right. n Tom Mather Contributing Editor

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arT GALLERY

By Dick Goff

informant says Obamacare fate doesn’t matter

W

e are joined in the studio today by an informant whose identity must be kept secret. While he – gender is all the information I can give up – is being disguised and the lighting adjusted I’ll take a moment to give you some background on his appearance here.

Of course you know the world is on tenterhooks awaiting judicial review of the federal law PPACA familiarly known as Obamacare. Divergent federal court decisions appear to be sending the law for final judgment to the Supreme Court, but who knows how long that will take? In the meantime employers are paralyzed in their ability to make long-term decisions about employee health benefits. Must PPACA be followed? Will it stay or will it go?

except by function. This occurred in a conference room in a state I can’t identify. Around the table were the heads of a regional hospital-based medical system, a large network of physicians, several regional employers, a third-party administrator and a captive manager.

Dick: and the purpose of this meeting?

D.V.: Their goal was to take direct responsibility for health care for all the employer groups and individuals in their region who care to belong. They are in a preliminary phase of establishing a member-owned not-for-profit health care plan that excludes the traditional health care insurance industry and with relief from state insurance regulations and federal health care schemes.

Dick: That’s a big chunk to bite off. is this a kind of community care organization or so-called accredited care organization known as an aCO? D.V. That’s the idea, but in a much larger sense. Through direct ownership of a costeffective, comprehensive health plan financed by a captive, the group believes it can beat the cost of any insurance product or government-mandated program. Call it a Universal Care Organization because it serves its regional market with universal care from top to bottom.

Dick: uniCare. i like that. and this concept would work whether or not Obamacare survives its legal challenges?

D.V.: It may sound disrespectful to say this, but in the face of this method PPACA becomes irrelevant. Even passé. This is a private sector response to principles of national health reform without the costs of federal administration, rising insurance premiums and

Now, a little more on our informant: I first met him in a Washington DC parking garage where he revealed secrets that could rock the health care world. I gave him the code name of Deep Voice. Now, to proceed with our interview:

Dick: What can you tell us about a recent meeting you attended?

D.V.: I can reveal the substance but not the identities of participants

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ultimately higher taxes for everyone. And along the way, each UniCare plan would serve the goals of PPACA’s mandated cooperatives.

Dick: but isn’t the government likely to resist this approach?

D.V.: We know that the government avoids an all-out assault on the employersponsored self-insured health care system because it is simply – in a memorable phrase – too large to fail, with 90 million people participating. We think the addition of UniCare as it is established in regional markets will add many millions more to the ERISA-enabled, federallypreempted system.

Dick: but isn’t this just another approach that would leave many uninsured people out in the cold?

D.V.: No, the UniCare organization whose preliminary meeting I attended

would include care for uninsured or indigent persons within their region.

Hospitals already care for this population and pass costs on to other patients or sometimes to their states resulting in higher taxes. By counting these people into the system’s costs originally, hospitals are relieved of a burden on their balance sheets and populations are relieved of higher taxes.

Dick: What other community benefits are envisioned?

D.V.: Right now there is a crisis looming for many small to mid-sized hospitals serving less populated areas of the country. This UniCare plan would preserve those facilities for their existing access by many patients for most kinds of treatment, and funnel the more complex cases to large regional hospitals.

Dick: What about the goals of Obamacare that address things like

preexisting conditions, lifetime caps and young adults living with their parents?

D.V.: Those principles and others may be observed by a UniCare plan but they would cost less when they are addressed by a broadly-owned large pool of patients that is operated without regard to profit.

The captive financing the plan would reinsure against catastrophic risk.

Dick: There is much more that needs to be discussed about such an approach, but unfortunately we are out of time today.

D.V.: Stay tuned for further developments.

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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PPACA, HIPAA AND FEDERAL EDERAL HEALTH BENEFIT MANDATES::

Practical

© 2011, By David Godofsky, FSA, Esq, and John Hickman, Esq.

The Patent Protection and Affordable Care Act (PPACA), the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and other federal health benefit mandates (e.g., the Mental Health Parity Act, the Newborns and Mothers Health Protection Act, and the Women’s Health and Cancer Rights Act) dramatically impact the administration of self-insured health plans. This monthly column provides practical answers to administration questions and current guidance on PPACA, HIPAA and other federal benefit mandates.

Attorneys John R. Hickman, Ashley Gillihan, Carolyn Smith, and Johann Lee provide the answers in this column. Mr. Hickman is partner in charge of the Health Benefits Practice with Alston & Bird, LLP, an Atlanta, New York, Los Angeles, Charlotte and Washington, D.C. law firm. Ashley Gillihan, Carolyn Smith and Johann Lee are members of the Health Benefits Practice. Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner’s situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation. Readers are encouraged to send questions by E-MAIL to Mr. Hickman at john.hickman@alston.com.

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Q&A

Does it Make economic Sense to Drop health Coverage? The answer May Surprise You.

S

ince passage of the Patient Protection and Affordable Care Act (“PPACA”) the popular press and many business publications have been filled with predictions that employers would abandon employer-provided health insurance, and let their employees buy insurance on the new exchanges that are to be formed by 2014.The simplistic assessment is that the $2,000 per employee fine for not providing health insurance is less than the current amount expended by many employers to provide health coverage.Therefore, employers would rather “pay” the fine than “play” and provide health coverage.

Of course employers pay no fine today for failing to provide health insurance, and yet most of them do.Today, the fine – zero – is certainly less than the cost of providing health insurance.Yet most employers find that it makes sense to provide coverage.

Ah, but the naysayers reply that now, there is no other coverage option since there are no exchanges. When the exchanges come into existence, there will no longer be a need for employers to provide health insurance at all. And, PPACA will push up the cost of providing insurance, so the combination of increased cost and the availability of an alternative will drive employers out.

However, both sides in this argument miss the fact that a pure economic analysis demonstrates that merely changing, not eliminating, how health insurance coverage is provided will produce better results.

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Why do employers provide health insurance?

• Fundamentally, employers provide health insurance because (some) employees would prefer to have employer provided coverage than cash wages of equal cost. Employees prefer insurance to wages because of the following factors: • Purchasing coverage for an employer group ensures that all individuals have access to coverage.

Current laws applicable to employer-provided group coverage require that coverage be available to all employees regardless of health status.

• Paying for medical care is more expensive for an individual than for an insurance company. Insurers negotiate very deep discounts, and medical providers dramatically overcharge uninsured individuals (if they are willing to care for them at all).

• Money paid on employer-provided insurance generally escapes 15.3% FICA taxes and income taxes. The purchase of individual insurance generally does not have this tax break.

• Many employees have an aversion to risk of financial loss associated with major illness.

What’s changing?

For purposes of the pay or play analysis, the key factors are: • The cost of employer provided health insurance will go up (that is, the total cost to the employer and the employee) as a result of the PPACA coverage mandates and the provision of coverage to many uninsured (or even uninsurable) individuals. .

• The out-of-pocket cost of insurance on the individual market will go up also, except for families that are subsidized by the Federal Government.

• Employees will be able to buy individual insurance on the exchanges without higher premiums based on health status or any exclusions for pre-existing conditions.

• The cost to each employee of not buying insurance will go up due to the badly misnamed “individual mandate.”

• The cost to the employer of not providing insurance will also go up, by either the “sledgehammer tax” or the “tack hammer tax,” both of which are nondeductible for corporate federal income tax purposes.

The sledgehammer penalty and the tack hammer penalty Under PPACA, an employer with more than 50 full time employees that fails to offer health insurance to all full time employees will pay the sledgehammer penalty if even one employee purchases insurance on the exchange and receives a federal subsidy. For this purpose, employees working 30 or more hours per week are considered full time, and part time employees may count for determining whether an employer has 50 employees based on full time employee equivalencies (or “FTEs”). The sledgehammer tax is $2,000 times the number of

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full time employees (with the first 30 full time employees not counted). So, for Company X which has about 100 employees, the sledgehammer penalty is about $200,000 (even if only one employee has subsidized exchange coverage).

However, if you offer health insurance to all of your full time employees, and they turn it down in favor of exchange coverage, you pay a much smaller amount.This amount (the “tack hammer penalty”) is based solely on the number of employees who actually receive coverage on the exchange.The amount is $3,000 for each such employee.

However, the penalty is at most $695 per year, while the cost of insurance, whether subsidized or not, will be several times that amount. Further, most people who would decline insurance are exempt from the penalty because of income limitations on the penalty.Thus, on the margin, a few high-income people may find it slightly more attractive to purchase insurance because of the penalty. However, virtually all of those people already have insurance and would be most likely to continue to have insurance either way.

This point is important for employers who are considering whether to cancel their insurance coverage. Because the “individual mandate” does not apply to most employees who would decline insurance, the cost of the tack hammer penalty is reduced.That is, if you offer insurance at a high employee premium, many of the employees who turn it down will also turn down the opportunity to buy insurance on the exchanges, even if that insurance is subsidized.Those employees do not count in the tack hammer penalty, but they do count in the sledgehammer penalty. Which means that no penalty would apply with respect to such individuals if coverage is made available – even on an employee pay all basis.

The exchanges will not be sufficient for high value employees

how to react to increased coverage costs from ppaCa

Federal subsidies will be available for individual coverage purchased through the exchanges. But the federal subsidy is scaled back depending on income, and employees whose family income is more than four times the poverty limit are not eligible for any subsidy on the exchange.

So, for example, a single employee with an income of about $40,000 is not eligible for a federal subsidy on the exchange. An employee with a family of four who has family income of about $88,000 will not be eligible for a federal subsidy. In other words, many of the employees you value the most will not have subsidized exchange coverage available, and will have coverage that likely costs more than the cost of your coverage even when offered on an unsubsidized basis. Add in the lost tax advantage (FICA and income tax) of premiums paid for employer coverage, and any employer who fails to offer insurance to high-value employees will be at a significant disadvantage for attracting and retaining such employees.

The “individual mandate” that isn’t Perhaps the most misunderstood factor in PPACA is the so-called “individual mandate” that is, in fact, no mandate at all.The mandate is nominally a tax, although some call it a penalty.

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For employers with a high value workforce, the right answer will generally be to absorb those extra costs and continue to offer coverage in a similar fashion. Ultimately, any extra cost will factor into salaries, and the salaries will go up less over time than they otherwise would. However, for a high-value workforce, the employees will appreciate the employer subsidized coverage and it will be advantageous to the employer to have most employees covered.

For industries where employees are not highly paid (retail, food service, banking, and certain manufacturing, just to name a few) the right answer might be to pass more costs on to employees in the form of higher employee premiums.Taken to its logical extreme, this could result in an “employee pay all” plan.

In either case, the right answer is likely to be to continue to offer health coverage, but to make adjustments in the level of employer subsidy.

Lets take Company X for example. We will assume it has a mostly hourly paid nonunion workforce with wages typically in the range of $10 to $20 per hour. Company X

Company X with 200 employees Cost of Low Subsidy Coverage vs. no Coverage Employees who Number of Employees Purchase employer coverage 60 - Less value of tax deduction - Less FICA savings to employer for employee pre-tax contributions Obtain coverage elsewhere 40 (parents, spouse, medicare, medicaid) 60 Decide not to purchase insurance (or can’t afford it)3 Purchase exchange coverage 10 without subsidy Purchase exchange coverage with 30 subsidy (tack hammer penalty) Total cost to employer 200 Comparison: sledgehammer 170 penalty if employer eliminates coverage entirely

Cost per Employee 2,000

Total Cost $120,000 (42,000) (13,770)

0

0

0

0

0

0

3,000

90,000

2,000

$154,230 $340,000

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March 2011

25

considered eliminating health insurance entirely due to the increasing costs.

However, Company X then considered the possibility of raising the employee premium as an alternative to eliminating coverage entirely. Company X’s new employee premium structure provides a $2,000 cost (or subsidy) per employee to the Company, with the employees paying the remaining average of $3,000 per employee per year.

Company X likely had to raise salaries of certain employees because of its decision to increase the employee premium. However, it would have had to increase salaries even more had it eliminated coverage entirely.

The analysis above actually understates the advantage of continuing to offer coverage. Had Company X eliminated coverage entirely, it would have had to increase salaries even more than it did. So, the cost to the Company of eliminating coverage is really worse than what is shown in the table.

There are also a number of factors

in addition to pay or play that will impact the employer’s economic decision/ • Eligible small employers (e.g., under 25 employees) that decide to exit the market will be unable to take advantage of the small employer health insurance tax credit (up to 35%).

• Because of the FICA tax exclusion available to employers for pre-tax salary reduction, any employee pretax contributions that are converted to taxable payroll costs will result in an approximate 7.65% increase in employment taxes paid by the employer and an equal amount paid by the employee.

• Any state or local income tax savings would be lost by employees as employer and employee pre-tax amounts are converted to taxable payroll.

• Employers might be able to achieve even greater cost savings than exchange based plans due to future increases in the amount of incentive (in some cases up to 50%) that can

be used to encourage employee health through wellness programs.

• For employers that are self-insured, maintaining their own plans may achieve much greater cost savings than is available through the exchanges because of greater variability in benefits that must be covered. Moreover, employers that are able to continue their “grandfathered” status may achieve even greater savings.

Of course, the scenarios discussed above represent end-points on the spectrum of responses to PPACA. For many companies, the right answer will fall somewhere in-between.That is, the companies will want to pass more costs on to the employees, but still retain significant employer subsidies. However, the analysis above demonstrates that for virtually all companies, providing coverage with a modest subsidy will produce a better result financially than eliminating coverage entirely. n

Hit the mark. Every time.

YOUR EMPLOYEE BENEFITS need to be right on target. At The Principal®, we offer a wide range of flexible employer-paid and voluntary benefits plus self insured options. And, with over 70 years in the business, you have the expertise of a benefits leader at your disposal. From our innovative products and solutions to our attentive service and support, count on us to help you hit the mark with your employee benefits every time.

Visit principal.com or call 800-654-4278, ext. 44116, for more information. ©2010 Principal Financial Services, Inc. “The Principal,” “Principal Financial Group,” the Edge design, “We’ll Give You an Edge” and the illustrated character are registered service marks of Principal Financial Services, Inc. Insurance products from the Principal Financial Group® are issued by Principal National Life Insurance Company (except in New York) and Principal Life Insurance Company.

Securities offered through Princor Financial Services Corporation, (800) 247-1737, member SIPC. Principal National, Principal Life, and Princor® are members of the Principal Financial Group, Des Moines, IA 50392. AD1989 | GP 59547

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

Can Your Plan Withstand Unlimited Risks?

35 th

y ers–ar v i n An– Est. 

You can risk less by knowing more. Health reform could drive catastrophic medical claims and costs to record levels. Now, with self-funded health plans removing benefit maximums, one of the only things standing between unlimited exposure and an employer’s liability is the security of medical stop loss insurance coverage. Risk less by knowing more about your stop loss insurance carrier.

The product portfolio offered by the companies of OneAmerica®

Medical stop loss insurance Life insurance & annuities Employee benefits Asset-based long-term care solutions

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Life Insurance | Retirement | Employee Benefits www.OneAmerica.com —--

The companies of OneAmerica®: American United Life Insurance Company®, The State Life Insurance Company, OneAmerica Securities, Inc., McCready and Keene, Inc., R.E. Moulton, Inc., Pioneer Mutual Life Insurance Company and AUL Reinsurance Management Services, LLC. © 2010 OneAmerica Financial Partners, Inc. All rights reserved. OneAmerica® and the OneAmerica banner are all registered trademarks of OneAmerica Financial Partners, Inc.

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

The Self-Insurer

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March 2011

27

SIIA New Members REGULAR MEMBERS Voting representative/Company name David Boone, President & CEO, American CareSource Holdings, Inc., Dallas, TX Alicia Drouant, Manager, Conner Ash P.C., St. Louis, MO Joyce Muller, President & CEO, IMEDECS, Lansdale, PA

Thomas Revelas, Managing Partner, Lawley Benefits Group, Buffalo, NY

Stefani Krall, Senior Manager, Market Research & Strategy, Health Care Service Corp., Chicago, IL

Charles Gfeller, Partner, Seiger Gfeller Laurie LLP, West Hartford, CT

Melissa Kremer, Executive Vice President, Select Surgical Solutions, Anaheim, CA

JW marri ott D Es E rt s p ri n g s r Es o rt & spa

PAlM DEsErT, cA•APrIl 13-15, 2011

TPA & M GU / E xc E s s I ns U r E r W W W. s i i a . org

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Ex E c ut iv E F orum

8 0 0 . 8 51.7789

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

Mind over risk: The secret weapon of visionaries, leaders and the people who insure them.

For firms with self-funded health plans, the potential risk of a catastrophic loss can shatter an enterprise. Protect your greatest assets, the people who keep the wheels of your company in motion. With over 30 years of medical stop loss experience and the financial stability to earn ratings of A+ (Superior) by A.M. Best Company, AA (Very Strong) by Standard & Poor’s and AA (Very Strong) by Fitch Ratings, we’re uniquely qualified to provide coverage for businesses that dare to be extraordinary.

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

HCC Life Insurance Company

The Self-Insurer

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March 2011

29

BIG JOE March 5, 1948 – February 2, 2011

T

he Self-Insurance industry lost a hero February 2 with the passing of Joe McErlane who many of us in the industry referred to as “BIG JOE.” Big, not just because of his stature, but because everything about Joe was big. He always had big ideas, made big deals out of little ones, was big on giving his time and talent to the industry, and was a big supporter of our industry and the Self-Insurance Institute of America, and he also had a super big heart and was always there when you needed him.

I first met Joe back in the late 70’s when I ran a TPA firm and Joe was a sales executive for IDS Life Insurance Company. I can remember my first meeting with Joe as if it just occurred a few days ago. My TPA administered several association sponsored benefit plans and we were out to market to expand the portfolio of benefit plans to incorporate supplemental life and long term disability insurance as part of the association employer/employee sponsored programs. Most carriers that I discussed our proposed plan with pretty much showed me the door! But then, by some stroke of luck, I met Joe. I can remember traveling to Minneapolis from California to meet Joe to discuss our idea and like all good brokers, “sell him” on our plan. Unlike the other carrier reps I had met with to pitch our idea, Joe rolled out the red carpet and to my surprise, he actually read our material! In fact, he studied it, and like he became to be known as Mr. Big, he took our “little” idea and turned it into a “Big” idea, one that IDS ended up underwriting.

Since that day, Joe and I did quite a bit of business together during my TPA days.

He truly was an exceptional person.

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I left the TPA organization a few years later and formed my own consulting business primarily dedicated to associations and in the process lost touch with Joe, but then, back in 1981, when a handful of self-insurance industry leaders approached me to help them form a trade association to represent the selfinsurance community it wasn’t long before Joe and I came back in contact. My meetings with a handful of industry pioneers resulted in the formation of the SelfInsurance Institute of America, Inc. (SIIA) and it was not long after the formation of the association when Joe appeared on the scene. He immediately became active in the association and I was certainly pleased to see Big Joe coming forth to support the association and the industry we would come to represent.

The early days of SIIA were certainly challenging. Starting an industry association is no easy task and it takes a lot of dedication and endless hours of volunteer work by the men and women who work in the industry. Joe, like so many, gave unselfishly of his time and money to help make SIIA what it is today. He served on many committees, served as a director, as well as an officer, of the association. He helped formulate industry policy positions, worked to create special networks and working groups to solve industry challenges within the excess/stop loss arena with TPAs and self-insured employers. To say Joe was a visionary is an understatement. He always thought big and he did so with integrity and in a way that took into consideration each stakeholders interest. His style of leadership will certainly be missed.

To all who ever had the pleasure of knowing and working with Joe, you know first hand of what I am saying. To sum it up, Big Joe was one classy guy, who was always there whenever you needed him, always willing to give his time to help others and share his ideas even with his competitors so that the industry could continue to grow and be strong. Yes, Big Joe will certainly be missed, but the lessons he taught us will forever live on.

Jim Kinder Editors note: Jim Kinder was part of the founding group to form Self-Insurance Institute of America, he served as the association’s chief executive officer and lead lobbyist from 1981 until his retirement in 2006. Jim remains active in the industry as a consultant within the selfinsurance/alternative risk transfer community. Jim can be contacted at jkinder120@aol.com Tel: 864-409-8347

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

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

The Self-Insurer

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March 2011

31

CHAIRWOMAN’S REPORT Freda Bacon

B

enjamin Franklin is quoted as saying, “If you would persuade, you must appeal to interest rather than intellect”.

As most of the country is beginning to thaw out, things are heating up in our nation’s capital. The 112th Congress welcomes many newcomers to the political arena, and education of these elected officials and their staff has been a top priority for SIIA since the Session began.

SIIA’s members, and particularly the staff and leadership, have worked diligently to bring the self-funding and alternative risk transfer message to our various congressional delegations with the goal of ensuring their awareness of not only our industry concerns, but our industry in general.

The Legislative/Regulatory Conference held each year is an important venue for us to be heard. The Walk on the Hill, legislative reception and general session meetings give all SIIA members a chance to participate in the political process that makes SIIA unique in the self-funding arena.

The Government Relations, Health Care and Worker’s Compensation Committees met while we were in Washington. The SIIA ART Committee also recently met in Nashville. In addition to regular meeting agendas, all of the committees were focused on further promulgating discussions we will need in our legislative intent.

Webinars are being held on a regular basis to bring the membership up to date on their progress. The most recent event focused on: • PPACA oversight and repeal initiatives • HHS & DOL studies on self-insured health plans • LRRA Modernization legislation • GAO study on risk retention groups • Medicare Secondary Payer action legislation Mike Ferguson, SIIA’s Chief Operating Officer and Jay Fahrer, Director of Government Relations will be hosting future webinars to keep our membership apprised of ongoing developments.

As Chair of the SIIA leadership board, I urge all members to become more involved in these on-going debates and processes. If we must persuade, we have to be willing to appeal.

Freda Bacon, Chairwoman

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The Self-Insurer

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

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