Self-Insurer Mar 2013

March 2013

www.sipconline.net

Is PBM Spread Pricing

INCREASING The Cost of Your employee health Plan?

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The Self-Insurer

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www.sipconline.net

March 2013 | Volume 53

March 2013 The Self-Insurer (ISSN 10913815) is published monthly

by Self-Insurers’ Publishing Corp. (SIPC), Postmaster: Send address changes to The Self-Insurer P.O. Box 1237 Simpsonville, SC 29681

Features

editorial staff PuBlIShINg DIreCTOr James A. Kinder MANAgINg eDITOr erica Massey

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SeNIOr eDITOr gretchen grote

artICles 10

From the Bench

14

ArT gallery: rrg opposition: a lesson from the Twilight Zone

16

PPACA, HIPAA and Federal Health Benefit Mandates: IrS Issues game-Changing regulations Interpreting health Care reform’s Pay or Play requirement, Part Two

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SIIA News

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Medicare Based Pricing – For Smart Payors

end stage renal Disease

by Jakki Lynch

DeSIgN/grAPhICS Indexx Printing CONTrIBuTINg eDITOr Mike Ferguson

by Clare liedquist and Dr. Bruce roffe

DIreCTOr OF OPerATIONS Justin Miller

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by Bob g. Shupe

DIreCTOr OF ADverTISINg Shane Byars Editorial and Advertising Office P.O. 1237, Simpsonville, SC 29681 (888) 394-5688 2013 self-Insurers’ Publishing Corp. Officers James A. Kinder, CeO/Chairman erica M. Massey, President

Not All Self-Funded Plans are Created equal

26

Is PBM spread Pricing Increasing the Cost of Your employee Health Plan?

by Terrance Killilea, Pharm.D. and Scott Haas

InDustrY leaDersHIP 40

SIIA President’s Message

lynne Bolduc, esq. Secretary

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

The Self-Insurer | March 2013

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end Stage

renal Disease

by Jakki Lynch

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The Self-Insurer

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

I

n today’s era of sensitivity to health and healthcare cost issues, one frequent topic of discussion is end stage renal disease. In the u.S., the Center for Disease Control and Prevention found that chronic kidney disease affected almost 17% of the adult population during 1999 to 2004 i and that number is growing. The purpose of this paper is to describe the definition, causes, treatment and financial implications of this disease.

First, let’s take a step back and look at the purpose of the kidneys. The primary function of the kidney is to remove waste and excess water from the body. It also manages how much water is in the body, maintains the balance of minerals and vitamins in the body and makes sure the blood acid balance is normal.

There are 2 types of kidney failure.

The first, chronic kidney failure, is the slow loss of kidney function over time and occurs when disease or disorder damages the kidneys so that they can no longer adequately remove fluids and waste from the body or maintain the proper level of certain kidney-regulated chemicals in the bloodstream. It is often diagnosed based on screening of people with a high risk of kidney disease (diabetics, those with high blood pressure and those with family ii members with chronic kidney disease .

All people with a glomerular filtration rate (gFr) <60 ml/min/1.73m² are classified as having chronic kidney disease whether or not there is kidney iii damage . The second type, acute kidney failure, is a sudden loss of kidney function. It is most common in people who are already hospitalized, particularly critically ill people who iv need intensive care . end stage renal disease (eSrD) is defined as an irreversible decline in kidney function that is severe enough to be fatal without treatment. Once an individual reaches stage 5 chronic kidney disease, it is considered eSrD.

Diabetic nephropathy is the most common cause of end stage renal disease. Other causes include high blood pressure, autoimmune diseases, genetic diseases, infection, drugs, traumatic injury, major surgery and nephrotoxic poisons.

What treatments are available for kidney failure? hemodialysis and peritoneal dialysis are acceptable modes of treatment for renal disease. Both these types of dialysis remove waste products from the body by diffusion from one fluid compartment to another across a semi-permeable membrane.

With hemodialysis, blood is passed through an artificial kidney machine and the waste products diffuse across a manmade membrane into a bath solution (dialysate), after which the cleansed blood is returned to the patient’s body.

Sometimes this type of dialysis can be performed at home. home hemodialysis treatments may help keep blood pressure lower and do a better job of removing waste products. however, both the patient and the caregiver must learn to handle and clean the equipment, place the needle, monitor v blood pressure and keep records .

With peritoneal dialysis, waste products pass from the patient’s body through the peritoneal membrane, into the abdominal cavity, where the dialysate is introduced and periodically removed. A variation of this process is continuous ambulatory peritoneal dialysis which employs a continuous dialysis process using the patient’s vi abdominal membrane as a dialyzer .

The other option besides dialysis is a kidney transplant. The most important outcomes with any form of renal replacement therapy are patient survival and quality of life. In the younger patient, transplantation has three potential advantages when compared with dialysis; a better quality of life, release from the tedium of dialysis and longer survival. little data exists concerning the relative

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mortality for elderly patents of dialysis versus transplantation. Due to the overall perceived advantage, some clinicians suggest that, in the absence of contraindications, transplantation should be offered as renal replacement therapy to all patients – independent of age. however, all patients must be careful to follow through on posttransplant care, including for most, immunosuppressive therapy for life.

The new kidney may come from a living donor (related or non-related) or from a deceased donor. Patients generally do better if they receive a kidney from a living related donor. however, that is not always possible.

Patients who need a transplant and do not have a living donor, register with the united Network for Organ Sharing (uNOS) to be placed on a waiting list for a cadaver kidney transplant.

Kidney allocation is based on a formula that awards points for factors that can affect a successful transplant, such as the patient’s health status and age. The most important part of the equation is that the kidney be compatible with the patient’s body.

A human kidney has six antigens, substances that stimulate the production of antibodies. (Antibodies then attach to cells they recognize as foreign and attack them.) Donors are tissue matched for the antigens and compatibility is determined by the number and strength of those matched pairs. Blood type vii matching is also important .

There is a shortage of donated organs and a growing waiting list. As a result, patients are waiting longer than ever to receive a kidney transplant.

There are currently over 101,000 people on the waiting list. To put that in perspective, so far in 2012 there were 6,118 deceased donor organs and 4,417 viii living donor organs made available . given the scarcity of organs and the prevalence of older and potentially sicker patients on the wait list, it is important that potential kidney

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| March 2013

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transplant recipients are carefully evaluated in order to detect and treat coexisting illnesses which may affect transplant candidacy, perioperative risk, and survival after transplantation.

In the u.S., transplant candidates can be placed on the deceased donor waiting list when their gFr (glomerular filtration rate) is 20 ml/min or less or when they are receiving chronic dialysis therapy. A number of initial studies should be completed on a potential candidate including blood work, a pregnancy test for fertile women, serologic testing, hlA typing and a panel reactive antibody assay, urinalysis, tuberculosis skin test, a chest x-ray and electrocardiogram, a colonoscopy, a breast examination and Papanicolaou smear (for women) or testicular examination (for men), and abdominal and pelvic ultrasounds.

There are a few generally accepted contraindications to transplantation including; an untreated current infection,

active malignancy with a short life expectancy, a chronic illness with shortened life expectancy, active substance abuse or reversible renal failure. There are also a number of relative contraindications, which require careful evaluation and possible prior therapy including; an active infection, advanced or uncorrectable coronary artery disease, congestive heart failure, active hepatitis, chronic liver disease, cerebrovascular disease, a proven habitual history of non-compliance or insurmountable psychosocial barriers to post-transplant compliance, severe peripheral vascular disease, active peptic ulcer disease, malnutrition, a history of cancer (excluding basal cell skin cancer), primary oxalosis, or severe hyperparathyroidism. let’s discuss the cost of end stage renal disease. In 2010, Medicare spent ix approximately $32.9 billion on eSrD . The eSrD program was established in 1972 when the u.S. Congress authorized the Program under Medicare. Medicare coverage was extended to Americans if they have stage 5 chronic kidney disease (CKD) and are otherwise qualified under Medicare’s work history requirements. x This entitlement covers over 90% of u.S. citizens with severe CKD .

In 1982, Medicare Secondary Payer (MSP) Provisions of the program were articulated. This provided for the coordination of benefits between Medicare and private health insurance plans for individuals entitled to Medicare solely on the basis of eSrD. After revisions to this program, the private health plan is now considered xi primary for the first 30 months .

A payment system was implemented under which a single payment is made for renal dialysis services and other items and services related to home dialysis.

Consolidated billing requirements confer on the eSrD facility the payment responsibility for all of the renal dialysis services that their eSrD patients receive, xii including those services provided by other suppliers and providers .

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1-800-920-4185 The Self-Insurer

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7

There has been an astronomical increase in the costs for dialysis. We’ve found consistent and major errors including: • Billing eSrD services more frequently than monthly.

• unusually high charges for eSrD services.

• Billing of additional charges or higher rates for nocturnal dialysis services.

• unbundling of drugs and/or laboratory tests that are provided by the eSrD facility and are related to the treatment of eSrD. • Failure to report quality and medical necessity indicators to assess the effectiveness of hemodialysis.

• Not reporting hgB or hCT to track and validate the units and dosing of epogen What are some strategies to address the inappropriateness of coding and inflation of charge issues?

• Monitor your dialysis claims • have an audit plan.

• Practice aggressive disease management.

• If possible add language to your contracts to: 3 Support auditing, 3 Define covered charges, 3 Define and implement usual and customary charge language, 3 Provide balance billing protection for members, 3 Ensure deferral to your plan specific policies and procedures (if you leverage a network), 3 Leverage state specific charge practice patterns and averages to negotiate with facilities • ensure proper coding. even with exceptional case management efforts and an optimal contractual rate, billed charges should be reviewed to ensure only appropriate and eligible charges are considered. n

Jakki Lynch founded the Presidio PULSE™ program in 1999 and serves as its director.

Prior experience includes providing medical case management for occupational and non-occupational patients, clinical expertise in the management of spinal injuries and work as a registered nurse/physician assistant in obstetrics and gynecology.

Jakki is the author of papers on subjects including back pain treatment and controlling the costs of health care in catastrophic cases. She is certified as a case manager and medical audit specialist.

Jakki received her B.S. in nursing from San Francisco State University. i

Centers for Disease Control and Prevention (CDC) (March 2007). “Prevalence of chronic kidney disease and associated risk factors – united States, 1999–2004”.

MMWr Morb. Mortal. Wkly. rep. 56 (8): 161–5. PMID 17332726. www.cdc.gov/mmwr/preview/mmwrhtml/ mm5608a2.htm ii www.umm.edu/ency/article/000500.htm iii National Kidney Foundation (2002). “K/DOQI clinical practice guidelines for chronic kidney disease”. www. kidney.org/professionals/KDOQI/guidelines_ckd. retrieved 2008-06-29 iv www.mayoclinic.com/health/kidney-failure/DS00280 v www.nim.nih.gov/medlineplus/ency/article/007434.htm vi http://kidney.niddk.nih.gov/kudiseases/pubs/peritoneal/ vii www.surgeryencyclopedia.com/Fi-la/Kidney-Transplant.html viii www.unos.org/donation/index.php?topic=data ix www.usrds.org/2012/pdf/v2_ch11_12.pdf x www.medpac.gov/publications/other_reports/Sept06_ MedPAC_Payment_Basics_dialysis.pdf xi www.cahabagba.com/part_b/msp/providers_general_ info.htm Cahaba gBA xii www.empiremedicare.com/pdf/combined/mmr2008-1. pdf Medicare Monthly review

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The Self-Insurer

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The Self-Insurer

| March 2013

9

Bench From the

by Thomas A. Croft, Esq.

a Creeping and Insidious Market Mindset

A

s many of you know, the focus for my bimonthly column here has always been the legal relationships between stop loss carriers, Mgus, brokers, TPAs and self-insured groups. For years, there were plenty of interesting reported legal decisions that illustrated and explicated the various tensions between these entities as they functioned and interacted in the stop loss arena. In the past year or so, that simply hasn’t been the case. Truth is, there hasn’t been a significant stop loss case decided since July, and only a handful in the entire year preceding.

One explanation may be that the legal norms regulating disputes between carriers and insured groups have “matured,” in the sense that the law has developed over the past twenty-plus years such that there are few novel issues left to be litigated – the “answers” are already there in the case law. Part of this is certainly true, but more is afoot. There are plenty of unresolved issues left to be addressed by the courts, and the legal and factual differences in varying claims disputes are almost always unique. There are few “off-the-shelf ” situations out there. The evolution of the legal landscape for stop loss claims litigation cannot alone explain the evident decrease in activity.

Another explanation rings truer to me: carriers are avoiding litigation at all costs, regardless of the merits of their position on a disputed claim. Carriers and Mgus (most of them, anyway – and there are exceptions) have always tried

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to avoid litigating claims issues for the obvious reason, expense. But litigation has always been expensive.

This is nothing new; and if anything, rates are declining somewhat. Yet, my recent anecdotal experience suggests that claims that are simply not owed are getting paid anyway, without so much as a denial letter followed by an attempt at a negotiated resolution to the problem – one that reflects an economic compromise encompassing the relative strengths and weaknesses of each side’s legal and factual positions. Mgus and carriers seem to be losing their stomach even for the process of negotiation over claims. So, what’s going on?

First, I think Mgus and carriers are losing sight of the fact that they are not claims processors, but

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claims adjudicators. In this context, to adjudicate means to make an informed analysis and then a formal judgment about a disputed matter.

The function of a claims department is to analyze whether a given claim is in fact payable under the terms of a policy or not. Most of the time, this can be done without consultation with management, but that will be necessary sometimes, as it will be to seek outside professional input and assistance on the matter in some instances. Mgus have a fiduciary duty to their issuing carriers to adjudicate, not just timely process, stop loss claims. Those issuing carriers, in turn, have duties to their reinsuring treaty partners only to pay claims that are really owed. None of these legal duties can be properly discharged if the focus is on processing instead of adjudication, and if the decision-makers aren’t really making tough decisions. Mgus and carriers get paid to adjudicate claims, and very often have significant skin in the game themselves, having a substantial piece of the reinsured risk, directly or indirectly.

So one would think self-interest would alleviate or eliminate this problem, but, again anecdotally and with certain exceptions, I am not seeing that it has.

Second, my sense is that perceived market pressures contribute to lax claims adjudication and the payment of claims that are not owed. I am not naïve enough to believe that marketing and relationship concerns with TPAs and/or brokers should not figure into the mix when deciding to honor a claim that might otherwise not be paid. But I am a firm believer that a Mgu/Carrier should communicate, in writing, that it is making an exception based on relationship considerations when that is being done. This not only reflects a conscious and formal acknowledgement to the affected party that a claim is being paid out of regard for the business relationship, but it also protects the Mgu/Carrier from

future claims of waiver or estoppel made by the same party or others when a similar situation arises again.

But exceptions can only be made after an act of diligent adjudication.

Just paying the claim short circuits the process to the detriment of the carrier, and reflects an incorrect economic judgment: that it is almost always better to pay a claim than to insist on one’s contractual rights.

There is a creeping and insidious market mindset toward treating the stop loss contractual arrangement as if it obligates the carrier to pay any claim that the Plan has paid, so long as it was paid within the contract period.

Mgus and carriers are passively buying into this, at their own expense. Issues like disclosure, eligibility, r&C, and the applicability of exclusions in the Plan Document or the stop loss contract, all seem to be falling by the wayside in favor of an approach that espouses the notion that all large claims result from underwriting misjudgments that can be corrected in the next cycle, and that it is too expensive, or too troublesome, or too unseemly perhaps, to deny a stop loss claim on the grounds that the carrier has no obligation to pay it under the terms of the parties’ bargain as reflected in the policy.

Worse, some carriers are writing policies with virtually no teeth in them to please the market. What factors are operating to encourage this mindset?

The whole “mind-the-gap” fad of the last few years is partially responsible.

Non law firm outlets pitched low cost advice to TPAs and groups, offering to do a review of potential gaps in coverage between a Plan Document and a given stop loss policy and then advise what changes should be made in the policy contract to “bridge” those gaps. Don’t get me wrong: it is a good thing that insureds negotiate to protect themselves up-front, before problems arise. But many carriers over-reacted by trying to write stop loss policies

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

that had no gaps. The “mirroring” phenomenon was the result. Was the cost of the “bridge” factored in by these carriers? I don’t know, of course, but I imagine that time will tell.

All this is leading us toward stop loss contracts that do not stand on their own, but are instead mere promises to pay claims in excess of a specific attachment point that the Plan has paid between two specified dates, and nothing more. Court decisions that adopt the view that a Plan Administrator’s discretion trumps any right of a carrier to argue that a given payment by a Plan was “outside” the terms of the Plan document (either because the claimant was ineligible, or the kind of claim was not covered or excluded by the terms of the Plan) contribute greatly to this problem, especially with so-called “mirrored” policies. until carriers make the decision to beef-up the anti-PlanAdministrator-discretion language in their policies, make it clear that they retain the last word on claims, and defend those rights in the courts, we will slip further into this particular abyss.

And frankly, we deserve to.

And I’ve heard another troubling prediction: that, in a post-ACA world, the market mindset won’t tolerate the disclosure process. Why? Because as pre-X becomes a relic of the past for Plan Administrators, the prevailing assumption will be that it will and should become a thing of the past for stop loss carriers. everybody is covered, and must be treated equally, right? Of course, there is absolutely no legal basis for this view, but it has a certain ring of plausibility to it, and sounds just like the kind of thing some carrier might try as an aggressive marketing ploy: disclosure-less stop loss, no lasers, ever. Soon, we may not even need underwriters...

But I do see some hope. Just as market forces lead toward the near elimination of meaningful distinctions

The Self-Insurer

| March 2013

11

between a stop loss product and a fully-insured one, they may ultimately rescue the stop loss carrier that writes a good policy, insists on adequate disclosure, and takes steps to enforce its rights when disagreements arise. I’m no underwriter, but common sense tells me that such a carrier ought to be able to sell that product for less than one from a carrier pricing as if the selfinsured group was just a fully-insured one with a high deductible. If so, then that carrier should have an advantage in the marketplace – both from lower pricing and from more inexpensive access to sources of reinsurance due to positive loss ratios.

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Health Insurance Consultants

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ACCREDITED INDEPENDENT REVIEW ORGANIZATION

There will be stop loss cases to report about again. Inevitably, carriers and Mgus will come back to the realization that they can compete more effectively in the marketplace by keeping their loss ratios in-line through careful underwriting, by writing good contracts, and by acting to enforce those contracts when it is reasonable and appropriate to do so. Just writing checks is neither a solid nor sustainable marketing strategy. n Known for his extensive writing on medical stop loss insurance issues, both in The Self-Insurer and on his comprehensive website, www.stoplosslaw.com, Tom has been practicing law for 34 years. Currently he practices through his own firm, CROFT LAW LLC, in Atlanta, GA. He regularly advises and represents stop loss carriers, MGUs, and occasionally TPAs, brokers, and self-insured groups, in connection with matters relating to stop loss insurance and the disputes that may arise among these entities regarding it. He currently serves on SIIA’s Healthcare Committee. He has been honored as a Georgia “Super-Lawyer” for the past six years running, and is listed as “Tier 1” in insurance by Best Lawyers. He is an honors graduate of Duke University and Duke University School of Law, where he formerly served as Senior Lecturer and Associate Dean.

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The Self-Insurer

| March 2013

13

art gAllerY

by Dick Goff

rrG opposition: a lesson from the Twilight Zone

A

while ago in the last century a Tv program named The Twilight Zone probed mysteries that seemed beyond explanation in reality. In the hallmark moment of each show host rod Serling would inform viewers, “You have just crossed over into the Twilight Zone.”

That’s the way I feel about what has happened to the risk retention group form of selfinsurance. Mysteriously it is being eroded, even threatened with extinction in some quarters despite its obvious benefits to its participants and the general public. risk retention groups were invented by the u.S. Congress in 1981 with passage of the liability risk retention Act (lrrA) that enabled groups comprised of businesses or professionals to organize self-insured risk retention groups (rrg) across state lines. Once licensed by their state of domicile, rrgs could operate in any other states under Federal protection.

It was the intention of Congress to shortcut the ineffective liability insurance process by putting control of it into the hands of those who needed it most: the insureds.

If you weren’t paying attention during those decades you may have missed the crisis in medical malpractice insurance

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that all but decimated the medical provider community.

Because of soaring malpractice claims and resulting exorbitant insurance premiums, doctors in many parts of the country were forced out of business. As insurers withdrew from some markets there were states where it wasn’t advisable to have a baby unless you knew a reliable midwife.

The solution was found in the basic premise of self-insurance: risk should be covered by those with skin in the game. With passage of the lrrA, doctors were able to form their own risk retention groups to cover their practices, and what do you think happened? They policed themselves with high standards for medical quality and competence.

Doctors no longer had to suffer being in the same risk pool as the small minority of incompetent docs who were responsible for the highest claims. Formation of medical risk retention groups ended the malpractice insurance crisis.

Similar results were reported in other fields. Manufacturers resolved their product liability insurance problems through formation of rrgs and the resulting risk management practices. Transportation, trucking and construction industries joined the movement with new safety practices, and soon many kinds of liability coverage were available across the business-professional spectrum.

But not everyone was a big fan of rrgs.Traditional insurance companies didn’t like them because they lost

business to them. State insurance regulators didn’t like them because those in non-domiciliary states couldn’t control them. An rrg licensed in any state was free to set up shop in every state.

Now we all know about the longstanding efforts by the National Association of Insurance Commissioners (NAIC) to strangle the rrg movement in the name of standardized practices – following, of course, any standards the NAIC would choose.

Some states have engaged in open interference with rrg practices within their borders, and there is nothing anyone can do about that. The lrrA failed to establish a vigorous enforcement process to protect rrgs from state malfeasance, and individual suits by rrgs against state governments are prohibitively expensive.

That was why SIIA and other organizations supported a rrg modernization bill that was introduced in the house of representatives two years ago. That bill would have provided a federal dispute resolution process in cases where rrgs believed they were being improperly regulated by nondomiciliary state regulators.

A curious effect has been noted among federal legislators who would stand up for the rrg industry. A companion bill that was expected to be introduced in the u.S. Senate last year suddenly fell off the table as its sponsor suddenly lost interest.

Further, California republican Congressman ed royce openly challenged the NAIC last year, charging that it operates as an

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insurance regulator while, in fact, being a professional trade association comprised of state insurance commissioners. This would violate McCarran-Ferguson, as interpreted by the Supreme Court, that no private association may regulate interstate insurance commerce. rep. royce’s letter to the NAIC was answered, to be blunt, in stonewalling boilerplate and his subsequent request to the Federal Insurance Office asking that it review the nature and scope of NAIC activities has not, to my knowledge, been acted upon.

Would you navigate uncharted waters without a compass?

Now, here’s the mystery: how does a group of state regulators hold such sway over elements of the federal government? It just doesn’t seem plausible that a trade group could exert such influence until, as they say in cop shows, we follow the money.

NAIC allies in controlling and diminishing self-insurance are the major traditional insurance companies whose throw-weight of lobbying money is counted in tens of millions. But if the insurance lobby is at the heart of attacks on self-insurance and alternative risk transfer mechanisms such as rrgs, that has not been acknowledged.

Dear readers, we may all have just crossed over into The Twilight Zone. n Dick Goff is managing member of The Taft Companies LLC, a captive insurance management firm and Bermuda broker at dick@taftcos.com.

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The Self-Insurer

| March 2013

15

PPaca, hIPaa and Federal health Benefit Mandates:

Practical

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

Q&A

Irs Issues Game-Changing regulations Interpreting Health Care reform’s Pay or Play requirement, Part two

h

ealth care reform does not require that every employer offer health coverage. rather, in 2014, certain “applicable large employers” (or “ALEs”) will become subject to a confiscatory excise tax if they fail to make coverage available to all full time employees and/or they fail to make affordable coverage available that provides a minimum value to all eligible full time employees and at least one full time employee enrolls for subsidized coverage under the new Affordable Care Act (ACA) exchange plans. Now, less than a year before these game-changing rules go into effect, the IrS has issued comprehensive proposed regulations (the “Proposed rules”) that clarify and change the operating rules that apply with regard to this so-called “employer shared responsibility” or “pay or play” requirement. The IrS also issued a set of FAQs that helps make the otherwise complex Proposed rules more palatable.

Part One of our two-part article provided the underlying framework for the rules. The next step after identifying the applicable large employer member’s fulltime employees is identifying whether the applicable large employer is liable for penalties and how much. This is addressed below. employer plan sponsors should take heed now while there is still time to react.

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both of the following occur:

Practice Pointer:Terms and concepts that are critical in the analysis triggered by 4980H are italicized throughout.

These are terms and concepts you should become familiar with in order to understand the impact the new 4980H rules will have on you and your plans.

Once full-time employees are identified, penalties may be assessed on the applicable large employer member based on the coverage that it offers, or fails to offer its full-time employees.

If the applicable large employer member fails to offer minimum essential coverage under an eligible employer sponsored plan to its fulltime employees (and their dependents) during a month, it may be liable for a Sledgehammer Penalty. If the applicable large employer offers minimum essential coverage during a month, but the coverage is not affordable or doesn’t provide minimum value, the applicable large employer member may be subject to the Tackhammer Penalty.

In either case, a penalty is assessed only if one of the applicable large employer member’s full-time employees receives a Premium Subsidy in an exchange.

The following provides a more in-depth review of the penalties, the manner in which each one is triggered, how the penalty is calculated and how to avoid them.

What is the sledgehammer Penalty?

The Sledgehammer Penalty – also known as the “no offer” penalty or the 4980h(a) penalty, is imposed in accordance with the following fundamental concepts: • The Sledgehammer Penalty is imposed on applicable large employer members who are not otherwise exempt under the Substantially All test (described below) for any month in which

– The applicable large employer member fails to offer minimum essential coverage offered through an eligible employer sponsored plan (“minimum essential coverage”) to its full-time employees (and their dependents), and – One or more of the applicable large employer member’s full-time employees enrolls in an exchange and receives a premium tax credit or cost share reduction from the federal government (“Premium Subsidy”) for that month.

• An eligible employer sponsored plan is defined in Code Section 5000A(f)(2). Proposed regulations recently issued by the IrS indicate generally that an eligible employer sponsored plan is any self-insured group health plan that would qualify as a welfare plan as defined by ERISA (without regard to whether erISA applies) that provides “medical care,” including a governmental plan and any fully insured group health plan issued in the small or large group market. An eligible employer sponsored plan does not include a plan the benefits for which constitute excepted benefits as defined in PHSA 2791(c).

Practice Pointer: Do not conflate “minimum essential coverage” with minimum value; they are not the same concepts. Minimum essential coverage offered through an eligible employer sponsored plan is the minimum coverage that must be offered by an applicable large employer member to avoid the Sledgehammer Penalty.To avoid both the Sledgehammer and the Tackhammer Penalty, that minimum essential coverage offered through an eligible employer

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sponsored plan must ALSO provide minimum value.

• Applicable large employer members who pass the “Substantially All Test” are exempt from the Sledgehammer Penalty, even if a full-time employee receives a Premium Subsidy.

An applicable large employer member passes the Substantially All Test if the applicable large employer member offers minimum essential coverage to at least 95 percent of its full-time employees and their dependents.

Practice Pointer: Although applicable large employer members who offer minimum essential coverage to 95 percent or more of their full-time employees (and their dependents) are exempt from the Sledgehammer Penalty, such employers will still be liable for the Tackhammer Penalty if one of the full-time employees not offered coverage receives a Premium Subsidy in an Exchange.

• The Sledgehammer Penalty for any month is equal to the product of 1/12 of $2000 ($167) multiplied by all of the applicable large employer member’s full-time employees (reduced by its allocable share of the applicable large employer’s 30 full-time employees). See exhibit A to this article for a more detailed example of how the Sledgehammer Penalty is assessed.

Practice Pointer: If an applicable large employer member is liable for the Sledgehammer Penalty, the number of full-time employees of the applicable large employer member on which the penalty is based is reduced by that applicable large employer member’s allocable share of 30 full-time employees.

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The applicable large employer member’s allocation is equal to 30 allocated ratably among all the members of the applicable large employer on the basis of the number of full-time employees employed by each member during the calendar year. Fractional numbers are rounded UP to nearest whole number. See Exhibit A to this article for an illustration of this allocation rule.

• An applicable large employer member is not treated as offering coverage to a full-time employee unless coverage is offered to both full-time employees and their dependents. Dependents are defined as children (as defined in Code Section 152(f)(1)) under age 26. There is a transition rule for 2014 for employers who do not offer dependent coverage. under the transition rule, if an applicable large employer member who did not previously offer coverage to dependents takes steps to offer coverage to dependents during the plan year that begins in 2014, the applicable large employer member will not be liable for the Sledgehammer Penalty solely on account of failure to offer dependent coverage during the 2014 plan year.

Practice Pointer: Children include only natural children, stepchildren, adopted children, children placed for adoption and children defined in the Code as “eligible foster children.” Spouses and domestic partners are not included in the definition of “dependents” for purposes of the Sledgehammer Penalty assessment.

• An applicable large employer member is not treated as “offering” a full-time employee coverage during a month for purposes of the Sledgehammer

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Penalty if the full-time employee is not provided an “effective opportunity” to elect to enroll no less than once during a plan year.

Whether a full-time employee has been offered an effective opportunity to enroll during a month is based on the facts and circumstances, including but not limited to adequacy of notice, the period of time during the election may be made and any other conditions of the offer.

Practice Pointer #1: Employers who conduct enrollment electronically should pay special attention to the electronic enrollment safe harbor requirements set forth in 26 C.F.R. 1.401(a)-21.

Practice Pointer #2:The Proposed Rules seem to align the 4980H Rules with the irrevocable election rules under Code Section 125. Consequently, an applicable

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large employer member who offers coverage to a full-time employee is not liable for the Sledgehammer Penalty solely because the employee who chooses not to enroll is not permitted to enroll again during the plan year, absent a change in status or cost or coverage change, until the beginning of the next plan year.

Nevertheless, the Proposed Rule provides special transition relief for cafeteria plans that operate on a fiscal plan year that will enable plan sponsors to amend plans to let employees in or out of the plan at least once without a corresponding event. See “Highlights of the Proposed Rules” above for more details.

• except where coverage ends during a month following termination of employment, an applicable large employer member is not treated as having offered coverage for a month unless the full-time employee is offered coverage for the entire month. In the case of a termination of employment, a full-time employee is treated as having been offered coverage during the entire month if the full-time employee would have been offered coverage for the entire month had he/she remained employed.

Practice Pointer #1:The Proposed Rules do not specifically address the impact of this entire month rule on coverage that begins mid-month due to an otherwise permissible waiting period. Additional clarification from the IRS is needed.

Practice Pointer #2:What about leaves of absence? Is coverage considered “offered” to a full-time employee for an entire month if the employee takes a leave of absence during a month and is permitted to continue coverage for the remainder of the month ONLY if the employee elects

COBRA (e.g., following a personal leave of absence)? Additional clarification of this issue is needed.

• An applicable large employer member is generally not treated as failing to offer coverage for any portion of a coverage period (usually the plan year) following a termination of coverage due to failure to timely or completely pay a required premium. however, this rule applies only if the applicable large employer member applies the following premium payment rules from 26 C.F.r. 54.4980B-8, Q-5: – 30-day grace period rule (see Q-5(a)) – Provider response rules regarding status of payment (See Q-5(c)) – Insignificant shortfall rule (e.g., where payment is insufficient by the lesser of 10 percent of $50) (see Q-5(d)) – Deemed payment rule (payment deemed received when sent) (See Q-5(e)) If the applicable large employer member is NOT subject to the Sledgehammer Penalty in accordance with the rules described above, then the applicable large employer member must still determine whether it may be liable for the Tackhammer Penalty.

What is the tackhammer Penalty?

The Tackhammer Penalty, also known as the “non-qualifying coverage” penalty or the 4980h(b) penalty, is imposed on applicable large employer members in accordance with the following fundamental concepts: • The Tackhammer Penalty is imposed on an applicable large employer member for any month

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in which the following occur: – Minimum essential coverage is offered to at least 95 percent of the applicable large employer member’s full-time employees and their dependents during a month, but: • the coverage is not “affordable”; • the coverage doesn’t provide “minimum value” (affordable and minimum value are terms of art discussed in more detail below); or • The coverage offered is affordable and provides minimum value, but excludes no more than five percent of the applicable large employer member’s full-time employees; AND – One of the applicable large employer member’s full-time employees receives a Premium Subsidy in an exchange for such month.

• The Tackhammer Penalty for a month is equal to the product of 1/12 of $3,000 and the total number of full-time employees who received a Premium Subsidy during that month, or if less, the amount that could apply under the Sledgehammer Penalty. As a general rule, the Tackhammer Penalty amount will almost always be less than the potential Sledgehammer Penalty since the Tackhammer Penalty only applies with respect to employees who actually receive a Premium Subsidy. See exhibit B for a more detailed illustration of this penalty.

Practice Pointer: The significant difference between the Sledgehammer and the Tackhammer penalties is that the Sledgehammer Penalty is based on

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ALL of the applicable large employer member’s full-time employees reduced by its allocable share of 30, without regard to how many received a Premium Subsidy in an Exchange. The Tackhammer Penalty is assessed only with respect to the applicable large employer member’s full-time employees who receive a Premium Subsidy.

• generally, a full-time employee who has been offered minimum essential coverage during a month through an employer’s plan will not qualify for a Premium Subsidy if the coverage is affordable and it provides minimum value.

The following is a brief overview of the affordability and minimum value rules.

When is coverage affordable?

Coverage is considered affordable under the Premium Subsidy rules if the employee’s contribution or premium for self-only coverage is less than 9.5

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Practice Pointer: In order to use any one of the following affordability safe harbors, an applicable large employer member must, as a threshold matter, offer fulltime employees and their dependents minimum essential coverage that provides minimum value.

• W-2 Safe harbor: Coverage is deemed affordable for purposes of the Tackhammer Penalty if the employee’s share of the applicable large employer member’s lowest cost, self-only coverage that provides minimum value for an entire calendar year is less than 9.5 percent of the employee’s W-2, Box 1 wages from the employer for that same calendar year (other than a period during which an employee is receiving COBrA or other continuation coverage).

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percent of his/her household income (as defined in Code Section 36B).

Applicable large employer members will not know an employee’s household income. Consequently, the Proposed rules provide various, optional safe harbors below for determining affordability.

Practice Pointer: Note that the benchmark is the employer’s lowest cost option for self-only coverage that provides minimum value.We do not believe that all of the options offered by an applicable large employer member must be affordable and provide minimum value in order to avoid the Tackhammer Penalty; we believe that the applicable large employer member must only offer one option that is both affordable and provides minimum value. However, this means that the lowest cost, selfonly coverage offered by the employer may not be the benchmark for the affordability standard if it doesn’t also provide minimum value. In that case, the employer will have to look to the next cheapest, self-only coverage that also provides minimum value.

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This W-2 safe harbor is subject to the following additional rules: • If the offer of coverage is only for a portion of the calendar year, the W-2 wages must be adjusted for the period that coverage was offered during the calendar year.

To adjust the W-2 wages, the Form W-2 wages are multiplied by a fraction equal to the number of months during which coverage was offered over the number of months during the year in which the employee was employed.

• The employee contribution must remain a consistent dollar amount or percentage of all W-2 wages throughout the calendar year, or if the plan operates on a fiscal year, within each portion of the plan year during that calendar year.

Practice Pointer:The wages in Box 1 of the W-2 do not include pre-tax salary reductions made through certain employer sponsored plans, such as a 401(k) or cafeteria plans.Thus, the employee’s wages for purposes of this affordability safe harbor will be proportionally reduced by the contribution amount used as the basis for the affordability test if the employee enrolls in and elects to pay for such coverage with pre-tax dollars. Some employers may be tempted to increase the margins by requiring such amounts to be paid with after-tax dollars, which will increase the wage base on which that affordability standard is based under this safe harbor and allow the employer to charge a higher premium.

Nevertheless, we caution employers so tempted to tread cautiously.This practice, if applied to lower wage employees, would most certainly run afoul of the cafeteria plan nondiscrimination rules.

Moreover, it is unlikely that the increased margins gained by increasing the wages through after-tax payroll deductions will prove more valuable than the tax

savings garnered from the pre-tax salary reductions. A better practice is to use the rate of pay safe harbor described below.

• rate of Pay Safe harbor: under this safe harbor, coverage is deemed affordable for a month with respect to an employee if the required contributions for the month for the applicable large employer member’s lowest-cost self-only coverage that provides minimum value does not exceed 9.5 percent of an amount equal to 130 hours multiplied by the employee’s hourly rate of pay as of the first day of the coverage period (generally the first day of the plan year). For non-hourly employees, applicable large employer members must use monthly salary instead of 130 multiplied by hourly rate of pay.This safe harbor may be used only to the extent the full-time employee’s hourly rate of pay or monthly wages (as applicable) is not changed during the calendar year by the applicable large employer member or any other applicable large employer to whom the fulltime employee is transferred.

• Federal Poverty line Safe harbor: The affordability safe harbor is satisfied for a calendar month if the employee’s contribution for the applicable large employer member’s lowest cost option that provides minimum value does not exceed 9.5 percent of an amount that is 1/12 of the federal poverty line for a single individual for the applicable calendar year.

Applicable large employers may use the most recently published poverty guidelines as of the first day of the applicable large employer member’s plan year.

Practice Pointer: The federal poverty line affordability safe harbor is determined

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without regard to what the applicable large employer actually pays the fulltime employee.

If it is determined that the coverage offered by the applicable large employer member during a month to full-time employees is affordable, then the next step is to determine if the coverage provides minimum value.

When does coverage provide minimum value?

A plan provides minimum value for purposes of the Tackhammer Penalty assessment if the plan pays at least 60 percent of the allowed costs. The Proposed rules do not provide any substantive guidance regarding the minimum value standard; however, the agencies have previously addressed the minimum value determination at a very high level in IrS Notice 2012-31 and by hhS in the proposed essential health benefit regulations issued in November 2012. Although we await critical details regarding the minimum value determination, the IrS and hhS have identified three general methods for determining minimum value.

• First, employers will be able to use a minimum value calculator (“Mv Calculator”) similar to the actuarial value calculator established by HHS for qualified health plans in the exchanges.

The difference is that the Mv calculator would be based on continuance tables reflecting claims data of typical self-insured plans). Passing the test with the Av calculator (while awaiting the Mv Calculator details) will generally ensure passage under the Mv Calculator.

• Second, employers may be able to use a benefit plan design checklist. This would be available for plans that provide benefits in

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the four core categories (physician, hospital and emergency, pharmacy and lab) with cost sharing attributes at least as generous as any of the checklist options.

• Third, a plan with nonstandard features (the first two are for plans with standard features) such as quantitative limits on any of the four categories of benefits could obtain an actuarial certification.

• Also, as is the case with the Av calculator, employer hSA and hrA contributions are counted, to some extent, when making the minimum value determination.

Practice Pointer: The proposed regulations clarify that minimum value for fully insured plans in the large group market and self-insured plans will be determined using a standard population that is based upon large self-insured group health plans.

next steps Subject to the transition rules identified above, the employer shared responsibility rules go into effect January 1, 2014, which is just around the corner. employers must begin assessing the impact of the 4980h rules sooner rather than later. Digesting the 4980H Rules is a good first step, but additional steps are required. While we await the issuance of final rules, we identify below key, highlevel questions that employers must answer to begin the process of identifying the impact of the 4980h rules: • As noted above, the first question for many employers that must be answered will be: Am I an applicable large employer? For many the answer will be obvious, but not for everyone, especially small employers that are members of a controlled group of employers and/or who employ a significant number of parttime employees whose aggregate hours may add enough full-time equivalents, with the employer’s full-time employees, to or over the 50 threshold.

• If you are an applicable large employer, do you want to pay or play? To answer this question, the following preliminary questions must be answered.

• Do you currently offer coverage to full-time employees? Do you offer coverage to children under age 26? If no, will the cost to offer coverage exceed the Sledgehammer Penalty? Keep in mind, the Sledgehammer Penalty is assessed against each applicable large employer member based only on that member’s full-time employees and it is only assessed to the extent a full-time employee receives a Premium Subsidy in the exchange. Moreover, the Proposed rules prescribe a “Substantially All Test” that enables applicable large employer members to escape the Sledgehammer Penalty to the extent minimum essential coverage is offered by the applicable large employer member to at least 95 percent of the applicable large employer member’s full-time employees.

• If you do offer coverage to full-time employees and their dependents, does your definition of full-time employee differ from the 4980H definition? If it differs, to what extent does it differ? Many employers define full-time employment based on a higher number of hours of service (e.g., 32).

Consequently such employers who want to play will have to close that gap by offering coverage to employees with hours of service between 30 and 32 hours of service. Those who don’t should understand that they may be liable for a Sledgehammer Penalty if the percentage of the full-time employees in

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the “gap” (the difference between the 4980H definition and your definition) exceeds five percent of the applicable large employer member’s full-time employees.

• Do I need to use the safe harbor to identify full-time employees?

The safe harbor may prove valuable to you if you have classes of employees who are not defined by you as “full-time” and who are not offered coverage, but whose hours may fluctuate from month to month such that they may qualify as a full-time employee in any given month.

• If you use the safe harbor, what is the duration of your stability and measurement periods?

• If you offer coverage, is it affordable? A critical step in making this determination is identifying the affordability safe harbor that is best for you under the circumstances.

If not affordable, what is the potential Tackhammer Penalty you may have to pay and will that exceed the cost to make the coverage affordable? Similar to the Sledgehammer Penalty, the Tackhammer Penalty is assessed on each applicable large employer member, except that the Tackhammer is based only on that applicable large employer member’s full-time employees who receive a Premium Subsidy.

• If you offer coverage, does it provide minimum value? If not, will the Tackhammer penalty exceed the cost to provide minimum value coverage?

exhibit a the sledgehammer Applicable large employer member A and applicable large employer member B are the two members of an

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applicable large employer. Applicable large employer member A employs 40 full-time employees in each calendar month of 2014. Applicable large employer member B employs 125 fulltime employees in each calendar month of 2014. Applicable large employer member A does not sponsor an eligible employer-sponsored plan for any calendar month of 2014, and receives a Premium Subsidy Certification for 2014 with respect to at least one of its full-time employees. Applicable large employer member B sponsors an eligible employer sponsored plan under which 120 of its full-time employees (and their dependents) are eligible for minimum essential coverage. Applicable large employer member B also receives a Premium Subsidy Certification with respect to two of the five employees who are not eligible for coverage provided by applicable large employer B. In accordance with the 4980h rules,

applicable large employer member A is subject to a Sledgehammer Penalty for 2014 of $64,000, which is equal to 32 x $2,000 (40 full-time employees reduced by eight (its allocable share of the 30-employee offset ((40/165) x 30 = 7.2, rounded up to eight)) and then multiplied by $2,000). even though applicable large employer B did not offer coverage to all of its full-time employees, and two of the five who were not offered coverage received a Premium Subsidy, applicable large employer member B is not subject to the Sledgehammer Penalty because applicable large employer B offered coverage to at least 95 percent of its full-time employees and their dependents. Nevertheless, applicable large employer B will be liable for a Tackhammer Penalty with respect to the two full-time employees who weren’t offered coverage and who received a Premium Subsidy.

exhibit B the tackhammer Penalty Applicable large employer member C and applicable large employer member D are the two members of an applicable large employer.

Applicable large employer member C employs 50 full-time employees in each calendar month of 2014. Applicable large employer member D employs 100 full-time employees in each calendar month of 2014. Applicable large employer member C sponsors an eligible employer sponsored plan under which all 50 of its full-time employees (and their dependents) are eligible during each month of the year; however, the coverage is not affordable in 2014. Applicable large employer C receives a Premium Subsidy certification with respect to three of its full-time employees for 2014. Applicable large employer member D sponsors an eligible employer sponsored plan under

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which 96 of its full-time employees (and their dependents) are eligible for minimum essential coverage. The coverage is affordable and provides minimum value. Applicable large employer member D also receives a Premium Subsidy Certification with respect to two of the four employees who are not eligible for coverage provided by applicable large employer D. In accordance with the 4980h rules, applicable large employer member C is subject to a Tackhammer Penalty for 2014 of $9,000, which is equal to a $3,000 assessable payment for 2014 multiplied by the three full-time employees who received a Premium Subsidy for 2014. even though applicable large employer D offered affordable, minimum value coverage to 95 percent of his full-time employees and their dependents, two of the four to whom D did offer coverage received a Premium Subsidy for 2014.

Consequently, employer D is subject to a Tackhammer Penalty for 2014 equal to $6000, which is equal to a $3,000 assessable payment for 2014 multiplied by the two full-time employees who received a Premium Subsidy for 2014. 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 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 email to Mr. Hickman at john.hickman@alston.com.

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Is PBM Spread Pricing

INCREASING The Cost of Your employee health Plan?

by Terrance Killilea, Pharm.D. and Scott Haas

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P

harmacy benefit managers (PBMs) are service providers hired by health plans to administer pharmacy benefits.

PBMs that practice spread pricing, charge Plan Sponsors (employers) more for prescription drugs than what’s actually paid to the pharmacy.

PBM spread pricing is largely unknown to Plan Sponsors and those who pay health bills. The practice is occasionally understood by some participants in the health system (health plans, brokers), but often not acted upon due to relationships and/or fiscal incentives that benefit both parties.

PBM spread pricing has a significant impact on health plan costs. For example, when a PBM pays a pharmacy a minor amount (say $6) for a prescription, but charges the employer and patient a much higher price (say $30) the higher amount is reflected in both the member co-pay and the billing to the employer. Clearly, this has an impact on the prescription drug claim cost of a Plan Sponsor. It also impacts the claim funding and/or premiums levels through paid claims experience being inflated by the level of PBM spread pricing.

Many health insurance carriers and some Third-Party-Administrators who offer exclusive (preferred) PBM relationships to their clients where spread pricing is occurring, either do not know about spread pricing or know about it and share in the revenue generated by the PBM through spread pricing. This revenue sharing often amounts to a per prescription fee paid to the health plan by the PBM. These arrangements occur in both self-funded and fully insured situations. regardless of the setting, PBM spread pricing increases the cost of prescription claims above the actual cost paid to the pharmacy.

address the actual issue of PBM spread pricing. Many PBMs in fact are charging the client what is paid to the pharmacy. however, just because a PBM is truly eliminating spread pricing from their business model does not assure the client that the pricing levels themselves are competitive to pricing that would otherwise be considered optimal in the ability to produce the lowest net cost to the client. elimination or reduction of PBM spread pricing to obtain low net cost is the most effective strategy to lower claim costs for patients and Plan Sponsors. The effect of this methodology will increase the affordability of medications which is likely to improve overall health outcomes.

Until recently, PBM spread pricing did not affect members of a health benefit plan. When a PBM reported a claim cost of $45, paid the pharmacy $12, and charged the member a $10 co-pay, the member was not affected by the higher claim cost. The plan, however, experienced a charge of $33 more than what was actually paid to the pharmacy. In this type of copayment design, it’s the plan sponsor (employer) who bears the increased cost of PBM spread pricing.

Now, with increasing frequency, employers are establishing high deductible health plans (hDhP). A hDhP typically has an annual deductible of at least $1,200 for individual coverage and all expenses (except some preventive visits), including pharmacy costs, go toward the deductible. In the most common claim scenario, it’s the prescription drug cost that accumulates to satisfy the member’s deductible and out-of-pocket expenses. In some families, the prescription cost is the primary source of medical care cost, particularly in plans where maintenance check-ups and other wellness services have no co-pay or out-of-pocket exposure. PBM spread pricing results in higher consumer costs. It is not unusual for generic prescription charges to i be $30-$50 above the actual claim cost.

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health plans often use terms such as “transparency” or “pass-through” to explain pricing, but this does not

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But more important, may be the affect on prescription compliance due to the inflated cost of care being created by PBM spread pricing.

While not being specifically studied, it’s reasonable to believe that compliance diminishes as the cost of prescriptions increase by 400% or more. The cost impact of PBM spread pricing to multiple members of a family, on multiple medications, can be dramatic. The effect of high patient prescription costs on decreased adherence to therapy was the subject ii of a 2010 Wall Street Journal article. however, PBM spread pricing was not mentioned as a factor.

If higher medication costs lead to lower compliance, it’s likely to be more significant in patients with multiple or complex disease states. While the extent of lower compliance is variable, higher cost results in lower affordability and is likely to affect disease outcome.

This is particularly true in situations

where members are paying all of the drug cost, such as in a hDhP.

$300 per year, substantial compliance

According to a recent Consumer reports poll, 48 percent of adults have taken steps to save money due to the economy. Included among the actions taken were:

likelihood of compliance decreases,

and successful treatment is likely. The however, when PBM spread pricing drives the cost of that same therapy up to $2,000 or more.

Finally, prescription cost increases

• Putting off a doctor’s visit (21 percent)

due to PBM spread pricing, places

• Delaying a medical procedure (17 percent)

deductible ceiling quicker. Thus, the cost

• Taking risks to save on medications (28 percent), including;

sooner, and negates the fiscal value of a

• Not filling a prescription (16 percent)

impact on care, it certainly increases

• Taking an expired medication (13 percent)

the establishment of a hDhP.

• Sharing a prescription with someone else (4 percent).

been a common practice in the PBM

members and their families above the of therapy impacts the plan sponsor hDhP. While this may not have a direct net costs to plan sponsors, in spite of While PBM spread pricing has marketplace for years, the impact on

When one considers that a complex patient with hypertension, hyperlipidemia, and type-2 diabetes can be effectively treated with generic drugs cumulatively costing less than

member costs and member quality of care is now greater. It’s advisable for all plan sponsors to assess the extent of PBM spread pricing that is occurring in their pharmacy benefit program and examine methods to eliminate it to the greatest expense possible. n Dr. Killilea and Mr. Haas both work in the Portland, OR office of Wells Fargo Insurance Services USA, Inc. Terrance Killilea, Pharm.D. is Vice President, Integrated Healthcare Metrics -Clinical and Fiscal Integration. Scott Haas is Vice President, Integrated Healthcare Metrics For more information on this subject, and methods to assess pricing, please contact Scott Haas at (503) 525-5020

i Based on competitive claim analysis where a transparent PBM has reported actual costs paid to pharmacies. There is no reason to believe that a larger PBM would be paying the pharmacy more than the smaller PBM for which the actual claim price is known.

www.wspactuaries.com | Email: info@wspactuaries.com

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ii

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| March 2013

29

SIIA NeWS Coalition launched to Help Protect employer self-Insurance Options

• erISA preemption challenges

The Self-Insurance Institute of America, Inc. (SIIA) announced the formation of the Self-Insurance Defense Coalition (SIDC). The purpose of the new coalition is to coordinate lobbying, litigation and media relations activities of leading national trade associations on legislative/regulatory/legal issues related to self-insured group health plans at both the federal and state level. The need for this new coalition has been prompted by the heightened attention on self-insurance in the wake of the enactment of the Patient Protection and Affordable Care Act (ACA).

• The exchanges created under the ACA

The federal agencies responsible for implementing the ACA have already taken steps toward further regulating self-insured employers and/ or their business partners. States are also looking to enact policies to make it more difficult and/or costly for employers to self-insure. Additionally, policymakers at both levels of government continue to eye selfinsured health plans as easy revenue sources to pay for government health care-related spending programs such as Medicaid or to fund the operation of the new health insurance exchanges.

Current issues on SIDC’s agenda include: • The ACA requirements applicable to self-insured group health plans • Additional federal and state taxation of selfinsured employers • Stop-loss insurance regulation • Federal tax treatment of employer-sponsored health insurance

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• Wellness programs and initiatives

Founding members of the SIDC include:

The campaign will include the following components:

• Self-Insurance Institute of America, Inc. • u.S. Chamber of Commerce • National Association of health underwriters • Council of Insurance Agents & Brokers • National retail Federation

• Targeted outreach to captive insurance regulators to educate them about what they should be looking for and what questions they should ask when considering eBgC applications.

• Targeted outreach to broker organizations to educate them on why the opportunity to participate as part of an eBgC may make the decision to selfinsure easier.

• National Association of Wholesaler-Distributors • National Association of Manufacturers For more information about the coalition, please contact SIIA Government Relations Director Jay Fahrer at 202/463-8161, or via e-mail at jfahrer@siia.org.

sIIa’s Captive Insurance solution to Promote Growth of employee Benefits Group Captives The Self-Insurance Institute of America, Inc. (SIIA) announced a new, multi-faceted educational initiative, The Captive Insurance Solution, that is focused on employee benefit group captives (eBgCs), also known as stop-loss captives.

The effort is designed to raise the awareness of how this type of alternative risk transfer solution can help smaller and mid-sized employers successfully operate self-insured group health plans, and in turn, better control the cost of providing quality health benefits to their employees.

“This is the perfect opportunity for the association to leverage its

collective expertise in self-insured group health plans with the potential to expand the marketplace when coupled with information about innovative captive insurance solutions,” said SIIA president les Boughner.

• Creation of new SIIA-hosted linkedIn discussion group focused exclusively on eBgCs. • Collect and publish information about industry service providers that are currently active in the eBgC space to help facilitate business partnerships.

• Development of several eBgC captive educational sessions to be incorporated as part of the SIIA National Conference & expo, scheduled for October 21-23, 2013 in Chicago.

SIIA’s Alternative risk Transfer (ArT) Committee, comprised of leading captive managers and other industry service providers, developed the initiative. “This is another example of how SIIA effectively harnesses volunteer resources to get big things done for our industry,” said Andrew Cavenagh, chairman of the committee.

Additional information can be accessed online at www.siia.org, or by calling 800-851-7789.

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SIIA NeWS continued agencies release Final rule on Cost-sharing limitations and Minimum Plan Value Calculations in Conjunction with Essential Health Benefits The Departments of health and human Services, labor and Treasury have jointly released a Final Rule which contained clarification as to how self-insured plans are to comply with the ACA’s cost-sharing limitations and how self-insured plans are to calculate Minimum Plan value. The rule also detailed how the Essential Health Benefits (EHBs) will be determined as well as how self-insured plans are to comply with requirements which are linked with such benefits.

Cost-Sharing Limitations The Final Rule codifies that self-insured plans do in fact need to comply with the limitations on costsharing under the new law. Specifically, the amounts required to be paid under a self-insured plan in the form of cost-sharing (e.g., deductibles, copays, and other co-insurance) cannot exceed the maximum out-of-pocket limits for a high-deductible health plan defined under the health savings account (“hSA”) rules for 2014.

The Final rule makes mention of the concerns of the timing and operational issues that are associated with such a restriction.

As such, concurrent sub-regulatory guidance will be issued identifying an enforcement safe harbor for selfinsured group health plans to address those operational concerns.

Through this rule, the agencies confirmed that self-insured plans are not required to comply with the

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annual deductible limitations that are otherwise applicable to fully-insured health plans purchased by a small employer (i.e., under the new law, fully-insured “small group” health plans cannot include a deductible greater than $2,000 for single coverage and $4,000 for family coverage).

Rule’s specific provisions or for help with interpretation, please contact Jay Fahrer, SIIA’s Director of government relations at 202-463-8161 or jfahrer@siia.org .

Determining Minimum Value

legislation that would make it more difficult for employers to operate self-insured group health plans by restricting the availability of stop-loss insurance has been introduced in rhode Island general Assembly.

The Final Rule clarifies how selfinsured plans are to calculate whether they meet a Minimum Plan value threshold. An employer-sponsored plan provides Minimum value if the employer’s share of the total allowed costs of benefits provided under the plan is greater than 60 percent. To calculate Minimum value, employersponsored plans may account for any benefits covered by the employer that are also covered in any one of the ehB-benchmark plan options in any State. employer contributions to an hSA and amounts newly made available under an “integrated’ hrA will be taken into account in determining Minimum value.

Minimum Plan value can be determined through any of the following options: • The Minimum value Calculator made available by the Department of health and human Services and the Internal revenue Service • Any safe harbor established by the Departments of health and human Services and the Internal revenue Service • Certification by an actuary to determine Mv if the plan contains non-standard features that are not suitable for either of the methods For further details about the

self-Insurance threat expands to additional state

house Bill 5499, sponsored by reps. linda Finn (D) and John edwards (D), includes the following provisions: h5459 Summary: The legislation proposes to place restrictions on stop-loss insurance policies sold to sponsors of selfinsured plans. restrictions on policies sold to groups of all sizes: • Policies may not be issued that have an annual attachment point for claims incurred per individual that is: – lower than $60,000. restrictions on policies sold to groups with 50 or fewer lives: • Policies may not be issued that have an annual aggregate attachment point that is lower than the greater of: – Fifteen thousand dollars ($15,000) times the number of group members; – One hundred thirty percent (130%) of expected claims; or – Twenty thousand dollars ($20,000)

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restrictions on policies sold to groups with 51 or more lives: • Policies may not be issued that have an annual aggregate attachment that is: – lower than one hundred ten percent (110%) of expected claims The legislation also grants the State Insurance Commissioner authority to: • Amend the dollar amounts • Adopt rules that carry out the requirements of this legislation • Prescribe additional standards for stop-loss insurance policies h5459 effective Date: Would be effective for policies issued on, or after, January 1, 2014

are expected to consider legislative proposal to make it more difficult to self-insure, with the intent of steering more lives into the federal/state health care exchanges slated to be on-line effective January 1, 2014.

The association is currently assessing its advocacy options/ capabilities in rhode Island and will be reporting again soon. In the meantime, should you have any questions regarding h5459 or would like to volunteer with anticipated grassroots lobbying efforts, please contact SIIA government relations Director Jay Fahrer at 202/463-8161, or via e-mail at jfahrer@siia.org. n

SIIA Analysis and response This development confirms SIIA’s prior reporting that additional states

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Medicare Based Pricing – For smart Payors

by Clare Liedquist, General Counsel, H.H.C. Group and Dr. Bruce Roffe, President and CEO, H.H.C. Group

M

edicare Claim repricing makes sense – is transparent, consistent, fair, rational, defensible, and predictable and eliminates provider price creep. groups contemplating converting to a Medicare Claim repricing program should consider the following:

Can Medicare repricing save your groups money?

Absolutely! Plans that cover benefits at a percent of Medicare experience significant savings. Take the example where a dialysis patient is dialyzed three (3) days a week over a period of seven months and that patient’s charges to the plan totaled $580,094. That’s right, $6,905.88 per treatment. The actual Medicare payment per treatment would have been $254.20 cents; or, an overall savings at a specific multiple over the Medicare rate of $545,905. That is a 94% reduction in Dialysis charges. At best, national PPO network savings realizes 20-25% savings per treatment.

with Medicare, as Medicare rates are public information and can be reviewed by providers and beneficiaries.

Companies that reprice claims to uCr attempt to do the same thing. however, their numbers are based on much less information. Further, unlike basing payment on Medicare, companies that utilize uCr base their numbers on select providers’ costs.

Medicare bases its payments on the costs of all providers participating in the Medicare program as well as other specific provider costs, geographical and patient factors.

Is basing coverage on a multiple of Medicare arbitrary?

Basing a benefit payment on a percentage of Medicare is basing it on the real costs associated with that treatment as Medicare utilizes panels of physicians, actual provider cost data, geographical factors, and patient factors (all updated on an annual basis) to determine a fair provider reimbursement amount. In addition, there is transparency

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Is there potential for legal challenges?

As is the case with any action or inaction, there is the potential for

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

litigation or legal challenge. In fact, legal liability is at least equal if not less than when plans pay claims at Medicare rates as opposed to uCr. As stated previously, uCr numbers are based on much less information than Medicare rates and therefore more likely to be criticized as arbitrary.

Ironically, the leading argument of the lawsuit cited in previous Medicare repricing articles in Myhealthguide, In re Wellpoint, Inc. Out-of-Network “uCr” rates litigation, questions the objectivity of the uCr rates that were utilized. So, whether your plan bases reimbursement on uCr, or a multiple of Medicare, it is our contention that the possibility of legal challenge is about the same. The potential for legal challenges can never be eliminated.

But, health plans can take steps to limit their exposure to potential legal liability based on having a clear and concise plan document.

How can clear and concise plan documents minimize the potential for legal challenge?

Amend and pay claims according to the terms of your Plan as the Plan document is critical to making sure that it spells out clearly how benefits are paid.

• Work with a vendor that has experience and can reprice to Medicare. As noted in Mr. Christiansen’s article, “Medicare payment calculations can be complex… vary regionally and by other factors, and change frequently.” (Christiansen, Medicare Plus repricing of Dialysis Claims: Not for the Faint of heart – of the Prudent Administrator, Myhealthguide, Jan. 2013).

• educate your members.

Members and your groups should

upcomingeVents self-Insured Health Plan executive Forum

March 20-21, 2013 • JW Marriott Desert Springs Resort & Spa • Palm Desert, CA The Self-Insured health Plan executive Forum (formerly known as the TPA/ Mgu excess Insurer executive Forum) will be held March 20-21, 2013 at the beautiful J.W. Marriott Desert Springs resort in Palm Springs, CA. The educational focus for this event will be expanded to address the interests of plan sponsors, in addition to third party administrators and stop-loss entities.

27th annual legislative/regulatory Conference

April 17-18, 2013 • Washington Marriott at Metro Center • Washington, DC SIIA’s Annual legislative and regulatory Conference is your opportunity to hear directly from the policy-makers who will shape the health policy agenda in 2013 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 29-30, 2013 • Chase Park Plaza Hotel • St. Louis, MO SIIA’s Annual Self-Insured Workers’ Compensation executive Forum is the country’s premier association sponsored conference dedicated exclusively to self-insured Workers’ Compensation funds. In addition to a strong educational program focusing on such topics as excess insurance and risk management strategies, this event will offer tremendous networking opportunities that are specifically designed to help you strengthen your business relationships within the self-insured/alternative risk transfer industry.

International Conference

June 10-12, 2013 • Newport Beach Marriott Hotel & Spa • Newport Beach, CA Beyond Emerging: Innovations in Self-Insurance Around the Pacific Rim 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.

33rd annual national educational Conference & expo October 21-23, 2013 • Sheraton Chicago Hotel & Towers • Chicago, IL 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.

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The Self-Insurer

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understand how their benefits are paid and the potential for balance billing. If members understand their plan, they can communicate openly with their care providers about payment and select providers that are less likely to balance bill or appeal.

Conclusion

Clare Liedquist, General Counsel, H.H.C. Group, can be reached at cliedquist@ hhcgroup.com or 301-963-0762 ext. 146 and Dr. Bruce Roffe, President and CEO, H.H.C. Group, can be reached at broffe@ hhcgroup.com or 301-963-0762 ext. 101.

Medicare claim repricing saves money, is fair, rationale and defensible. groups interested in reimbursing based on Medicare payment should consult with Medicare repricing specialists to ensure their claims are repriced accurately and their plan documents are clear. n

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SIIA pursues its mission to preserve and protect self-insurance and alternative risk transfer in part through political advocacy that is a coordinated, multi-layered ongoing effort. Activities include lobbying by an expanded full-time staff in SIIA’s Washington, D.C. office; operation of the Self-Insurance Political Action Committee; visits to legislators in Washington and elsewhere by members of the SIIA Grassroots Project; educational activities in conjunction with SIIA by members of the Self-Insurance Educational Foundation (SIEF) and direct presentations about self-insurance to business and public affairs organizations throughout the United States.

Grassroots engagement at the local level is essential to the strength of any association, and SIIA is no exception. Many policy-makers do not truly understand self-insuring, or even worse, are swayed by the misconceptions of our industry’s opponents. That is why we need to do our part to ensure those making the laws and regulations that affect our industry hear from us early and often.

Participation in this initiative helps to develop relationships with Members of Congress who support the legislative goals of the self-insurance and Alternative Risk Transfer industries and allows policy-makers to see the personal impact of legislation by putting a face to an issue. This is a program that many of your colleagues are already engaging in and it is a vital part of our advocacy efforts with elected policy-makers.

SIIA’s Government Relations Staff makes it as easy as possible for you to participate in this important initiative. Staff will schedule all meetings, provide talking points and draft any correspondence you might wish to submit; anything you need to make the experience best fit your interests and needs.

To get started, contact SIIA’s Government Relations Office at 202-463-8161 or legislative@siia.org.

not all self-Funded Plans are Created equal

by Bob G. Shupe, CEO, ESPinc, Brentwood, TN

T

he term self-funded plan is often used in a general way to protect employers from oversight, mandates and taxes of local state insurance departments. The vehicle that allows that to happen is, erISA. But there is a catch. Without discounting the efforts of SIIA to stop the taxing in Michigan of erISA plans, there is another movement afoot in local legislative circles.

In Tennessee, there have been two recent laws passed under Title 7 that have taken certain self-funded groups in our state by surprise. Specifically those self-funded groups are classified as non-federal, ERISA exempt, municipal plans. As an example, a county government, county board of education, city, or local municipal utility would fall into this classification. In many states these groups comprise a sizable number of insured individuals and are responsible for spending significant tax revenues to support the programs.

Title 56-7-2366 and Title 56-7-2368 are two examples of the camel getting its nose under the tent. SIIA looked at these two issues, and conferred with others, ultimately coming to the conclusion that there was nothing that could be done as long as the current language was in place.

Title 56-7-2368 mandates that children under 18 must be provided certain hearing assisted devices within the plan document. Title 56-7-2366, mandates that a plan falling into this class MuST notify their participants, in the self-funded plan, of the employees obligation to notify a divorced spouse that it is the insured employees responsibility to carry coverage on the divorced spouse for thirty days after the day the divorce is final; through COBRA or another policy. While this mandate does not increase the claims liability of the self-funded plan, it is another example of the State’s

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ability to mandate action on the part of the self-funded plan. There is a cost for the notification, and, one would assume a penalty for non-compliance. A good article concerning this mandate can be found at the following link: http:// law.justia.com/codes/tennessee/2010/ title-56/chapter-7/part-23/56-7-2366/ We are working with state Senators and representatives to draft legislation that would protect these non-federal erISA exempt municipal plans from any state mandates. We are also asking that we be notified if any bill like the Michigan bill is introduced in Tennessee.

As of this writing, we have a chance of getting Title 7 rewritten. We have the support of Democrat and republican senators and representatives. The outcome depends on how much the state insurance departments wants to control self-funded plans. I would encourage our members to bring this

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to the attention of your state legislators. let me offer a word of caution. Make sure you know who you are talking to, and their position on state control of self-funded plans. Don’t dangle a raw piece of meat in front of a tax starved politician. They may thank you for an idea that they were not keen enough to think up themselves.

Aside from not being exempt from certain state mandates, municipal self-funded groups are also treated differently in regard to transparency.

Most municipal groups “bid” their plans when they look for alternate venues of service and reinsurance. Municipal groups are subject to individual “open records” laws. Simply put, everything that is submitted by a vendor can be released to anyone who requests the data after the bid is awarded. PPO networks and similar organizations are well aware of this requirement and in most cases refuse to submit credible information concerning their contracts with providers.

In some cases, PPO Networks will share this data with a private employer with the understanding that they will not share the data with their competitors.

This situation leaves municipal groups with a generalized report, usually by zip code, and with very limited information.

In many cases these groups are being asked to make a decision on fifteen to twenty million dollars in claims payments on the simple statement of, “we have the best discounts, trust us.” Or, even worse, “we are the largest carrier so you know we have the best deal.” In some cases that is correct simply because of MFN, Most Favored Nations clauses.

But that is another issue altogether. In summary, perhaps it is time we stopped treating self-funded groups differently based on who they are.

Another issue that will eventually separate self-funded groups is size. There is greater pressure now on federal regulators, state insurance departments

and the NAIC to define group size related to compliance with ACA and “exchanges.” If our self-funded industry is going to be attacked, and it is inevitable, we should be prepared with a battle plan and a positioning of our troops and resources. We need to protect the low hanging fruit! In my estimation, that low hanging fruit will be small to medium (whatever that is), non-federal, erISA exempt, municipal plans.

Our legislative team in DC has worked very hard to address many of these issues, including some state based initiatives. They are asking our membership to become more involved in grassroots efforts within our states. The definition of grassroots in sometimes also blurred. There are two things that we, as members, need to address on the local level. Federally, we need to be visiting with our Congressmen and Senators when they are home and away from DC. A second, and more challenging effort involves becoming known by our state legislature.

We should also become familiar with its structure and how it works, or more often, doesn’t work.

It has long been thought that selffunding was a way to keep the state out of our business, and as long as we did, what goes on regarding the state and the department of Insurance was never a consideration.Those days are long gone.

In the near future the line between these two issues is going to become so blurred that it may be impossible to distinguish who is in control.

Please join me in thinking through a process to initiate more communication within our states, and from state-to-state, in order to stay ahead of this transition. hopefully, in doing so, we can also be a part of molding it as it transforms. There is no better organization than SIIA to be at the front of this process. They cannot do it all however. We must step up to the plate. how? here is a short list of things you can do as a member of SIIA’s membership team.

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1. Invite someone to join SIIA; industry rep or employer personnel.

2. have an informal get-together occasionally with all of the SIIA members in your state to discuss these issues and coordinate your efforts.

3. regularly visit your Senators and Congressmen when they are in town and when they are not.Their staff should know who you are and that you are a valuable resource.

4. get to know your state senators and representatives and the key members if you are not in their district.

5. Become acquainted with your State website and how to search for key words in proposed and pending legislation.

6. read, read, read, read, read everything you can that hints at losing control of self-funding… yes you have time.

7. Contribute to the SIIA PAC. You don’t have to like the way the political system works. You do have to live in it until it is changed so go to the SIIA website and sign up today!

8. Contribute to local senator and representatives campaigns. If possible be a volunteer during their election or reelection campaigns.

9. report to our federal leg team at SIIA as you discover or introduce items at the state level.

10. 1Never…never give up.

That’s it. let’s go to work. n Bob began his career with the Nationwide Insurance Group in 1978. In 1988 he purchased ESPinc and became a fee based consultant to municipal governments in the state of Tennessee.

Today ESPinc serves over thirty public entities ranging in size from 16 to 4,000.

Prior to joining SIIA Bob was very involved in the National Association of Health Underwriters serving as chapter and state president and as regional legislative chair for seven southeastern states.

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SIIA PreSIDeNT’S MeSSAge Les Boughner

S

IIA members have a unique opportunity next month to get involved at the 27th Annual legislative/regulatory Conference April 17-18th at the Marriott at Metro Center in Washington, DC.

SIIA’s Government Relations Office is the “Crown Jewel” of the self-insurance industry. Personally, on two occasions Mike Ferguson and Jay Fahrer have been able to arrange meetings for me to discuss industry issues with senior government officials. On both occasions it was very clear that SIIA holds a respected position in Washington.

SIIA’s government relations staff does an excellent job of keeping us informed of significant policy and regulatory issues on both the State and Federal level. With no electoral mandate, everything is “on the table”.

Considering how this will affect our industry, it may be more important than ever to attend SIIA’s legislative and regulatory Conference.

Of course, SIIA will have a top notch line-up of speakers scheduled including representatives from the Department of labor, the Federal Insurance Office, the Department of Health & Human Services, Centers for Medicare and Medicaid Services, Kaiser health News, and last but certainly not least, Members of the house and Senate.

One experience that distinguishes the legislative/regulatory Conference apart from other SIIA events is the “Walk On Capitol hill.” We urge you to participate in this opportunity to meet with your elected representatives.

You will be able to see for yourself the effect you can have on the knowledge and attitudes of your elected representatives. When you register for the conference, SIIA Staff will set up appointments with your representatives and provide you with talking points. Past participants in the Walk on Capitol hill can attest to the importance and effectiveness of participating in this event.

There is still time for you to get involved, join the sessions and to participate in the annual “Walk on Capitol hill” and the following Capitol reception.

For detailed session information and to register for the legislative/ regulatory Conference, please visit www.siia.org.

I hope to see every committed SIIA member in Washington, DC! n

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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

2013 Board of Directors

Committee Chairs

ChAIrMAN OF The BOArD* John T. Jones, Partner Moulton Bellingham PC Billings, MT

ChAIrMAN, AlTerNATIve rISK TrANSFer COMMITTee Andrew Cavenagh President Pareto Captive Services, llC Conshohocken, PA

PreSIDeNT* les Boughner executive vP & Managing Director Willis North American Captive + Consulting Practice Burlington, vT vICe PreSIDeNT OPerATIONS* Donald K. Drelich, Chairman & CeO D.W. van Dyke & Co. Wilton, CT vICe PreSIDeNT FINANCe/ChIeF FINANCIAl OFFICer/COrPOrATe SeCreTArY* Steven J. link executive vice President Midwest employers Casualty Company Chesterfield, MO

Directors ernie A. Clevenger, President Carehere, llC Brentwood, TN ronald K. Dewsnup President & general Manager Allegiance Benefit Plan Management, Inc. Missoula, MT elizabeth D. Mariner executive vice President re-Solutions, llC Wellington, Fl

ChAIrMAN, gOverNMeNT relATIONS COMMITTee Horace Garfield vice President Transamerica Employee Benefits louisville, KY ChAIrWOMAN, heAlTh CAre COMMITTee elizabeth Midtlien Senior vice President, Sales Starline uSA, llC Minneapolis, MN ChAIrMAN, INTerNATIONAl COMMITTee greg Arms Co-Leader Mercer Marsh Benefits global leader, employee health & Benefits Practice Marsh, Inc. New York, NY ChAIrMAN, WOrKerS’ COMPeNSATION COMMITTee Duke Niedringhaus vice President J.W. Terrill, Inc. St louis, MO

SIIA New Members regular Members Company name/ Voting representative

Chris Cheney CFO Advantek Benefit Administrators Fresno, CA Jeff Diekema President American Trust Administrators, Inc. lee’s Summit, MO Mark reynolds President BeN-e-leCT visalia, CA Deborah Saremi, esq. vP of Compliance Consolidated health Plans, Inc. Springfield, MA reed Stock Discovery Benefits Inc. Fargo, ND Sriram Iyer CeO engage health North Bethesda, MD Caroline Fraker vP of Compliance and Chief Privacy Officer MedBen Newark, Oh Patrick Timoney, esq.

Attorney Schwarz & Mongeluzzi, llP Philadelphia, PA

Jay ritchie Senior vice President hCC life Insurance Company Kennesaw, gA

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March 2013

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The Self-Insurer

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