Self-Insurer May 2011 by SIPC

May 2011

Small BuSineSS

&Self-funding Dispelling Some myths

SiiA OffiCeRS Chairwoman of the Board* Freda Bacon, administrator alabama Self-insured WC Fund Birmingham, al President* alex Giordano, Vice President of marketing elite underwriting Services indianapolis, in Vice President Operations* John T. Jones, Partner moulton Bellingham PC Billings, montana

MAY 2011 | Volume 31

feATuReS

Vice President Finance/CFO/ James e. Burkholder , President/CeO TPABenefits, Inc. San antonio, TX

12 From the Bench

Executive Vice President erica massey midland, nC Chief Operating Officer mike Ferguson Simpsonville, SC

SiiA diReCTORS les Boughner, executive VP and managing Director Willis north american Captive and Consulting Practice Burlington, VT

Small Business & Self-funding dispelling Some Myths By George J. Pantos, Esq.

ernie a. Clevenger, President CareHere, llC Brentwood, Tn Donald K. Drelich, Chairman & CeO D.W. Van Dyke & Co. Wilton, CT Steven J. link, executive Vice President midwest employers Casualty Company Chesterfield, MO Robert Repke, President Global medical Conexions inc. San Francisco, Ca

SiiA COMMiTTee CHAiRS Chairman, Alternative Risk Transfer Committee Kevin Doherty, Partner Burr Forman nashville, Tn

ARTiCleS 14

mather’s Grapevine

What is the Cost of Solvency Compliance? By michael a. Schroeder

aRT Gallery

PPaCa, HiPaa and Federal Health Benefit Mandates: Practical Q&A

SiiA leAdeRSHip

SiiA Carries Self-funded Message to Bangkok at the invitation of the Thai government

2 President’s message 36

Chairwoman’s Report

Chairman, Government Relations Committee Jay Ritchie, Senior Vice President HCC life insurance Company Kennesaw, Ga Chairwoman, Health Care Committee Beata madey, Senior Vice President, underwriting Hm insurance Group Pittsburgh, Pa Chairwoman, International Committee liz mariner, executive Vice President Re-Solutions intermediaries, llC minneapolis, mn Chairman, Workers’ Compensation Committee Skip Shewmaker, Vice President Safety national Casualty Corporation St. louis, mO

May 2011

The Self-insurer (iSSn 10913815) is published monthly by Self-insurers’ Publishing Corp. (SIPC), Postmaster: Send address changes to The Self-Insurer, P.O. Box 1237, Simpsonville, SC 29681 The Self-Insurer is the official publication of the Self-Insurance Institute of America, Inc. (SIIA). Annual dues are $1495. Annual subscription price is $195.50 per year (U.S. and Canada) and $225 per year (other country). Members of SIIA subscribe to The Self-Insurer through their dues. Copyright 2010 by Self-Insurers’ Publishing Corp. all rights reserved. Reproduction in whole or part is prohibited without permission. Statements of fact and opinion made are the responsibility of the authors alone and do not imply an opinion of the part of the officers, directors, or members of SIIA or SIPC. Publishing Director - James a. Kinder managing editor - erica massey editor - Gretchen Grote Design/Graphics - indexx Printing Contributing editor - Tom mather and mike Ferguson Director of advertising - Justin miller advertising Sales - Shane Byars Editorial and Advertising Office P.O. 1237, Simpsonville, SC 29681 • (864) 962-2201 Self-Insurers’ Publishing Corp. Officers (2010) James a. Kinder, CeO/Chairman erica m. massey, President lynne Bolduc, esq. Secretary 2010 Editorial Advisory Committee John Hickman, attorney, alston & Bird David Wilson, esq., Wilson & Berryhill P.C. Randy Hindman, Deloitte & Touche, llP Jason Davis, Global excel management, inc. The Self-insurer

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

The Self-Insurer

May 2011

PReSiDenT’S meSSaGe Bullies Squashed by the Truth of Self-insurance

ike most Brooklyn neighborhoods ours had its share of bullies and you learned to avoid them like you learned to avoid polio. But those that spread lies about you were especially troublesome. The season for bullies never ends, of course. even in the supposedly grownup and civil world of business, competitors sometimes resort to all kinds of intimidation, even including untruths. We who toil in the service of self-insurance know only too well how damaging rumors can be spread by unscrupulous competing interests. Well, the bullies have been exposed as cheap-shot artists by an even greater power, the federal government agencies that were ordered by Congress in the Patient Protection & affordable Care act (PPaCa) to investigate self-insurance. The Department of labor (DOl) and the Department of Health and Human Services (HHS) released findings that struck down the misconceptions – that’s the polite term for lies – that had been spread around by business interests that apparently have felt threatened by self-insurance for all the decades since eRiSa was passed. i was never so proud of my membership in Siia as when mike Ferguson told the press, “Our work educating HHS officials during the report development process has clearly proven worthwhile.” He related how Siia representatives met with government officials and their contracted researchers on multiple occasions to help them understand how self-insured health plans operate and why so many employers choose to set them up. in this instance, the government did its job of helping to assure a level playing field for all the employers and small businesses that are involved in self-insurance and alternative risk transfer. everyone who provides services to self-insuring employers should keep a summary of these government reports handy to dispel any lingering doubts about the advantages of self-insurance to employees and dependents as well as to sponsoring employers. Here are the highlights of how the HHS report struck down those misconceptions about self-insurance: • HHS and contracted researchers of RanD found no evidence that selfinsured plans are most cost effective because they deny claims at a higher rate than fully-insured plans, as competing interests had contended. • no evidence was found to support the criticism that self-insured plans bring greater potential for conflict of interest violations in connection with plan coverage decisions. • The report offered no evidence to dispute Siia’s position that coverage benefits of self-insured plans are at least equal to and often more generous than those of fully-insured plans. • no evidence was found to support the misconception that self-insured plans require higher out-of-pocket payments compared with fully-insured plans. • The contention that self-insured plans will contribute to adverse selection when insurance market reforms are fully implemented, thereby undermining them, is largely discounted by the report. • The “star witness” of the report is the striking statistic that from 2009 to 2010 for self-insured plans with more than 200 lives, the average premium increase was $248 compared with $808 for fully-insured plans.

May 2011

The Self-Insurer

Siia continues to work with the government on the matter of confusing stop-loss insurance with health insurance. mike was further quoted in the press release: “The association sees no reason to subject employers and/or stop-loss insurers to unnecessary regulations or restrictions that dictate how employers choose to finance employee health benefits.” The benefits to SIIA of these government reports could be huge and far-reaching. The PPaCa law will be implemented over future years in a variety of regulatory activities or even by further legislation. The clear indication from DOl and HHS is that self-insurance does not require further government interference through this process. This doesn’t mean that Siia members can drop their guard. Our job now is to put the wheels on these government studies and take them to everyone with whom we do business, and constantly remind our representatives of the value the federal government finds in selfinsurance. The full DOl and HHS reports are available on Siia’s website, www.siia.org. That’s it for now,

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The Self-Insurer

May 2011

Small BuSineSS

&Self-funding Dispelling Some myths By George J. Pantos, Esq.

May 2011

The Self-Insurer

This article originally appeared in Thompson’s Guide to Self-Insuring Health Benefits, www.thompson.com.

mall business consistently has said that its No. 1 concern is controlling the escalating cost of health insurance premiums. As health costs continue to climb, smaller employers increasingly are turning to self-insurance as a costeffective way of managing health plans they offer employees. However, as many small employers declare independence from health insurance companies, some critics observe that self-insurance (also referred to as “self-funding”) is too risky for small firms and only large firms should be allowed to self-insure.

profits, according to a 2009 Kaiser/HRET Report. A 2010 study by the American Medical Association reporting on the dominant market share of large health insurers in nearly two-thirds of U.S. cities states that “when insurers dominate a market, people pay higher health insurance premiums than they should.” So it is not surprising that smaller employers are exploring alternatives to commercial insurance to help bend the cost curve downward.

Self-Insurance Is Not for Everyone Over the 30-plus years since passage of ERISA, financially qualified employers of all sizes have shown they are capable of self-funding, with more than 77 million workers and their dependents covered by self-insured group health plans in 2009. Clearly, however, self-funding is not a viable option for everyone. While larger firms – up to 90 percent by some estimates – self-insure group health benefits, small business owners typically cover employees with fully insured plans. In small Ethicare_Ad factors_01_03.pdf 1 1/5/11 1:04 PM firms with 3 to 199 employees, 88 percent were in fully insured plans in 2008, according to the non-profit Employee Benefit Research Institute (EBRI).

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Now, in two newly released white papers, the Self Insurance Institute of America (SIIA) responds, “While it is generally true that larger employers self-insure at higher proportions, there is no valid reason why smaller employers should be restricted from this often advantageous financing C option.”

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May 2011

However, mid-size and small firms increasingly are turning to self-insurance as a cost-effective alternative to ever rising commercial health insurance premiums. While only a small fraction of the nation’s 28 million small firms self-insure, the trend to self-funding has gained momentum. Between 2008 and 2010, the trend to self-funding by small employers increased by as much as 20 percent, according to Price Waterhouse Coopers. Though self-insurance is not widespread in the small group market, it has grown steadily, with some 12 percent of small company health plan sponsors (3 to 199 employees) in self-insured plans in 2009 – up from 6 percent earlier in the decade. an important contributing factor is employer reliance on professional consultants who are able to objectively evaluate whether an employer is capable of retaining the financial risk of self-insuring.

What Constitutes a ‘Small employer’? Unfortunately, Congress did not use a consistent definition of a “small employer” in the Patient Protection and Affordable Care Act (PPACA) and figures vary widely as to what constitutes a “small employer,” depending on the specific provision. While many changes are mandated without regard to employer size, PPaCa provisions specifically applicable to “small employers” range from fewer than 26 employees for tax credit eligibility to 100 employees or less to qualify for exchanges. Starting 2014, companies with 50 or more employees must either offer health coverage (employer mandate) or pay a $2,000 annual fee for every employee (after the first 30) if any employee receives a health care tax credit. “The conventional wisdom that you need at least 250 employees to self-insure is proving wrong,” says Curtis Donley, president of indianapolis-based Donley

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May 2011

The Self-Insurer

Consulting inc. and former president of a third-party administrator (TPa) firm. “My experience shows that selfinsurance is a viable alternative for financially qualified small employers. Over the past quarter century, we’ve routinely set up and administered self-funded health plans for financially qualified groups as low as 25 employees and up.” as the economy struggles to revive itself, small employers in greater numbers view the self-insurance option as a favorable way to save money without sacrificing health care quality. Self-insurance lets companies take control of their plans and offer benefits uniquely suited to their workers’ needs, free of many of the costliest state government mandates. nevertheless, critics suggest that small employers are not able to bear the financial risk of self-insurance. This echoes a refrain from the mid-’90s debate when the Clinton administration unsuccessfully advanced proposals initially to restrict selfinsurance to very large firms with 5,000 employees, then to 1,000 employees and up. Opposed by industry, these attempts and a later drive to limit selffunding to firms with 500 employees and up were defeated on Capitol Hill. The same issue has surfaced once again in connection with the government operated insurance exchanges to be set up under PPaCa where small employers will be able to elect coverage starting Jan. 1, 2014. a new paper published by the national Health Policy Forum (nHPF) once again advances old, misguided assumptions saying that small employers that self-insure are likely to cover healthier workers and then elect coverage in the insurance exchanges. The paper observes this could have an adverse selection impact that will trigger higher premiums in exchange

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May 2011

them for potential high costs of large or catastrophic claims. Selfinsured employers with stop-loss are reimbursed for individual employees’ medical costs above a certain predetermined amount. Following the passage of the PPaCa, most stop-loss insurers amended policies and now cover unlimited annual and lifetime benefit costs.

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pools and that only larger employers should be allowed to self-fund health benefits. This rankled the industry, which fired back that these conclusions are without foundation. “We are working to head off a DOl report that concludes smaller employers should not self-insure due to solvency concerns and a separate HHS report suggesting that self-insured health plans will negatively impact health insurance exchanges due to adverse selection,” says mike Ferguson, Siia’s chief operating officer. These conclusions are incorrect for the following reasons:

dispelling the Myths • Myth 1: Self-insured plans cover healthy employees. Not true. Federal laws prohibit plan sponsors – whether insured or self-insured – from selecting only the most favorable risks among individuals in plans they sponsor. PPaCa bars coverage denial based on pre-existing conditions and prohibits discrimination based on employee health status, including such factors as claims experience, medical history, genetic data, evidence of insurability and disability. moreover, these practices have been prohibited for more than 20 years since the passage of HiPaa. • Myth 2: Self-insurance will result in adverse selection. Employer sponsored self-insured plan membership includes a broad cross-section of workforce risk, covering low, medium and high employee health risks Since insured and selfinsured plans have similar membership demographics, there is no basis for the highly speculative assumption that self-insured plans enroll a more favorable selection of health risks. There is no historical basis for the speculation that small employers that self-insure under PPaCa will skim healthier and better risk out of exchange pools. This observation is inconsistent with empirical evidence and published research studies. • Myth 3: Small employers can’t bear the financial risk of self-insurance. Not true. Employers must meet sound actuarially determined financial requirements (good cash flow) in order to demonstrate they are capable of self-funding. To protect against year-to-year variations and the expenses of complex illnesses, small employers purchase stoploss insurance to indemnify

May 2011

The Self-Insurer

The Patient Protection and affordable Care act (PPaCa) requires the u.S. Departments of labor (DOl) and Health and Human Services (HHS) to prepare and submit an annual report to Congress on selfinsured plans, with both reports due March 23, 2011. Based on Form 5500 data, the DOl report will include general information on self-insured group health plans (including plan type, number of participants, benefits offered, funding arrangements and benefit arrangements). Using data from financial filings, the report will also include information on assets, liabilities, contributions, investments and expenses. The HHS report will cover insured and self-insured employer characteristics (including financial solvency, capital reserve levels, the risks of becoming insolvent), and the extent to which new insurance market reforms are likely to cause adverse selection in the large group market. Siia reported recently on a series of meetings with DOl and HHS officials to discuss PPACA-mandated studies on self-insurance. “Our assumption is that there at a minimum there is ignorance among regulators, but more likely a negative bias pervades,” said Siia Chief Operating Officer Mike Ferguson. moreover, as the white papers note,

PPaCa contains anti-adverse selection reforms that will keep coverage rates in check regardless of pool risk exposure. The tax credit subsidy available to eligible small employers is only available for employers who purchase insurance in the exchanges. employers now have a guaranteed right of renewability regardless of plan risk profile changes. also, the new premium review process will help combat against excessive increases for small groups. The white papers are titled “Why Self-insured Health Care Plans Will not Contribute to adverse Selection under PPaCa” and “Companies of all Sizes Can Operate Viable Self-insured Group Health Plans” can be accessed via e-mail at mstrickfadden@siia.org, or by calling 202-463-8161.

The Options under ppACA under PPaCa, small business

owners with fewer than 26 employees and average annual wages of less than $50,000 can now claim a tax credit of up to 35 percent of the premium cost – increasing to 50 percent in 2014. If they choose to offer insurance coverage, an estimated 4 million small companies will be eligible for the tax credit on 2010 tax returns, according to a Families uSa report. Though some insurers already saw a dramatic increase in plan enrollments in 2010, millions of small employers in this size range that exceed the average annual wage limit will not be eligible for the tax credit. Small employers (up to 100 employees) looking ahead to 2014 when the well-publicized exchanges will be in place need to decide whether to continue health insurance coverage or scrap their plans and pay the $2000-per-employer penalty. They will need to weigh not only the impact

on their bottom line, but also “what is the right thing to do for employees.” There is no clear answer; this will be a business-by business decision. employers in this size range that decide to continue health plan coverage will need to choose the funding method – insurance or self-insurance – that does the most to lower health costs and improve employee health care quality. The other option, coverage in state health insurance exchanges, is expected to benefit from negotiated prices with insurers, but will be subject to new HHS-regulated “essential benefits” mandates and other requirements. Some insurers have announced they will not participate in the exchanges but will offer their products only outside the exchanges. many employers not eligible for coverage in exchanges (mainly due to size) can be expected to continue funding health

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The Self-Insurer

May 2011

benefits outside the exchanges through commercially insured plans. However, these plans will be subject to the same mandated state benefits, premium taxes, rating restrictions and other costly requirements that have resulted in soaring premiums.

The Self-insurance Advantage “increasing medical costs and willingness to assume more risk are driving many employers, even small employers, to shift to self-insured health plans,” according to Sheri Sellmeyer, vice president of analysis for Health leader interStudy, a leading provider of health care market intelligence. From January to July 2008, self-insured health plan enrollment grew by 1.6 million lives, or 2.2 percent nationwide, according to a 2009 HealthLeaders study. Self-funded plans are appealing to small employers because of the greater flexibility that comes with freedom under eRiSa to tailor plans

to specific workforce needs (including medical, dental, vision and prescription drug benefits) without being impacted by costly state mandated benefits and premium taxes. “We’ve just finished our first year on a self-funded plan backed by stop-loss insurance and we’ve saved over $600,000 in the first year by being self-funded,” said Tad Roane, CFO of Crescent Directional Drilling, a small employer in Houston, Texas. unlike employers that purchase insurance from a commercial insurer licensed by a state, employers that self-fund health benefits can offer the same uniform health plan in multiple states, as permitted by the federal eRiSa provisions. This is a significant advantage for the many small employers that do business across state lines and operate in multiple states. The PPaCa sets forth new federal standards and mandates applicable to fully insured as well as self-insured plans. However, self- insured plans are exempted from some PPACA reforms that apply specifically to insurers such as medical loss ratio (mlR) standards, rating restriction rules and insurer fees. Starting July 1, 2011, any planned rate hike of 10 percent or more in the smallgroup insurance market must undergo extensive review by the state involved or by the u.S. Department of Health and Human Services (HHS), according to new PPACA rules issued by HHS – another reason to consider the self-funding alternative.

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May 2011

The Self-Insurer

modeling) to help employees make healthy lifestyle choices and reduce health care costs. insurers have worked hard to keep employers – the payers – in the dark about what’s going on in their health plans. lacking detailed plan data, employers have been forced to swallow premium increases year after year. But self-funded plan sponsors have direct access to historical plan claims data and can use new technology to see where their benefit dollars are going. Self-funded employers can access their own plan clinical and prescriptiondrug claims data, without an insurance company standing in the way. Working with their TPa, employers can use innovative technology to leverage HiPaa-compliant claims data that unveil a real-time snapshot of plan health risk. They are able to gain insight into potential costly catastrophic conditions in the workforce before

high-cost claims are filed. With this information, employers can adopt actionable plan design and employee outreach prevention campaigns to mitigate risk. Proactive employers can launch educational activities that engage employees in programs such as care management, disease management and nurse coaching. By offering employee incentives, some self-funded employers report better than 50-percent voluntary employee participation rates in targeted outreach programs – far in excess of the 30-percent national benchmark on voluntary participation. implementing this strategy has already saved many companies money. For example, a selfinsured South Carolina-based long-term care company used innovative software programs to reduce its health care costs by 19 percent. an atlanta-based self-insured radio station company employed technology and saw a fourfold increase in employee enrollment in wellness programs.

Conclusion in the post-PPaCa world, escalating costs will represent one of the most predictable outcomes of health reform for employers. as employers face higher costs and expanded requirements, many will turn to alternative risk transfer funding methods such as self-insurance to better manage their health plans and control costs. While embraced by larger firms for years, selfinsurance is becoming an increasingly popular option for mid-size and small employers as well. in the new health care marketplace, self-insurance is a viable solution to rising health care costs – whether for financially qualified employers considering self-funding as an alternative to fully insured coverage, or for employers with self-funded plans already in place. n George J. Pantos, Esq is a member of Thompson’s Editorial Advisory Board and senior advisor, WellNet Healthcare, Bethesda, Md. gpantos@ wellnet.com

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May 2011

Bench from the

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A primer on interrogatories

o particularly compelling stop loss cases have been decided since my last article, and so i have the freedom to wander a bit from the usual format of case report and comment. i decided to cover a subject near and dear to every litigator’s heart: the interrogatory.

interrogatories, if carefully designed, can be of great assistance during the discovery process in rooting out and establishing the facts of a case. an interrogatory is nothing more than a written question to the opposing party which that party must answer (or object to) in writing, within 30 days, under oath. That sounds simple enough, but since interrogatories are created by, construed by, and, in practical effect, answered by lawyers, the process can become unwieldy and unproductive. Consider, for example, a stop loss dispute between a carrier and the group over the simple issue of whether a TPa mailed checks on time such that claims were paid within the stop loss contract period. an interrogatory such as “when did you pay the claims?” seems straight forward enough, but is likely to draw objections as to the meaning of “you” and the meaning of “pay,” or an answer like “right on time.” a better interrogatory would be: On what date(s) were the following checks placed in the U.S. mail by the TPa? (list checks). For another example, consider a disclosure issue case, where the group’s representative signed the disclosure statement on 12/20/11 but failed to include certain individuals who had been diagnosed with medical conditions specified on the disclosure

May 2011

The Self-Insurer

statement form as being required to be disclosed. a typical “defense” in such a case is that such individuals had not incurred claims at the dollar level specified on the disclosure statement for disclosure. an interrogatory that asks why the group contends its disclosure obligations were limited to individuals exceeding the claims threshold will force the group to come to grips with a key problem with their case. another typical use of interrogatories is to elicit the facts underlying various legal contentions made by the other side. Suppose a group alleges that the stop loss carrier acted in “bad faith.” an interrogatory that asks the plaintiff to state the facts that support this claim will be useful in determining whether plaintiff merely claims a denial was without a

interrogatories are also commonly used to identify individuals that should be deposed, such as the name(s) of the underwriter(s) involved in a disclosure issue case or the names and roles of HR department personnel in an eligibility dispute, for example. One salient aspect of the interrogatory is that it captures the corporate knowledge of the recipient. That is, the answers must include the “knowledge available” to a corporate entity - - not just the knowledge of the person answering them. See Federal Rule of Civil Procedure 33(b)(1)(B). Otherwise, it would be an easy matter to avoid meaningful responses simply by having a low level employee answer the interrogatories. a lawyer representing a party served with interrogatories must explain the “corporate knowledge” requirement carefully to ensure that the client’s response will be complete and accurate. Fulfilling the “corporate knowledge” requirement may mean that several individuals within a given entity must participate in the formulation of answers. Finally, there is a protection in the Rule that is designed to limit the use of interrogatories to force the opposing party to undertake extensive research projects in order to answer the questions posed. This is the option to produce business records in lieu of a written answer appearing in Federal Rule 33(d). There are important constraints on the use of this option, however. First, the option to produce records in lieu of answering may only be invoked “where the burden of deriving or ascertaining the answer will be substantially the same for both parties.” in other words, the party wanting to simply produce records rather than supply a textual answer to an interrogatory must establish that it

would be as difficult for it to research and provide a response as it would be for the inquiring party to do so. Further, the answering party must specify and make available the records from which the answer may be derived, not merely effect a “document dump” on the inquiring party. like any tool in the arsenal of available discovery mechanisms, the interrogatory is subject to abuse. in such cases the party served with the interrogatories may object in lieu of

answering, and put the inquiring party to the trouble and expense of enlisting the court’s assistance in compelling an answer. in such a case the court may, under certain circumstances, make an award of monetary sanctions against a party objecting to an interrogatory without a proper basis, or against the inquiring party if its interrogatories were in fact objectionable. Fortunately, the vast majority of discovery disputes over interrogatories are resolved by agreement of counsel, without court involvement. n

reasonable basis, or whether it is alleged to have been motivated by some particular animus or ill will toward the particular group.

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The Self-Insurer

May 2011

maTHeR’S GRaPeVine

o there i was, staring at a blank computer screen and going through a bad case of writer’s block as i tried to put this months article together. Just then an incoming message from an old friend was received. it went like this.

Oh, how true i thought. in the last six months we have been deluged by the media with bad news, worse news, incomplete news and evasive news. We have had such mysteries to deal with such as Obamacare, the economy, the crisis in Japan, the wars in the middle east, lost jobs, declining savings, Social Security, retirement funds, public sector labor unions, etc. Our leaders in Washington have recently kind of worked out a deal to make a pittance of a deal on a national budget that should have been put into operation six months ago. next years budget plan battle ought to be a real scramble considering its timing with the upcoming elections in 2012.

Over five thousand years ago, Moses said to the children of Israel “Pick up your shovels, mount your asses and camels, and I will lead you to the Promised Land.” Nearly seventy five years ago when Welfare was introduced, Roosevelt said “Lay down your shovels, sit on your asses, light up a Camel:This is the Promised Land.” Today, government has stolen your shovel, taxed your asses, raised the price of Camels and mortgaged the Promised Land! 14

May 2011

The Self-Insurer

Nationalized Health Care, an idea first proposed not by Franklin Roosevelt but by Teddy Roosevelt almost a hundred years ago, is in the background for the moment but you can be sure that the war will fire up again with movements ranging from minor changes to complete destruction. as the battles rage on the most positive activity i have seen on this subject has come from the Officers and Directors of SIIA, its members and our lobbying efforts in Washington, and reported on so well by mike Ferguson at (legislative@siia.org) and at www.siia.org. The worst reporting on this subject comes from the main stream media, both right and left, which of course works into the hands of the government. From time to time these days i feel a little tired and gloomy. i brush it off by telling myself that it’s just the aging process at work. and then there are the times when i get downright mad at our political processes in this country.The individual self-serving motivations of our representatives in the House, Senate and the White House in Washington, repeated over and over again by many of our State governments, are so obvious as to make one ill.The worst of it is that a great number of americans tend to think there is nothing that they personally can do to create any change. if there was ever a time for you, our Siia membership, to step up and make yourself heard, that time is now. if you are not involved in Committee activities, get involved. Contact you legislators who are supposed to be representing you on a myriad of issues that will affect your businesses and personal lives. let them know your feelings and how they need to react. Put the pedal to the metal. Because if we don’t, this “Promised land” will one day cease to exist. n

former SiiA president & Chairman, Jim Hippler, passes Courtesy of MyHealthGuide, Source: Las Vegas Review-Journal, CDAPress.com, 4/12/2011

im Hippler, 64, of Henderson, passed away Friday, April 8, 2011. He was born Feb. 24, 1947, in Coeur D’alene, idaho, and was a resident of nevada for over 30 years.

Jim served on the Self-insurance institute of america (Siia) Board of Directors and later as its President and Chairman. “Jim helped workers comp administration and activities become more prominent and receive greater focus in Siia conferences,” said erica massey, executive Vice President, Siia. Jim grew up in Coeur d’alene where he had many great boyhood friends and experiences, including many wonderful summer days at his parents’ lake home on lake Coeur d’alene. He graduated from Coeur d’alene High School in 1965 and went on to the

university of idaho where he graduated in 1969. At the University, Jim was a member of the aTO fraternity. Jim’s business career included a number of years in the audit department of equitable life Co. and then a long career in las Vegas with the Boyd Gaming Group where he retired several years ago as the Vice President of administration. in all, Jim spent more than 30 years in nevada where he was a well respected business man and member of the community. He was active in a number of organizations over the years including the united Way and nevada Counsel of Problem Gambling.

mountains of the state. Jim is survived by his wife, ivy Hippler; son, Dan Hippler; stepdaughter, ava mims; stepson, mitchell mims; sister, Sharon (Dale) anderson; and brothers, larry (Barbara) Hippler and Jon (Cindy) Hippler. You may visit Jim’s memorial and sign his online guest book at www. yatesfuneralhomes.com. n

Jim was an avid outdoorsman and made a number of trips back to his native idaho to go camping and hunting with his brother larry in the central

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The Self-Insurer

May 2011

COST

What is the of SOlvenCY COMpliAnCe? By Michael A. Schroeder

new York WC Self insured groups

he news out of the empire State frequently includes big numbers. Sometimes that is good like a slugger’s batting average and sometimes it’s not like workers compensation claim costs. For self insured workers compensation groups, the numbers have been bad for quite awhile. The estimate of unfunded liabilities for all self funded groups is between $500 and $800 million. Big enough to cause the state’s regulators and legislators to take notice and get involved with litigation and new laws. most recently, new self insured groups have been legislated out of existence and established self insured groups or trusts must satisfy new onerous reserve requirements. it should come as no surprise that when bad numbers are released or “put up” as they say in baseball, something will change. For new York’s 18 or so self insured groups, the change will make their insurance purchase more expensive from both a loss funding and compliance perspective. The subject of this article is the consideration of the best way to fund these higher costs going forward.

How Much for Compliance? Regulators do not like unfunded claims or insolvencies no matter what kind of insurance facility made the claim payment promise. Generally, solvency oversight and management includes making sure there are funds on deposit to pay incurred and estimated claims. audits of the claims and accounting functions also work to provide the regulator with some assurance the insurer can pay claims. Traditional insurers have

May 2011

The Self-Insurer

incurred these regulatory oversight charges as part of their business for a long time. When these traditional solvency monitoring techniques are applied to the self insured trust, costs will necessarily go up. How much will the new rules cost? a good estimate would be something close to what a primary insurer charges for fronting services. after all, the primary insurer’s cost to issue coverage includes reimbursement for the expense of assuring regulatory compliance. Considering that most of the new regulatory oversight requirements being imposed upon new York self insured groups are taken right from the regulator’s handbook, the costs of claim, premium and operation audits will most likely cost the self insured groups in added administration expense as much as 7% of premium.

Self-inSurance inStitute of america, inc.

international ConferenCe MArriott toronto • June 7-9, 2011 Downtown eAton Centre • toronto, ontArio, CAnADA

Self-inSurance inStitute of america, inc.

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The Self-Insurer

May 2011

These new solvency rules will also increase the required reserve funding for the self insured groups. SiGs will no longer be able to conduct insurance business with little or no surplus reserves. Capital contributions above incurred claims that are the norm for the traditional insurer will now become the rule for SiGs as well. The $500 to $800 million shortfall created by a few poorly managed SiGs will cause the others to reduce their premium writing leverage and contribute additional capital to assure the regulators there is a cushion should the reported claim or premium numbers prove inaccurate. How much, again a look to the traditional insurer marketplace may lend some guidance. new York like most states likes to see insurers with surplus capital equal to premium writings and certainly not less than one-third of the written premium. How many of the SiGs in new York have this level of surplus capital and how much is required to be contributed under the

new solvency rules? We may find out over the next twelve months as many of the SiGs consider their existence and whether there is a better way.

is a group Captive a Better Way? One of the primary objections when the trustees or other managers of a SiG, look at a captive arrangement is the added expense resulting from policy issuance by a fronting insurer. The 7% fronting fee is an added expense for a Group Captive program that typically makes a SiG more attractive from an administrative expense perspective. The benefits of multi-state policy issuance authority and financial responsibility have not been enough for these groups to move the Group Captive structure. Will this change under the new SiG laws in new York that essentially will make regulatory compliance akin to being a full-fledged admitted insurer? Some certainly believe so after

reviewing the new rules of engagement in new York for existing self insured trusts. The Group Captive offers most of the same benefits of a SIG along with a built in compliance program in the form of a regulated policy issuing company or front. Risk sharing, customized claims and loss control, experience underwriting and premium savings are all available from a Group Captive program. An added benefit to the Group Captive approach is capital and surplus demands that are more flexible and attractive than the stateâ&#x20AC;&#x2122;s regulatory requirements of one to one or even three to one. Mix this benefit with the complexity and cost of claim, premium and operational audits and the 7% fronting fee looks like a bargain compared to the new regulatory environment for SiGs in new York. Only time will tell as the new York laws are effective in the coming new year, but our estimate is that many of

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May 2011

The Self-Insurer

the SIgs will go away or move into an arrangement like the group Captive. Why not, they would maintain the benefits of self insurance and be assured of satisfying the regulatory requirements at a fixed cost they probably cannot equal on their own. n Mike Schroeder is the Founder and President of the Roundstone organization. Mike offers twenty years of insurance industry management experience with responsibilities in the captive market, self-insurance pools and trusts, publicly held insurance companies and the regulatory environment. Roundstone Management, Ltd. (“Roundstone”) based in Westlake, Ohio is an insurance organization focused on the development, underwriting and servicing of alternative risk products, including captives, rent-a-captives and specialty insurance programs. Roundstone offers intermediaries and buyers an expertise in the captive marketplace with an unbundled services approach utilizing the facilities of Roundstone Insurance, Ltd., a class III Bermuda reinsurer registered as a segregated account company. Mr. Schroeder received his Juris Doctorate from The Ohio State University College of Law, and received his Bachelor of Science degree in Business Management from Tulane University. Mike is also a member of the Workers’ Compensation Committee of SIIA.

SIIA New Members REgulAR MEMBERS Voting Representative/ Company Name Cecil Witt, Jr., President, Alternative Risk Services, Kansas City, MO Debi Hardwick, President/CEO, Coastal TPA, Inc. Salinas, CA lisa Marecki, Supervising Managing Director, Discover Re, A Travelers Co. Farmington, CT Victor Castellanos, Sr. VP & Chief Marketing Officer, Insurance Administrative Solutions, Orlando, Fl

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The Self-Insurer

May 2011

Siia Carries

Self-fuNded MeSSAge to

Bangkok at the invitation of the Thai Government

May 2011

The Self-Insurer

uring recent years international health care and medical tourism have become

increasingly important to SIIA members. But the u.S. self-insurance industry is equally important to countries that provide international health care. Accordingly, the Royal Thai Embassy invited SIIA and others industry leaders in global medical, to provide a briefing on how Thailand can market medical services to self-insured health care plans. The SIIA delegation visited Bangkok and nearby locations in a

COO of Companion global Healthcare shared his expertise of the medical

mutual exchange of views that will

tourism industry and how Companion global Healthcare is facilitating medical

result in some of the information

tourism through US employer health insurance plans. His presentation included

SIIA members will receive in medical

ideas of how to mitigate any negative perceptions of medical tourism for the

tourism seminars as part of the

US patient and the development of insurance products that address medical

International Track at the national

travel risks.

Educational Conference & Expo this fall. Mr. Songsak Saicheua, Deputy Director-general, Department of American and South Pacific Affairs, Ministry of Foreign Affairs, Thailand, gave opening remarks and the introduction to the United States Delegation. He explained the purpose of the meeting was to build a stronger relationship with the United States in regards to their medical tourism industry in Thailand and to gain an understanding of the US healthcare market after healthcare reform. Ms. Erica Massey, Executive Vice

Mr. Armando Baez, Regional Vice President of global Benefits group, followed with a discussion of the impact of the expat industry and the opportunities to focus on Asian countries to expand the medical tourism market in Thailand. Dr. Paul Chang, Managing Director of the Joint Commission International (JCI), Asia Pacific Office, presented the trends of standardizing uS hospitals and other countries as well US patients’ needs and insurance companies’ needs towards international hospitals. The invited delegation was escorted to several medical facilities which cater to the International patient to learn about these medical facilities provided which included, Rutin Eye Hospital, Bangkok International Dental Center, Bangkok International Hospital, and Bumrungrad International Hospital. Medical tourism will be featured in two sessions at the National Conference & Expo October 9-12 at the J.W. Marriott Desert Ridge Resort in Phoenix, including: “Self-Insured Employer Says yes to Medical Travel Option” by Thomas

President of the Self-Insurance

Showalter, Human Resources Director of Chenega Corporation. He will relate

Institute of America, Inc. (SIIA)

how the firm covering 3,000 plan participants evaluated the medical travel option

presented an overview of the

and explain why they ultimately decided to incorporate a medical travel option

association, self-insurance and a

into their health plan.

briefing on uS healthcare reform and

“A Primer on global Health Care” by David Boucher who participated in the

the opportunities and challenges for

Thailand tour. He will provide a general overview of global health care and how

medical tourism in Thailand from a uS

U.S.-based employers can utilize this strategy to better contain health care costs

perspective.

while providing expanded treatment options for plan participants.

Mr. David Boucher, President &

Information about the conference is available at www.siia.org. n

The Self-Insurer

May 2011

ART GAllERY By Dick Goff

An Approach to Retiree Benefits Risk

he old joke is that if I had known I was going to live so long I would have taken better care of myself. That’s the state of retirement health care and pensions today – if the government had known we were going to live so long it would have made different rules. When the Social Security Act was passed in 1935 the average life expectancy was about 62 years, so risking retirement benefits at 65 wasn’t a bad bet. The only problem was not having an escalator clause that by now would have pushed retirement age to 75 or 80. We would have fewer golfers and more experienced employees. Now, of course, the major risk management problem facing Corporate America is providing retirement benefits. Unfunded liabilities for pensions and retiree health care now number in the hundreds of billions of dollars. For SIIA members this problem may serve as your advance homework before attending the national conference in Phoenix next October. The keynote speaker will be Roger Lowenstein, author of (take a deep breath before you read this) While America Aged – How Pension Debts Ruined General Motors, Stopped the NYC Subway, Bankrupted San Diego, and Loom as the Next Financial Crisis. A big subject apparently requires a long title. I don’t want to steal any of Roger’s thunder, but I’ll offer an approach to solving the retiree support crisis right now in one word: “captives.” Companies are already establishing captive insurance companies as the funding mechanism for retiree costs on a tax-deductible basis. While tax-deductibility doesn’t occur for self-funded health plans until claims are paid, pretax money can be invested in a captive to hopefully grow in some reasonable approximation of future liabilities. Self-insured organizations from the largest down to the middle market may now consider establishing captives to insure retirees’ benefits even before addressing the funding of ERISA plans covering their current employees and dependents. Alert TPAs and other professional service providers may think of this combination as a strategic risk management package. Establishing captives to cover employee benefits began slowly in the U.S. The Department of Labor, which has approval over ERISA plans, seemed suspicious of captives for a time but warmed up to the concept as more U.S. states became captive domiciles. Now the DOL operates its fast-track application process known as EXPRO to provide exemptions from prohibited transactions in about three months. The catch is that applying companies must demonstrate that at least two similar companies must already have been approved. Largely, the DOL relies on approval and oversight of the captive’s licensing authority, the state captive insurance regulator. So a captive’s funding arrangements must meet the requirements of both its state of domicile regulator and the DOl. Methods of setting up benefits captives have grown more complex in recent years, stemming from their increasing reliance on employee contributions. With ever-spiraling health care costs, plans have migrated from being totally supported by employers to including a mix of employee contributions in various proportions.

May 2011

The Self-Insurer

There is a widespread perception among some consultants and employers that a Voluntary Employees’ Beneficiary Association (VEBA) trust must be established as the vessel that holds both employer and employee contributions. This is not true but perception in many cases has become the reality. Not only does the method become far more complicated than necessary, it also penalizes employers drastically. Once employer money is comingled with employee contributions and locked up in a VEBA trust it is gone for good, not available to the employer at any time in the future. Rather a captive may follow a strategy of identification and segregation: Identify whose money is being held in trust and segregate employee contributions from employer contributions for greater corporate flexibility in managing cash flow. The important concept is that without tying up its money in a VEBA trust, the employer’s money will accrue to the employer’s benefit. I believe that some major benefits captives have cost their employer-owners millions of dollars in money that has been unnecessarily locked up within a VEBA trust and lost to their use.This would imply that many more companies would be setting up employee benefits captives if they realize they can still retain the use of their cash. Setting up captives whose assets will accrue value through future years will help any organizations support its retiree benefits obligations, and also help solve a national problem. 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

May 2011

PPACA, HIPAA AND FEDERAl HEAlTH BENEFIT MANDATES:

Practical

Q&A

By John Hickman, Esq.

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

May 2011

The Self-Insurer

Department of Labor Extends Enforcement Grace Period for Certain Internal Claims and Appeals Requirements In guidance issued on March 18, 2010, the Department of Labor: • extended the enforcement grace period previously provided for certain of the new requirements relating to internal claims and appeals that are imposed on group health plans and health insurers under the Affordable Care Act (ACA), and • relaxed in some cases the prior requirement that plans and insurers must be working in good faith to implement the new requirements in order to take advantage of the grace period.

n providing the relief, the Departments of labor (DOl), Treasury and Health and Human Services (HHS) (collectively, the “Agencies”) signaled their intention to make changes to certain of the new requirements, including the requirement that notices be provided in a culturally and linguistically appropriate manner, the accelerated time frame for making urgent care decisions and the provision that failure by a plan or insurer to strictly comply with the new requirements is deemed to be an exhaustion of administrative remedies. Changes to these requirements will be made in a modification to previously issued intern final regulations. While the precise changes are yet to be seen, the new guidance indicates that the changes

will respond to the concerns raised by plan sponsors, insurers and others and provide additional relief from the previously issued regulations. The extension is provided in Department of labor Technical Release 2011-01 (TR 2011-01), which modifies prior relief set to expire July 1, 2011, under Technical Release 2010-02 (TR 2010-02). No relief is provided with respect to the external review requirements; however, the grace period does apply to the requirement that notices to claimants include a description of available external review processes and how to initiate an appeal. TR 2011-01 notes that the agencies have received numerous comments regarding the scope of the federal external review process. This issue is still under review by the agencies and may be addressed in future guidance.

health plans, on health insurance issuers in the group and individual markets, as well as plans. The Interim Regulations also impose seven new standards for internal claims and appeals processes. On September 20, 2010, the Department of Labor issued TR 201002, which established an enforcement grace period for compliance with certain internal claims and appeals standards until July 1, 2011. The

Details of the relief are provided below.

New internal claims and appeals and external review requirements were added by ACA to Section 2719 of the Public Health Service Act (PHSA), and are incorporated by reference into the group health plan provisions of ERISA and the Internal Revenue Code (the “Code”). The Agencies jointly issued interim final regulations (“Interim Regulations”) implementing the new internal appeals and external claim review requirements in July 2010. 75 Fed Reg 43330 (July 23, 2010). As noted above, these new requirements do not apply to grandfathered plans.

The recent extension of the grace

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The new internal appeals and external review requirements do not apply to grandfathered plans.

Background

TR provided that, during the nonenforcement period, the Agencies would not take any enforcement action against a group health plan that was working in good faith to implement the internal appeals standards but did not yet have them in place. In addition, HHS would encourage states to apply a similar grace period with respect to insurers.

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period in TR 2011-01 was prompted as a result of comments received regarding the Interim Regulations and provides relief in order to avoid the enforcement of standards that the Agencies intend to modify in the near future. As a result of the extension, rolling effective dates apply with respect to enforcement of the seven new standards imposed by the Interim Regulations. These effective dates are discussed below.

• Expansion of the definition of adverse benefit determination. The definition of “adverse benefit determination” eligible for internal claims and appeals is broadened to include rescissions of coverage (as defined by new PHSA Section 2712 and applicable regulations), regardless of whether the rescission has an adverse effect on any particular benefit at the time.

Enforcement Period Timing

• Full and fair review. Plans and insurers must provide the claimant, free of charge, with any new additional evidence relied upon, considered or generated by the group health plan or issuer in connection with the claim, as well as any new or additional rationale for a denial at the internal appeals stage, and a reasonable opportunity for the claimant to respond to such new evidence or rationale.

The following provides a summary of enforcement period timing for the seven new standards imposed under the Interim Regulations under TR 2011-01.

• Avoidance of conflicts of interest. Generally, a plan or insurer must IR WY VI X lEX EPPGPEM QW ERH ETTIE PWEVI EHN YHM GEX IH M R E QE RRIV HIWM KRIH X S ensure the independence or impartiality of the persons involved in making the decision.

Plan Years Beginning on or after September 23, 2010 No enforcement grace period was

provided with respect to the following new requirements, which are effective for plan/policy years beginning on or after September 23, 2010:

May 2011

The Self-Insurer

Example: A group health plan cannot provide bonuses based on the number of denials by a claims adjudicator. Similarly, a group health plan cannot contract with a medical expert based on the expert’s reputation for outcomes in contested cases (rather than based on the expert’s professional qualifications).

First Day of the First Plan Year Beginning on or after July 1, 2011 (January 1, 2012, for calendar-year plans) TR 2011-01 extends the enforcement grace period for the expanded content requirements for notices of adverse benefit determinations. In particular, the grace period for following requirements is extended from July 1, 2011, as under TR 2010-02, to the first plan year beginning on or after July 1, 2011. Thus, there will be a rolling effective date for these requirements based on the plan year. It appears that, as under TR 2010-02, the enforcement grace period does not apply unless the plan or issuer is acting in good faith to come into compliance.

• A description of the internal and external appeals review processes, including information regarding how to initiate an appeal. • The Agencies have previously issued guidance relating to the federal external review process, including TR 2010-02, frequently asked questions and model notices of adverse benefit determinations. All of these are available on the DOL website at http://www.dol.gov/ebsa/healthreform. 2S X I X lEX X lI QS HIP RSX M GIWHS RSX EHHVIWW X lI M WWY I SJ X lI WG STI SJ X lI federal external review process, mentioned above.

Notices to claimants to provide additional content. • Disclosure of information sufficient to identify the claim involved, including the date of the service, the health care provider and the claim amount (note, as discussed below, the requirement to automatically disclose diagnosis codes and treatment codes, and their meanings, is deferred until plan years beginning on or after January 1, 2012). • In the case of an internal adverse benefit determination, the reason or reasons for the determination must include the denial code (and its corresponding meaning), as well as a description of the standard, if any, that was used in denying the claim. In the case of a notice of final internal adverse benefit determination, the description of the reason for denial must also include a discussion of the decision.

• Insured plans are generally subject to the external review process applicable under state law. The federally operated external review process is in effect for just three states and four territories: Alabama, Mississippi, Nebraska, U.S. Virgin Islands, Northern Mariana Islands, Guam and American Samoa. HHS has issued technical guidance on the federal review process applicable to insured plans in these jurisdictions, which may be found at http://cciio.cms. gov/resources/files/interim_appeals_guidance.pdf.

Plan Years Beginning on or after January 1, 2012: The enforcement grace period with respect to the following requirements is extended until plan years beginning on or after January 1, 2012, to give the Agencies time to publish new regulations. Further, plans and issuers are not required to work in good faith to implement these requirements as set forth in the Interim Regulations in order for the grace period to apply. Thus, it is expected that further regulations will modify these requirements substantially and will not go into effect as presently formulated in the Interim Regulation. • Reduction in time frame for urgent claims. The Interim Regulations provide that a group health plan or insurer must notify a claimant of an urgent care benefit determination as soon as possible, taking into account the medical exigencies—but not later than 24 hours after the receipt of the claim by the group health plan. • Requirement to provide notices in a culturally and linguistically appropriate manner. The Interim Regulations provide that a group health plan or issuer

The Self-Insurer

May 2011

must provide adverse benefit determination notices in a culturally and linguistically appropriate manner. If the plan covers less than 100 participants at the beginning of the plan year, the plan is considered to comply with this requirement if it provides notices, upon request, in a language in which 25 percent of more of its participants are literate (only in the same nonEnglish language). If the plan covers 100 or more participants at the beginning of the plan year, the plan is considered to comply with the requirement if it provides the notices, upon request, in a language in which the lesser of 500 or more participants or 10 percent of all participants are literate (only in the same non-English language). Once a participant

May 2011

The Self-Insurer

requests a notice in an applicable non-English language, all further notices must be provided in that language. • Strict Adherence. The Interim Regulations provide that if a group health plan or issuer fails to strictly adhere to all of the internal claims and appeals process requirements, the claimant is deemed to have exhausted the internal claims and appeals process regardless of whether the group health plan or issuer asserts that it substantially complied with these requirements or that any procedural error committed was inconsequential. Upon a group health plan’s failure to strictly adhere to the internal claims and appeals process, the claimant may initiate an external review and pursue any available remedies

under ERISA or state law. • Automatic Disclosure of Diagnosis and Treatment Codes. The Interim Regulations provide that notices of adverse benefit determinations must include diagnosis and treatment codes (and the meanings of the codes). TR 2011-01 notes, however, that the existing DOl claims regulations, which are applicable under the Interim Regulations to non-ERISA plans and issuers, as well as ERISA plans, generally require such information to be provided upon request. A request for such codes is not, in the Agencies’ view, to be considered to be a request for (and therefore trigger the start of) an internal appeal. n

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The Self-Insurer

May 2011

SIIA lEGISlATIVE & POlITICAl NEWS BRIEFS

t’s been a busy few months on the legislative and political front for SIIA. Provided in the space below are a few stories of particular note.

SIIA’s Political Action Committee

The prizes just keep on coming. Just last month in Washington, DC, SIIA member Horace Garfield won a free stay at a luxury vacation villa in the British Virgin Islands as part of the association’s political action committee (PAC) raffle promotion. And at SIIA’s TPA & MGU/Excess Insurer Executive Forum in Palm Desert, the PAC raffle winner was Liz Mariner, who took home a new iPad 2. This latest raffle generated nearly $7,000 in total contributions, bringing the total amount raised so far this year to more than $30,000! SIIA uses PAC funds to provide financial support to members of Congress and congressional candidates who support the self-insurance/alternative risk transfer industry, so it is a very important association initiative. Watch for information on additional SIIA PAC raffle events this year. In the meantime, you can access additional information about the PAC, including contributions forms, on-line at www.siia.org. SIIA hosted an exclusive fund-raising luncheon event for U.S. Senator Jon Tester (D-MT). Held at the Monacle Restaurant in Washington, DC, the event provided SIIA the opportunity to show its appreciation for Senator Tester’s interest in sponsoring legislation to modernize the liability Risk Retention Act (LRRA), which is one of the association’s legislative priorities. SIIA was successful in raising nearly $12,000 in political campaign contributions for Senator Tester, including a contribution from the association’s PAC. Individual contributions were provided by the following members: • Keith Fawcett, Brentwood Services, Inc. • Dick Goff, The Taft Companies, ltd. • John Jones, Moulton Bellingham PC • Jim LeRoy, Meadowbrook Insurance Group • larry Mirel, Wiley Rein, llP • Don McCully, Roundstone Insurance • Dave Pike, Preferred Contractors Insurance Company, RRG • Phil Salvagio, Preferred Contractors Insurance Company, RRG • Glenn Saslow, Saslow Lufkin & Buggy, LLP

This is the second successful PAC event that SIIA has hosted this year. last month, the association held a breakfast event for Rep. John Kline (R-MN) in Washington, DC, during which the association presented the congressman with more than $11,000 in campaign contributions, including a check from SIIA’s PAC.

May 2011

The Self-Insurer

“These events demonstrate that SIIA is serious about increasing its political influence in Washington, DC,” said SIIA Chief Operating Officer Mike Ferguson. “SIIA’s ability to financially support members of Congress who appreciate the self-insurance/ alternative risk transfer industry is critical to our lobbying efforts.” According to Ferguson, the association anticipates hosting additional PAC events for other key members of Congress over the next several months.

PPACA Law Update: Free Choice Vouchers to be Repealed As part of the spending bill just agreed to that will fund the government for the remainder of the Fiscal Year, the Free Choice Vouchers Provision will be struck from the PPACA law. Since enactment, SIIA has lobbied for this provision to be repealed and hails this development as a victory for self-insured health plans. This provision would have allowed employees to have left an employer’s plan to enter the exchange and forced the employer to pay through a voucher for them to do so.The voucher would have

been equal to what the employer would have paid had the employee remained in the employer’s plan.The provision also would have allowed for an employee to keep any leftover amount of the voucher not spent on the premiums of an exchange plan.The population most likely to have taken advantage of the rebate would have been the younger and healthier workers as they are permitted to purchase the low-cost catastrophic plan.The exiting from the employer plan by this population would have increased the risk of the employer’s pool, as well as decrease its economies of scale to negotiate with providers - all of which would have led to higher costs for those remaining in the plan.

Stay Informed on the PPACA SIIA’s Government Relations Staff is continually updating SIIA’s PPACA In-Depth Analysis as regulations and guidance are issued by Federal agencies and Congress. Please continue to visit our website to review the most up-to-date information - www.siia.org. n

Integrating medical and business solutions for your organization CPR Risk Management Services include:  Case Management  Utilization Management  Disease Management  Medical Underwriting/Cost Projections  Claims Management  Medical Review  Hospital Bill Audits CPR Risk Management, Inc. services a wide spectrum of clients ranging from employer groups to reinsurers, including stop loss products and first dollar products. We provide quality medical management services, focusing on best practices, superior turn-around time and quality customer service. For more information call or visit our website. Mary Pozuelo RN, LHRM, CMS Chief Executive Officer 1-727-565-2992

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The Self-Insurer

May 2011

InSIdER INFORMATION PHX Announces Addition of Patrick Crites - SVP, West Coast Sales and Vendor Agreement With LAN Doctors, Inc. BEDMINSTER, NJ – PHX, a leading provider of healthcare cost management solutions, is pleased to announce that Patrick Crites has joined the company as Senior Vice President of West Coast Sales. In this new position, Patrick and his team will be responsible for building demand for the innovative suite of PHX solutions, which span the integrated cost management market place. The PHX solutions offer a full complement of in-network, out of network and post payment solutions. PHX also announces that it has entered into a vendor agreement with LAN Doctors, Inc. to provide PHX with a wide variety of IT support and disaster recovery services. Under the terms of the agreement, lAN Doctors, Inc. will provide a 24/7 data monitoring environment and a disaster recovery system that employs triple redundancies ensuring an ‘always-on’ business continuance capability for PHX and its customers.

About PHX PHX delivers advanced cost management solutions for health plans. The company combines claim processing automation with professional services to deliver a timely, centralized approach to cost management. This results in a significant reduction in errors and a significant increase in healthcare cost savings. PHX services include data analytics, benchmarking, predictive modeling, PPO network management, clinical bill review and audit, out-of-network negotiations and claims editing. The firm’s solutions are utilized by industry leading insurance companies, Taft-

May 2011

The Self-Insurer

Hartley Funds, Health Maintenance Organizations (HMOs) and Third Party Administrators (TPAs). For the second consecutive year, NJBIZ recognized PHX as one of the fastest growing companies in New Jersey. For more information, please visit www.phxonline.com or contact Clara Pachomski at (888)311-3505

Benefit Administrative Systems Opens Nashville, TN Office and Names Justin Forton as Lead Sales Executive HOMEWOOD, Il – Benefit Administrative Systems, llC (BAS) is pleased to announce the opening of BAS’ Nashville Tennessee office. The office will be a primary sales office, targeting the Nashville and middle Tennessee market. Similarly, in 2003, BAS opened the St. Louis office in Fairview Heights, IL in conjunction with the merger of BAS and Spectrum RMS. The Fairview Office—a full service facility—is currently staffed with 20 sales, marketing and operational staff. BAS named Justin Forton as lead Sales Executive to head up the Nashville office. Justin has over 10 years of experience in the marketing of life and health insurance products and working with brokers in the middle Tennessee area. His work has primarily been with employee benefit programs. “Justin brings a unique set of relationships and experiences to BAS which will greatly enhance our position in the Tennessee benefits market”, stated Marty Joseph, BAS President. Justin will continue forging strong relationships with the Tennessee broker community, introducing them to the BAS suite of products and services.

About BAS BAS is a privately held company

founded in 1983. It provides self-funded healthcare plans, claims administration, and innovative, low cost solutions. These solutions are achieved through integrated tools that engage the employee population and improve their health profile. BAS administers the employee benefit programs for more than 350 employer groups covering 50,000 employees. These employer groups range in size from 25 to 5,000 employees. With offices located in the suburbs of Chicago, St. Louis, and now Nashville, BAS offers flexibility, timeliness, and control to its diverse client base of corporate, nonprofit, and government employers. In today’s changing world of healthcare, our goal is to design and manage employee benefit plans that are not only cost effective for the employer but meet the ever changing needs of the employee and his/her family. For more information, please contact Diane Geiger, Director of Marketing Services, at (708) 647-3408.

Sedgwick CMS Launches Healthcare Risk Management and Patient Safety Services Division Industry Leader Michelle Hoppes Selected to Lead New Practice MEMPHIS,TN – Sedgwick Claims Management Services, Inc. announced the establishment of its risk management and patient safety consultation practice to serve hospitals, physician groups, healthcare systems, insurance companies, and other healthcare organizations. Leading the company’s efforts in this area is industry veteran Michelle Hoppes. Sedgwick CMS’s healthcare risk management practice is designed to create high reliability solutions for the risk management, quality, and patient safety challenges facing healthcare organizations today. Using proactive risk assessments, data analytics, compliance studies, and loss

control metrics, Sedgwick CMS specialists will partner with clients in the healthcare arena to improve their performance and help them prevent medical errors and omissions that can result in patient injuries and financial losses related to medical malpractice claims and compliance issues. Appointed senior vice president and national director of healthcare risk management and patient safety of Sedgwick CMS, Hoppes brings to her new role more than 30 years of experience in healthcare, risk management, patient safety, and performance improvement. She specializes in providing customized and innovative consulting through an enterprise risk management approach with a primary focus on clinical risk management. To learn more about Sedgwick CMS’s healthcare risk management and patient safety services, contact Michelle Hoppes at 704-995-2253, michelle.hoppes@

sedgwickcms.com, or Tim Over at 312356-0813, tim.over@sedgwickcms.com.

One Call Medical Promotes Senior Management Team to Drive Continued Growth, Expansion, and Market-Leading Specialty Services PARSIPPANY, NJ – One Call Medical (OCM), the nation’s leading provider of specialty services to insurance payers, today announced six senior-level promotions to drive the company’s continued growth, expansion, and diversification. The executives and their new positions are: • Steven Davis, previously chief counsel at STOPS, assumes the new position of chief counsel for One Call Medical. In this role, Davis will provide legal direction for the company, develop a regulatory and

compliance strategy, and manage arrangements with external legal counsel as needed. • Sharon Ciavatta, previously controller, has been promoted to senior vice president of finance and controller. Ciavatta will perform enterprise-wide financial management functions across OCM and its subsidiaries. She will lead the financial integration of the recently acquired STOPS and Express Dental Care (EDC) subsidiaries, as well as perform due diligence for future acquisitions. • Audrey Fischer, previously director of financial analysis and compliance, has been promoted to vice president of financial analysis and reporting. With her experience in forecasting and planning, Fischer will perform contribution margin analysis for OCM and its subsidiaries, as well as financial reporting to enable OCM to

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The Self-Insurer

May 2011

maintain financial excellence through sound business decisions. • Jim Sullivan, previously director of network operations, has been promoted to vice president of network and data services. In this capacity, Sullivan will oversee enterprise-wide IT infrastructure, networking, and data transmissions for OCM and its subsidiaries. Sullivan will also facilitate companywide best practices in regards to information security, disaster recovery, and EDI transactions. • Bill Colacurcio, previously director of marketing and sales support, has been promoted to vice president of marketing and sales support. In this capacity, Colacurcio will continue to define the company’s brand strategy and position in the marketplace to become synonymous with excellent service, quality, and value. He is also charged with establishing an

enterprise-wide communications plan and expanding the company’s public relations program to include recent acquisitions. • Chris Toepke, previously director of product development and management, has been promoted to vice president of product development and management. Toepke will focus on developing new products and services that meet client needs in the workers’ compensation market. He is also tasked with developing strategic plans to successfully launch and drive adoption of these solutions.

About One Call Medical, Inc. One Call Medical (OCM), the nation’s leading provider of specialty services to the insurance industry, has a “smart partner” approach in delivering its suite of easy-to-use, efficient, and cost-effective ancillary services that help claims professionals to achieve superior

outcomes. OCM enables injured claimants and insurance payers to get the best quality and value for diagnostic scans and electrodiagnostic testing—the building blocks for successful treatment plans and optimal return-to-work results.Through its STOPS subsidiary, the company provides transportation and language services, required by today’s increasingly diverse claimant population; and through its Express Dental Care subsidiary, OCM assists with all aspects of the dental claims management process, as well as handling referrals to hearing, eye, and other hard-to-find specialty providers. OCM’s customers include the nation’s leading insurance companies, third-party administrators, payers, and self-insured employers. More information about One Call Medical can be found at www. onecallmedical.com, or by contacting Bill Colacurcio at 973-316-3718 or Bill_colacurcio@onecallmedical.com. n

VOLUNTARY BENEFITS. DELIVERED with EASE. These days, more and more businesses are using voluntary options to maximize their employee benefit dollars. With Principal Voluntary Benefits EdgeSM, we make it easy to offer the benefits employees want and need, at a price they can afford. Our flexible products can be tailored to your business. Plus, we offer personalized, one-on-one employee education and online enrollment to help take the load off you and your staff. Which means, when it comes to voluntary benefits, we deliver every time.

VISIT principal.com or CALL 800-654-4278, ext. 44116, FOR MORE INFORMATION. ©2011 Insurance products from the Principal Financial Group® are issued by Principal National Life Insurance Company (except in New York) and Principal Life Insurance Company. Securities offered through Princor Financial Services Corporation, 800/247-1737, member SIPC. Principal National, Principal Life, and Princor® are members of the Principal Financial Group, Des Moines, IA 50392. AD2023 | GP59709 02/2011

May 2011

The Self-Insurer

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The Self-Insurer

May 2011

CHAIRWOMAN’S REPORT Freda Bacon

“When we recall the past, we usually find that it is the simplest things – not the great occasions – that in retrospect give off the greatest glow of happiness.” Bob Hope was once quoted,

like to think that he must have made this revelation while playing golf or sitting on his patio in beautiful Palm Springs, the site of SIIA’s recent TPA/MGU Conference. Over 450 attendees were on hand to hear a variety of speakers give the latest developments in the self-funding industry. Networking opportunities were available in the exhibit hall during the conference and also at a variety of locations throughout the property. Thank you to all the sponsors who made the event so special. I want to give a special thanks to Heidi Svendsen with OptumHealth who serves as Chairwoman of the Self-Insurance Education Foundation, and who put together a fabulous golf outing on the first day to raise money for the Foundation. An absolutely great time was had by all. A huge round of applause is to be given to Beata Madey of HM Insurance Group as Chairwoman of the Health Care Committee and to all of the committee members for their hard work in putting together an outstanding educational program.

May 2011

The Self-Insurer

A new publication, Understanding Self-Insured Group Health Plans, was unveiled during the conference. This publication is a comprehensive look at the self-funding process, including success stories of self-funded employers. On behalf of the Board of Directors, I want to thank all of the contributors to this project. The staff of SIIA, as always, was working behind the scenes to make sure everyone was taken care of and the event functions ran smoothly. Now, we are off to Charleston for the Worker’s Compensation Executive Forum. Once again, we will gather together to hear industry leaders provide their insight into the self-funding worker’s compensation arena. As Bob Hope would say, “Thanks for the memories”! God Bless Our Troops,

Freda Bacon, SIIA Chairwoman

The Self-Insurer

May 2011

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