Self-Insurer Nov 2010 by SIPC

November 2010

Would Your Captive

BENEFIT from an

INDEPENDENT DIRECTOR?

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

ABigKahuna Sun Life is one of the nation’s leading providers of medical stop-loss. We understand that large claims happen. Our No New Lasers at Renewal product comes with a Renewal Rate Cap. We don’t impose new or higher deductibles. And we pool renewal rates for price stability. Think of it as catastrophic claim forgiveness. For more details about how we can make things easier for employers, contact your local Sun Life stop-loss specialist or call 866-683-6334.

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

Group insurance policies are underwritten by Sun Life Assurance Company of Canada (Wellesley Hills, MA) in all states, except New York, under Policy Form Series 93P-LH, 98P-ADD, 02P-STD TDBPolicy-2006, 02-SL, 07-SL, and 01C-LH-PT. In New York, group insurance policies are underwritten by Sun Life Insurance and Annuity Company of New York (New York, NY) under Policy Form Series 93P-LH-NY, 06P-NYDBL, 02P-NYSTD, 98P-ADD-NY, 02-NYSL, 07-NYSL, and 01NYC-LH-PT. Group insurance policies are underwritten by Sun Life and Health Insurance Company (U.S.) (Wellesley Hills, MA) in all states under Policy Forms Series GP-A and GP-D (or appropriate state edition). Product offerings may not be available in all states and may vary depending on state laws and regulations. ©2010 Sun Life Assurance Company of Canada, Wellesley Hills, MA 02481. All rights reserved. Sun Life Financial and the globe symbol are registered trademarks of Sun Life Assurance Company of Canada. Visit us at www.sunlife.com/us. SLPC 22507 10/10 (exp. 10/12)

SIIA OFFICERS Chairman of the Board* Armando Baez, Vice President Global Benefits Group Foothill Ranch, CA President* Freda Bacon, Administrator Alabama Self-Insured WC Fund Birmingham, AL Vice President Operations* Alex Giordano, Executive Vice President / Chief Marketing Officer Starr Global Accident & Health Greenwich, CT

November 2010

FEATURES

Les Boughner, Executive Vice President & Managing Director Willis North American Captive and Consulting Practice Burlington, VT

20 PPACA, HIPAA and Federal Health

Benefit Mandates: Practical Q&A

Would Your Captive Benefit from an Independent Director?

22 From the Desk of Erica Massey Greetings!

25 ART Gallery:

John Jones, Partner Moulton Bellingham PC Billings, MT

Steven J. Link, Executive Vice President Midwest Employers Casualty Company Chesterfield, MO

REPORTS Claim Procedures on TPAs, Part II

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

Daniel Lebish, President & CEO HM Insurance Group Pittsburgh, PA

Volume 27

8 From the Bench: Impact of New

Vice President Finance/CFO/ Corporate Secretary* Robert Repke, President Global Medical Conexions, Inc. San Francisco, CA

SIIA DIRECTORS

Taking the Sting Out of Obamacare

Top Industry Leaders Converge on SIIA’s 30th Anniversary Conference

26 Mather’s Grapevine

DEPARTMENTS

SIIA COMMITTEE CHAIRS

2 President’s Message: My Kind of Town

Chairman, Alternative Risk Transfer Committee Kevin M. Doherty, Partner Burr & Forman LLP, Nashville, TN

28 Chairman’s Report: In Chinese it’s “Xièxie”

Chairman, Government Relations Committee Jay Ritchie, Senior Vice President HCC Life Insurance Co. Kennesaw, GA Chairwoman, Health Care Committee Beata A. Madey, Senior Vice President, Underwriting HM Insurance Group Pittsburgh, PA Chairman, International Committee Liz Mariner, Executive Vice President Re-Solutions Intermediaries, LLC Minneapolis, MN Chairman, Workers’ Compensation Committee Chris Mason, Chief Operating Officer USATPA, Inc., Syracuse, NY

November 2010 The Self-Insurer (ISSN 10913815) is published monthly by

Self-Insurers’ Publishing Corp. (SIPC), PO. Periodical Postage Rates paid at Tustin, California and at additional mailing offices. 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: n International/national conferences and industry forums which provide educational opportunities, with substantial discounts on the registration fees offered to SIIA members. n Distributed monthly, The Self-Insurer, features useful technical articles as well as updates on topical issues of importance to the self-insurance industry. n 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

November 2010

PRESIDENT’S MESSAGE

ne of the greatest coaches of all times, Vince Lombardi, once said, “The achievements of an organization are a result of the combined efforts of each individual”. How true. SIIA’s National Conference held last month in Chicago is a testimony to 30 years of success. The overwhelming attendance at this year’s event proves that the commitment of our members and their belief in SIIA’s mission statement to preserve and protect self-funding both domestically and abroad is an investment not only in the past triumphs that have been achieved, but the future as well. Over 1,600 attendees had the opportunity to hear industry experts in over 50 educational sessions on health care, alternative risk transfer, worker’s compensation and international self-funding strategies. Of the 1,600 in attendance, 29% were first-time attendees to the National Conference, and over the past year we have seen a 39% increase in new members. New this year were sessions geared for the health care brokerage community. Employer representatives shared their success stories through case-study style presentations and senior executives from many of the industry’s largest service providers shared their perspective on selfinsurance and ART programs. And,

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the worker’s compensation and international education tracks had record attendance. SIIA’s legislative staff brought us up to date on the latest health care reform issues and offered us some further insight into where we are heading with this monumental legislation and regulation. Over 150 exhibitors were on hand throughout the conference to meet with attendees and I must say that the exhibit hall was absolutely full! It gave a whole new meaning to the word “networking” with so many individuals being in one venue, sharing the same common interest of self-insurance. My thanks to all of our exhibitors and sponsors for their continued support of SIIA. I hope all of you who attended came away with the same satisfaction that I felt. I was able to learn, participate, meet new people, share a laugh with familiar faces, and come away with the knowledge that as an organization, the individuals are who make SIIA great. God Bless our Troops,

Freda Bacon President

“The achievements of an organization are a result of the combined efforts of each individual.”

The Self-Insurer

November 2010

Would Your Captive

BENEFIT from an

INDEPENDENT DIRECTOR? By John Weitzel

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November 2010

solely on behalf of a parent company and its affiliates or does it represent groups of insureds? All other things equal, a risk retention group or an

These rules are now in place for insurers or groups of insurers who have more than $300 million of direct written premium. But how about the many insurers who are smaller than that? The vast majority of captive insurers, including risk retention groups, are not that big. Good corporate governance should not be limited to compliance with statues and regulations. Rather, captives should adopt best practices based on common sense.

association captive has a greater need for independent directors to represent the interests of its customers than does a pure captive that does not write any unrelated business.

he Model Audit rule promulgated by the National Association of Insurance Commissioners has been adopted by most states. It established independence requirements that became effective January 1, 2010. Independence requirements were intended by the NAIC to apply to audit committees appointed by the Board of Directors to oversee the accounting and financial reporting processes, and the audit of financial statements of captives and other insurers. To the extent that many insurers have not appointed an Audit Committee, the entire Board is deemed to be the Audit Committee.

It has often been said, “If you have seen one captive, you have seen one captive”. More so than traditional carriers, each captive insurer is unique. No two captives have the same objectives, the same ownership structure, the same business model, and the same skill sets on their management team. Here are some of the key factors to consider in determining the corporate governance needs of your captive: • Who owns your captive? After all, the shareholders are the ones who elect the Board of Directors to best represent their interests. • Is your captive taking risk

• Who manages the daily operations of your captive? Do you have full time employees dedicated to the management of your captive, or have you outsourced critical functions to professional service providers? Your board needs to independently evaluate the performance of management, and this process becomes problematical if the board and the managers are the same people. • What is the current makeup of your Board? Do you have sufficient expertise on the board to address strategic risk

management issues, investment policy matters, and the business acumen required to objectively evaluate vendor selection decisions?

What can regulators (and legislators, if necessary) do to encourage best practices in the arena of corporate governance? One small, but important step, is to re-examine the requirement common to many states for a “resident director”. Many captive domiciles require that each captive board of directors include a resident of the state in which the captive is domiciled. Historically, this might have been a well-intended attempt to insert representation on the board that is independent of the management. In practice, it frequently accomplishes just the opposite. The most common starting place to find a resident director is a captive management firm representative who lives and works in the captive’s domicile state. While this individual may be well qualified to advise the board, this advisory role is best served in a nonvoting capacity. Captive managers

The Self-Insurer

November 2010

should attend all board meetings and play an active role in the agenda setting. However, allowing them to vote on the vendor contracts for critical services, including their own, creates a potential conflict of interest. Additionally, many captive managers (and regulators) consider the role of the captive manager to be a quasi-regulator. The first and foremost obligation of the board of directors is the fiduciary duty of care and loyalty to the people who elect them – the shareholders. In the unlikely event that the interests of shareholders come into conflict with those of a regulator, the captive manager is caught in the middle. Captive domiciles would be well served by providing the option of an independent director in lieu of a resident director. The independence standard is a far better measure of the potential value of a board member than the location of his or her home. Enabled by legislation or regulations that permit independence requirements as an alternative to residence requirements, captive shareholders have more inducement to select value added members to their boards. Will this add another cost to the captive’s expense structure? Probably so. Many captives do not pay director fees to their inside directors, who are already compensated by their respective employers for their efforts on the captive’s board. Finding well qualified independent directors to serve on the captive’s board of directors will be the first challenge. When you find the right person, you will discover that they are not willing to serve at no cost – nor should they! The cost will be influenced by your expectations of the independent director’s contribution. How frequently does your board meet in person or telephonically? Are there board committees on which the independent board member should serve? How smoothly does your independent audit process work? Do the auditors communicate well on the front end planning of the audit and the tail end wrap up stage? You just might discover that having an independent director on your board results in better planning and documentation for all your board members. If the additional benefits of having an independent director do not justify the additional costs over the long haul, do not continue the practice. Insurers who write more that $300 million of premium have a very specific minimum requirement for outside directors. Insurers writing more than $500 million of premium have an even higher quota. Captives and other smaller insurers have a choice to make. Would your captive benefit by adding one or more independent directors to your board? n John A. Weitzel is the owner of Palmetto Consulting, a financial consulting firm that provides services to insurers and businesses considering the formation of captive insurance companies. During his forty-year career in the insurance industry, Mr. Weitzel has served on the boards of directors of over 20 insurance companies. Ten of these

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November 2010

“The most common starting place to find a resident director is a captive management firm representative who lives and works in the captive’s domicile state.”

The Self-Insurer

November 2010

Bench from the

By John Eggertsen and Michael Friedman

IMPACT OF NEW CLAIM PROCEDURE REGULATIONS ON TPAs Part II: External Reviews Delayed effective date for some internal claim requirements.

n our prior article, we reviewed the new internal claim and claim appeal regulations that became or will become effective on the first day of the first plan year starting after September 23, 2010. After that article was put to bed, there was a significant development. Before discussing the External Review requirements, therefore, we need to inform you about a significant delay in implementing some of the requirements of the new internal claim and claim appeal regulations.

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November 2010

Safe Harbor. Self-insured Group Health Pans (GHPs) and their TPAs have until July 1, 2011 to fully comply with three significant requirements so long as they are making ‘‘good faith efforts” to comply. First, EOB’s need not yet be changed to include all of the new claim disclosure information nor need they be translated into non-English. Second, the turnaround time for Urgent Care Claims remains 72 hours until next July. Third, the failure of a GHP to strictly adhere to all of the internal claims and appeals process requirements will not, until next July, result in the claimant being deemed to have exhausted the internal claims and appeals process regardless of whether the GHP had substantially complied or that any procedural error committed was inconsequential. Therefore, until next July, such failures should not permit a claimant to immediately initiate an external review or pursue any available remedies under ERISA. (Please refer to our previous article for more detail about these requirements.) CAUTION: All of the other changes described in our previous article will go into effect as of the first day of the first plan year starting after 9/23/2010. While this “safe harbor” relief is welcome, it is not a free pass until July 1, 2011. If a GHP does not use this extra time to move to complete compliance, the Department of Labor can revoke the safe harbor and seek enforcement. Finally, the regulatory safe harbor does not preclude unhappy participants or beneficiaries from suing. While

a Court would not want to ignore the Department of Labor’s safe harbor, the Court could, and likely would, do so in a particularly egregious case.

o The claimant has exhausted the GHP’s internal appeal process (unless excused by the GHP’s failure to strictly complied with the New Claim Rules);

New Requirement for External Reviews

o The claimant has provided all the information and forms required to process an external review.

Federal External Reviews. SelfFunded ERISA GHPs that are not grandfathered (and the TPAs they rely on) must follow the new Federal External Review Rules. • Request for External Review. Within four months after receiving an adverse benefit determination (either an initial denial or a denial after appeal) a Self-Funded ERISA GHP must allow the claimant to file a request for an external review. The claimant must first, however, exhaust the GHPs internal appeal process, if the GHP so requires. It will be necessary to make this requirement explicitly clear in all SPDs. Starting July 1, 2011, however, the claimant need not first exhaust his or her appeal rights if the GHP has not strictly complied with the New Claim Rules, especially the New EOB Rules. • Preliminary review. Within five business days of receipt, the GHP must determine whether: o The claimant was covered on the date the health care item or service was rendered or requested; o The initial denial or denial on appeal does not relate to the claimant’s failure to meet the requirements for eligibility under the terms of the GHP;

The GHP must then, within one business day, tell the claimant in writing whether or not the request is complete and eligible VHN_SelfInsurer_4.5x6.75_bw:Layout for external review.

o If the request is not complete, the GHP must tell the claimant what information or material is still needed and must allow the claimant to perfect the request for external review within the normal four-month filing period 6/24/09 11:40 AM Page 1 or within the 48 hour period

In this article we will review the External Review requirements that will become effective on the same date as the new internal claim and claim appeal regulations.

o If the request is complete but not eligible for external review, such notification must include the reasons for its ineligibility (such as failure to exhaust appeals) and contact information for the DOL.

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The Self-Insurer

November 2010

following the receipt of the notification, whichever is later. • Referral to Independent Review Organization. The GHP must assign all complete and eligible external reviews to an accredited independent review organization (IRO). GHPs must contract (or have their TPA contract) with at least three such IROs for assignments and must rotate assignments among them.

Note – These provisions seem to indicate that the federal external review procedure will be available for challenging a range of claim denials, and is not limited to those based on medical judgment. The scope of the IRO’s authority to construe plan documents is not fully explained in this guidance. o The IRO will review the claim and not be bound by any decisions or conclusions reached by the GHPs during the GHP’s claims or appeals process. In addition to the documents and information provided, the IRO may consider the following in reaching a decision: • The claimant’s medical records; • The attending health care professional’s recommendation;

Note – It is unclear how many such accredited organizations currently exist. If every GHP in the country has to contract with a t least three of them, it likely will create a supply-demand imbalance. The guidance does not address licensing or accreditation requirements for IROs, either stat or federal.

Each contract between a GHP and a IRO must provide: o The IRO will utilize legal experts where appropriate to make coverage determinations under the GHP. o The IRO will timely notify the claimant in writing of the eligibility and acceptance for external review. This notice will also say that the claimant has ten business days to submit in writing additional information that the IRO must consider when conducting the external review. The IRO may also, but is not required to, accept and consider additional information submitted after ten business days. o Within five business days after designating the IRO, the GHP must provide to the IRO the documents and any information considered in making the benefit denial. If the GHP fails to timely supply the documents and information, the IRO may terminate the external review and make a decision to reverse the benefit denial. o If the claimant submits information to the IRO, the IRO will inform the GHP with in one business day. The GHP then has one business day to reconsider its benefit denial and provide coverage or payment. If so, the IRO and claimant must be informed within one business day and the IRO must terminate the external review. If not, the external review process will continue uninterrupted.

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• Reports from appropriate health care professionals and other documents submitted by the GHP, claimant, or the claimant’s treating provider; • The terms of the GHP, unless the terms are inconsistent with applicable law; • Appropriate practice guidelines; • Any applicable clinical review criteria developed and used by the GHP unless the criteria are inconsistent with the terms of the GHP or with applicable law; • The opinion of the IRO’s clinical reviewer(s). o The IRO must provide written notice of its decision to the claimant and GHP within 45 days of the external review request. The IRO’s decision notice will include: • A general description of the reason for the request

for external review, including information sufficient to identify the claim (including the date(s) of service, the health care provider, the claim amount, the diagnosis code, and its corresponding meaning, the treatment code, and its corresponding meaning, and the reason for the previous denial);

other remedies may be available under federal or State law to either the GHP or the claimant and that judicial review may be available to the claimant; and

• Reference to the evidence or documentation, including specific coverage provisions and evidenced-based standards, considered in reaching its decision;

Note – The guidance does not address the standard of judicial review of an IRO decision. Would ERISA’s current standards apply to an IRO’s adverse determination (i.e., one that agree with the GHP’s internal review denial)? Would a court have to review the IRO decision de novo? If not, what would be required for the court to apply a deferential standard of review?

• A discussion of the principle reason(s) for its decision, including the rationale for its decision and any evidencedbased standards that were relied on; • A statement that the determination is binding except to the extent that

• Contact information for any applicable State appointed ombudsman. (It is not clear whether this provision applies to Self-Funded ERISA GHPs.)

• Reversal of GHP’s Decision. Upon receipt of a notice of a IRO’s

decision reversing a benefit denial, the GHP must immediately provide coverage or payment (including immediately authorizing or immediately paying benefits) for the claim. Note – The guidance does not address whether a Plan Administrator can appeal an IRO’s decision reversing a benefit denial. Under ERISA, a fiduciary can bring an action to enforce the terms of the GHP, and presumably could challenge the IRO’s decision on that basis, but the guidance is silent on this point. If GHPs can appeal IRO reversals, but must pay claims immediately based on the IRO’s decision, GHPs could have problems recovering those payments from the health care providers.. Could GHPs include in their SPDs that such recoveries could come from offsetting future benefits?

The Self-Insurer

November 2010

• Expedited External Reviews. The Federal External Review Rules also include detailed requirements for expedited external reviews in special circumstances, including: o Request If a benefit denial involves Urgent Care or if an appeal denial involves emergency services of a still institutionalized claimant, then the GHP must allow the claimant to file a request for an external review immediately upon receipt of the denial.

Forms – The DOL has published three model forms for communicating initial adverse benefit determinations, final adverse benefit determinations and final external review decisions that are compliant with this new regime. The model forms are available at:

o Preliminary Review. Immediately upon receipt of the request for an expedited external review, the GHP must determine whether the request meets the reviewability requirements set forth above for standard external reviews and immediately send a notice to the claimant of its eligibility determination. The notice must satisfy the requirements described above for standard external reviews.

http:///www.dol.gov/ebsa/ ABDModelNotice1.doc

o Referral to Independent Review Organization. If a GHP determines that a request is eligible, the GHP will assign an IRO in the same way it does for a standard review. The GHP must provide all necessary documents and information considered in making the benefit denial to the IRO electronically or by telephone or facsimile or any other expeditious method.

http:///www.dol.gov/ebsa/ ABDModelNotice1e.doc

The IRO will consider the information or documents described above under the procedures for standard review, if appropriate. In reaching a decision, the IRO must review the claim de novo and is not bound by any decisions or conclusions reached during the GHP’s internal claim and appeal process. o Notice of Final External Review Decision. The GHP’s contract with the IRO must require the IRO to provide notice of the final external review decision, in accordance with the requirements set forth in above for a standard review, as expeditiously as the claimant’s medical condition or circumstances require, but in no event more than 72 hours after the IRO receives the request for an expedited external review. If the notice is not in writing, the IRO must provide written confirmation to the GHP and the claimant within 48 hours after the date of providing that notice,

State External Reviews. Insured and Non-ERISA GHPs (and their TPAs) will have to follow State enacted External Review Rules that contain the consumer protection provisions found in the Model External Review Act proposed by the NAIC. The Departments strongly encourage the States to establish external review processes that meet the minimum consumer protections of the NAIC Uniform Model Act. They prefer having States take the lead role in regulating insurers, with Federal enforcement only as a fallback measure. In order to allow States time to amend their laws to meet or go beyond the minimum consumer protections of the NAIC Uniform Model Act, the Departments will treat existing State external review processes as meeting the minimum standards. This transition period is available for plan years beginning before July 1, 2011. If a State fails to meet this deadline, then GHPs in those States will have to meet the Federal External Review Rules described above.

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http:///www.dol.gov/ebsa/ ABDModelNotice2.doc

Conclusion TPAs are going to have to dramatically change the way they process claims for many of their clients’ GHPs. TPA’s claim decisions will have to be done faster, their EOBs will have to be much more detailed and they must be prepared to defend those decisions before an IRO within four months or, in the case of Urgent Care cases, within 72 hours. Not only will TPAs have to overhaul their claims processing procedures, but they will have to review their administrative service agreements, and initiate or increase their agreements with IROs. TPAs and GHPs will have to review their plan documentation to ensure maximum protection under these new rules. And there is not much time. The consequences of not implementing the necessary changes will be felt very soon by the GHPs and the TPAs that serve them. In the worst case scenarios, claims that should have been denied will have to be paid by the GHP, and if it does not get its ducks lined up, the TPA may end up having to pay them. n

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November 2010

Top Industry Leaders Converge on

SIIA’s

ANNIVERSARY CONFERENCE

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November 2010

op executives from many major corporations, insurers, self-insurance/ART service companies and healthcare providers converged on Chicago last month for the 30th Anniversary SIIA National Educational Conference & Expo under the theme, “Sharing the Success of Self-Insurance.” One of the largest attendances at a SIIA annual conference created the buzz of a major entertainment or sports event, with many sessions held before standingroom-only crowds. For the opening day general session, late arrivals were forced to monitor the program through jammed doorways.

Serving as “leadoff man” as keynote speaker was Joe Plumeri, chairman and CEO of Willis Group Holdings, Inc., the global insurance broker with 125 offices around the world. He was joined by top executives from many industries on a roster of 110 speakers that included household corporate names Intel, Lowes, Marriott, Mayo Clinic, McDonalds and United Airlines. Plumeri, who formerly led Citicorp and Smith Barney before taking the lead role at London-based Willis, freely acknowledged that “Self-Insurance amounts to half of all the cover in the world, and I appreciate that. Insurance came out of adversity and self-insurance is accustomed to disruption.” In his keynote address titled “The Changing Nature of Risk” Plumeri said the greatest current insurance challenge is regulatory and compliance risk characterized by the current healthcare reform environment. “That has caused a

growing interest in alternative risk transfer solutions as people work to improve coverage and lower costs,” he said. Plumeri, who divides his time between New York and London, said he was pleased to join SIIA in Chicago where his firm became the title tenant of America’s tallest office building as the Sears Tower was renamed the Willis Tower. Two panel discussions immediately following Plumeri’s address featured an unprecedented number of six leading TPA firm chief executives to speak at a SIIA conference.They comprised panels discussing issues facing selfinsurers of health benefits and workers’ compensation. The health care TPA session featured Jay M. Anliker, president and CEO of UMR, a United HealthCare Company, Elliott S. Cooperstone, CEO of Meritain Health, and Paul Lotharius, president and CEO of CoreSource, Inc. The workers’ compensation TPA panel was comprised of Scott R. Hudson, president and CEO of Gallagher Bassett Services, Inc., Kenneth F. Martino, Jr., president and CEO of Broadspire, and David A. North, president and CEO of Sedgewick Claims Management Services. SIIA this year sought “best practices” case studies of employer self-insurance programs to present under the “Sharing the Success of Self-Insurance” theme. Sessions in the four educational tracks of Alternative Risk Transfer, Healthcare, International and Workers’ Compensation featured presentations by the major corporations cited above as well as many other employers. Along with many networking events in the packed exhibit hall, conference attendees were treated to a “Rocktail Party” at Chicago’s famed House of Blues. Business turned to pleasure in the historic venue where the crowd rocked to a concert by New Orleans-based band “Better Than Ezra.” n

The Self-Insurer

November 2010

PPACA, HIPAA AND FEDERAL HEALTH BENEFIT MANDATES:

Practical

Q&A

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.

NEW GROUP HEALTH PLAN INTERNAL CLAIMS AND EXTERNAL REVIEW PROCEDURES CREATED BY PPACA

n July 23, 2010, the U.S. Departments of Treasury, Labor (DOL) and Health and Human Services (HHS) (collectively, the “Agencies”) jointly issued interim final regulations (“Interim Regulations”) regarding internal appeals and external claim review procedures (“Claims Review Rules”) for fully insured and self-funded group health plans and insurance policies issued in the individual market. These new requirements were included in new Section 2719 of the Public Health Service Act (PHSA), as

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added by the Patient Protection and Affordable Care Act (PPACA), and were incorporated into ERISA and the Internal Revenue Code. In this article, we address the new Claims Review Rules as applied to group health plans. The new Claims Review Rules are generally effective for plan years beginning on or after September 23, 2010. However, as discussed below, on September 20, 2010, the Department of Labor issued Technical Release 2010-2

which announced an enforcement grace period until July 1, 2011 for certain of the new Claims Review Rules.

1. Expansion of the definition of adverse benefit determination. The definition of “adverse benefit determination” is broadened to include rescissions of coverage (as defined by new PHSA Section 2712 and applicable regulations).

The new Claims Review Rules apply only to non-grandfathered group health plans otherwise subject to the health insurance reforms added by PPACA. Thus, the Claims Review Rules do not apply to the following plans:

Practice Pointer: The interim final regulations issued by the Agencies with regard to rescissions define a rescission as any retroactive cancellation of coverage other than a termination of coverage for non-payment of premiums. A rescission is permitted only in the case of fraud or intentional misrepresentation of a material fact. If a plan is otherwise permitted to rescind coverage, it must provide 30 days’ advance notice.

• health plans that are grandfathered plans; • health plans that constitute “excepted benefits” as defined by HIPAA’s portability rules (e.g., most health flexible spending arrangements (FSAs), vision and dental plans); • plans with less than 2 current employees participating in the plan on the first day of the plan year (e.g., stand-alone retiree-only plans); or • non-health plans, such as disability and retirement plans. The new Claims Review Rules establish both internal and external claims review procedures. We address each in turn.

A. Internal Review Procedures The Interim Regulations clarify that group health plans must establish an “effective” internal claims review process. As a threshold matter, group health plans must comply with all of the requirements currently applicable to ERISA-covered group health plans as set forth in 29 C.F.R. 2560.503-1 (the “ERISA Claims Rules”), without regard to whether ERISA applies or not (e.g., nonfederal governmental plans). In addition, the Interim Regulations augment existing ERISA requirements by requiring the new internal claim review procedure requirements as described below. DOL Technical Release 2010-02 provides an enforcement grace period until July 1, 2011 for requirements 2, 5 and 6 below:

2. Reduction in time frame for urgent claims. A group health plan 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. This is a change from the ERISA Claims Rules, which allow up to 72 hours to determine an urgent care claim. All other requirements of the ERISA Claims Rules applicable to claims involving urgent care continue to apply. Practice Pointer: A claimant with a claim involving urgent care may be entitled to file an expedited external appeal even if the claimant has failed to exhaust the internal review procedures. See “External Appeals” below for more information. 3. Full and Fair Review. Plans must allow the claimant to review the claim file and present evidence and testimony. More specifically, the group health plan must: a) provide the claimant, free of charge, with any new additional evidence relied upon, considered or generated by the group health plan in connection with the claim sufficiently in advance of the due date of the notice of final adverse benefit determination (as set forth in the ERISA Claims Rule) to give the claimant a reasonable opportunity to respond; and if a final adverse benefit determination is based on new or additional rationale, provide the claimant with the rationale, free of charge, sufficiently in advance of the due date of the notice of the final adverse benefit determination (as set forth in the ERISA Claims Rule) in order to give the claimant a reasonable opportunity to respond. Practice Pointer: Must the plan allow in-person testimony? Although not clear, it would not appear that a plan must allow the claimant to present testimony in person; plans should be permitted to limit testimony to written testimony. 4. Avoidance of conﬂicts of interest. Generally, the group health plan must ensure that all claims and appeals are adjudicated in a manner designed to ensure the independence or impartiality of the persons involved in making the decision. 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). 5. Notices. Notices of adverse benefit determinations must not only satisfy the current requirements set forth in the ERISA Claim Rules, but the notices must also satisfy the following additional requirements:

The Self-Insurer

November 2010

• A group health plan must provide denial 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 or more of its participants are literate (only in the same non-English language). If the plan covers 100 or more 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 the lesser of 500 or more participants or 10 percent of all participants are literate (only in the same non-English language). Practice Pointer: If the threshold requirements described above are met, then the notice must include a statement in the applicable non-English language offering to provide the notice in the non-English language. If an individual requests that notices be provided in the non-English language, all subsequent notices must be provided in the non-English language. In addition, any customer assistances processes (such as a telephone hotline) would need to provide assistance in the non-English language.

corresponding meaning of the such codes; • the standard used in denying the claim (e.g., if a plan applies a medical necessity standard in denying a claim, the notice must include a description of the medical necessity standard); • in the case of a final internal adverse benefit determination, a discussion of the decision • description of the internal and external appeals review processes; and • the contact information for any applicable office of health insurance consumer assistance. The Agencies have issued model notices that can be used to satisfy all of the notice requirements. You can find the model adverse benefit determination at http://www. dol.gov/ebsa/IABDModelNotice2.doc. You can find the model final internal adverse benefit determination at http://www.dol.gov/ebsa/ IABDModelNotice1.doc.

• the date of service, the health care provider and the claim amount;

6. Strict Adherence. If a group health plan 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 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 502(a).

• the diagnosis code (such as an ICD-9 or ICD-10 code), the treatment code (such as a CPT code), the denial code and the

7. Continued Coverage. A group health plan must provide continued coverage pending the

• In addition, a group health plan must ensure that any notice of adverse benefit determination include information sufficient to identify the claim involved, including:

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outcome of an internal appeal. This means that a group health plan must comply with the requirements set forth in 29 C.F.R. 2560.503-1(f)(2)(ii), which generally provides that benefits for an ongoing course of treatment cannot be reduced or terminated without providing advanced notice and an opportunity for advanced review. For ERISA-covered plans, this is not a new requirement. Practice Pointer: Some have misconstrued this language to impose a coverage continuation requirement for all claims. When this requirement is read in context, it merely imposes the existing ERISA concurrent care requirement on all plans (whether ERISA applies or not).

B. External Review Requirements Group health plans and health insurers must comply with either a state or federal external review process. The Interim Regulations provide a basis for determining which process applies. Ultimately, an applicable state process and the federal process will incorporate, at a minimum, the consumer protection provisions of the Uniform Health Carrier External Review Model Act promulgated by the NAIC (the “Model Act”). Currently, however, as described below, the Agencies have issued interim and transition guidance that does not necessarily incorporate all the Model Act provisions. The Model Act may be found at http://www.dol.gov/ebsa/ pdf/externalreviewmodelact.pdf. The Interim Regulations also contain a description of the Model Act provisions. With respect to plans utilizing the federal external review process, the external review applies to all adverse benefit determinations and final internal adverse benefit determinations other than those determinations based solely on the individual’s eligibility to

participate in the plan. With respect to plans utilizing a state external review process, the scope of external review may be narrower as it is determined by the state review process. According to the Interim Regulations, the NAIC model requirement with respect to scope of review is that the state process must provide for “the external review of adverse benefit determinations (including final internal adverse benefit determinations) by issuers (or, if applicable, plans) that are based on the issuer’s (or plan’s) requirements for medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit.” Practice Pointer: Does the new external review process apply only to claims arising (i.e., incurred) after a plan’s PPACA effective date (e.g., January 1, 2011, for a calendar year plan), or would it arise with regard to any claims as long as it has not been finally adjudicated

prior to the PPACA effective date? This issue is not clearly addressed in current guidance. Moreover, the prior DOL group health claims rules (adopted in 2001) specifically stated that the new claim rules only applied with respect to claims incurred after the effective date. Does the absence of such language mean that existing claims could take advantage of the external review process? The answer is unclear. At least during the transition phase, the external review requirements will have more of an impact on self-insured plans, because such plans generally were not required to have an external review process before PPACA.

Fully Insured Plans Under a transition rule, in the case of fully insured plans, the insurer must comply with the state external review process if the state has such a process in effect on September

Claims Savings for Everyone!

23, 2010, regardless of whether that process complies with the Model Act. The Agencies have indicated that all but three states—Alabama, Nebraska and Mississippi—have external review processes in place, so that, with the exception of those states, the state external review process applies to fully insured plans (and to fully insured options under a plan). Practice Pointer: If a plan is fully insured and a state external review applies, the insurer is responsible for complying with the state external review process and the plan has no obligation to comply with either the state or the federal review process. The transition rule for state external review processes is effective for plan years beginning on or before July 1, 2011. However, for final adverse benefit determinations provided after the first day of the first plan year beginning on or after July 1, 2011, the federal external review process applies

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(301) 963-0762 • www.hhcgroup.com The Self-Insurer

November 2010

unless the otherwise applicable state external review process complies with the minimum consumer protections of the Model Act. HHS will be working with state insurance regulators during

process is administered by the Office of Personnel Management. The process may be found at http://www.hhs.gov/ ociio/regulations/consumerappeals/ interim_appeals_guidance.pdf.

state has chosen to expand their process to self-insured plans. The federal process incorporates some, but not all, of the consumer protection provisions in the Model Act. DOL has indicated that it will modify the federal external review procedures in the future to incorporate all the Model Act provisions. The federal process contains a standard review process, as well as an expedited review process. The Technical Release is applicable until further guidance is issued.

Self-Insured Plans Not Subject to ERISA Self-insured plans that are not subject to ERISA, such as church plans and non-federal governmental plans, may be subject to state external review processes, because ERISA preemption provisions do not apply to such plans. n the transition period to help bring nonconforming state external review processes in line with the Model Act. Example: Plan A in State X has a calendar year plan year. State X has an applicable external review process but State X’s external review process does not provide the minimum consumer protections set forth in the Model Act. Although the external review process in State X does not comply with the Model Act, the insurer of Plan A must comply with State X’s external review process until January 1, 2012. Beginning January 1, 2012, Plan A must comply with the federal external review process, unless the state external review process has been modified to comply with the consumer protection provisions of the Model Act. Insurers in the states that do not have an external review process in effect on September 23, 2010, must comply with a federal external review process established by HHS. This

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Self-Insured Plans Subject to ERISA Self-insured plans that are subject to ERISA must comply with the federal external review process. Practice Pointer: The DOL has issued Technical Release 2010-01, which provides an interim enforcement safe harbor federal external review process. See “Federal External Review Process” below for a more detailed discussion. The Department of Labor (DOL) has issued a Technical Release (“Technical Release”) that provides an interim enforcement safe harbor applicable to self-insured plans (http://www.dol.gov/ebsa/pdf/ ACATechnicalRelease2010-01.pdf). Under the Technical Release, selfinsured plans may either: • Comply with the technical release, or • Voluntarily comply with a state external review process, if the

“Group health plans and health insurers must comply with either a state or federal external review process.The Interim Regulations provide a basis for determining which process applies. Ultimately, an applicable state process and the federal process will incorporate, at a minimum, the consumer protection provisions of the Uniform Health Carrier External Review Model Act promulgated by the NAIC (the “Model Act”).”

ART GALLERY By Dick Goff

Taking the Sting Out of Obamacare Potential good news for employer benefit plans under Obamacare came at the SIIA annual conference last month during the pre-conference panel titled “ART Program Opportunities in the New Healthcare Regulatory Environment.” For those early-arriving attendees who didn’t find our breakout room, I’ll try to hit some highlights here To identify the players, our panel consisted of: Tess Ferrera, recognized as a leading expert on benefits law as a former Labor Department attorney now practicing with Miller & Chevalier in Washington, DC. Tess never leaves her audience in doubt as to her meaning, and once described Obamacare as “an absolute freakin’ mess.” Richard Bray, Executive Vice President of Trean Corp. of Minneapolis, a highly regarded independent reinsurance intermediary. His firm could play a key role in the plan design and funding of ART programs serving employee benefits. Rod Kastelitz, Vice President-Marketing of Employee Benefit Management Services, Inc., a Billings, Montana, TPA that has established a captive (EBMS Re) to reinsure excess benefit losses of some of its clients as a variation of stop-loss insurance. He told the audience, “We have a clean piece of paper, and we get to write the story.” Kevin Doherty, Chair of SIIA’s Alternative Risk Transfer Committee and partner of law firm Burr & Forman in Nashville. Kevin provided a high-altitude view of where employers find themselves as Obamacare begins to kick in. “I compare this to the workers’ compensation situation back in the early 1990s when nobody could obtain affordable coverage and group workers’ compensation funds blossomed as a result. Now that health insurance will be mandatory just as it is for workers’ compensation, there will be significant opportunities for ART solutions,” he said. “Employers will continue to have the incentive of providing good health benefits because they will still use that as a recruiting tool,” he said. “Their choices will be traditional fully insured plans, self-insured plans or some combination or form of ART. Of those, the commercial fully insured plans may be most restricted in coverage and price.” Doherty said he believed there would be opportunities for employers to establish alternative plans in groups as long as they comply with all the coverage requirements of Obamacare. “People will be able to design their own plans,” he said. A federal mandate for everyone to purchase health insurance could strengthen alternative plans, he said: “That will force younger and healthier people into the program,” he said. “The basis for any workable insurance program, including good alternative plans, is to build the largest possible diverse pool of people to spread the risk.” Kevin admitted that no one now can accurately predict what the state healthcare exchanges will look like when they go into operation in 2014. “Many states are politically in flux right now because of the elections,” he observed. “And the more proactive the alternative industry can be, the better the chances that ART can do well in this new environment.” Rod Kastelitz of EBMS said that EBMS Re would likely evolve from today’s captivebased stop-loss model to a program that would resemble a cooperative with segregated cells within the captive structure. Coverage could vary from first-dollar self-insurance to various retentions by the employer or the captive along with traditional reinsurance.

“A cooperative program would give us the ability to go to the market with something that looks like a fully-funded program for a variety of sized groups,” he said. “This would certainly help take the sting out of Obamacare for employers because it will bring solutions for both coverage and cost.” While the kind of program Kastelitz envisions is not available today, he projected that it will be introduced at some point before Obamacare becomes fully operational in 2014. To all these ideas, I can only add: Amen.

PAC Challenge SIIA issued an appeal for members to support the Self-Insurance PAC with their personal contributions (no corporate donations allowed). I don’t have to restate here all the reasons that it’s important for SIIA to support its friends in Washington through the PAC and that we are starting from the tail-end spot in PAC power compared to our industry competitors. What I will state here is a challenge on behalf of the ART Division to members of SIIA’s healthcare, workers compensation and international divisions to see which group is most supportive of the PAC. If PAC management agrees, donations can be recorded by SIIA membership divisions and we’ll see which groups support our political goals, and which don’t. So, if you haven’t already, roll out your checkbooks or credit cards and earn your bragging rights. All you need to know about contributing is on www.siia.org. n Dick Goff is managing member of The Taft Companies LLC, a captive insurance management firm and Bermuda broker at dick@taftcos.com.

The Self-Insurer

November 2010

FROM THE DESK OF

ERICA MASSEY

Greetings!

his is my first column in The Self-Insurer which will now appear in each issue. The purpose of my column is to keep our readers/members upto-date on the activities taking place at SIIA to support our mission of “Protecting & Promoting Self-Insurance & Alternative Risk Transfer.” The intent of my column is not to duplicate what our Chair & President will cover in their respective columns, however, I may end up repeating a few points, and if so, it is only to reinforce the importance of each issue to our membership. As you may know, SIIA has been extremely busy over these past few years with many positive changes taking place to meet the ever-changing environment in which self-insurance/alternative risk transfer works to effectively manage risk in the most cost effective manner. The SIIA leadership and its members have embraced these changes and have effectively created a much broader association with its’ entry into the Global marketplace resulting in a substantial increase in membership both domestic and international and expanded educational programs to address a wide variety of topics/issues on a Global basis. Just as risk has no boundaries, neither does the use of self-insurance/ART. The world continues to shrink and US companies both small and large are now part of this Global revolution and thus it is fitting that SIIA takes the lead as we have done for over 30 years to protect and promote this option of risk financing. Since the adoption of the SIIA strategic plan, restructuring of committees and commitment to enter the Global market, I along with several SIIA members, have had the privilege of promoting SIIA on a Global basis. Our travels have taken us to the UK, China, Thailand, Spain, Brazil, Czech Republic and plans are underway for a visit to India in early 2011. These trips were all centered on continuing education, the advancement of self-insurance/ART for US companies operating abroad, and building alliances with other industry associations to assist in advancing our legislative/regulatory agenda both here in the US and abroad. SIIA’s presence in these countries has been very well received and I am pleased to report we have now established a working relationship with the Association of Insurance Risk Managers (AIRMIC), one of the most prominent industry associations in Europe. This relationship will assist in developing a better understanding of global regulation of the self-insurance/ART community with the goal of expanding the market for our industry with the least amount of regulatory oversight. We are able to bring fresh ideas from our domestic experience and in turn, bring back fresh ideas from the international market. This inter-professional relationship development will create both short and long term opportunities for all the companies involved in our industry, from businesses who utilize self-insurance/ ART strategies, to those involved in providing services to self-insured’s, as well as excess and reinsurance arrangements worldwide. In addition to our new international presence, I am pleased to report our domestic membership programs, continuing education, information, and legislative representation for our industry has also expanded to meet the ever-changing needs. As we prepare for what lies ahead as a result of the passage of healthcare reform, we are hard at work dissecting the 3000 pages of legislation and thousands

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of pages of regulations associated with this misguided law. We will work hard to undo provisions of the law that are detrimental to our industry, and at the same time promote legislation to advance the concepts of self-insurance/ ART. To say members, elected leadership and staff have a lot of work ahead is truly an understatement. To succeed it will take a commitment of all of us working together to Promote & Protect SelfInsurance & Alternative Risk Transfer and we encourage your active involvement. In closing, it was great to see so many members, guests, and supporting organizations represented at our 30th Annual National Conference in Chicago last month. The excitement, educational value and networking was fantastic. A big thank you to all the committee members, sponsors and exhibitors who worked hard to make this year’s conference an outstanding success! n Until next time... Erica M. Massey, Executive Vice President, SIIA President/Managing Editor, SIPC

Newsman Hayes Predicted Republican House Takeover

PREVIEW

Speaking three weeks before this month’s Congressional election, Fox News commentator and author Stephen Hayes predicted a House takeover by Republicans and a competitive race for control of the Senate during his “Election Day Preview” at the National Conference. He cited as major factors affecting the election the rise of the Tea Party, steadfast turnout by traditional Republicans and the repudiation by moderate independent voters of Obama Administration policies. Hayes predicted that a Republican-controlled House would initiate repeal of healthcare reform legislation but that it would have little chance of surviving the Senate or a White House veto. Regarding the lawsuit by states to overturn health reform, he said, “That’s not a frivolous constitutional argument,” and predicted that additional states would join the suit following the Congressional election. He predicted that Tea Party candidates elected to Congress could have a “refreshing effect because they are unaccustomed to talking like people talk in Washington.” Hayes said “watch out” on the possibility of Republican gains this year resulting in winning the White House in 2012. He cited Harry Truman, Dwight Eisenhower and Bill Clinton as presidents who won reelection after losing control of Congress during their first terms. “But of course they all moved to the political center,” he said, adding that President Obama has shown no indications of doing likewise. n

The Self-Insurer

November 2010

INSIDER INFORMATION ARC to Distribute $4.4 Million - Largest Retro Return Ever

HOOVER, AL – Alabama Retail Comp will return $4.4 million to qualified participants in 2011, the largest retrospective return in the fund’s 26-year history. The board of trustees of Alabama Retail Comp, the selfadministered, self-insured workers’ compensation fund sponsored by the Alabama Retail Association, voted today to distribute the $4.4 million in the 2011 fund year, which begins Jan. 1. The 2011 retrospective return represents a 10 percent increase over the 2010 return. “We are pleased to once again bring some good economic news to our members by providing this retro return, which will help lower the costs of doing business for our members and increase the Benefit From the Value they get from their workers’ compensation coverage and their membership in the association,” said Rick Brown, the fund’s administrator and president of ARA. Since its inception in 1984, ARC has returned ALMOST $40 MILLION – almost 20 percent of all premiums collected – to its participants through its retrospective return plan. The retrospective rating plan provides a controlled method for the fund to return excess funds accumulated due to favorable operating experience. The retrospective rating plan uses an actuarial formula that takes into

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account individual participants’ experience versus the experience of the fund as a whole. The amount of credit a participant receives is tied directly to the business’ loss ratio. Lower losses mean a higher retrospective credit at renewal. This acts as an incentive for participants to provide a safe work environment. Alabama Retail Comp, the state’s most stable, cost-effective workers’ compensation insurance program for retailers, is regulated by the Alabama Department of Industrial Relations and governed by a board of trustees who are fund participants. While ARC specializes in the retail industry, it also provides coverage to many employers in an array of different classifications of business. “At ARC, our goal is simple,” said Fund Manager Mark Young, “To provide the most cost-effective workers’ compensation coverage to Alabama businesses with unparalleled customer service.” n

Re-Solutions Intermediaries, LLC is pleased to announce the addition of Matt Smith as Senior Vice President. Matt joins Re-Solutions as part of its ongoing strategy of expanding its market presence, and attracting the most talented and experienced professionals. Prior to joining Re-Solutions Matt was with Guy Carpenter, where he held the position of Senior Vice President. He brings to Re-Solutions

over 12 years of insurance and reinsurance experience. Matt has built his career on the basis of superior customer service and advocacy, and brings great expertise in, and knowledge of, the excess medical and managed care marketplace, and group life & disability products. Matt joins Re-Solutions’ team of professionals with over 100 years of combined experience in the U.S. Life, Accident and Health market, and will help further solidify the company’s position as one of the premier independent A&H reinsurance intermediaries and consultants. Matt’s scope will be national while being based in Washington State, where he will enhance Re-Solutions’ West coast presence. Tony Plampton, President of Re-Solutions, commented “We are absolutely delighted to have hired somebody with the market stature, abilities and talents that Matt possesses. Matt will play a key role in Re-Solutions’ continued growth as we build upon our excellent market reputation and presence. Matt will be a great fit with Re-Solutions as we continue to build a team of experienced industry professionals providing guidance and expertise to clients within Re-Solutions’ positive entrepreneurial environment.” About Re-Solutions Intermediaries, LLC (www. re-solutions.net) Re-Solutions Intermediaries, LLC is a leading independent reinsurance intermediary and consultant headquartered in Minneapolis, Minnesota. The

company was formed in 2001 and has grown steadily serving the needs of an expanding client base. Re-Solutions enjoys a reputation for professionalism and expertise working with clients of all types in both the A&H and P&C markets, with the ability to place reinsurances both in the U.S. and internationally. n

Edison Ventures Invests in PHX LAWRENCEVILLE, NJ – Edison Ventures announced $4 million investment in Premier Healthcare Exchange, Inc. (PHX) based in Bedminster, NJ. Edison is the sole institutional investor in this late stage healthcare cost management company. Proceeds will expand sales, marketing and shareholder liquidity. The Company delivers advanced cost management solutions to health plans. PHX combines people, process, technology, and business intelligence to deliver significant savings to their customers. PHX has been dedicated to providing superior customer service and developing long-term relationships with customers. Customers include Government Employee Health Association, Inc. and HCC Life Insurance Company. Chris Sugden, Managing Partner, and Lenard Marcus, Principal, led Edison’s investment process. Tom Vander Schaaff, VP Analysis, conducted Edison’s due diligence. Chris Sugden and Edison Director Network member, Nanci Ziegler, joined PHX’s Board of Directors. Nanci Ziegler is EVP Market Strategy & Business Development

for Edison portfolio company, Portico. Lenard Marcus will serve as BOD Observer. The Founder of PHX, Todd Roberti, stated: “Edison’s track record of strategic guidance and value-added services will accelerate PHX’s growth over the next three years. We are happy to have Edison onboard as their healthcare and technology expertise will help us take a leadership role in healthcare cost management industry. As a very successful expansion stage investment firm, they bring a wealth of experience and contacts to the company.” “This solid management team brings deep domain expertise to drive sales,” stated Chris Sugden. “Customers praised PHX’s realized return on investment and exceptional customer service,” added Tom Vander Schaaff. For more information contact: Clara Pachomski (888)311-3505. n

SIIA New Members REGULAR MEMBERS Voting Representative/ Company Name Dave Moen, Sr. Manager for Large Group Sales, Blue Cross & Blue Shield of Arizona, Phoenix, AZ Carl Terzer, Principal, CapVisor Associates, LLC, Chatham, NJ Naz Farrow, Chief Operating Officer – Health, Colonial Medical Insurance Company, Hamilton, Bermuda Mary Stivers, Director of Operations, Preferred Health Plan, Inc., Louisville, KY Beth Kalianoff, Director, Lab Card Operations, Quest Diagnostics, Lenexa, KS Michael Schroeder, President, Roundstone Management, Ltd., Westlake, OH Leesa Davis, President, SB Howard & Company, Rogers, AR

EMPLOYER MEMBERS Voting Representative/ Company Name Noe Calvo Morales, Director of Human Resources, Cooperativa La Cruz Azul, S.C.L., Delegacion, Coyoacan, Mexico David Kellogg, President & CEO, Solers, Inc., Arlington, VA Rebecca Durfee, HR & Safety Director, Vino Farms LLC, Lodi, CA

The Self-Insurer

November 2010

MATHER’S GRAPEVINE

ere I am again sitting on our back deck and looking out into the woods

Perhaps it is the fault of the media. We are so deluged with the daily news, repeated every eight minutes,

straight, holding a kind regard for the poor. Fifteen years later he found himself

twenty-four hours per day, that many

bucking the very system that had

behind my wife’s beautiful gardens.

Americans just hit the off button. Then

attracted him in the first place. More

Yesterday we had two deer

again it may be by design. In the annals

and more middle and upper class

munching on the ground cover.

of history, great republics have fallen

patients were saving up and traveling

Tonight as the sun sets the leaves

time and again as a result of apathetic

to the United States for timelier,

of early autumn are glowing with

citizens simply allowing the government

higher quality care while at the same

their annual beauty. The dragon

to run the show. History is still the

time the poor had to wait or simply

flies are circling our pond from

best teacher when trying to predict

accept poorer quality care. They were

which the Great Blue Herron has

the future so I am genuinely concerned

forbidden by law to buy a catastrophic

again removed all of the fish.

that if we continue to allow that to

private care plan. Furthermore, they

Assuming the U. S. Postal

happen we are headed straight into

were not allowed to contract privately

service operates with their usual

a socialistic form of government that

with physicians for basic medical

efficiency, by the time this reaches

will eventually, perhaps sooner than we

services. A willing provider could not

you the mid-term elections may

think, bring this country to its knees.

give care to a patient willing to pay

very well be over but certainly

To make matters worse, the Kaiser

cash!

not forgotten This is a very

Family Foundation monthly tracking poll

special election year. All facets

indicates Americans are warming up

the Canadian single payer system and

of the insurance industry are

to the health care law as the months

in a trial before the Canadian Supreme

facing challenges with the national

go by, but it also points out that the

Court argued that the low quality

healthcare changes, passed six

majority of us are very confused about

of care imposed upon patients, long

months ago, coming into effect.

its provisions. It also indicates that the

waiting lists and prohibitions from

economy and unemployment issues

buying a private health plan violated

turnout for this election to be

dominate the congressional elections

“constitutional rights to life, liberty and

somewhat below 20% of the

with healthcare in a distant second

security.” Amazingly, the Court agreed,

registered voters, and then we

place in the voter’s minds. Even senior

saying that “access to a waiting list is

have those who are unregistered

citizens who continue to oppose the

not access to health care, and that low

and will not vote at all. With all the

new law have dropped in percentages

quality of medical care could threaten

endless harangue that has gone on

from 49% in March to 38% presently.

a patient’s life”. While the Canadian

in Washington and throughout the

Maybe we should take a lesson

system is still in place, large cracks in

country between the Republicans,

from Dr. Jacques Chaoulli, a French

Democrats, Independents and Tea

trained physician who in 1979 decided

Partiers over every issue from

to move his medical practice to

this country will eventually lead to the

taxes to healthcare, from warfare

Canada. Apparently he chose Canada

same results, as it has through recent

to isolationism, to the legality of

rather than the United States because

history in a dozen other countries

walking a dog in public places

he wanted to live in a country that

throughout the world. And voter

without a leash, you would think

was more compassionate. After all, any

apathy will not stop it. n

that the American Public would

government that provides its citizens

get out and vote!

with health care must have its priorities

Sadly, I fully expect the voter

26 www.siia.org

July 2010

Dr. Chaoulli, single-handedly, sued

the wall are appearing regularly. A same or even similar system in

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November 2010

CHAIRMAN’S REPORT Armando Baez

In Chinese it’s “Xièxie”

s I stepped to the podium last month to preside over the SIIA annual conference in Chicago, it felt more like I was leaving home and saying goodbye to my family. That conference would be my final leadership role for SIIA as I retire as chairman at the end of this year. I had the pleasant duty to note one of the largest assemblies at any SIIA conference, especially meaningful on the 30th anniversary of the event that has become the annual anchor of the self-insurance and alternative risk transfer industry. Of course part of the credit for major attendance went to the conference site, both for its central U.S. location and its concentration of business. We were very happy to be in Chicago! Looking back at the past 30 years of SIIA’s growth and development as a true global leader in spreading the gospel of selfinsurance and ART, I was extremely gratified at the high executive level attendees this conference attracted. There was an impressive roster of top executives from many major insurers and self-insuring organizations as well as leading TPAs, brokers and professional specialists. Our attendees comprised a true “Who’s Who” of our industry. The well-worn cliché is that something seems in our memories like it happened just yesterday. But that was true for me as I vividly recalled my first SIIA conference – and I missed just a few of the earliest events.

28 www.siia.org

November 2010

Clearly, the great difference between SIIA then and now is our evolving transformation into a global leader for self insurance education and advocacy. Over the past five years, first by establishing an International Committee and later by sponsoring key events on several continents, SIIA has broadened its focus to become a true global force. Conferences in places such as Barcelona, London and Singapore, and exploratory trips by SIIA members to China, Brazil and early next year to India bring the benefits of self-insurance to new markets, attract new members and enable our members to gain first-hand the opportunities of being truly global in scope and vision. SIIA has institutionalized its global presence by establishing a separate membership division for International along with our traditionally strong divisions of health care, workers compensation and alternative risk transfer. In our synergistic industry, of course, there are no barriers separating these divisions. Nor are there such barriers within SIIA. We find intersections and crossovers among our specialties that result in creative and unique coverage programs for client and member organizations around the world.

Serving the Mission I am also very proud of SIIA’s continued success in serving our mission: “To protect and promote self-insurance and alternative risk transfer.” We learned at the conference how we are working to protect our industry, notably in preserving the employer-based healthcare system during the federal overhaul of healthcare, in working to

modernize the federal law governing risk retention groups, and in standing up loud and proud for the continued expansion of self-insured workers’ compensation groups in various states. As I prepared to step down from SIIA leadership, I passed along some advice for new – and not-so-new – SIIA members: Get involved, join a committee to gain the benefits of relationships that will further your business, inspire your creativity and provide the mentoring that is so crucial to success in any people-centered business – especially one that deals with life and health issues of employees’ healthcare, safety and security. I also shared a personal note with the bittersweet observation that I have now reached what I always looked forward to but also feared: the time to pass on the leadership baton to someone else. It has been a true privilege to have served this association and its members. I have received so much and it seems I have not given nearly enough. I pledged to our conference audience in Chicago that I would keep coming back to SIIA events if only to stay in touch with so many friends and colleagues whom I have had the pleasure of getting to know, do business with and travel the world spreading the gospel of self-insurance. And I left our conference audience with my thanks for SIIA members’ friendship, help and advice given so generously along the way, in the traditional Chinese thank you, “Xiéxie!” n

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