Self-Insurer Nov 2011 by SIPC

November 2011

Onsite Clinics Bring the

Value Proposition

BACK

into Healthcare

Liability

Driven

Investing

We know what you’re made of. Our self-funded health plans are custom-fit to the unique profile of a company’s health and well-being. Find the balance between cost containment and employee satisfaction today. Visit hnas.com to learn more. With HealthNow, everyone benefits.

Offices located: Arizona, California, Massachusetts, New Jersey, Pennsylvania, Texas

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

NOVEMBER 2011 | Volume 37

FEATURES

Vice President Finance James E. Burkholder, President/CEO Health Portal Solutions San Antonio, TX Executive Vice President Erica Massey Midland, NC Chief Operating Officer Mike Ferguson Simpsonville, SC

SIIA DIRECTORS

‘Innovation’ in Many Flavors at the National Conference

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

ARTICLES

Onsite Clinics Bring the Value Proposition Back into Healthcare by William F. Burke,William M. Bennett and Dianne W. Geiger

Robert Repke, President Global Medical Conexions, Inc. San Francisco, CA

Mather’s Grapevine

Colorado Federal Court Reaffirms Principle That Purchase of Stop Loss Insurance Does Not Affect Self-Insured Status of Plan

New Fees for Group Health Plans Loom on the Horizon

SIIA Grassroots & Political Advocacy: SIIA Members Carry Message in DC and Home Districts

ART Gallery: An expert’s view of captives for health plans

SIIA LEADERSHIP 2 President’s Message 28 Chairwoman’s Report

SIIA COMMITTEE CHAIRS Chairman, Alternative Risk Transfer Committee Andrew Cavenagh, President Pareto Captive Services, LLC Chairman, Government Relations Committee Horace Garfield, Vice President Transamerica Employee Benefits

November 2011 The Self-Insurer (ISSN 10913815) is published monthly by

Chairwoman, Health Care Committee Elizabeth Midtlien, Senior Vice President, Sales StarLine USA, LLC

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.

Liability Driven Investing by Matthew P. Leahy, CFA

Chairman, Workers’ Compensation Committee Skip Shewmaker, Vice President Safety National Casualty Corporation St. Louis, MO

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

The Self-Insurer

Chairman, International Committee Greg Arms, Global Head, Employee Benefits Practice Marsh Inc.

Publishing Director - James A. Kinder Managing Editor - Erica Massey Senior Editor - Gretchen Grote Design/Graphics - Indexx Printing Contributing Editor - Tom Mather and Mike Ferguson Director of Operations - Justin Miller Director of Advertising - Shane Byars

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

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-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

November 2011

PRESIDENT’S MESSAGE A salute to conference supporters!

y the time you read this many of you will be back in the cooler, wetter or even worse weather conditions much of the country experiences at this time. But as I am writing it, I’m enjoying the sunny desert warmth at SIIA’s annual conference in Phoenix. That’s the miracle of long-lead time publication schedules. I announced at the conference that SIIA currently enjoys the participation of the largest number of involved members – counting the board, officers and committee members – in its history. We also are blessed with the deepest corps of sponsoring member companies. Their support provides much of the first-class experience for conference attendees, and as I strolled through the conference facilities and exhibit hall, I was constantly reminded about that. Now I can offer my salute to our sponsoring members, and you can browse the alphabetical list for full appreciation of their contributions. A.M. Best Company – Sponsor of the all-important link to our conference experience: the name badge lanyards.; AWAC, LLC – Cosponsor of the Disco in the Desert party and sponsor of the Cyber Café; Coalition America, Inc. – Cosponsor of Disco in the Desert; CorVel Corporation – Sponsor of the Monday Evening Reception; Emdeon – Sponsor of hotel key cards; EthiCare Advisors, Inc. – Sponsor of the Sunday Evening Reception; Global Medical Conexions, Inc. – Communications sponsor; HCC Life Insurance Company – Conference notepads and pens, plus the Session Planning Guide; Healthx, Inc. – Sponsor of the Schedule of Events Pocket Guide; Hines & Associates – Health Care Educational Track title sponsor; HM Insurance Group – Sponsor of the Self-Insurance Educational Foundation keynote speaker at Tuesday’s general session and sponsor of the Official Conference Program; Humana – Sponsor of the Exhibit Hall Luncheon on Tuesday; MultiPlan, Inc. – Sponsor of Exhibit Hall aisle signs and the conference newsletter; Optum – Sponsor of the keynote speaker at Monday’s general session and cosponsor of Disco in the Desert; Presidio Reinsurance Group – ART Educational Track title sponsor; ProtoHit – Sponsor of directional signage; QBE the Americas – Sponsor of the Exhibit Hall Luncheon on Monday; Safety National Casualty Corporation – Workers’ Compensation Educational Track title sponsor; Select Surgical Solutions – Sponsor of conference tote bags; Simplicity Health Plans – Sponsor of registration area counters; The Phia Group, LLC – Sponsor of the New Members/First Time Attendees Reception; Transamerica Employee Beneﬁts – Sponsor of continental breakfast on Monday. So, all together, now: Cheers for our conference sponsors! We can’t list all our exhibitors here, but special salutes are due to long-time exhibitors, led by The Trizetto Group which has exhibited at each of the 31 SIIA national conferences. Quite an achievement!

November 2011

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Exhibitors for 20-some years were Celtic Insurance Company (24); Eldorado a divison of MphasiS (22) and MultiPlan Inc. (22). Teen-years exhibitors included Complete Health Systems, LC. (19); Hines & Associates, Inc. (18); WLT Software Enterprises, Inc. (17); Coalition America, Inc. (16); RESTAT (16); Business Insurance Magazine (14); American Health Holding, Inc. (13); Emdeon (13); Healthx, Inc. (13); Optum (13); Scrip Care, Ltd. (13); Judy Diamond Associates (12); Preferred Medical Claim Solutions and 10-year exhibitors GTESS; Integrated Health Plan, Inc. and INTERLINK Health Services, Inc. Congratulations to all our long-time exhibitors and we’ll look forward to welcoming them back again next year! And I’ll see all of you at our 32nd Annual National Conference & Expo Oct. 1-3, 2012, at the J.W. Marriott Hotel in that racy town of Indianapolis.

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The Self-Insurer

November 2011

Innovation ‘ ‘ in Many

Flavors at the National Conference

November 2011

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ompelling keynote speakers, an outstanding educational faculty including panels of industry leaders and an exhibit hall full of new products and services combined for a treasury of information supporting the theme, “Innovation: Shaping the Future of Self-Insurance” at SIIA’s 31st Annual Educational Conference and Expo last month in Phoenix.

Other characteristics of innovative leaders are stimulating a “what if?” culture and sharing knowledge throughout the organization to answer “why” new policies are necessary and to help employees feel they “want to” rather than “have to.” He said the companies that resist change face the problem of a “dead horse” by buying a bigger whip while innovative companies get off the dead horse and find a live one. “If you don’t like change you’re going to hate extinction,” he warned, adding that innovative change is “the relentless pursuit of excellence.”

The opening day keynoter, journalist Roger Lowenstein, recounted the many financial crises he has covered for the Wall Street Journal and in the books he has authored. “They asked me to talk about the next financial crisis,” he said.”But I didn’t realize we were finished with the current one.” Lowenstein listed several storm clouds on the financial horizon, including European debt, but found a looming threat right here in the U.S. He said the country has not yet felt the full effects of the debt crisis at all levels of government and among many individuals as household debt peaked at 135 percent of annual income. “By maintaining low interest rates the Federal Reserve has been telling people to borrow and spend rather than save and invest,” he said, and predicted that the crisis will take a long time to resolve as people must gradually change their mentality from borrowing to saving. However, he left the audience with a brighter message by saying, “We have survived many traumas as a country and we will survive this one, too.” Noted business leader, author and motivational speaker Robert Stevenson provided a highly charged message about innovation in his second day keynote address. He said innovative leaders learn from mistakes, with a twist: “Smart people learn from their mistakes, but wise people learn from others’ mistakes.”

Keynote speaker Roger Lowenstein.

Health Reform Panels A special series of panel discussions on the impact of health care reform from the perspectives of employers, TPAs and stop-loss insurers highlighted the health care track of educational seminars, combined on the program with tracks in alternative risk transfer, international business and workers’ compensation. Employers’ View: The panel of employers who candidly spoke of their organizations’ difficulties in responding to The Patient Protection and Affordable Care Act (PPACA) included Dianne Harrington, Human Resources Director of Otto Environmental Systems North America, Inc.; Mark Hopkins, Senior Director of Compensation, Benefits and HRIS for Mohawk Industries Inc.; Chris Mangelsdorf, Risk and Benefits Manager of Martin Sprocket and Gear, Inc., and Hicks B. Morgan, Treasurer and General Counsel of Morgan Buildings and Spas. Panel moderator Steve Rasnick summarized the discussion as there still being too many unknown factors about the federal health reform law, and noted that the world appears to be getting serious about cost containment and wellness programs and in stimulating employees to take responsibility for their own health. The panel reflected that some employers are nearing the decision point of whether to maintain their employee health plans or abdicate that responsibility to state health insurance exchanges that have been mandated to be operational by 2014 if that element of the law is upheld by the Supreme Court. Factors favoring continuation of employee health plans include assuring that employees receive sufficient health care and the strong value of health plans as recruiting and retention tools.

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November 2011

TPAs’ Perspective: This panel was comprised of Todd E. Archer, President and CEO of Mutual Assurance Administrators, Inc.; Tom Byrd, President and CEO of Group Resources, Inc., and Kathy Major, President, General Manager, Medical TPA, Innovante Benefit Administrators, a division of HealthTrans. Moderator was Stephen Touche, President of Mountain States Administration Services. The consensus was that TPAs face PPACA-brought challenges in expanding their technologies and legal expertise and in adapting to a wellness culture. They also sense great opportunities in the shift particularly among small to mid-sized companies to self-insurance.

Alternative Risk Transfer Track Among the outstanding seminars comprising the ART track was the longtitled ART Program Provides Innovative Health Care Cost Containment Solution for Self-Insured Employers. It was presented by Kyle A. Plath, senior vice president of Trean Re and Dick Goff, managing member of The Taft Companies. Ten years ago Montana TPA Employee Health Benefits Services (EBMS) was up against a hard market in bringing stop-loss insurance to its clients. Rather than putting them in the position of swallowing 300 percent premium increases, the TPA formed EBMS Re, a captive to provide a layer of stop-loss and purchase reinsurance for excess losses. The employers joining the program gained cost stability in an actuariallymodeled program, and also have shared in the underwriting profits of EBMS Re. The program now has 29 employer members insuring about 20,000 lives.

Moderator Stephen Touche (standing), Tom Byrd, Todd Archer, Kathy Major One panelist said, “Self-insurance is now a more viable option for employers than ever.” Most agreed that they are receiving an increased level of inquiries from employers and brokers. The movement toward preventive care was summarized by one panelist: “Historically we’ve been product-oriented marketers. Now that is changing to a cultural orientation to wellness, to convince people to do the right things to take care of themselves.” Stop-loss insurers’ perspective: Response to PPACA was provided by panelists Scott Beliveau, Vice President of Underwriting and Claims, Sun Life Financial; Michel Fry, Executive Vice President, Symetra Financial; Craig J. Kelbel, President and CEO, HCC Life Insurance Company, Inc., and Michael Sullivan, President and Chief Operating Officer, HM Insurance Group. Panelists generally agreed that the full effects of PPACA have not yet been felt in the industry. Some companies have already started writing coverage for unlimited lifetime benefits and others have increased their maximum coverage levels. Investment in updating documentation and educating staff and business partners is prevalent. One panelist summarized: “PPACA hasn’t required a lot of changes yet. We’ll know more in 2014 or after the next election and as legal challenges to the law are concluded. Right now it’s hard to see two years into the future. A major overhaul is less likely now than when the law was passed. The more important question is whether employers will be able to continue with their plans. I’m more concerned about that than any federal regulations.”

November 2011

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Other ART seminars ran the gamut from Captives for Beginners through the structures of protected cell captives and on to the case study, City of New York Relies on Innovative ART Program to Help Rebuild After 9/11 Attack Destruction.

International Track That self-insurance is now a global consideration was evident through the International Track of six seminars that included a session on International Employee Benefit Management Strategies for Mid-Sized Companies by Patrick G. Hickey of Wells Fargo Insurance Services USA, inc.; a Primer on Global Health Care by Phil Midden of Companion Global Healthcare, Inc.; a program, Self-Insured Employer Says Yes to Medical Travel Option by Thomas

Showalter of Chenega Corporation; The Evolution of Multinational Benefits Pooling Networks by Greg Arms of Marsh Inc.; Solvency II: Implications for U.S.-Based Companies and Insurance Entities by Leslie Boughner of Willis North American Captive and Consulting Practice, and Global Security Risks and How to Insure Them by James Krampen of Seven Corners, Inc., and Garry Vardon-Smith of Red24.

Dianne Harrington, Hicks B. Morgan, Chris Mangelsdorf, Mark Hopkins

Workers’ Compensation Track

The panel was comprised of Chares C. Caldwell, president and CEO of Midland Management Corporation; Duke Niedringhaus, vice president of J.W.Terrill, Inc., and Steve Luebbert, executive president of Safety National Casualty Corporation. With many seminar attendees joining in, the discussion about regulation of SIGs took flight. New York has banned the formation of new SIGs after this year and will require existing SIGs to deposit funds equal to the prior year’s claims. One person said, “We asked the New York regulators to call the California regulators to see how they were dealing with SIGs. But they don’t seem to know each other and don’t have a common forum to share information.” A California TPA serving SIGs noted, “In California they’re working hard with self-insured groups to make sure they work well. They don’t want to take them over, but make sure they work.” Charles Caldwell said, “We can’t overemphasize the importance of staying involved with state regulators on behalf of SIGs. We’ve got to get the word out that SIGs are the best workers’ compensation solution.” Panelist Luebbert noted that the SIIA Workers’ Compensation committee is working to educate regulators and employers on the value of SIGs. n

A lesson in reducing workers’ compensation claims through significant investments in safety was provided by Grace Crickett, Chief Risk Officer of the University of California in her seminar, Major University System Innovates to Slash Workers’ Compensation Costs. As the largest higher educational institution in the world with 170,000 employees, UC’s risk management trust was $130 million in deficit a few years ago, and through the Be Smart About Safety program has reduced its WC claims by 47 percent and brought the trust back into surplus. The safety program runs on a budget of 10 percent of WC premium and has realized a savings in claims of more than 2-1 for safety program expenditures. According to Ms. Crickett the program empowers UC system campuses to propose their own specific workplace safety initiatives in applications for funding. The innovative program is described in full at www. ucop.edu/riskmgt.com. The hottest topic among the panel discussion, Hot Topics for Workers’ Compensation Self-Insurers predictably was the draconian treatment of self-insured workers’ compensation groups (SIG) by the state of New York. Chairwoman Freda Bacon and President Alex Giordano

The Self-Insurer

November 2011

MATHER’S GRAPEVINE by Tom Mather

was sitting in my home office after dinner, enjoying a glass of Cognac and listening to some soft Jazz in the background. It was a good time for reminiscence of both the immediate past and the very distant past. The immediate past had been a program on the TV I had just sat through featuring a group of Tea Party activists who had blabbed on for an hour about the need for “small government” and how without it we would fail as a nation. The basis for their presentation was, as you might suspect, Obamacare. The very distant past were the memories of my history teacher in high school taking us through the revolutionary years leading up to the development of the Declaration of Independence. Mr. Jim England was a great teacher. He would often speak for nearly an hour, painting a picture of the subject being discussed, and in doing so causing the subject to become three dimensional in nature. His approach, all those many years ago, differed so much from the program I had just watched.

the government to the exercise of its properly delegated powers and to restore a partly national and partly federal form of government that our Founding Fathers had in mind to begin with. But as I remember, my high school history teacher always finished each class with the reminder to think through all of the many aspects of each piece of history, and to keep in mind that to have masses of human beings come together and agree on an approach is indeed a very difficult task to say the least.

Mr. England taught us about King George establishing an “absolute Tyranny” over the colonies by erecting a multitude of new offices with swarms of officers sent into the hinterlands to “harass the people and eat out their substance.” This of course led to the eventual writing of the Declaration of Independence and the events that followed. Considering the happenings of the late seventeen hundreds of our country’s history and applying it to today’s activities, one could surely make some connections. The number of regulations and the horde of administrators necessary to execute the Obamacare schemes are staggering. We have only to think of the Independent Payment Advisory Board. It is a commission of 15 members appointed by the President, charged with the task of reducing Medicare spending, supported probably by dozens if not hundreds of backroom button pushers in Washington. This commission has rule making power which carries the force of law. The Senate, it is true, will have power to override this Board’s decisions – but only with a three-fifths majority. There are no procedures that will allow citizens or doctors to appeal the Board’s decisions. The administrative state, here in the guise of providing healthcare for all, will slowly but surely reduce the rights of the people under the kind of tyranny that will insinuate itself into all aspects of American life, destroying liberty by stages until liberty itself becomes a distant memory. The only certain way to defeat Obamacare, and other cases of federal overreach is true political opposition. I truly believe that the American public wants this done, but the question remains –how? A political party dedicated to “limited” government, not “small” government, is an urgent political task. Can the Tea Party do it? I don’t know. Can a combined Tea Party and a properly thinking Republican Party do it? I think so. The most important thing to remember as we move forward is that the objective here is to confine

November 2011

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The Self-Insurer

November 2011

Bench From the

by Thomas Croft, Esq.

Colorado Federal Court Reafﬁrms Principle That Purchase of Stop Loss Insurance Does Not Affect Self-Insured Status of Plan (Goyen v. Vail Corp., No. 10-cv-02392, in the United States District Court for the District of Colorado, September 26, 2011).

f it weren’t for the recent brouhaha spawned by the NAIC’s criticisms of stop loss insurance, this case would be somewhat akin to an announcement that no tsunami occurred today – greatly reassuring, but somehow not so newsworthy. The plaintiff plan participant sued her employer and its TPA in state court for

benefits denied under the Plan, relying on state law causes of action. The defendants removed the case to federal court and then moved to dismiss on the grounds of ERISA pre-emption. The Court converted the motion to a motion for summary judgment. Plaintiff argued that the Plan’s purchase of what the court termed “stopgap insurance” rendered it no longer self-funded, such that ERISA’s “deemer clause” did not operate to insulate the Plan from state law based claims under the Supreme Court’s ruling in FMC Corp. v. Holliday, 498 U.S. 52 (1990). The Court squarely rejected plaintiff ’s position, noting that “numerous courts” have recognized that a plan does not lose its self-insured status simply by purchasing stop loss insurance or excess insurance. This, of course, is precisely the position taken by SIIA in its recent whitepaper responding to the NAIC.

November 2011

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Plaintiff further argued that she needed discovery to show that the Plan had in fact delegated its financial responsibilities to the stop loss carrier, at least where the specific deductible had been met. The Court disagreed, indicating that its review of the stop loss policy suggested no such thing. One can nevertheless imagine a scenario where the Plaintiff ’s argument concerning a de facto delegation of financial responsibility might become problematic. If an MGU actually took over the management of a claim and made all the decisions concerning it

after the spec was breached without consultation with the group/TPA, there is not only the possibility of ERISA fiduciary liability for the carrier/MGU, but the distinctions between a selfinsured and a fully insured product become all the more blurry. Federal Court Refuses to Set Aside Ruling for Stop Loss Carrier in Eligibility Case, Citing“Late COBRA” Exclusion in Stop Loss Policy (Clarcor, Inc. v. Madison National Life Insurance Co., No. 3:10-189, in the United States District Court for the Middle District of Tennessee, September 2, 2011) In ruling on a motion filed by the group, Clarcor, to alter or amend (in essence to reconsider and set aside) the Court’s prior judgment in this case, reported on in the September 2011 issue, the Court faced the issue I noted in my previous write-up: namely, whether the Madison National stop loss policy’s exclusion for untimely

offers of COBRA barred Clarcor’s claims regardless of the eligibility issues dissected and discussed in the Court’s first opinion. In a September 2, 2011 opinion, the Court recognized the effectiveness of the exclusion: “[T]he Court has determined that the termination of the FMLA leave was a COBRA “qualifying event” because it resulted in the end of coverage under the terms of the Plan. As COBRA coverage was not offered for five months after that event, the Court concludes that, even if “eligibility” were not an issue, the offering of COBRA coverage was not “timely,” and [the “late COBRA” exclusion] would apply to relieve Madison of its COBRA coverage obligations.”

and coverage is nevertheless continued to be provided by means of some employer policy existing outside the four corners of the Plan document. If COBRA is later offered to the participant and it is accepted, a valid “late COBRA” exclusion will operate to exclude the claim from coverage on the ground that the offer of COBRA was untimely. This is also the lesson of The Majestic Star Casino v. Trustmark Ins. Co. In other words, even though the employee could have been covered under COBRA had it been timely offered and the employer had not relied on some outside-the-plan continuation policy, the stop loss carrier has no liability for such claims. n

In more general terms, then, the two Clarcor opinions jointly stand for the proposition that a COBRA qualifying event occurs when a Plan participant loses his or her eligibility

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November 2011

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HEALTHCARE SOLUTIONS T H E S Y M E T R A W A Y:

Still searching for solutions to today’s healthcare challenges?

It’s tough out there. With rising medical plan expenses and mini-meds in transition you need solutions now. Symetra can help. Whether your clients are moving to a self-funded medical plan—or already there and wondering how to handle unlimited lifetime and annual maximums—our stop loss policy can help cap their risk. And our fixed indemnity group insurance policy, Select Benefits, may be a good alternative to their mini-med. To learn more about our suite of healthcare solutions—including life and disability income insurance—contact your Symetra representative at 1-800-426-7784.

Symetra Stop Loss, filed as a group Excess Loss policy, and Select Benefits group insurance policies are insured by Symetra Life Insurance Company, 777 108th Ave. NE, Ste 1200, Bellevue, WA 98004 and are not available in all states or any U.S. territory. Policies may be subject to limitations and exclusions. Select Benefits is not a replacement for major medical insurance or other comprehensive coverage. Symetra® and the Symetra Financial logo are registered service marks of Symetra Life Insurance Company. Reach for great things® is a registered mark of Symetra Life Insurance Company. LMC-5586 3/2011

The Self-Insurer

November 2011

Onsite Clinics Bring the

Value Proposition

BACK

into Healthcare

by William F. Burke, William M. Bennett and Dianne W. Geiger

November 2011

The Self-Insurer

ith the recent passage of the Patient Protection and Affordable Care Act (PPACA), known to most of us as simply healthcare reform, the industry is now faced with certain realities. Among them is the fact that healthcare resources, both in the form of financing and delivery, will be under more pressure than ever before. The facts are fairly simple – approximately 40 million more people will have access to some form of healthcare support from a declining number of primary healthcare providers. Under any circumstances imaginable, this scenario will force every facet of the industry to examine its resource allocation and delivery process and make some very, very hard decisions about their future state. Is it possible we will soon experience affordable care that we cannot access? And yet, if we examine the health status of the US-based population, we see a sustained and alarming growth of individuals will a body mass index of 35 or higher indicating an explosion of obesity leading to the onset of type II diabetes, hypertension and heart disease. In other words, our national healthcare initiatives are somehow focused on increasing the population of people insured with little to no focus on the huge population that is currently at risk for these devastating and costly diseases. Over 75% of the incurred healthcare expenditures are the direct or indirect result of 5 conditions that are exacerbated by lifestyle and could be either reduced or eliminated. Imagine for a second, that is really all it takes, how the influx of forty million Americans into the healthcare system will impact the healthcare delivery that will be necessary to identify and manage these diseases.

metabolic risk , which includes one out of ten children ages 12-19 and a 43.5% prevalence rate among adults ages 60-69. The term Cardio Metabolic Risk (CMR) is a group of risk factors such as high blood pressure, abnormally high glucose, elevated triglycerides, low “good” cholesterol, abdominal obesity, smoking, excessive alcohol intake and physical inactivity. The combination of at least three risk factors may lead to an increased risk of developing type II diabetes and cardiovascular disease. This is fueled in part by the increasing obesity rates, which have doubled over the past twenty-five years. According to a statement by the American Diabetes Association (ADA) and the American

Heart Association (AHA), excess body weight has become a major public health problem in the U.S., with nearly two-thirds of adults either overweight or obese. Care for chronic conditions such as obesity, diabetes, and cardiovascular disease account for 75 percent of $1.4 trillion medical care costs in the U.S. In as early as 2002, diabetes estimated costs were already $132 billion6 and heart disease was projected to cost more than $258 billion in 2006.7 The identification of individuals with cardio metabolic risk can assist health plans, clinicians and consumers in determining the appropriate prevention strategies for delaying or averting the

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November 2011

onset diabetes and cardiovascular disease, and/or options for managing the treatment of cardio metabolic risk through lifestyle changes and pharmacological interventions. Let’s examine the impact that CMR and disease in general has on employerbased healthcare delivery solutions since it is clear that traditional medicine has failed to intervene in a substantive way to suspend or reverse this trend. There are no other stakeholders in healthcare that have a larger investment or interest in the healthcare of working Americans than the employer themselves – not providers, not hospitals, not laboratories, not drug manufacturers, not insurance carriers. After all, employers come face-to-face with the overall population’s healthcare risks, and the costs associated with a failed healthcare system year after year. This has traditionally been a reactive event rather than a proactive one. For decades, they have struggled with the challenge of managing healthcare costs in the workplace, a daunting task outside the workplace, while attempting to build and manage successful businesses that in turn are expected to support the economic value proposition for all U.S. citizens earning wages today. So, when all else fails, the employer is left holding the bag. Most employers have exhausted their options, with cost sharing limitations now capped by the PPACA initiative, which means they have to continue to focus on ways to better manage the cost drivers within their employee population. In other words, the attitude has been one of “shifting costs” rather than managing the underlying cause of these costs. The end result is that more attention is paid to how these costs will be financed rather than how these costs will be contained.

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Solutions for the Commercial Population Let’s begin with examining the generation of healthcare resources designed in the last 20 years that are used today by the commercial population, and available to employers. In order to properly evaluate the various forms of healthcare support and delivery available today, we have established the following criteria focusing on the key components of the healthcare support or “care management program model”: Program Participation • Enrollment – the ability to attract an individual to the care management program • Engagement – the ability to effectively establish participation and keep an individual in the care management program Program Effectiveness • Utilization – the care management program’s base measurement of effectiveness in the enrollment and engagement methods • Price and Value – the relationship of these care management components • Impact on the overall health status of those served – the value proposition • Sustainability of business model used in the delivery In applying these criteria, we will assign a score from 1-5 based on the following: • Very Poor • Poor • Acceptable • Good • Very Good The delivery and support program business models evaluated are as follows: • Employer and Health Plan-based Disease Management • Online Wellness Programs • Telephonic Coaching • 1-800 Nurseline • Online Portals and Health Management Tools • Online Physician Consultation • Onsite Health Coaching • Onsite Medical Clinics (Employers)

Employer and Health Plan-based Disease Management Having evolved over the last 25 years from a pharmaceutical company-based Medication Therapy Management (MTM) initiative, initially designed to increase compliance (and sell more drugs) to the chronically ill population, and then expanding into a call center-based nurse model, today Disease Management (DM) is embracing more enabling technologies meant more to lower the cost structure. The fact that DM is still in existence, yet is constantly evolving gives the appearance that there is value in actively managing the chronically ill population, but leaves the value and sustainability still very much in question.

The fact that new DM companies are still springing into existence seems to give some credence to the notion that actively managing this population must provide some form of ROI, but the newer generations are able to implement care management models that use lower cost enabling technologies in the place of nurse or nurse practitioner labor in the delivery. Using condition monitoring devices such as blood pressure cuffs and glucometers that deliver data via the phone line or internet to a care team that works off of alerts and not some outdated telephonic outreach protocols appears to at least provide value in the form of lower cost. It even, perhaps, extends the timeframe for proving the value proposition of this model of care.

Disease Management Score Card

Online Wellness Programs These programs are unfortunately gaining in popularity because they appear to the employee and employer as a new benefit, but the reality is that they provide little, if any, real return on investment (ROI) for the program. Sometimes, these programs include a biometric screening and health risk assessment that, coupled together, assist in the identification of individuals at various levels of health risk. While this is important in giving the employee

Model/Score Care Management Criteria DM Score Comments

Enrollment

Eng-Telephonic

Eng-Internet Eng-Face to Face Utilization Price & Value

Typically limited to a mass marketing approach in very impersonal telephone campaigns

Once Identified, usually the high acuity remained engaged

Very hard to reach population limits utilization

Complex ROI measurement Makes this difficult to determine, but low due to lack of acceptance by employers

Impact

Sustainability Total

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some idea of their health risk overall, if the employer is not prepared to invest in providing real support in altering the behavior causing or exacerbating the risks, these services are of little value. It’s like a cardiologist that once said, “Never take a medical test unless you are willing and able to act upon the findings.” Typically speaking, these programs fall well short of providing the long term support that individuals require to make significant changes in these conditions.

Online Wellness Program Score Card

Telephonic Coaching While these programs have generally been designed for those identified at higher risk than the online wellness programs, which leave it up to the individual to complete, the basic design of the program represents some of the same flaws as DM in that they rely on the telephone as a means of communication. They are further complicated in that the people targeted, unless highly incentivized by the employer or health plan to participate, are less likely to engage due to the state of their health. At least with the high acuity population identified in disease management, they are more likely to engage as a matter of extending their life. The other challenge exists due to the limitations of the telephonic regarding true communication and relationship building. Psychologists have documented that close to 85% of what we communicate is non-verbal. It is difficult for a health coach to truly assess the commitment and sincerity of the individuals when they are limited to the telephone in making their assessments. Like DM, accountability is the ultimate challenge in this care management model.

Model/Score Care Management Criteria Online Wellness

Enrollment

Score

Eng-Telephonic

1-4

Comments

Eng-Internet Eng-Face to Face Utilization Price & Value 2 Usually limited to the length of the programs, typically 12 weeks

The variation of enrollment is due to the amount and/or form of incentive used in these programs

1-4

Impact

Sustainability Total

11-17

Usually higher Again, based upon value is assigned due incentive, it is mostly to the low directed at cost, but the program ROI the entire population is generally not as opposed seen at the lower levels of to DM investment

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Telephonic Coaching Score Card Model/Score Care Management Criteria Telephonic Wellness

Score Comments

Eng-Internet Eng-Face to Face Utilization

Impact Sustainability Total

Enrollment

Eng-Telephonic

Price & Value

1-3

The variation of enrollment is due to the amount and/or form of incentive used in these programs

Usually limited to the length of the programs, typically 12 weeks

Again, based upon incentive, it is mostly directed at the entire population as opposed to DM

Since these programs are more costly, the value assigned is intuitive at best due to the limited length of the program unless an ongoing measurement plan is part of the model

8-13

1-800 Nurseline This is another very good example of a low cost program implemented by employers and health plans to give the appearance of value as an employee health benefit when the reality is this is a very low cost service resulting in very low utilization. The frustration rests in the fact that nurses housed in central locations lack the knowledge of local healthcare resources and specific worksite populations to properly assist beyond symptom identification and recommendations on care options such as ER, physician or self-care. Most often times too, these services are sought by individuals urgently seeking definitive answers under stressful circumstances only to come away with less-than-satisfactory experiences due to the factors cited above. One would also question the quality of this care option on many levels.

Nurseline Score Card Model/Score Care Management Criteria 1-800 Nurseline

Score

Enrollment

Eng-Telephonic

n/a

Eng-Internet Eng-Face to Face Utilization Price & Value

Comments

1 Unless required by the SPD, this service gets single digit utilization

Impact 1

Sustainability Total 2

Only as a perceived employee benefit

Online Portals and Health Management Tools If there is one area where the vendors of these services have out-smarted themselves, it is in believing that the increased sophistication in online portals and health management tools lead to higher utilization and improved health. Unlike the banking and the travel industry that have demonstrated that increases in sophistication and functionality result in higher utilization, satisfaction and customer loyalty, health portal vendors reached the point of diminishing returns on their product design road map long ago. Can this be said for everyone that has logged on to one of these sites and used the various applications much to their satisfaction? The simple answer is no, but the reason can be stated simply – like the super users of Microsoft’s Excel program, there are some in the low single digits that utilize a large majority of the program’s capability. Those that require support in the area of macros and data sorting are perfect examples of these users. The vast population of users probably utilizes less than 10% of the program’s power. Let’s face it – healthcare is a service that is provided on demand by people in varying states of physical, financial and emotional stress. At best, these healthcare portals, while improving in degrees of sophistication, still do not support the

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November 2011

transactions that their counterparts in the travel and banking industry do. The reason people have expanded their use of online banking is not because they can log on and check their account balances. It is because they can perform financial transactions in paying bills. Even still online banking is used by only approximately 30% of the population. Until such time that healthcare portals assist in the same manner, their use will be limited to much lower percentages.

Online Portal Score Card Model/Score Care Management Criteria Online Portal Enrollment

Score Comments

Eng-Telephonic

Eng-Internet Eng-Face to Face Utilization Price & Value

Unless incentivized

1 Unless customized to reflect other employer

Impact 1

Sustainability Total 1

Only as a perceived employee benefit

Online Physician Consultation This may represent the next generation of anything of real, sustainable value in online health services. Designed to address specific instances where physicians and patients can connect for non-urgent care needs, it represents a lower cost alternative to face-to-face visits and still compensates the physician for his time and expertise.

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As a step in the direction towards direct connectivity with the physician, these services also embrace various aspects of social media such as

allowing a “friend” to become part of the access to your page. In this case, these so called “friends” can become part of the care team of a particular individual thereby expanding the human factor of support in the care process. It is expected that the EMR initiative set forth under the Bush administration and strengthened under the recent healthcare reform legislation will only expand the interoperability between these types of Personal Health Records and a physician’s Electronic Medical Record. Additionally, other online tools can become much more useful under the guidance of their use by the physician or the physician’s staff. In these examples, the case can be made that improvements in functionality and sophistication will increase in utilization and benefit. The two key factors are these – increase in the direct interaction between the provider and the patient and support for the typical transaction (visit) that occurs daily in the real healthcare world.

Online Physician Consultation Score Card

Onsite Health Coaching Quickly becoming the accepted mode for this service, onsite health coaching is proving its value in impact and sustainability. Outcomes measures document that a coaching model of this type drives accountability by effectively engaging individuals face-to-face over a period of time long enough to educate the employee, support lasting change in healthy behaviors and reinforce these changes through the creation of a trusted relationship.

Model/Score Care Management Criteria Online Consult Enrollment

Score Comments

Eng-Telephonic

Eng-Internet Eng-Face to Face

n/a

Utilization

When necessary and allowed according to reimbursement criteria

Approximately 30% of all physician visits would qualify under these guidelines. At this time, the overall utilization is very low, but is expected to vastly increase

Price & Value Impact Sustainability Total 4

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Let’s examine the key words in the paragraph above and expand on the value of this service: • Onsite – this is not just a convenience to the employee, this allows the health coach to utilize the benefit of full communication capability in engaging with the individual • Coaching – Encouragement is the root of all change

• Impact – this is occurring at two levels: Employees seeing lifestyle benefits from healthier lifestyles and employers in the form of lower healthcare costs. In contrast to disease management, this impact can be easily felt by self-funded health plans without having to agree with complex actuarial equations • Sustainability – if it creates impact,

it is sustainable • Effectively Engaging – this is not a telephonic service or one left up to someone logging on to a website. This is face-to-face healthcare • Trusted Relationship – created only through the impact of effectively educating with the proper tools and coaching with the individual’s best interest in making healthy changes

Onsite Health Coaching Score Card Model/Score Care Management Criteria Onsite Health Enrollment Eng-Telephonic Eng-Internet Eng-Face to Face Coaching

Score

Comments

Utilization 3

Price & Value Impact Sustainability Total 4

Best Practice indicates that high risk individuals are coached with more intensity and that identification criteria create a larger population than DM

Especially with incentives in place

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Onsite Medical Clinics This is a renewed trend utilized by many employers with employee populations concentrated in one location. More and more, this model is being implemented by employers with 250 employees and above with similar results. The reason behind the use of this model is fairly simple. It comes down to four primary factors: 1 - financing, 2 - Onsite primary care clinics are less expensive to finance directly through a third party management company than through the dollars spent on a healthcare benefit plan, 3 - use of primary care investment, 4 - better care guidance and care compliance, and 5 â&#x20AC;&#x201C; accessibility, affordability and accountability assure the success in terms or reduced costs and removing barriers to treatment.

The average primary care visit is estimated to be in the range of $115 to $125 per visit according to most network arrangements with self-funded employers. Through a third-party onsite clinic management company that visit will typically cost in the range of $68. Due to cost shifting strategies used by employers to lower their healthcare costs, more of the burden has shifted to the employees in the form of higher copays, deductibles and out-of-pocket maximums. When the need arises for physician care, employees have become less likely to spend their own money unless absolutely necessary. In the case of onsite clinics, most employers provide the service as a free benefit to the employees. Next, self-funded employers spend as much as 25% or more of their overall healthcare dollars on primary care. Through improved access with the free onsite service, experience shows that the percentage of the amount spent on primary care goes up, but only because the overall amount of the budget is lower due to earlier stage intervention in health matters. Less money is ultimately spent on emergency rooms and specialists. Finally, through the trusted relationship formed between the onsite medical staff and the employee, more efficient use of the healthcare investment is made. The compliance with medications increase (especially if there is an onsite drug supply) and appropriate referrals are made to specialists when the medical need arises and is determined by the clinic staff.

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Onsite Medical Clinics Score Card Model/Score Care Management Criteria Onsite Medical Enrollment Eng-Telephonic Eng-Internet Eng-Face to Face Clinics

Score Comments

Utilization 4 Very good if copays and deductibles are eliminated

Especially with incentives in place

Conclusion of the Commercial Solutions To recap, the following scores were given for the care management models used by employers:

More effective purchase of care and more effective use of the primary care component

educating and promoting one towards the achievement of goals that lead to better health is done in a very personal, compassionate and trusted manner. The combination of resources used for health coaching and to attend to one’s primary care clinical needs is even more compelling in that it addresses an individual’s need for behavior change (health coaching) and compliance to medical direction (primary care). These are the ideals of first rate health care.

Care Management Model

Score (out of a possible 30 points)

Employer and Health Plan-based Disease Management

7 – very poor

Online Wellness Programs

11-17 – poor to acceptable

Telephonic Coaching

8-13 – very poor to acceptable

1-800 Nurseline

7 – very poor

Online Portals and Health Management Tools

7 – very poor

Online Physician Consultation

15 – acceptable

Onsite Health Coaching

23 – good

Summary

Onsite Medical Clinics (Employers)

26 – very good

With this in mind, it is clear that a face-to-face relationship is essential to effective care and that telephone or Internet-based healthcare fails to engage individuals in ways that drive accountability and proper self management. As demonstrated by the scores assigned to each of the solutions graded in this evaluation, services such as onsite health coaching and care management techniques, and onsite health clinics meet the criteria for first rate health, while those delivered via telephone and the Internet fail to properly engage individuals in ways that lead to better health.

We are in a precarious time with healthcare though there are still many who don’t admit or recognize it. Legislative discussions continue on the track of “how do we afford healthcare” rather than the more logical question of “how do we make healthcare affordable?” Over 50% of the population is living with one or more chronic conditions and the rapidly increasing number of CMR cases will push an over taxed system over the edge if left to run as it is. There is already a national shortage of family practice physicians and the infusion of another 40 million individuals into the market will do nothing short of causing a theoretical rationed healthcare system.

Most compelling about the onsite solutions is this – the provider (health coach or staff in the clinic) creates a personal relationship with a defined population of people and engages them consistently over a sustained period of time with the goal of improving their health. Through a series of encounters, the process of evaluating,

In all fairness to the wellness and disease management industries, they have made logical attempts in providing solutions that identify health risks and

It is important to remember that while in times past, we viewed healthcare in terms of events, today’s research has changed our thinking so that we now understand it is actually “a continuum” throughout life. Specific case studies have demonstrated that good health is derived from an ongoing personal relationship between patient and provider based on trust between the parties, accountability on the part of the patient to abide by the provider’s advice and direction, and the realization by the patient that individual responsibility is essential to proper self management.

Price & Value Impact Sustainability Total

November 2011

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Conversely, we see that where solutions seek to engage individuals in a face-to-face manner where trusted, accountable relationships are developed, these tools may find a more useful role as an adjunct to a well established relationship where common goals are established and pursued by both the provider and the patient. It is therefore reasonable to assume that these Internet- and telephonic-based healthcare tools can provide a higher return on investment when provided as another dimension to an established human relationship. In conclusion, we believe the lessons learned from the past 20 years of development and experimentation of employer-based solutions are this simple – the closer and individual comes to developing a trusted oneon-one relationship, the more likely it is that a lasting positive change will occur. For this to be true in healthcare, we also believe that the buyer of these solutions recognizes that a minimal investment in sustainable, effective solutions is required for success. n

and focuses on a population health management approach supported by onsite and offsite clinics. Bill Burke has 21 years of experience in healthcare and was charged with strategic planning and business development of I-trax. Dianne Geiger has over 25 years of experience in the healthcare business including management and oversight of systems operations of a major carrier subsidiary. Bill Bennett founded one of the early TPAs in 1971 and has been involved in the onsite clinic industry over a decade. www.worksiterx.com

Ford, ES, et al. Prevalence of the metabolic syndrome among US adults: findings from the Third National Health and Examination Survey. JAMA 2002;287:356-9 2 American Heart Association Metabolic Syndrome Statistical Fact Sheet 2007 Update. www.americanheart. org/downloadable/heart/1168553793520META07.pdf 3 Centers for Disease Control and Prevention Overweight and Obesity Introduction www.cdc.gov/nccdphp/dnpa/ obesity/index.htm 4 RH. Eckel, R Kahn, R Robertson, RA Rizza. Preventing Cardiovascular Disease and Diabetes: A Call to Action From the American Diabetes Association and the American Heart Association. Circulation 2006;113;2943-2946 5 Centers for Disease Control and Prevention. Cost of chronic disease. http://0-www.cdc.gov.mill1.sjlibrary.org/ nccdphp/overview.htm#2. Accessed August 8, 2007. 6 Centers for Disease Control and Prevention www.cdc.gov/ diabetes/pubs/estimates05.htm 7 Heart Disease and Stroke Statistics – 2006 Update. American Heart Association; 2005. 1

conditions, enroll those affected in their programs and then attempt to provide sustainable life style changes that will positively impact health. While they have provided useful tools, the issue is one of engagement. As this study points out, where there is greater dependency on the telephone and/or the Internet for program delivery, there is a built-in weakness in engagement. In an age where these tools are used to sustain and support existing human relationships in our daily lives, it is perhaps bold to believe that these tools can be effective in newly established relationships in something as sensitive as one’s own health.

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“We crafted a lower-priced PPO network. How’s that for creativity?”

Bill Burke, Dianne Geiger and Bill Bennett are three principals of WORKsiteRx. The company was founded in 2002

When a client wants to self-insure for the chance to keep the insurer’s profit, VHN PLUS provides the opportunity. For the client’s employees, it provides over 12,000 healthcare professionals and 80-plus hospitals in network. To learn more, including how to use VHN PLUS through fully insured carriers, please visit www.vhn.com/plusnetwork; or contact Jim Gore at jgore@vhn.com or 800-989-3837 ext. 105. And put our creativity to work for you. 7400 B EAU FONT SPR I NGS DR IVE, SU ITE 505 R I C H M O N D , V I R G I N I A 2 3 2 2 5 • www.vhn.com

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November 2011

PPACA, HIPAA AND FEDERAL HEALTH BENEFIT MANDATES:

Practical by John Hickman, Esq., Alston & Bird, LLP

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

November 2011

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Q&A

New Fees for Group Health Plans Loom on the Horizon

he Affordable Care Act (ACA or the “Act”) imposes two new temporary fees with respect to group health plans that go into effect in the near future:

• A fee to fund comparative effectiveness research that, in the case of calendar year plan years, is first due for plan years starting on or after January 1, 2012, and • starting in 2014, a “contribution” in an amount to be determined by the Department of Health and Human Services (HHS) and collected at the state level that is part of the temporary reinsurance program established under ACA to help ensure the financial stability of the individual insurance market as further reforms go into effect (including the guaranteed issue requirement) and the Affordable Insurance Exchanges (“Exchanges”) become operational.

The entities subject to one or both of these fees are health insurers, selfinsured health plan sponsors, and third-party administrators. These fees may apply to certain group health plans that are generally exempt from the Act’s health insurance reforms, such as retiree-only plans. Final guidance on the fees has not

yet been issued. As the details of these new fees begin to appear, this article discusses some key aspects that should help group health plan sponsors prepare accordingly.

A. New Fee to Fund the Patient-Centered Outcomes Research Institute The Affordable Care Act created the Patient-Centered Outcomes Research Institute (the “Institute”), a non-profit organization to advance “comparative clinical effectiveness research,” and to provide information regarding the effectiveness, risks and benefits of various medical treatments. The Institute is to be funded in part by a new fee on health insurers and sponsors of self-insured health plans (the “CER Fee”). Although no guidance has yet been issued, in Notice 2011-35, the IRS requested public comments regarding how the fee will be determined and paid. The Notice provides some background on the fee and some insights into issues the IRS is considering.

Who Pays, How Much and For How Long? The CER Fee is imposed on both health insurers (including HMOs and similar arrangements) and employers and other sponsors of self-insured health plans (including governmental plans). Exempt from this fee are policies or plans under which substantially all coverage is of “excepted benefits,” as defined under HIPAA, such as stand-alone vision and dental coverage. Even though stand-alone retiree health plans are generally exempt from the Act’s health insurance reforms, stand-alone retiree plans that are not otherwise an “excepted benefit” are subject to the CER Fee.

The fee applies for each plan year (policy year in the case of fully-insured plans) ending after September 30, 2012, but does not apply for policy or plan years ending after September 30, 2019. Thus, for example, if the plan year in the case of a self-funded plan is the calendar year, the fee applies to plan years 2012 through 2018. For policy or plan years beginning in October or later months, the fee will apply even earlier. (For example, a November 1 – October 31 plan year means the fee will apply from November 1, 2011). For the first year for which the fee is effective, it is $1 multiplied by the average number of covered lives. The rate of the fee increases to $2 for the next year and is indexed thereafter based on any increase in the projected per capita amount of National Health Expenditures as published by the HHS.

Forthcoming Details The topics IRS highlighted for comment in IRS Notice 2011-35 include the following: 1. Average Number of Covered Lives. The fee is calculated by reference to the “average number of lives covered” under the policy or plan. With respect to health insurers, comments were requested on reasonable methods that may be used to determine the number of lives covered under the policy, and whether future guidance should provide a safe harbor providing that the IRS will not challenge the health insurer’s calculation if it is based on the number of lives reported to state insurance bureaus. With respect to sponsors of self-insured health plans, comments were invited on how future guidance could reduce administrative burden by providing for reasonable methods to determine the number of average

covered lives; whether future guidance should provide a safe harbor permitting plan sponsors to compute the number of average covered lives using a formula without actually counting dependents; and on formulas and factors that could be used to determine the number of dependents. Of particular interest to the IRS at this point is whether the information necessary to determine the average number of lives covered will be unavailable for the first year for which the fee is effective – i.e., the first policy or plan year ending after September 30, 2012. Some plans, (e.g., non-exempt health flexible spending arrangements (FSAs) and health reimbursement arrangements (HRAs)) may not currently track dependent coverage to the degree necessary to calculate the fee with respect to covered individuals other than the participant. 2. Health FSAs and HRAs. Benefits provided under a health FSA as described in Code § 106(c) (2) are not subject to the fee on applicable self-insured health plan, if the health FSA qualifies as an excepted benefit under the HIPAA portability rules – that is, if other group health plan coverage not limited to excepted benefits is made available and the maximum benefit payable under the health FSA is not more than two times the participant’s salary reduction election (or, if greater, $500 plus the amount of the salary reduction election). For health FSAs that do not qualify as an excepted benefit under this definition, comments were invited on the variations that exist and which types of health FSAs would nonetheless be excluded from the fee. This could be the case, for example, if the health FSA provided only benefits for vision or dental benefits.

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November 2011

It is important to note that while the exception covers most FSAs, those that do not currently qualify as an excepted benefit under the HIPAA portability rules (e.g., because other non-excepted benefit coverage is not available) will be subject to the new CER Fee unless relief is provided in future guidance. Comments were also invited on the type or types of HRAs that would be excluded from the fee because they are excepted benefits under HIPAA and the basis for such a conclusion. The IRS also requested comments on whether there are types of HRAs to which the fee should apply. 3. Annual or Quarterly Reporting and Payment. IRS Notice 2011-35 indicates that future proposed regulations could (a) require each issuer and plan sponsor to report and pay the fee annually as opposed to quarterly, and (b) require the reporting and payment to occur on the same calendar date regardless

of the applicable policy year or plan year. Comments were invited on this approach and possible alternatives.

B. New Required Contribution to Fund the Transitional Reinsurance Program Background The Affordable Care Act provides that each state must establish a transitional reinsurance program to help stabilize premiums for coverage in the individual health insurance market during the first three years (20142016) of operation of the Exchanges. This is one of three risk-spreading mechanisms that are provided under the Act that together are designed to mitigate the potential impact of adverse selection and provide stability for health insurers that issue individual

and small group health insurance policies. Adverse selection occurs when each new health insurance purchaser understands his or her own potential health risks better than health insurance issuers do, and health insurance issuers are therefore less able to accurately price their products. As described by HHS, the reinsurance program is designed to reduce the uncertainty of insurance risk in the individual market by making payments for high-cost cases. Theoretically, this will reduce individual market rate increases that might otherwise occur because of the immediate enrollment of individuals with unknown health status, potentially including those currently in state high risk pools. The reinsurance program is funded by contributions imposed on health insurance issuers and third-party administrators with respect to insured and self-insured plans in the individual and group markets.

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November 2011

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November 2011

On July 15, 2011, HHS issued proposed regulations regarding the reinsurance program, including the contribution requirement.

The Contribution Requirement To fund the temporary reinsurance program, the Act contains a contribution requirement on health insurance issuers and on third-party administrators (TPAs) on behalf of self-insured group health plans. States are required to establish reinsurance entities that will be responsible for collecting the contributions. The aggregate contribution required to be collected for the program for all states is $10 billion for plan years beginning in 2014, $6 billion for plan years beginning 2015 and $4 billion for plan years beginning in 2016. In addition, an additional aggregate

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contribution of $2 billion for 2014, $2 billion for 2015 and $1 billion for 2016 is to be collected for deposit into the U.S. Treasury as general revenues. States may impose additional contribution requirements on health insurers under the program as well, such as to fund administrative expenses. The Act states that the Secretary of HHS is to determine the amount that issuers and TPAs must contribute to the temporary reinsurance program, and that the contribution amount may be based on (1) the percentage of revenue of each issuer and the total costs of providing benefits to enrollees in self-insured plans; or (2) a specified amount per enrollee. Under the proposed regulations, the amount collected from each contributing issuer and TPA will be calculated by reference to a national contribution rate that will be set forth by HHS in future guidance based on its estimate of total premiums in the fullyinsured market and medical expenses in the self-insured market. Under the proposed regulations, health insurance issuers and TPAs on behalf of group health plans will be required to submit contributions in a frequency and manner determined by the state or HHS – for each state in which the entity issues health insurance. Issuers and TPAs may be required to submit contributions on a monthly or quarterly basis starting in January 2014. If the state establishes or contracts with more than one reinsurance entity, the issuer or TPA will be required to make payments to each reinsurance entity that covers the geographic area in which the contributing entity issues health insurance. Each issuer or TPA will be required to submit data to substantiate its contribution amounts.

Will the Contribution Requirement Apply to All Third-Party Administrators? One question that self-insured plans should pay close attention to is whether the TPA contribution

requirement will be limited to health insurers providing TPA services (i.e., through an administrative services only (ASO) contract), or whether the contribution requirement will apply to all TPAs of self-insured plans. The Act does not provide a clear answer. The proposed regulations appear to adopt the more expansive interpretation by defining the term “contributing entity” as “any health insurance issuer and, in the case of a self-insured group health plan, the third party administrator of the group health plan.” “Third party administrator” is defined as “the claims processing entity for a self-insured group health plan.” The preamble to the proposed regulations states that, if a self-insured group health plan processes its own claims, the selfinsured plan will be considered the TPA. Under this interpretation of the Act, all TPAs of group health plans would be required to make the contribution – not just health insurance issuers providing TPA services. n

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The Self-Insurer

November 2011

SIIA GRASSROOTS & Political Advocacy Monthly Wrap Up Report

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

Grassroots Network in Action SIIA’s Grassroots Network of members who have volunteered to educate members of Congress about self-insurance are making steady progress in educating their representatives about the advantages of self-insurance to both employers and employees.

Stu Thompson, CEO of The Builders Group, met with Brooke Dorobiala, district director for Rep. John Kline (R-MN) to express support for the Risk Retention Modernization Act that Rep. Kline cosponsors. “This was the first time calling on my Congressman and I strongly urge other members to become involved in making positive changes for our industry,” he reported. Bob Madden, vice president of First Niagara Benefits Consulting Group met with Melissa Fratello, western New York regional director for Sen. Kirsten Gillibrand (D-NY) to discuss the importance of self-insurance to smaller companies. “Our Congressional leaders need help in understanding real-world examples of how their decisions impact us and our business,” he reported. Jim LeRoy, senior vice president of Meadowbrook Insurance Group, met with legislative counsels for Minnesota Democrat Senators Amy Kobuchar and Al Franken in their Capitol Hill offices. “These meetings were a true affirmation of SIIA’s grassroots campaign as a respected voice in Washington,” he reported. Further meetings last month were being scheduled for Grassroots Network members Craig Kelbel, president and CEO of HCC Life Insurance, to meet with Georgia Republican Senators Johnny Isakson and Chris Chambliss; Mike Sullivan, president and COO of HM Insurance Group, to meet with Sen. Bob Casey (D-PA) and Rep. Mike Doyle (D-PA); and Kelly Burn, vice president of KLB HealthCare Business Consulting LLC, to meet with Texas Republican Senators. Kay Bailey Hutchinson and John Cornyn.

November 2011

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SIIA Presses Self-Insurance Message at HHS A SIIA delegation will meet with top-level officials of the Department of Health and Human Services on Oct. 19 to bring requirements of the self-insurance industry to the department’s formulation of a regulation requiring contributions by all employee health plans to reinsurance funds backing up the state healthcare insurance exchanges mandated by PPACA. Jay Ritchie, recently installed chairman of the Self-Insurance PAC, and Horace Garfield, chairman of the Government Relations Committee, will meet along with SIIA lobbyists to reinforce points made to HHS by Chief Operating Officer Mike Ferguson in his earlier letter to HHS, and to offer SIIA’s expertise related to selfinsured group health plans. Among the points SIIA will make in support of the self-insurance industry are: • Contributions should be made on an annual basis to minimize the administrative burden on self-insured employers and TPAs, and that they should be collected through a federal process in keeping with self-insured plans’ federal regulation by ERISA. • Contributions should, as the agency has drafted, be based on medical expenses rather than per capita because self-insured plans are generally more successful in controlling costs than fully insured plans. • While the draft regulation specifies that a “claims processing entity” facilitate contributions, such contributions must come from plan assets and at the plan’s specific direction. Reinsurance should be limited to covering only essential health benefits so that insurers and self-insurers will not be forced to reinsure the cost of some benefits they do not themselves offer.

Ferguson takes mssage to Illinois employers SIIA Chief Operating Officer Mike Ferguson brought the self-insurance message to a group of more than 150 employers at the Central Illinois Cost Containment Conference in Peoria that was produced by the Illinois Chamber of Commerce last month. This speaking engagement is part of a broader outreach initiative to employer organizations throughout the country. Mike popped some eyeballs with his data supporting self-insurance of employee health plans including this point: “From 2009 to 2010 for employers with more than 200 lives, the average full-insured premium increased by $808 compared to an average increase of $248 for selfinsured premiums,” using data supplied by RAND and Deloitte Advanced Analytical Consulting Group on behalf of HHS/DOL. n

At this year’s National Conference, CoreSource once again showed their generous support of SIIA’s Political Action Committee. Pictured here is CoreSource President and CEO Nancy Eckrich, alongside Jerry Castelloe, Senior Vice President and Katherine Bresler, Vice President of Government Relations, presenting a $5,000 PAC-to-PAC check to SIIA COO, Mike Ferguson and SIIA PAC Board Member, Tom Belding. From left to right, Mike Ferguson, Nancy Eckrich, Tom Belding, Katherine Bresler and Jerry Castelloe.

The Self-Insurer

November 2011

ART GALLERY by Dick Goff

An expert’s view of captives for health plans

s curator of the Gallery, I have always been an avid collector of ways alternative risk transfer can augment, extend and improve self-insurance – all of ART is basically self-insurance. So I have argued the cases for captives to serve valuable roles in the entire spectrum of business self-insurance, including employers’ self-insured health benefit plans from the major corporations down to micro firms. But that’s just me. Maybe I’m looking at the world through ARTcolored glasses. There is plenty of pushback against the concept of self-insuring smaller organizations among state insurance regulators herded by the National Association of Insurance Commissioners (NAIC) as well as elements of the traditional insurance industry. Even some service providers to self-insured employers are slow to appreciate the role of captives in small to middling health plans. So I sought the opinion of a higher power, one George Pantos who I call the Godfather of ERISA application. Most of you know George as the onetime chief lobbyist for SIIA who now serves as executive director of the Healthcare Performance Management Institute, a think tank that has attracted many major employers to the mission of getting a handle on health care costs. Earlier he was an

November 2011

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instrumental member of the federal government when ERISA was passed, and then guided employers in its use as a Washington attorney before joining SIIA. If anyone is credible in this field, it’s George. He was happy to talk about the emergence of ART structures and offered his own third-party source to support the idea of smaller firms enjoying the benefits of self-insurance. He pointed to the recent article by Brian Schilling published by The Commonwealth Fund that was headlined, “Can Smaller Firms Self Fund? Surprise – Many Already Are.” Mr. Schilling quoted the leader of a small firm insuring 80 employees: “We’ve saved money every year versus buying a fully insured product… every year our costs have been 10 to 20 percent lower because we self-insure.” The author cited statistics indicating that self-insurance of employee health plans is growing in every size category including firms with as few as three employees. And, according to George Pantos, the more “self ” in self-insurance, the better. He agrees that emerging captive structures can help employers reduce costs, control the design of their plans, escape state mandates and certain taxes as well as gain some federal tax advantages. “My mantra is to take control and mitigate risk, and ART structures can drive those objectives,” he said. “Captives and all self-insurance vehicles enable employers to access claims data to analyze a group’s health trends and gain significant competitive advantages over fully-insured plans.” George advised that we take a step back a moment to grasp the significance of controlling your plan’s claims data. Under most insurance contracts the claims data is the property of the insurer, not the entity that pays the premiums. The insurer uses advanced technological tools to aggregate claims data over millions of transactions to devise profitable premium profiles. “When a member of an insured plan picks up a prescription for Lipitor, for example, the insurer knows that member may be at risk for heart problems or other issues related to high cholesterol,” George points out. “But think of the employer’s advantage to access that same information on a statistical basis and be able to formulate specific wellness programs that can address those health risks.” “Control of the data then translates to mitigation of risk,” he said. “This can put even smaller self-insured employers on an even strategic footing with the major corporations who already know the value of controlling claims data to mitigate risk.” In that way, George contends that captives and other self-insurance vehicles can begin to restrain costs by reducing certain risks. “We know that 80 percent of health costs are the result of five or six chronic health risks,” he said. “If we can begin to attack those risks through expedient analysis of claims data, we’re on our way to a more rational health care cost environment.” I was sufficiently buoyed by George’s comments to envision an ART solution

for self-insured ERISA plans of as few as 25 people. Supported by a fronted group captive spec and ag stop-loss program, such plans could operate with a self-insured retention of, say, a minimum of $5,000 per individual – though most regulators don’t like an SIR that low – while the captive takes the next $250,000, with reinsurance for catastrophic cases. That little company can now play in the big boy leagues to compete in recruiting and retention of top performers.

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

With ART, it could be a brave new world. n Dick Goff is managing member of The Taft Companies LLC, a captive insurance management firm and Bermuda broker at dick@taftcos.com.

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

Merry Gann RN, LHRM, CCM, ABDA President 1-727-565-2993

www.cpr-rm.com

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November 2011

Liability

Driven

Investing

November 2011

The Self-Insurer

by Matthew P. Leahy, CFA, Institutional Sales Consultant, Congress Wealth Management

oday’s institutional investor is faced with a complex and ever expanding set of challenges including increased regulatory scrutiny, heightened fiduciary requirements, and rising market volatility. At the outset of the client discovery process one should initiate a ‘checklist’ approach to help ensure proper adherence to compliance regulations while minimizing strain on resources. The specific areas of concern identified are addressed by taking a Liability Driven Investment Approach (LDIA) to investing institutional assets. Most institutional assets have required cash flows known in advance, such as a defined benefit pension payment, or a 5% spending requirement for a private foundation. The focus for these institutional assets should be on the cash outflow, specifically treating each flow as a liability. Once the liability is identified, LDIA by definition, attempts to position assets to mirror the movement of the liability. Taking a “liability first” approach allows institutional investors to limit volatility around generating returns, thus enabling them to meet both current and future liability payments in a prudent manner. Investment vehicles like defined benefit plans (DBP) are long term, complex investments that require the participation of a range of professional services including an actuary, investment manager, consultant, third party administrator (TPA), and trustee. Over the last decade, DBP’s came under significant scrutiny due to large plan failures, including Delta Airlines $2.2B default in 2006. Delta claimed the two main drivers for default were: 1) poor investment performance and 2) a difficult operating environment for the airline. However, Bradley Belt, executive director of the Pension Benefit Guarantee Corporation said in 2005 “it was a company’s ability to mask their plans true financial status as part of the problem”, and “companies are able to report that they are fully funded when in fact they are deeply in the hole and getting more deeply in the hole”. As a result of failures at Delta and other firms, the Pension Protection Act of 2006 (PPA) was passed and has been phased in over a period of five years. It is fully enforceable in 2011, with the exception of a few loopholes. The PPA aims to drive strict oversight of pension investing and results in lower smoothing periods for plan assets, larger required annual contributions, and penalties for plans that carry an unfunded liability. Two notable PPA thresholds to avoid as a plan sponsor include: 1) “endangered status”, which is triggered when funded status levels fall below 70%, and 2) “critical status”, which is triggered when funded status erodes below 60%. Given the strict enforcement of the PPA, we recommend that plan sponsors perform an internal examination to ensure proper compliance to avoid potentially costly legal and fiduciary violations. Today, considerable attention is paid to the definition of fiduciary responsibility. The Employee Retirement Income Security Act (ERISA) was established in 1974 and mandates that plan assets be managed for the sole benefit of plan participants. Three sections of ERISA that we highlight: ERISA 404 (a) Breach of Fiduciary Duty, ERISA 406 (a) Transactions between plan sponsor and a party of interest, and ERISA 406 (b) Transactions between plan and fiduciary. Trustees, board members, and all interested parties should stay up to date with these sections to avoid any perception of imprudence or self dealing. How plan sponsors invest assets comes under significant additional scrutiny by the Department of Labor (DOL), the Securities Exchange Commission (SEC), and the Internal Revenue Service (IRS). Given the presence of multiple governing bodies, we recommend strict adherence to proper compliance as ERISA violations are severely punished.

Institutional investors accept the fact that investing in public markets are not without significant market risk. However, plan sponsors rarely grasp the significance of accounting risk, derived from pension liability exposure to falling interest rates and its effect on funded status calculations. In its simplest form, a defined benefit plan makes a stream of payments to plan participants upon retirement. This dollar value is discounted back (present value calculation) to generate a target asset base the sponsor needs to maintain a fully funded status. Thus, the pension liability has bond-like features including an inverse relationship to interest rate movements. In 2008 the S&P 500 lost over 38% and interest rates fell to historic lows as the 10 year U.S. Treasury yield hit 2.05%. , This environment created a tsunami-like effect on many defined benefit plans as stocks and interest rates fell simultaneously, contrary to normal markets where lower rates are favorable for stocks. This unforeseen event weighed heavily on numerous plan sponsors due to: 1) overly aggressive asset allocations to stocks and alternative assets, and 2) plans sponsor failure to understand the role of accounting risk. Market volatility in 2008 ultimately drove down sponsor funded status, increased their pension liability, drove higher the amount required to contribute to the plan, all while more regulation was set to be enforced from the phase-in of the PPA. Finally, as economic growth rebounds, interest rates will rise again. The big question is the timing and size of interest rate increases. The solution is applying a Liability Driven Investment Approach to determine allocation and investment of plan assets. By aligning the duration of liabilities, with the duration of assets, you simultaneously align the market

The Self-Insurer

November 2011

risk with the accounting risk of the plan. While duration matching doesn’t solve the entire problem, as the liability is not truly investable, it does reduce large swings to the pension surplus. LDIA will typically result in reduced stock exposure, increased fixed income exposure, and longer duration within the fixed income segment. The allocation decision is driven first by funded status, then over time as the plan approaches fully funded status you de-risk the portfolio. The incremental gains from generating a large surplus with risky assets are not nearly as impactful as experiencing losses due to funding deterioration that requires higher contributions from the sponsor. In 2011, LDIA is popular among large plans including International Business Machines, Boeing, United Technologies, and Prudential. LDIA is a dynamic process that typically involves more resources; as a result, smaller, more

resource constrained plans can’t afford this type of allocation and advice.

constrained to allow for more realistic projections of liability values.

Regulation requires plan sponsors to submit annually a Form 5500 to the IRS, DOL, and SEC. The IRS will test the estimates used by the plan sponsor and actuary to calculate their funded status in Schedule (SB) of the filling. The PPA requires that private plans use a combination of three discount rates on the investment grade corporate bond curve to discount liabilities and determine funded status. Plan sponsors who apply aggressive assumptions like using higher discount rates than allowed, could expose themselves to an IRS audit, pay penalties and interest, and a requirement to amend their filing. In 2009, according to an SEI paper, plan sponsors used a median return on asset assumption of close to 8% to discount liabilities. However, given today’s muted market returns and the outlook for slower growth, discount rates must be

An essential requirement to apply LDIA is seamless information flow from actuary to investment manager. Historically, actuarial valuations took place annually. However, it’s paramount today to have an actuary that provides quarterly updates to the investment manager to ensure the proper duration exposure at all times. As interest rates and actuarial assumptions change over time, the investment manager can dynamically manage the asset exposure. LDIA is most common among mature and potentially frozen plans where accruals have either slowed or stopped completely, and managing this information flow from actuary to investment manager is essential to reaching the end goal of plan termination. By deploying a LDIA strategy for a defined benefit plan, institutional

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November 2011

investors may limit surplus volatility and focus on maintaining a certain funded status target, but this approach is not without disadvantages. For example, LDIA may require more capital be allocated to fixed income to replicate the bond-like features of a DBP payment stream. As more capital is placed into bonds, there is less opportunity for outsized asset performance from equities, which may help limit future sponsor contributions to the plan. However, governing bodies of ERISA assets are only concerned that sufficient assets are present to make payments, not growing a surplus for sponsor comfort. That said, many plan sponsors choose LDIA for its ability to meet liability streams when due, and industry best practices characteristics of this investment strategy. New regulations continue to put amplified demands on plan sponsors, making the decision to seek outside services a virtual necessity. For DBPâ&#x20AC;&#x2122;s that are frozen or striving to reach termination, a LDIA strategy would be most effective at controlling duration and limiting surplus volatility. As a result, proper due diligence of all service providers should be performed prior to entering into any contract to gauge their experience and ability to implement a LDIA strategy. The most successful plan sponsors will choose service providers with aligned interests to the plan, allowing them greater ability to navigate the complex world of DBPâ&#x20AC;&#x2122;s. n

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Mr. Leahy manages Institutional Relationships for Congress Wealth Management focusing on Endowments, Foundations, and Defined Benefit Plans. His responsibilities include developing customized strategies to meet the needs of institutional clients, integrating a liability driven approach to meet the complex requirements of the current institutional environment. Mr. Leahy is a CFA charterholder and a member of the Boston Security Analysts Society. He received his BS from the University of Vermont and his MBA from the Carroll Graduate School of Management at Boston College.

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November 2011

INSIDER INFORMATION Heather Wilson Joins H.H.C. Group as Regional Vice President of Sales H.H.C. Group is pleased to announce the addition of Heather Wilson as Regional Vice President of Sales. Heather will be responsible for new sales and client service for insurers, TPAs, self insured companies, ERISA plans, HMOs and government entities in the Western United States. “We are excited to bring Heather on board to help HHC Group expand our relationships on the West Coast. Her experience working with providers, payors and internal cost containment operations will be a valuable asset to our clients,” said Michael Scott,Vice President of Sales.

H.H.C. Group Launches Medicare/DRG Based Pricing Service H.H.C Group, a leading healthcare insurance consulting company, today announced the launch of its Medicare/ DRG Based Pricing Service, designed to help payors of all sizes reign in ever increasing provider related costs. “PPO discounts have been only partially successful in controlling spiraling provider costs. Many larger insurers have already made the switch to Medicare/ DRG Based Pricing or are considering doing so, putting all who compete with them at a serious disadvantage,” said Dr. Bruce Roffé, President and CEO of H.H.C Group. “Medicare/DRG based pricing offers a number of advantages over pricing based on a percentage off billed charges alone. Medicare/DRG Based Pricing eliminates excess charges due to providers artificially inflating their prices for services delivered. It also ensures similar payment (Medicare makes adjustments based on geographic and other factors) for the same or similar services,” stated Dr. Roffé. About H.H.C. Group – H.H.C. Group is a leading national health insurance consulting company providing a wide range of cost containment solutions for Insurers, Third Party Administrators,

November 2011

The Self-Insurer

Self-Insured Employee Health Plans, Health Maintenance Organizations (HMOs), ERISA and Government Health Plans. HHC utilizes a combination of highly skilled professionals and advanced Information Technology tools to consistently deliver targeted solutions, significant savings and exceptional client service. For additional about H.H.C. Group visit www.hhcgroup.com or contact Joseph Michaud, Executive Vice President of Sales at j_michaud@hhcgroup.com or 301-9630762 ext. 110

WEB-TPA Communitas Care Management Names Meyers Director of Data Management, Clinical Solutions IRVING, TX – WEB–TPA, Inc., a leading provider of health plan management services and an AmWINS Group company, has announced the appointment of Tadd Meyers as Director of Data Management, Clinical Solutions for the Communitas Care Management division. About WEB-TPA – WEB-TPA is one of the largest privately held benefit administrators in the United States, providing infrastructure and administration services to fully insured, self-funded and clinic programs across in both the group and individual marketplace. Founded in 1993, WEB-TPA has a proven history of successfully managing a wide array of health plans. Covering more than a quarter million members nationally and growing every year, WEB-TPA has earned a reputation as a forward-thinking, flexible, service-oriented administrator. To learn more, visit www.webtpa.com. About AmWINS Group, Inc. – AmWINS Group, Inc. is a leading wholesale distributor of specialty insurance products and services. AmWINS has expertise across a diversified mix of property, casualty and group benefits products, and offers valueadded services to support some of these products, including product development, underwriting, premium and claims administration and actuarial services.

With over 1,800 employees located in 16 countries, AmWINS handles over $4.8 billion in premium annually through four divisions: Brokerage, Underwriting, Group Benefits and International. To learn more, visit www.amwins.com.

One Call Medical Appoints Executive Vice President of Strategy PARSIPPANY, NJ – One Call Medical, Inc. (OCM), the nation’s leading provider of specialty services to insurance payers, today announced the appointment of John Stanzi to the newly created position of executive vice president of strategy. One Call Medical CEO Don Duford commented on the appointment: “We are pleased to have an executive of John’s caliber and experience join the OCM team. John will help to develop and manage corporate and business unit strategies that create synergies across our company and for the benefit of our customers. His leadership skills in mergers and acquisition, successful business integration, and enterpriselevel planning are critical as OCM continues to grow through both organic and M&A activity.” About One Call Medical, Inc. – One Call Medical, Inc. (OCM) is the nation’s trusted partner, delivering a suite of easy-touse, efficient and cost-effective specialty services that help claim professionals achieve superior outcomes. Through OCM’s specialty diagnostic, transportation, translation, interpretation, and dental network services, customers benefit from access to fully credentialed providers, prompt scheduling of services, and improved care. For additional information regarding One Call Medical, please contact: Bill Colacurcio at 973-316-3718 or Bill_ colacurcio@onecallmedical.com

Cindy English has joined Elite Group Consulting Cindy English has joined Elite Group Consulting of Lewisburg. English brings to Elite Group Consulting twenty plus

years of knowledge and experience including underwriting management, pricing insurance products, and leading strategic initiatives. She will be responsible for managing existing large clients and developing new business. Elite Group Consulting has been specializing in employer health and welfare benefit consulting since 1985. Cindy English can be reached at cenglish@elitegrpconsulting.com

PHX Announces Promotion of Mark Sartell - Vice President, Stop-Loss Carrier Relations BEDMINSTER, NJ – PHX, a leading provider of healthcare cost management solutions, is pleased to announce that Mark Sartell has been promoted to the newly created position of Vice President, Stop-Loss Carrier Relations. In this new position, Mark will be responsible for creating partnerships with group health stop-loss carriers to build demand for the innovative suite of PHX solutions which span the healthcare cost management market place. The PHX product portfolio offers a full complement of in-network, out of network, pre-payment and post payment solutions. Mark’s extensive industry experience provides him with an understanding of the challenges faced by a myriad of healthcare stakeholders and the ability to create partnerships that benefit all customers in the value chain. About PHX – PHX is a healthcare cost management company that delivers claim integrity services to health plans. 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-Hartley Funds, Health Maintenance Organizations (HMOs) and Third Party Administrators (TPAs). For more information, please visit www. phx-online.com.

SIIA New Members REGULAR MEMBERS Voting Representative/Company Name Tom Ciccotti, Vice President of Sales, CHC Wellness, Chicago, IL

Richard Swift, President, MedWise Partners, Inc., Scottsdale, AZ

Stephen Kelly, President, ELAP Services, LLC, Chester Springs, PA

Sandra Coble, ASO Product Manager, PacificSource Administrators, Inc., Tigard, OR

Jean LaFavor, Vice President, HealthEZ, Bloomington, MN

Deb Miller, Corporate Vice Pres. Marketing, Parity, Franklin, TN

Robert Schmidt, President, Innovative Healthware Services, Arnold, MD

Richard Schurfeld, CEO, Redsson, Toledo, OH

Ron Johnston, President, Johnston and Associates, Inc., Franklin, TN

Christopher Fazzini, Executive Vice President, Reliance Standard Life Ins. Co., Philadelphia, PA

EMPLOYEE MEMBERS Voting Representative/Company Name Wayne McCulley, CFO, Beehive Telephone Company, Lake Point, UT

Gregory Dolby, VP, Human Resources, Ellison Group, Mason, OH

Siri Gadbois, President/CEO, College Insurance Company, Inc., Chicago, IL

Ed Kahalley, Jr., Trust Administrator, IBEW-NECA Local 505 Health Plan, Mobile, AL

Julie Wohlstein, Director of TPA Services, Community Health Group, Inc., Chula Vista, CA

Kris Geary, Marketing Director, medTREANS Insurance Ltd., Greensburg, PA

Joseph Rhoads, CFO, ELAP Insurance Company, LLC, Chester Springs, PA

The Self-Insurer

November 2011

CHAIRWOMAN’S REPORT Freda Bacon

ill Gates has said, “Never before in history has innovation offered promise of so much to so many in so short a time”.

Innovation was the theme for this years’ 31st Annual National Conference, held at the beautiful J. W. Marriott Desert Ridge Resort in Phoenix, Arizona. Over 1,650 attendees were in attendance to hear noted speakers and panel discussions on health care, worker’s compensation, alternative risk transfer systems and SIIA’s international initiative. In addition to two full days of education, over 130 exhibitors were on hand to network and show their support to SIIA and its membership. On behalf of the Board of Directors, I want to thank all of those who sponsored events, exhibited, and provided entertainment during the conference. Speaking of entertainment, Village People rocked the Disco in the Desert on Tuesday night, and our boogie shoes danced the night away! 80 golfers took advantage of the beautiful Arizona weather and participated in the Self-Insurance Education Foundation golf tournament on Sunday. A special thank-you to our golf sponsors for a great time for all those who participated in this worthy cause. To all of those who were fortunate to attend this premier conference, I hope you came away with all that you expected. If Bill Gates himself had been there, he would have given a nod to a true innovation in the selfinsurance industry. Til next time,

Freda Bacon, Chairwoman

November 2011

The Self-Insurer

November 2011

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