Self-Insurer Sept 2014 by SIPC

September 2014

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A Critical Tipping Point Why ASOs are surpassing fully insured dental plans in the commercial market and other key trends

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SEPTEMBER 2014 | Volume 71

September 2014 The Self-Insurer

FEATURES

(ISSN 10913815) is published monthly by Self-Insurers’ Publishing Corp. (SIPC), Postmaster: Send address changes to The Self-Insurer P.O. Box 1237 Simpsonville, SC 29681

ARTICLES 10 The Health Plan Identifier (HPID) by Cori M. Cook

Editorial Staff

14 ART Gallery: NAIC Proposal

PUBLISHING DIRECTOR Erica Massey

Threatens ART Industry

SENIOR EDITOR Gretchen Grote

18 Impacting Your Medical Costs Through

Why ASOs are surpassing

by Cynthia Freese, RN, CPC

fully insured dental plans in

and Linda Myrick, CPC

CONTRIBUTING EDITOR Mike Ferguson

A Critical Tipping Point

the commercial market and

DIRECTOR OF OPERATIONS Justin Miller

other key trends by Bruce Shutan

DIRECTOR OF ADVERTISING Shane Byars EDITORIAL ADVISORS Bruce Shutan Karrie Hyatt

32 PPACA, HIPAA and Federal Health

Benefit Mandates: To Subsidize or Not Subsidize – That is the Question – How Halbig and King Affect Employer Requirements under the Affordable Care Act

38 Captives Nearly Reclassified as

Editorial and Advertising Office P.O. 1237, Simpsonville, SC 29681 (888) 394-5688

Multiple Procedure Reductions

Multi-State Reinsurance Companies

by Karrie Hyatt

Pain Management

2014 Self-Insurers’ Publishing Corp. Officers

by Kaylea Boutwell, MD

James A. Kinder, CEO/Chairman

INDUSTRY LEADERSHIP

Erica M. Massey, President Lynne Bolduc, Esq. Secretary

4 SIIA Chairman’s Message

Further Arguments in Opposition to the NAIC Multi-State Reinsurer Proposed Definition

by Terisa Anderson and Dana H. Sheridan

The Self-Insurer | September 2014 3

SIIA CHAIRMAN’S MESSAGE A Sneak Peak of the ART Sessions at the 2014 SIIA National Conference & Expo...

ue to the increased risk profile by ACA, an increasing number of smaller and mid-sized employers have been considering self-insured group health plans. Stop-loss captive programs can facilitate this transition. SIIA has become the recognized industry leader in this fast-growing captive insurance market development and will be featuring education and solutions at the SIIA National Educational Conference and Expo October 5-7th. There will be a special Alternative Risk Transfer Sessions track, and the speakers for this topic area will be many of the industry’s top experts. This year’s sessions include: Introduction to Captives In this beginner-level session, Martin Eveleigh, Chairman, Atlas Insurance Management and Christopher L. Kramer, Director of Marketing – Captives, ULLICO, will provide an overview of common captive insurance structures, including risk retention groups and Enterprise Risk Captives, also known as 831 (b) captives, and discuss the advantages and disadvantages that employers should be aware of when considering various captive insurance solutions. Introduction to Stop-Loss Captive Programs Andrew Clayton, President, Pareto Captive Services, LLC and Jeffrey Fitzgerald,Vice President -

September 2014 | The Self-Insurer

Employee Benefits, Innovative Captive Strategies will explain how stop-loss captive programs (also known as employee benefit group captives) can be structured along with the motivations/ value propositions from differing perspectives, including employer, captive manager, TPA and carrier. Stop-Loss Captive Programs Case Study Profiles James Minge, President/CEO, Texas Trust Credit Union, Aaron Schulte, Chief Financial Officer, Mountain Valley Express, Bernie Tillotson, Senior Vice President, Thoits Insurance, and Patti Tuma, Senior Area Vice President, Gallagher Benefit Services, Inc. will provide case study profiles of actual stop-loss captive programs. This promises to be a perfect follow-up to the introduction session as abstract business concepts will be matched up with the “real world.” Enterprise Risk Captive (ERC) Case Study Profiles Jeffrey K. Simpson, Attorney, Gordon, Fournaris & Mammarella, PA will serve as Moderator, while Jarid S. Beck, ACI, CRIS, Director, Risk Management Advisors, Inc., John Naughton, CPCU, Principal, Keystone Risk Partners, Martin Eveleigh, Chairman, Atlas Insurance Management, Kirk Mooneyham, Managing Director, Wilmington Trust Captive Management and Kevin Myers, CPA, Principal, Oxford Risk Management Group will provide case study profiles of actual Enterprise Risk

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Captives, also known as 831 (b) captive programs. Both “pooled” and “nopooled” structures will be explained and described. Regulatory Considerations for Stop-Loss Captive Programs There are numerous regulatory considerations that must be properly accounted for in order to successfully launch a stop-loss captive program. David F. Provost, CFE, Deputy Commissioner of Captive Insurance, Vermont Department of Financial Regulation, Mike Ferguson, President & CEO of SIIA, Tess Ferrera, Partner, Schiff Hardin, and Lisa Kaderabek, Partner, McDermott Will & Emery LLP will discuss prohibited transactions, stop-loss insurance restrictions, securities issues and domicile licensure requirements. Stop-Loss Captive Programs – Roundtable Discussion Still have questions and/or information to share regarding stop-

loss captive programs? Perfect! Join Michael Kemp, President, IHC Risk Solutions, Phillip C. Giles, CEBS,Vice President of Sales & Marketing, Accident & Health, QBE North America, Scott Smith, Executive Vice President & Director of Employee Benefits, S.S. Nesbitt & Company, and Don McCully,Vice President, Sales, Roundstone Management, Ltd. for a moderated roundtable discussion where panelists from previous sessions join the audience for an informal exchange of questions and opinions. This promises to be one of the liveliest sessions of the entire conference. Enterprise Risk Captives (ERC) Crossfire – Let the Debate Begin! Perhaps one of the hottest discussion topics within the captive insurance industry over the past couple years is whether Enterprise Risk Captives (ERCs), also known as 831 (b) captives, provide true risk management solutions for small employers or if the actual value is more limited. Jeremy Huish, Director, Artex Risk Solutions, Inc. and Patrick Theriault, Managing Director, Strategic Risk Solutions, Inc. will discuss their differing perspectives in a moderated, debate-style session. The Pros and Cons Stop-Loss Captive Programs The convergence of self-insurance and captive insurance over the last several years has been the most pronounced in the form of stop-loss captive programs. Some industry experts believe these programs provide an effective solution to help smaller employers operate self-insured health plans. Other experts disagree,

concluding that participation in these programs are unnecessary to take advantage of self-insurance. So who’s right? Come to this moderated, debatestyle session where Matthew Rhenish, President & COO, HM Insurance Group and Andrew Cavenagh, Managing Director, Pareto Captive Services will share their opinions on this timely subject and will invite audience questions. SIIA is fortunate and proud to be able to attract these leading experts in their Industries as speakers. This is an unequaled opportunity to learn how to develop the most effective selfinsurance solutions. I look forward to seeing you in Phoenix! n

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The Self-Insurer | September 2014

A Critical Tipping Point Why ASOs are surpassing fully insured dental plans in the commercial market and other key trends by Bruce Shutan

September 2014 | The Self-Insurer

he adoption of self-insured dental benefits is in overdrive as the Affordable Care Act (ACA) becomes fully implemented – much like on the group medical side of the market. The reason: All fully insured coverages, including stand-alone dental plans, were charged a more than 2% tax of total premium revenue beginning in 2014 – an assessment that will reach about 3% by 2016. Since self-insured plans are exempt from various ACA requirements, they’re now more palatable than ever for dental plan sponsors and the trend is even trickling down market. One notable exception is that pediatric dental qualifies as one of 10 essential health benefits, but it isn’t expected to have much of an impact. As of 2012, ASO contracts for self-insured dental plans accounted for 49% of the total commercial dental insurance market, which was up from 42% between 2006 and 2009 and 48% in 2010 and 2011. The numbers come courtesy of a long-standing annual survey on enrollment conducted by the National Association of Dental Plans (NADP) in collaboration with the Delta Dental Plans Association since 2002. Evelyn Ireland, NADP’s executive director, predicts that self-insured dental plans will finally surpass fully insured plans once the 2013 data is finalized – with a 1% to 2% increase in self-insured business nationwide serving as a backdrop. Additional NADP research supports this notion. Preliminary data from an employer survey, for example, suggests a significant increase in the self-insured dental market between 2013 and 2014, while an NADP analysis of carriers in California, the nation’s largest dental market, pegged ASO market share as high as 60% last year. The latter trend is expected to accelerate.

“In two or three years, there will most likely be a loss ratio applied out in California,” Ireland forecasts. “That’s just another incentive to push more of that business to the self-insured part of the market where you don’t have those limitations.” The self-insurance trend is also expected to flow further down market as ACA implementation deepens. “When employers up to 100 [employees] become part of the small group market in 2016, they’re going to have their benefit structure dictated to them, and it’s still feasible to self-insure the 50 to 100 size employers,” Ireland says.

Plan design issues Although the ACA sought to widen access to pediatric dental benefits, enrollment in stand-alone plans for children on public health insurance exchanges was only about 16% on average compared to 19% for adults. Employers are busy contemplating prudent plan design changes in this evolving marketplace. Ireland says one such issue may be subjecting orthodontic coverage to a medical necessity requirement, adding that it’s “pretty much a recipe for a lot of employee complaints.” She says about 30% of children who typically have orthodontia on an annual basis (about 16% of all covered children) are estimated to qualify for a midlevel medical necessity requirement on a Salzmann Index of some sort. “We haven’t seen much backlash yet, but it’s still really early in the administration of these policies to get much information back,” she reports. There may not be many plan design changes in pediatric dental plans, which traditionally have covered most of what is in the ACA requirements. “The difference could be in the coverage level or out-of-pocket cost, especially if it’s a bundled plan,” explains Fred Horowitz, D.M.D., a former practitioner and industry insider, as well as founder of OpenView Consulting, LLC. “There are minor changes, but they’re administratively more complex changes that an administrator would have to have.”

The rise of ASOs In a recent conversation Ireland had with a midsize dental carrier in a highly populated state, she was told that more benefit brokers were suggesting self-insured solutions for smaller companies with between 50 and 100 employees. The individual went on to say national carriers have the economies of scale to manage the selfinsured product as they would an insured product. “Most individual employees don’t know that they’re in a self-insured program because it is still administered by an Aetna, a Cigna, a WellPoint, a UHC, or one of the big carriers,” she observes. “They may get a card that has that carrier name on it, but it’s actually just managed by the carrier and not a fully insured product.” While ACA premium taxes on fully insured medical and dental plans will, no doubt, influence whether an employer would prefer an ASO solution, they may not necessarily be a game-changer. “In our experience, it is simply one of many financial dynamics they take into account when making their decision,” reports Mark Moksnes, staff vice president of sales and marketing, specialty sales national accounts for WellPoint. He says traditional fundamentals remain at the core of any purchasing decision. To wit: Service with meaningful guarantees, access to a strong dentist network and competitive administrative fee pricing. “We are also seeing a growing trend toward employers wanting the administrative simplicity of one bill and one ID card,” he explains. “It makes lives for the employer and their employees simpler.” Moksnes cites a few key trends that could reshape the dental benefits landscape. One is how clinical integration can improve health outcomes and help lower costs.

The Self-Insurer | September 2014

“More than 100 medical diseases show signs in the mouth,” he says. “By synthesizing medical and dental claims data, multi-line carries will be in an increasingly strong position to deliver not just benefits, but complete care management programs, to treat the ‘whole’ person.” Another development is the availability of high-performance networks that confine participation to dentists whose practice patterns deliver savings and are consistent with modern clinical science. “These networks are based on the fact that we’ve demonstrated through the analysis of more than 50 million dental claims that a dentist’s treatment decisions are a much greater factor than their fees for a particular service when it comes to delivering long-term value,” according to Moksnes. “Dentists who look at each patient’s individual needs, rather than on a one-size-fits-all basis, tend to deliver lower claim costs and better oral health.”

September 2014 | The Self-Insurer

Risk vs. Administration Asked whether self-insurance matters when offering voluntary dental benefits, which have become increasingly popular among smaller employers, Horowitz believes the underlying issue is whether carriers are focusing their profit on risk or administration. He sees a shift toward the latter, though there’s also enormous pressure to operate more efficiently because of much smaller administrative fees relative to medical plan carriers. “Risk has always been something where there’s a potential for profitability loss in the insurance industry across the board,” Horowitz observes. “It’s always been a big portion of the insurance market on the dental side, but I think as dental is becoming a bit more of a commodity, that focus is shifting, and hence the ability to see the rise of more self-insured plans.” Given this trend, he wonders how smaller dental plans in particular

can move to self-insurance, but still believes many dental plans are more efficient than medical plans. “The cost of utilization review and some of the other care-management components of medical are much greater than they are in dental, but the pure administrative functions are almost identical,” he says. Horowitz also sees the emergence of more managed care-like plans on the dental side in the style of HMOs rather than PPOs within the self-insured marketplace. “There’s not a lot of that now, but I think you’re going to see more and more of it as dental plans continue to innovate to stay relevant and provide all the required coverages,” he says. n Bruce Shutan is a Los Angeles freelance writer who has closely covered the employee benefits industry for 25 years.

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The Self-Insurer | September 2014

The Health Plan Identifier (HPID) by Cori M. Cook, J.D., CMC Consulting, LLC

This article is intended for general informational purposes only. It is not intended as professional counsel and should not be used as such. This article is a high-level overview of regulations applicable to certain health plans. Please seek appropriate legal and/or professional counsel to obtain specific advice with respect to the subject matter contained herein.

nacted in 1996, the original HIPAA administrative simplification statute required the adoption of a standardized system for identifying employers, health care providers, health plans, and individuals. The intent was to have the same identifier on a national basis so that all electronic transmissions of health information would be uniform. More than a decade later, Section 1104(c) (1) of the Patient Protection and Affordable Care Act (PPACA) mandated that the Secretary issue rules adopting the health plan identifier (HPID). The Office of E-Health Standards and Services (OESS) developed the final rule and the Department of Health and Human Services (HHS) published final regulations on September 5th, 2012, which require that all health plans, fully-insured health plans and self-insured health plans, that are subject to HIPAA, obtain a HPID. Some important dates to remember! For self-insured health plans, the Plan Sponsor or Plan Administrator must apply for and obtain the HPID. Fully-insured and self-insured health plans have until November 5th of 2014 to obtain a HPID -

September 2014 | The Self-Insurer

which is right around the corner!! Small health plans, which have been identified as plans with annual receipts of $5 million or less, have until November 5th of 2015 to obtain a HPID. At this point, ‘annual receipts’ is understood to be receipts of paid claims prior to stop loss reimbursements and exclusive of administrative fees and stop loss premiums. As of November 7th of 2016, all health plans and other covered entities submitting electronic ‘standard transactions’ under HIPAA must begin using their unique identifier. The purpose of requiring standard unique identifiers is to increase the efficiency and accuracy of the standard transactions. Currently, the industry has

varying identifiers and going forward the HPID will be a standardized unique 10-digit identifier for each health plan, all utilizing the same format. During the comment period following the proposed regulations, numerous comments suggested that self-insured group health plans should not be required to obtain a HPID since most self-insured plans do not engage in the submission of HIPAA transactions themselves. HHS responded by stating, inter alia, “we believe it is important that the requirement to obtain an HPID extend to any entity that meets the definition of CHP. Therefore, we require selfinsured group health plans to obtain an HPID to the extent they meet the definition of CHP.” Furthermore, the preamble to the final regulations acknowledged that “very few selfinsured group health plans conduct standard transactions themselves; rather, they typically contract with third-party administrators (TPAs) or insurance issuers to administer the plans. Therefore, there will be significantly fewer health plans that use HPIDs in standard transactions than health plans that are required to obtain HPIDs...” It is anticipated that TPAs and other

entities will each have their own HPID which they will use in administering standard transactions for their health plans clients. These non-health plan entities may also need to be identified in HIPAA standard transactions as the entities often perform functions on behalf of health plans and may be identified currently in standard transactions in the same fields as health plans. These entities will be permitted, but not required, to obtain a unique Other Entity Identification Number (OEID) for use in standard transaction, and entities that are required to obtain an HPID are not eligible for an OEID. It is important to note that the final regulations do not impose any new requirements for when to identify a health plan that has an HPID in standard transactions. It merely requires the use of the HPID where the health plan is identified. The two basic HPID requirements are: 1. The health plans must obtain an HPID even if the TPA is conducting the transaction standards on behalf of the health plan. 2. When health plans are named in standard transactions, they must use their HPID in the HIPAA transactions.

Although all self-insured health plans are required to obtain HPIDs, there is an important distinction between a “controlling health plans” (CHPs) and “sub-health plans” (SHPs). CHPs are health plans that control their own business activities, actions or policies; or are controlled by entities that are not health plans (i.e. self-insured plan controlled by Plan Sponsor/Plan Administrator). SHPs are health plans whose business activities, actions, or policies are directed by a CHP. SHPs are eligible but not required to obtain a HPID. So where do we begin? Entities should apply for their unique identifier through the Health Plan and Other Entity Enumeration System (HPOES) within the Health Insurance Oversight System (HIOS), which can be accessed through the CMS Enterprise Portal. The online application to obtain the HPIDs is managed by CMS and is anticipated to take 20-30 minutes to complete the entire process. Unfortunately, some entities have expended resources obtaining HPIDs that were not issued through the HPOES. However, the final rule requires that HPIDs only be obtained from the HPOES to ensure that

The Self-Insurer | September 2014

HHS oversees the issuance of these unique identifiers. HHS fears that grandfathering in any identifier that was not obtained through the HPOES would simply cause more confusion. The required data to apply for an HPID is limited to: 1) company name, employer identification number (EIN) and domiciliary address; 2) name, title, phone number and e-mail address of authorizing official (which must be a senior officer or executive); and 3) National Association of Insurance Commission (NAIC) number (for fully-insured health plans) or ‘payer ID’ used in standard transactions. The same information is required for an OEID with the addition of the entity’s business classification. In theory, the adoption of the HPIDs and the OEIDs will increase standardization within HIPAA standard transactions and provide a platform for other regulatory and industry initiatives.

However, for some it is yet another administrative expense and burden. According to the final regulations, providers will likely yield the most benefit from standardizing the identification process while health plans will bear most of the cost.

So what’s next in the ‘administrative simplification’ process? In January of this year HHS published a proposed rule, the Certification Rule, to implement the PPACA requirement that health plans “certify” compliance with the rules for the HIPAA standard transactions. Health plans will be required to certify compliance with the rules for eligibility, claim status, electronic funds transfers and electronic remittance advice. Health plans will certify compliance by obtaining one of two credentials from the Council for Affordable Quality Healthcare Committee on Operating Rules for Information Exchange (CAGQ CORE). In anticipation of a final rule, health plans should access their IT systems and begin identifying gaps in compliance and their ability to obtain the appropriate credentials. n Cori M. Cook, J.D., is the founder of CMC Consulting, LLC, a boutique consulting and legal practice focused on providing specialized advisory and legal services to TPAs, employers, carriers, brokers, attorneys, associations and providers, specializing in healthcare, PPACA, HIPAA, ERISA, employment and regulatory matters. Cori may be reached at (406) 647-3715, via email at cori@corimcook.com, or at www.corimcook.com.

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The Self-Insurer | September 2014

ART GALLERY by Dick Goff

NAIC Proposal Threatens ART Industry

hen SIIA member Kevin Doherty volunteered to represent the organization at meetings of the National Association of Insurance Commissioners (NAIC) he had no idea that it would prompt the ironic proverb that no

good deed goes unpunished. Kevin, a partner in the Nashville law firm Nelson Mullins, who has long served SIIA in ART leadership roles, has found himself embroiled in a major controversy as the NAIC moves to require some captives to observe the same regulatory reporting requirements as traditional insurance companies. In this case I’m a “glass half-empty” kind of guy believing that the current NAIC incursion is just the camel’s nose poking under the tent flap, and that soon would follow broader transparency applications to more – perhaps all – of ART. The end result could be the wipeout of all the U.S. ART world.

“In essence, the NAIC is proposing a redefinition of multi-state reinsurance that would make captives subject to multi-state accreditation standards and treat them like traditional insurers,” Kevin says. “This is unnecessary because captives only conduct direct business in their state of domicile, and it would defeat the purpose of being a captive.” Being under no obligation for diplomacy, I can point out that the NAIC going back at least ten years has had ART in its cross hairs, first in the case of risk retention groups, then trying (unsuccessfully) to regulate stoploss insurance, and now attempting nationwide state regulation of large reinsurance contracts such as those used by life insurance companies. Next they could broaden their focus to all of ART, and would the last captive

September 2014 | The Self-Insurer

manager leaving for Bermuda please turn out the lights? Kevin Doherty has endured the reinsurance definition controversy while the NAIC has come under a barrage of attacks from the captive industry during the first half of this year. “I can report that attending NAIC meetings is no fun,” he says. “There is suspicion about captives among some NAIC committees and working groups,” Kevin says. “When industry representatives attend meetings there, we just watch the deliberations and may or may not be allowed to speak.” Kevin says it’s unfortunate that NAIC meetings aren’t more collegial. “These issues aren’t easy to understand, and it would benefit the commissioners and their staffs to learn more about them from people in the industry,” he says. “Regulators from states with active captive markets understand this, but it is not true across the board,” he added. “It’s unfortunate because it could send more people in the direction of wanting a strong federal insurance regulatory framework rather than the inconsistent patchwork of 50 regulators. But that’s not a perfect idea, either,” Kevin adds. But even during a period of controversy Kevin has noted some improvement in support of ART among the commissioners. “As more states become serious about operating captives and the ART industry becomes a larger part of risk management, I have sensed some softening of attitudes at the NAIC,” he says.

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The Self-Insurer | September 2014

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September 2014 | The Self-Insurer

Now, with more than half of the states having captive-enabling laws in force, I believe the future could go either way for captives. But as long as the NAIC employs blackmail tactics of captive-stifling regulations in order for states to receive its accreditation, the future is indeed in jeopardy. Just last month Fitch Ratings called for the NAIC to clarify whether all captives should be liable under its proposed accreditation standards. In reports by Captive Review and Captive Insurance Times, the firm asked the NAIC whether new reporting requirements would subject corporate captive insurers to full accreditation standards, a condition which would materially increase costs for those captives. One report indicated that oppressive reporting requirements for captives would lead to more of them being moved offshore, a trend which could have the unintended

consequences of weakening, rather than strengthening, captive regulation and disclosure. The Captive Insurance Companies Association and insurance commissioners of both New York and Delaware have gone on record opposing NAIC proposals regarding captives. Delaware Insurance Commissioner Karen Weldin Stewart reportedly called on the state’s captive industry to rally against the NAIC proposals. Kevin Doherty views advocacy for the ART industry as a long-term process requiring constant vigilance. “Often when the NAIC encounters strong pushback from the industry it will modify its positions,” he says. “But this requires a lot of hard work. You have to show up at every opportunity and be ready to express cogent opinions however that can be done. Often individual contact with

state regulators and their staffs can have a positive affect when those same people participate in the NAIC legislative process.” I won’t even bother pointing out that the NAIC is a self-styled legislature without any constitutional rights of regulation or law-making. It has occurred to me that the NAIC as a whole attempts to regulate ART because it doesn’t trust individual state insurance commissioners with the job. This column may prompt more questions, so next month we’ll specifically examine the NAIC proposal and provide fuel for rebuttal. n Readers who wish to comment on this column or write their own article are invited to contact Editor Gretchen Grote at ggrote@sipconline.net. Dick Goff is managing member of The Taft Companies LLC, a captive insurance management firm at dick@taftcos.com.

The Self-Insurer | September 2014

Impacting Your Medical Costs Through Multiple Procedure Reductions by Cynthia Freese, RN, CPC and Linda Myrick, CPC, United Claim Solutions This article originally appeared in United Claim Solution’s 3rd Quarter 2014 edition of Healthcare Savings Quarterly

he cost of medical services fluctuates from year to year. The leaders in healthcare cost containment, the Secretary of Health and Human Services and the Centers for Medicare & Medicaid Services (CMS) review the payment policies and procedures looking for reasonable and acceptable ways to cut the cost and payment for medical services provided by both providers and facilities. One of the many cost savings efforts that is in effect and has been adjusted over the years is to apply a Multiple Procedure

September 2014 | The Self-Insurer

Payment Reduction (MPPR) to services provided by the same provider to the same patient on the same date of service. Once implemented by CMS the reduction is applied to services such as and not limited to, surgeries, behavioral health, therapy and diagnostic services. In most cases the services are reduced to at least 50% of the current Medicare Fee Schedule allowable for that service. In the case of therapy services the reduction applies to the practice expense component of the relative value unit (RVU) for services provided in both the outpatient and provider office setting. With more and more insurance carriers choosing to follow CMS Reimbursement Rules and Claims

Processing Guidelines, providers will start seeing these reductions across the board with all claims payments. Multiple procedure reductions are a growing standard in medical bill payment and are guided by the regulations dictated by CMS. The multiple procedure reductions regulations have been expanded over the years in many ways, most recognized is due to the Affordable Care Act (aka Obamacare) and American Taxpayer Relief Act. As a result, Section 633 of the American Taxpayer Relief Act of 2012 revised the reduction to 50 percent for all settings. MPPR was first implemented in 2006 by CMS. A 25% cut was applied to the technical component (TC) of

imaging studies performed on the same patient, on the same day. This policy was revised several times in the following years. • In 2011, CMS changed the MPPR to include non-contiguous body parts, across different modalities. • In 2012 CMS used additional regulations to expand the MPPR to include a 25% cut to the professional component (PC) as well. • In 2013, CMS further expanded the MPPR to include multiple physicians taking care of the same patient, on the same day. The enactment of Medicare Physician Fee Schedule Regulations expanded the scope of the MPPR so it affected certain cardiology and ophthalmology procedures. A methodology that most providers and payers are familiar with and follow are multiple surgery reductions. When multiple surgeries are performed together, many of the services like the surgical approach and closure and pre- and postoperative care, etc. are already considered in the primary procedure’s payment. Therefore, the second, third etc... Surgical procedures performed in the same session will be allowed at 50% of the fee scheduled for that procedure. Leaving the primary procedure (Service with the highest RVU) being paid at 100% of the fee schedule.

Example The physician performs multiple shaving of epidermal lesion one lesion at 0.5 CM and another at 0.6 CM; the correct codes are CPT® 11300 and 11301. Code 11300 has an RVU of 2.68 and an allowable of $96.01, code 13001 has an RVU of 3.30 and an allowable of $118.22. In this case, the payer should reimburse the highest valued code 11301 at its full value and pay code 11300 at 50 percent of the allowable, 100 + [70 x 0.5] = 135. Diagnostic imaging services have special rules for the technical component (TC) if procedure is billed with another diagnostic imaging procedure in the same family. If the diagnostic service is performed in the same visit on the same day as another procedure with the same family indicator, the payer should pay 100% for the highest priced procedure, and 50% for each subsequent procedure. The professional component (PC) is paid at 100% for all procedures. Below are 2 examples of diagnostic families. If there is only one service from each family then each service would be allowed at 100% of the fee schedule. Family 8 MRI and MRA (lower extremities) MRI lower extremity w/o dye 73718 MRI lower extremity w/dye 73719 MRI lower extremity w/ & w/o dye 73720 MRI joint of lower extremity w/o dye 73721 MRI joint of lower extremity w/dye 73722 MRI joint of lower extremity w/o & w/dye 73723 MR Angio lower extremity w or w/o dye 73725 Family 9 CT and CTA (lower extremities) CT lower extremity w/o dye 73700 CT lower extremity w/dye 73701 CT lower extremity w/o & w/dye 73702 CT Angio lower extremity w/o & w/dye 73706

Endoscopic procedures reductions can be more complex; the calculation requires that reimbursement for the base procedure is subtracted from all endoscopic procedure(s) performed on that date except for the procedure with the highest fee schedule allowed amount. This applies when two or more to services that are performed on the same patient by the same provider in the same session and that fall into the same CPT® Code family. (i.e., another endoscopy that has the same base procedure) If the services are not within the same family then standard multiple surgery reduction applies.

Example When calculating endoscopic procedures you need the allowables of all codes including the base procedure. CPT® codes 45382 and 45385 both have a base endoscopy code of 45378. CPT® Code 45382 45385 45378 (Base)

Allowable $335.46 $312.14 $219.80

The calculation is as follows: Code 45382 has the highest fee schedule amount; the full fee schedule amount is used to determine reimbursement. Base procedure: ® CPT code 45378 = $219.80 ($312.14 - $219.80 = $92.34) Per Medicare Guidelines if an endoscopic procedure is reported with only its base procedure, do not pay separately for the base procedure. Payment for the base procedure is included in the payment for the other endoscopy. On another note: diagnostic scopes are always included in surgical scope even if the diagnostic scope is not a part of the same code family as the surgical scope. The Self-Insurer | September 2014

Therapy services are reduced at a “per unit of service” provided at the Practice Expense (PE) portion of the RVU for select therapy services. Effective for claims with dates of service April 1, 2013, and after, Section 633 of the American Taxpayer Relief Act of 2012 revised the reduction to 50 percent for all settings. This reduction applies to a specific list of Physical Therapy (PT), Occupational Therapy (OT), or Speech-Language Pathology (SLP) codes. Professional claims have a value of “5” on the Medicare Fee Schedule Database (MFSDB). Institutional claims have a value of “5” on the therapy abstract file. Note that these services are paid with a non-facility PE. The current and revised payments are shown in the example in the following table provided on the CMS website: Sample Payment Calculation from Medicare (www.cms.gov) Procedure #1 Unit 1

Procedure #1 Unit 2

Procedure #2

Total Current Payment

Revised Total

Revised Payment Calculation

Work

$7.00

$11.00

$25.00

No Reduction

$10.00

$8.00

$23.50

$19.00

$10 + (.50 x $10) + (.50 x $8)

$1.00

$3.00

No Reduction

Total

$18.00

$20.00

$51.50

$47.00

$18 + ($18-$10) + (.50 x $10) + ($20-$8)+(.50 x $8)

Due to the complexity of the reduction determination of the PE Allowable, most carriers have a set rate reduction to apply to these services, (at payor

September 2014 | The Self-Insurer

discretion) anywhere from 80/20 or 100/50 for the primary and secondary services. The calculation reduction from Medicare can range anywhere from 18.5% to 50% of the allowable. Diagnostic Cardiovascular and Ophthalmology Procedures have multiple procedure payment reduction applied on the Technical Component (TC). Cardiovascular Services, full payment is made for the TC service with the highest payment, then at 75% for subsequent TC services furnished by the same physician (or by multiple physicians in the same group practice, i.e., same Group National Provider Identifier (NPI)) to the same patient on the same day. Ophthalmology Services, full payment is made for the TC service with the highest payment then at 80 percent for subsequent TC services furnished by the same physician (or by

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The Self-Insurer | September 2014

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September 2014 | The Self-Insurer

multiple physicians in the same group practice, i.e., same Group NPI) to the same patient on the same day. The MPPRs do not apply to professional component (PC) services. The complete lists of codes subject to the MPPRs on diagnostic cardiovascular and ophthalmology procedures are in Attachments 1 and 2 of CR7848 respectively.CR7848 is available at www.cms.gov/Regulationsand-Guidance/Guidance/Transmittals/ Downloads/R1149OTN.pdf on the Centers for Medicare & Medicaid Services (CMS) website. CMS also designed the Correct Coding Initiative (CCI) to promote national correct coding methodologies and to control improper coding. The CCI lists thousands of code combinations that you should not, report together during the same patient encounter. The CCI edits should

be applied to all services on the same date of service by the same provider, before applying the MPPR guidelines. Providers should never receive reduced payment for separately identifiable evaluation and management services provided on the same day as other procedures/services, procedures designated by CPT® as add-on codes and procedure designated by CPT® as Modifier 51 exempt. The RVU’s for these codes already consider them as separate. In Conclusion, there have been many changes to the MPPR methodology in recent years. It is anticipated that changes will continue. Providers, who may have billed in the past and are not familiar with the current regulations, may perceive applied reductions as “incorrect payments” as many payors both federal and nonfederal are adopting and following Medicare guidelines. n Cynthia Freese is the Director of Claim Audits for United Claim Solutions (UCS). She has over 10 years audit experience in the Medicare, Medicaid and Commercial markets. UCS is a Claims Flow Management and Medical Cost Reduction company located in Phoenix, AZ. Cynthia can be reached at cfreese@unitedclaim.com. Linda Myrick is the Claims Editing and Special Projects Manager for United Claim Solutions. She has over 15 years’ experience in medical coding principles and guidelines, including the ability to read and interpret notes and charts and assign appropriate diagnostic and procedural codes. Linda can be reached at lmyrick@untedclaim.com References www.cms.gov

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The Self-Insurer | September 2014

Pain

Management by Kaylea Boutwell, MD

September 2014 | The Self-Insurer

ave you ever really thought about how important your “job” is? I actually try not to sometimes. Because I – like you – have a “job” that entails dramatically altering the life course of hundreds, thousands, even hundreds-ofthousands of people, just by doing what I do... just by doing what we do.

I may just be a hard-wired health care worker, but in my opinion, no matter how you do that, or who you are, that is a really... big... deal. The connection may be one-onone; face to face encounters with injured workers who require evaluation and the formulation of a plan that will ultimately guide them either to demise, or back to duty. The connection may be a step removed; digesting the opinions of treating physician “experts,” delicately managing the balance of patientemployer perceptions, and enforcing the policies set forth by larger governing bodies that, in theory, have been constructed to direct fair, prudent and cost-conscious care. Or the connection may be seemingly remote; generating large-scale algorithms to direct the authorization or denial of care that eventually determines the health of entire populations of workers. As you well know, on this level the financial health of the companies themselves may also be at risk. Regardless of your place on this spectrum, our common denominator, doing what we do, is Pat. Yes, Patrick. Patrick C. from Southwest Missouri. Pat was injured in 2004, and still requires the day-to-day financial support of his Worker’s Compensation insurance carrier after two failed back surgeries, the development of an undeniable addiction to narcotics, and being given a set of permanent restrictions that barely lets him look in the mirror in

the morning. Pain Management was involved beginning last year as a kind of health-management “hospice.” We also have in common Russell T., a laboring worker from a different company, on the other side of the state, who just might be the guy that “gets back up on the horse.” He had a recent fall with subsequent complaints of knee and low back pain, neither of which look too severe on initial evaluation. He seems motivated to get back to work due to needing to support his family, as well as working for a company that he feels cares equally about supporting him. Thus far – already at the direction of his Pain Management care team narcotics have been avoided, physical therapy facilitated by adjuvant (nonnarcotic) analgesics, and appropriate light duty modifications have ensured that recovery remains on pace. My hope today as an author is to garner your attention long enough to remind you how closely we are all connected to each other, and to the consequences of our decisions. As a Pain Management physician, my goal is to deepen your understanding of how that interplay can be sourced by the right providers to optimize outcomes within your care-directing continuum. Below, I discuss two key objective principles regarding the inherently subjective arena of “Pain Management”. They are evidence- and experiencebased concepts that may very well alter the way you think, react, and ultimately help determine the conclusions to cases involving your injured workers.

Honesty is the Best Policy One of the greatest challenges in dealing with injured workers is the issue of malingering for secondary gain. Due to the unique circumstances surrounding workers compensation injuries - including settlement money,

disability status, work dissatisfaction, and off-work excuses - there are many reasons patients commonly overstate their impairments. This becomes particularly complicated when their problems become chronic, with little in the way of objective findings to outwardly evidence ongoing ailment. This often evolves into the classic, and dreaded, “Pain Management” patient. The inherently subjective nature of this patient’s complaints leads to mistrust on the part of the insurer, the employer, and even the care providers themselves. It is important to acknowledge that there is no such thing as a human “lie detector”. Regardless of training or aptitude of intuition, the variability with which patients present creates a situation in which no one person can categorically rule In or out the presence of true, organic pathology. Something as simple as difference in socioeconomic class or geographic location can result in a difference in outward/”objective” pain-related behaviors. That said, the presence of Waddell’s Signs, inconsistent pain diagrams and reports, and a consistent mismatch of subjective complaints to objective findings frequently all serve as reliable alerts to ulterior motives. A large part of what a Pain Management physician can/should do is identify and acknowledge these findings to prevent certain patients from taking advantage of the subjective nature of “pain” as a diagnosis in order to artificially augment their disability. These patients begin to act more like victims than patients, feeling as though they must “prove” that they are truly injured by avoiding work and exercise, seeking stronger prescription medications and demanding higher-level medical services. They often do so for long periods of time with little to no objective findings to support their claims. You’ve seen this a thousand times! Not only does this take time and The Self-Insurer | September 2014

financial resources away from more deserving patients, it can actually enable individuals to unnecessarily initiate or prolong a decline in their own quality of life by cultivating a personal culture of physical inactivity, poor productivity, behavioral disorders and substance abuse. Although no one entity can prevent or solve this problem in every patient, a competent and compassionate physician who has the ability to develop a sound rapport with the injured worker is often more effective in averting these issues than one who is perceived as working for “the man” or even “their (the patient’s) lawyer.” In my own practice, this means that I’m not always saying what the patient wants to hear; but I’m also not always saying what “the man” wants to hear, either. In my opinion, it is critical to utilize physicians on the front line who recognize probable malingering, and

September 2014 | The Self-Insurer

who are not afraid to state such findings clearly but without the appearance of bias toward anything other than what is – honestly – the best outcome for the patient. As it turns out, this is best for everyone.

Once You’ve Played Major League, There is No Going Back to the Minors It has come to my attention in my years as a pain management specialist that a misperception prevails within the treatment of chronic pain. It is this: that once a patient has been put on narcotics “long term”, they must always be on narcotics. My practice has seen its fair share of patients who were still on narcotics when they were placed at Maximum Medical Improvement after failed spine surgery revisions, or nebulous “blunt head injuries”, etc. Some cases were not so long ago, whereas others continue to follow up for their once-a-month narcotic refill appointments with a Nurse Practitioner just like they’ve been doing for decades. The thing all these patients typically have in common is the belief that they will be on narcotics – that they MUST be on narcotics – until the day they die. Not true. This belief can stem from the validation many patients feel the narcotic prescription gives their condition and their impairment behaviors. “Poor Jim, the doctor prescribed him Oxycontin, so the pain really must be terrible.” “I guess it wasn’t that he just didn’t want to go to my mother’s crochet club luncheon.” The belief can stem from the fact that many of these patients truly do have organic problems and pain. When these patients attempt to quit “cold turkey” from chronic narcotic use, their pain sky-rockets due to the temporary lack of natural neurotransmitter pain relievers (serotonin, norepinephrine). This

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The Self-Insurer | September 2014

September 2014 | The Self-Insurer

is compounded by physiologic withdrawal symptoms that are reliably vicious. These patients become convinced they can’t try that again! The belief can stem from the thought that, if their ongoing condition has been sufficient to warrant restricted, narcotic level medication, nothing else could be as “strong” or as effective of a pain reliever. The belief can also stem from outright addiction... a situation in which the patient will, by definition, continue to seek and procure the drugs despite adverse consequences – loss of job, family, friends, function, quality of life, and even life itself. In the above scenarios, several pivotal opportunities had to be identified and seized in order to prevent the clinical deterioration that is sure next to ensue. First, secondary gain and the development of behavioral issues

related to illness and treatment MUST be recognized and dealt with early. Pain management as a last resort often fails because, as an end-attempt to re-rail a de-railed train, there are typically many more factors at play at that juncture. These include development of mood disorders/depression, adversarial attitudes towards the workplace and the insurer, physical deconditioning preventing return to work, and situations in which the patient actually becomes financially incentivized to remain “sick.” A keen physician, involved early in the treatment course, can be relied upon to recognize when avoiding the comprehensive treatment of these factors may be “penny wise”, but “dollar foolish.” Second, when a patient has been on narcotics chronically, their natural painmanagement mechanisms basically go to sleep, making an acute withdrawal of narcotics nearly unbearable. Despite

this, even patients with REAL pain problems who are truly motivated to get off narcotics can often do so, as long as it is done thoughtfully and in a stepwise manner. Here, a physician must employ the strategic utilization of alternative non-narcotic analgesics. Allowing time for their natural systems to “kick back on” is frequently the key to success with these patients. Third, once a patient has been given narcotics – especially in a sub-acute or chronic setting – it can seem as though nothing short of narcotics would be “strong” enough to help them. Offering patients Tramadol or Ibuprofen, for example, seems insignificant after a year on Vicodin, for example. These patients need to be educated regarding dependence, tolerance and opioid induced hyperalgesia (OIH). Falsely relying on narcotics due to physiologic dependence – as opposed to actual pain control – is clearly not



The Self-Insurer | September 2014

good medicine. Nor is the ongoing use of increasing doses of damaging narcotics when all they are doing is developing an “immunity” to medications that were once helpful. Such escalation ultimately leads to mood, social and sleep disorders, sexual dysfunction, organ disease, and disorders of the GI tract. As for OIH, this is a scientifically validated condition in which the continued exposure to narcotics actually paradoxically INCREASES the patient’s perception of pain. Discontinuing the narcotics under these circumstances often leads to an IMPROVEMENT in pain scores and higher level of function. Here, it is the job of the physician to effectively communicate that – in this setting - non-narcotic medications are often substantially more advantageous to the patient in both the short and long run. Lastly, in the case of addiction, recognizing and addressing this head-on is a difficult interpersonal situation for any patient and physician. One of the biggest mistakes I see as a pain management specialist is seeing doctors avoid this uncomfortable “intervention,” thereby continuing to enable and facilitate the ongoing misuse of the drugs. These patients will commonly assert that it was “Work Comp” and “their doctors” that somehow made them addicts, and that current/ future providers are obligated to sleep in the bed that was made. The physician here must understand that they are in no way required to continue providing narcotics to a patient who they feel may be abusing or who is addicted to the medications simply because the precedent of that prescription has been set. Continuing to use a provider, or approving management plans, that enable addictive behavior can have catastrophic consequences, as you know. In conclusion, recognizing the scale of our potential to reshape the lives of injured workers can be a daunting concept, but it is key to directing treatment in a meaningful, positive way. Because of its complicated and nebulous nature, managing the costly complaints of “pain” can be especially challenging, and often frustrating. Instead of trying not to think about the burden of such a position, I actively strive to remind myself that these situations represent unique opportunities to make educated, empathetic decisions that embody respect for these individuals. These are our chances to orchestrate care that is transparent and fair, but firm when the job calls for it, and to think critically about how each patient’s current clinical picture could be made better. It is a rare and important contribution to help make the lives of all the “Patrick C’s” and “Russell T’s” of the world the best they can be, one hurt worker at a time. When I think of it that way, I am genuinely grateful to have such a truly important “job.” I hope you are, too. n Kaylea M. Boutwell, MD, is a board-certified specialist in Anesthesiology and Surgical Intensive Care. Dr. Boutwell is fellowship-trained in Pain Medicine and Interventional Pain Management through The Cleveland Clinic, one of the top-ranking pain hospital systems in the nation. Her practice is devoted exclusively to the comprehensive management of acute and chronic pain syndromes. As a member of the American Society of Regional Anesthesia and Pain Medicine, the International Spine Intervention Society, the American Academy of Pain Medicine and the American Society of Interventional Pain Physicians, Dr. Boutwell remains current on new technologies and pharmacotherapeutic agents in her specialty field, applying these medical advances to set her practice apart from the rest. In concert with the Spine Research Center, she and the Pain and Rehabilitation Specialists team are actively designing and participating in clinical research protocols related to the advancement of multiple spine-based pain management technologies.

September 2014 | The Self-Insurer

Do you aspire to be a published author? Do you have any stories or opinions on the self-insurance and alternative risk transfer industry that you would like to share with your peers?

We would like to invite you to share your insight and submit an article to The Self-Insurer! SIIA’s official magazine is distributed in a digital and print format to reach over 10,000 readers around the world. The SelfInsurer has been delivering information to the selfinsurance/alternative risk transfer community since 1984 to self-funded employers, TPAs, MGUs, reinsurers, stop-loss carriers, PBMs and other service providers.

Articles or guideline inquiries can be submitted to Editor Gretchen Grote at ggrote@sipconline.net.

The Self-Insurer also has advertising opportunities available.

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The Self-Insurer | September 2014

PPACA, HIPAA and Federal Health Beneﬁt Mandates:

Practical

The Affordable Care Act (ACA), 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 ACA, HIPAA and other federal benefit mandates.

Q&A

To Subsidize or Not Subsidize – That is the Question – How Halbig and King Affect Employer Requirements under the Affordable Care Act Background

n June 22, 2014, two different United States Courts of Appeals issued conflicting rulings on whether the Affordable Care Act (the “ACA”) permits the federal government to provide premium tax credits to individuals who enroll in federally-facilitated exchanges or only in exchanges established by a state. (Exchanges are also often called “health insurance marketplaces” or “health exchanges”. The two courts disagree as to whether there are 36 or 34 federal exchanges. Either way, there are far more federal than state exchanges.1 This issue is important for employers because premium tax credit eligibility is what triggers potential employer liability under Section 4980H of the Internal Revenue Code (the “Code”) – the so-called “pay or play” tax generally applicable to employers with 50 or more full time equivalent employees. Plaintiffs in both cases argued that the federal government cannot provide premium tax credits in accordance with Code section 36B(b)(2) ( “Premium Subsidies”) to individuals enrolled in federally-facilitated exchanges because that section limits Premium Subsidies to individuals in qualified health plans “enrolled

September 2014 | The Self-Insurer

in through an Exchange established by the State under section 1311 of the [ACA]”. The plaintiffs believed Congress included this limitation as an incentive for states to establish their own exchange so their residents could receive Premium Subsidies. In regulations, the Internal Revenue Service (IRS) had interpreted this tax provision to provide that residents of all states can receive Premium Subsidies regardless of whether the state or federal government established the exchange. In arguing that the IRS regulation was valid, the federal government agreed, noted that the ACA requires it to “establish and operate such exchange” in any state that does not establish an exchange and asserted that it stands in the shoes of the state when it operates a federally-facilitated exchange. Moreover, the federal government believed that providing Premium Subsidies only in those states that established their own exchange was inconsistent with the ACA’s goal to make coverage more affordable for individuals. After considering the parties’ arguments, the courts reached two different conclusions. “[W]ith reluctance,” the U.S. Court of Appeals for the D.C. Circuit decided in Halbig v. Burwell that the statute only allows Premium Subsidies for coverage under a state established exchange. The court said that “the legislative record provides little indication one way or the other of congressional intent, but the statutory text does. [The ACA] plainly makes subsidies available only on Exchanges established by states. And in the absence of any contrary indications, that text is conclusive evidence of Congress’s intent.” Just a few hours later, the U.S. Court of Appeals for the Fourth Circuit unanimously decided that the federal government can provide Premium Subsidies for coverage in

both federally-facilitated and state exchanges. The court found that the statue was ambiguous and, based on other cases involving rulemaking by federal agencies, it held that “the IRS Rule [regarding Premium Subsidies in federally-facilitated exchanges] is a permissible construction of the statutory language.”

Implications for Employers The Halbig decision impacts potential liability under the employer responsibility provisions of the ACA, also known as the “pay or play” penalties, imposed under Code section 4980H. The penalties are triggered if a full-time employee receives a Premium Subsidy.2 Because Premium Subsidies are accessed by individuals through Exchanges based on place of residence (rather than where they work), Halbig means that employers could face different exposure to penalties based on where their employees live and whether there is a FFE or a state Exchange in the state of residence. The employer penalties generally apply starting in 2015.3

Overview of Employer Penalties The employer penalties apply to “applicable large employers” (ALEs), meaning employers with at least 50 full-time equivalent employees.4 In the case of employers that are members of a controlled group of entities, whether an employer is an ALE is determined by looking at the entire controlled group; however, liability for any penalties is determined separately for each applicable large employer member (ALEM), i.e., each separate employer that comprises the ALE. Generally, Code Section 4980H imposes penalties on ALEMs for any month during a calendar year in which

one or more of the employer’s fulltime employees are certified as having received a “Premium Subsidy” for individual coverage purchased through an Exchange and if either of the following applies: • The ALEM failed to offer minimum essential coverage (MEC) during that month to substantially all5 of its full-time employees and their dependent children (including adult dependent children up to age 26).6 In this case, the employer would be liable for what we refer to as the Sledgehammer Penalty (sometimes called the “fail to offer” or “4980H(a)” penalty) if even one full-time employee receives a Premium Subsidy; OR • The ALEM offered MEC to substantially all its full-time employees (and their dependent children) during that month but the coverage was not affordable or didn’t provide minimum value.7 In this case, the employer would be liable for what we refer to as the Tackhammer Penalty (sometimes referred to as the “nonqualified coverage” or “4980H(b)” penalty) with respect to full-time employees who receive a Premium Subsidy.8 As a practical matter, the Sledgehammer Penalty will typically be much greater than the Tackhammer Penalty, because, if triggered, it is based on the total number of the ALEMs full-time employees, whereas the Tackhammer penalty is limited to the number of full-time employees who receive Premium Subsidies. As a result, many employers have focused planning on at least avoiding the Sledgehammer Penalty. The penalties are calculated as follows: • The Sledgehammer Penalty for any month is equal to the product of 1/12 of $2,000 ($167) The Self-Insurer | September 2014

multiplied by all of the ALEM’s full-time employees (reduced by its allocable share of a de minimis amount). • The Tackhammer Penalty for any month is equal to the product of 1/12 of $3,000 ($250) multiplied by the number of full-time employees who received a Premium Subsidy during that month, or if less, the maximum amount of the Sledgehammer Penalty.

Effect of Halbig Because the employer penalties are triggered only if a full-time employee receives a Premium Subsidy, the decision in Halbig, if controlling, would have a direct impact on potential employer liabilities. The impact will vary based on the residence of the employer’s employees. The following general examples illustrate the potential impact if the rationale of the Halbig decision is controlling. For example, if all of an ALEM’s employees reside in states that do not establish their own Exchanges, then that employer would not be subject to a penalty, even if the employer does not offer coverage to any full-time employee. As another example, suppose an ALEM has employees who reside in Nevada (which has established an Exchange) and Texas (which has a FFE) and that the ALEM does not offer coverage to substantially all its full-time employees. Employees who reside in Texas cannot trigger the penalties under Halbig, because the Premium Subsidies are not available. However, if one of the full-time employees who resides in Nevada receives a Premium Subsidy, then the Sledgehammer Penalty would apply and would be calculated based on the total number of the ALEM’s full-time employees, including those who reside in Nevada and those that reside in Texas.

Note that the Sledgehammer penalty would apply even if only one fulltime employee in Nevada receives a Premium Subsidy. On the other hand, the Tackhammer penalty would only apply with respect to employees that reside in states that have established an Exchange. Thus, in general, Halbig adds a new element to the analysis of whether pay or play penalties may be triggered. The ultimate impact, however, will vary from employer to employer. An employer with even a few fulltime employees in states that have established their own Exchanges can still be subject to significant penalties without appropriate planning.

What now? Final decision of this issue by the courts may take some time and, ultimately, involve Supreme Court review. The Halbig decision is not yet

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effective because the government has the right to seek review of the decision and has now done so – asking the Court of Appeals for the D.C. Circuit for en banc review, which involves consideration of the issue by a larger panel of that court. If the court grants review and affirms the previous ruling, or if the court denies further review, the federal government will likely appeal the matter to the Supreme Court because the circuit courts have reached different conclusions. There are other pending cases in other circuits that involve the same issue addressed in Halbig and King. If needed at some point in the litigation process, the federal government is expected to seek an injunction against a Halbig-type decision pending further judicial review. Note also that, even if Halbig prevails, there may be a re-examination of what it means for a state to establish an Exchange, and more states could take action to do so. Because the outcome of this litigation is not certain, , employers should proceed as planned with their efforts to comply with the ACA “pay or play” rules as the matter works its way through the courts, as otherwise they might find themselves on the wrong side of a court ruling and owe

substantial penalties under 4980H. Employers should also keep in mind that any decisions in this line of cases would only impact an individual’s ability to receive a premium tax credit, and in turn, an employer’s responsibility for the “pay or play” penalties. The other ACA mandates, such as the requirements relating to coverage of children to age 26, for non-grandfathered plans to provide preventive care, and the 90-day waiting period rules, are not impacted by these decisions. n Attorneys John R. Hickman, Ashley Gillihan, Johann Lee, Carolyn Smith, and Dan Taylor provide the answers in this column. Mr. Hickman is partner in charge of the Health Benefits Practice with Alston & Bird, LLP, an Atlanta, New York, Los Angeles, Charlotte and Washington, D.C. law firm. Ashley Gillihan, Carolyn Smith and Johann Lee are members of the Health Benefits Practice. Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner’s situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation. Readers are encouraged to send questions by email to Mr. Hickman at john.hickman@alston.com.

References The federal exchanges counted by both courts generally include states that declined to establish an exchange and states that perform some exchange functions and are considered federal-state partnership exchanges. The two-state difference appears to be Idaho and New Mexico, which have adopted exchanges that are enrolled in through the federal exchange website, www.healthcare.gov. These states are counted as federal exchanges by the D.C. Circuit and as state exchanges by the Fourth Circuit. 1

The penalties are also triggered if a full-time employee receives a cost-sharing reduction under ACA section 1402. Neither court discusses how their decision affects availability of the cost-sharing reductions. However, the statute provides that cost-sharing reductions are not available “with respect to coverage for any month unless the month is a coverage month with respect to which a credit is allowed to the insured (or an applicable taxpayer on behalf of the insured) under section 36B of [the Internal Revenue] Code.” ACA § 1402(f)(2). Thus, the decisions in both cases would also appear to apply to cost-sharing reductions. For simplicity, Premium Subsidy is used in this part of the article to also include cost-sharing reductions. 2

The statute provides that the penalties are effective starting in 2014; Treasury Regulations provide a one-year delay. 3

Under a transition rule provided by the IRS, the 50 full-time equivalent employee threshold is increased to 100 full-time equivalent employees in 2015 for employers that satisfy certain requirements. 4

Under a transition rule provided by the IRS, substantially all means 70% for 2015 and 95% in 2016 and later years. 5

Under another transition rule provided by the IRS, certain plans that did not historically offer coverage to dependent children may have until 2016 to provide such coverage. 6

Even if the ALEM was not subject to the Sledgehammer penalty because it offered MEC to substantially all full-time employees, the Tackhammer penalty would still be assessed for any full-time employee who receives a Premium Subsidy because the ALEM did not offer that employee coverage. 7

This penalty would also apply if an ALEM is not subject to the Sledgehammer Penalty and a full-time employee who is not offered coverage receives a Premium Subsidy. 8

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The Self-Insurer | September 2014

Captives Nearly Reclassified as Multi-State Reinsurance Companies by Karrie Hyatt

he NAIC’s Financial Regulation Standards and Accreditation (F) Committee recently proposed a change to the definition of multi-state reinsurance companies in the preambles to the Part A and Part B accreditation standards. The proposed change to the definition was meant to include a specific type of captive, but due to broad and vague language, captives in general could have been included, thereby making them subject to the NAIC’s accreditation standards.

What is the Issue? Beginning late last year, at the request of Rhode Island commissioner Joseph Torti III, the (F) Committee

September 2014 | The Self-Insurer

began looking into the definition of a multi-state reinsurer to see if it should include reinsurers organized under captive laws and reinsuring business written in other states. The proposed change was meant to affect captive reinsurance companies that fell under the NAIC’s Valuation of Life Insurance Policies Model Regulation (known as Regulation XXX) and the Application of the Valuation of Life Insurance Policies Model Regulation (known as AXXX) – these regulations apply specifically to life insurance insurers and captives. By changing the definition of multistate reinsurer in the accreditation standards to include captives in which XXX applies, those captives would be subject to accreditation by the NAIC

and subject to NAIC capitalization requirements in order to do business. Captives, because they only operate in one domicile, are not regulated as regular insurance companies and have organization and capital requirements stipulated by the legislation in their captive domicile. According to a comment letter submitted to the (F) Committee on the draft changes from Wayne Goodwin, North Carolina Commissioner of Insurance, “Certain regulatory bodies, such as the Federal Insurance Office, have expressed concern that captive reinsurers, especially those captives providing reinsurance on life products, are not regulated as closely as traditional insurers and reinsurers.”

What is driving the change by members of the (F) Committee is an underlying fear regarding these life insurance captives, and likely all captives, are not as carefully regulated as traditional insurers. Due to the nature of life insurance captives, where assets and capitalization can be especially tricky, they are an easy target for industry members who don’t trust the captive mechanism. “The regulators’ concern is that you’re going to have captives creating these markets, creating these assets without sufficient collateral and it’s going to blow up and a lot of people will be hurt by it,” said Kevin M. Doherty, partner with Nelson Mullins Riley & Scarborough LLP and president of the Tennessee Captive Insurance Association. “Derivatives and securitized assets without sufficient collateral backing is what sank our economy back in 2008 and I suspect that the regulators are worried about this happening again, especially with transactions that are complicated. The NAIC gets nervous about captives because individual states feel that they don’t have full regulatory authority over captives domiciled in other states. They don’t and they shouldn’t.”

What is the Recommended Change? In March, NAIC staff submitted for the (F) Committee’s April meeting a draft proposal to change the definition of multi-state reinsurer. The draft proposal expressly removes the language referring to insurers operating in only one state being excluded and adds a long paragraph relating to the proposed definition of a multi-state reinsurer, including the line: “This includes but is not limited to captive insurers, special purpose vehicles and other entities assuming business.” The committee voted to expedite

the comment period from the standard one year to 45 days. The NAIC has long had a procedure in place for expediting proposals through its committees, but it has rarely been used. According to Steve Kinion, the director of Delaware’s Bureau of Captive and Financial Insurance Products, expediting this proposal was an unexpected move. “It was a rush to do things. What happened is, there were discussions about having an expedited approach to this, as early as last December’s NAIC meeting. I remember being at that meeting and arguing against that expedited approach because for accreditation matters there is a one year comment period. I have been attending NAIC meetings since 1997 and have never seen an expedited accreditation proposal like this. There are others who have been attending a lot longer than I have who will say ‘I’ve never seen this happen before.” There is concern that members of the (F) Committee were trying to push through the draft change by limiting the comment period. However, it had the opposite effect. During the 45 day comment period, the Committee received a robust 34 responses. Thirty of those responses thoroughly opposed the proposed changes and only four were in favor. Eleven companies, 11 trade associations, and eight state regulatory departments are all opposed to the changes. “I don’t believe the F Committee expected such a large number of comment letters that are in opposition,” said Kinion. “The opposition is very united, and at this point, very vocal. What we did in Delaware is that we sent a letter to captive managers and interested parties and told them what was happening, and made it a call to action. Some of the comment letters adopt Delaware’s position.”

What are the Arguments Against the Proposed Change? The comment letters layout a range of arguments against the change to the definition of a multi-state reinsurance company. The arguments breakdown into seven basic topics: • The concern is unwarranted – There is no evidence that any captive has created issues or problems that would require a change in the current definition of multi-state reinsurer. The proposed change is not a reaction to an existing issue. According to the comment letter submitted to the NAIC by Kinion on behalf of Delaware Insurance Commissioner Karen Weldin Stewart, “To date, no one has identified an actual risk related to captives on either a systemic or specific basis. A systemic risk is an issue inherent in the concept of using captive reinsurers, while a specific basis is when a particular captive presents a risk of failure.” • The proposed definition of multi-state reinsurer is too broad and the language is imprecise – The proposed change to the definition is broad and ambiguous and the definition uses vague phrasing without clarifying the specific meanings regarding domiciliary or non-domiciliary. “This broad definition would sweep in numerous alternative risk structures that have nothing to do with life reinsurance, including some captives that operate on a direct basis. The vast majority of captives insure or reinsure some form of property/casualty risk,” wrote Dennis Harwick, president of the Captive Insurance Companies Association, in his comment letter, “...The proposed definition is vague and, in some instances, contradictory ... The imprecision of the language may stem from the fact that the problem to be remedied has not been established.”

The Self-Insurer | September 2014

• Captives are already wellregulated – Captives that take on insurance risks are already regulated subject to the captive laws of their domicile. According to the argument made by D.C.’s director of financial examination, Risk Finance Bureau, Sean O’Donnell, “The proposed revisions are not needed because captives that assume insurance risks from licensed insurers are already subject to adequate regulation pursuant to the credit for reinsurance laws of the state of domicile of the ceding insurer.” • The change contradicts work being done by other NAIC groups – The proposed definition change does not conform to work being done in at least three other NAIC committees: PBR Implementation (EX) Task Force, the Financial Condition (E) Committee of the Executive (EX) Committee and the Reinsurance (E) Task Force. Dana Sheridan, general counsel for

Active Captive Management, in her comment letter, detailed exactly how the proposed change in definition of multi-state reinsurer could affect the work being done by several other NAIC committees. • The change would violate existing federal acts – According to the argument set forth by the Vermont Captive Insurance Association’s comment letter, the change would allow captives to be regulated by non-domiciliary states which is contrary to the McCarran-Ferguson Act. In the comment letter from the Hawaii Captive Insurance Association, the change would “violate and contradict” the Nonadmitted Risk and Reinsurance Act. • The change would increase premiums and/or send captives to offshore domiciles – The additional requirements, and associated costs that would be imposed on captives would be prohibitive to most small and medium captives.

This would result in increased premiums or would send them to off-shore domiciles where they would be less regulated. Kinion argues in his comment letter, “If the NAIC adopts this new definition for “multi-state insurer,” then... captives will have to abide by the same laws applicable to either a commercial life or property and casualty insurer. This means that many businesses throughout the United States will lose the alternative risk transfer benefits offered by captive insurers resulting in higher operating costs.” • The time given for states to implement is too short – It would be difficult for regulatory bodies to comply with the suggested timeline, implementation by January 1, 2015, and could jeopardize a state’s NAIC accreditation. In many cases, the proposed definition would require extensive changes to regulations and in some cases legislative changes to existing captive law.

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Paul S. Graham, III, senior vice president of the American Council of Life Insurers (ACLI) wrote in his comment letter, “If the changes to the accreditation standards are adopted as proposed, the accreditation status of every one of those states with captive reinsurance laws on their books would immediately be called into question if any provision of their captive laws and regulations differs from the accreditation standards. These states would not be afforded a period of time to bring their laws into harmony with the new standards as would be the case if the new accreditation standards were adopted pursuant to the Accreditation Program’s specified governance procedures.” There were numerous other related arguments against the draft definition change. Each commenter had at least three arguments against the change and many of them had a lot more. The opposition was very vocal in their criticism of the new definition of multi-state reinsurer. However, that was not the case of the four comment letters in favor of the change. All four letters were short and to the point: one response came from anonymous source that disparaged all captives, one was from Washington state that generally supported all the recommendations made at the April meeting, one came from a life insurance company and was aimed specifically at life insurance captives, and the fourth came from a traditional insurer who would like all captives regulated as traditional insurers.

this time. The issue was discussed, as part of the agenda of the Committee’s open meeting, but, as the large number of responses received during the truncated comment period indicated, opposition was both uniform and vocal. When the committee chairman asked for comment, Torti spoke on behalf of the proposed change and Kinion spoke up against it. No one else commented. The committee asked NAIC staff to attempt another revision to the definition to be presented in November, in time for the NAIC’s fall meeting. n Karrie Hyatt is a freelance writer who has been involved in the captive industry for nearly ten years. More information about her work can be found at www.karriehyatt.com.

What was the Final Decision? At the (F) Committee’s meeting during the NAIC Summer 2014 National Meeting held in mid-August, committee members decided that no action would be taken at

The Self-Insurer | September 2014

Further Arguments in

Opposition to the

National Association of Insurance Commissioners’ (NAIC)

Multi-State

Reinsurer Proposed Definition by Terisa Anderson and Dana H. Sheridan

September 2014 | The Self-Insurer

This article represents “commentary” and represents views of the authors. We welcome other opinions on the subject.

any in the captive industry have been closely following the development of the NAIC’s proposed definition of “Multi-State Reinsurer.” Basically, in an attempt to “clarify the definition of ‘multi-state insurer’” included in the preambles to the Part A and Part B of the “NAIC Policy Statement on Financial Regulation Standards,” the NAIC Staff, as directed by the Financial Regulation Standards and Accreditation (F) Committee (“F Committee”), prepared proposed revisions that if adopted would add a definition of “Multi-State Reinsurer.” The revisions were based on the discussion of “whether the definition of ‘multi-state insurer’... is unclear as to whether reinsurers organized under captive laws and reinsuring business written in other states are considered multi-state under the accreditation program... ” See the March 19, 2014 memorandum from Daniel Schelp, Managing Counsel, to Director John M. Huff, Chair, F Committee (“March 19 memorandum”). There are numerous reasons why the proposed revisions, especially as drafted, should be rejected by the NAIC. Many reasons were provided in various comment letters to the NAIC (including one submitted by ACM) that opposed the proposed revisions and definition of “Multi-State Reinsurer.” Below, we summarize and highlight some key opposition arguments raised in – or suggested by – the comment letters.

I. The Reasons and Basis for the Proposed Revisions are Faulty As noted above, the revisions were based on the premise that the F Committee was unclear if captive insurance companies reinsuring business written in other states are considered multi-state under the accreditation program, thus making them subject to the Part A and Part B accreditation standards. Yet, the existing definition of “multi-state insurer” and its usage in the preambles of Part A and Part B make it very clear that such captive insurance companies were not intended to be considered multi-state under the existing accreditation program. In the preamble for Part A, the title “Part A: Laws and Regulations – Traditional Insurers” (Emphasis added) and sentence stating that “Part A standards apply to traditional forms of multi-state domestic insurers” (Emphasis added), both of which remain unchanged in the proposed revisions, make it clear that it is for traditional insurers. The preamble for Part A indicates that “the term does not include risk retention groups [“RRG”] incorporated as captive insurers,” which are addressed separately in the “Part A: Laws and Regulations – Risk Retention Groups” section. Further, in the preamble for Part B, the existing language states that “[a]lthough this scope includes risk retention groups organized as a captive insurer, it does not include any other type of captive insurer.” That sentence is very clear regarding Part B standards not applying to captive insurance companies, other than captive RRGs. However, the proposed revisions expand that sentence to specifically include other captives by adding the following to the end: “... (except for captive insurers, special purpose vehicles and other entities described under Multi-State Reinsurers).” Additionally, the March 19, 2014 memorandum does not explain exactly how or why the F Committee concluded that the existing definition of “multi-state insurer” was “unclear” with regard to “reinsurers organized under captive laws and reinsuring business written in other states,” (Emphasis added), thus justifying and resulting in

proposed revisions. However, the F Committee considered this issue based on a December 2, 2013 memorandum (“December 2 memorandum”) from Joseph Torti III to Director Huff. In that memorandum, Mr. Torti explained why he believed that: ... a reinsurer that is assuming risk from a company or companies in a different state than its domicile and/or from a company or companies with policyholders in multiple states be considered a multi-state reinsurer for purposes of the Accreditation Program, i.e., such a company is operating in more than one state. (Emphasis added) As such, Mr. Torti believed that the following sentence in the preamble for Part A and a nearly identical sentence for Part B (which were deleted in the proposed revisions) were contradictory: It also does not include those insurers that are licensed, accredited or operating in only their state of domicile but assuming business from insurers writing that business that is directly written in a different state. Also in the December 2 memorandum, Mr. Torti expressed that his “concern is specifically with XXX and AXXX captives and special purpose entities.” However, Mr. Torti did not address how the existing preambles to the Part A and Part B accreditation standards explicitly exclude captive insurance companies, except for RRGs formed as captives, which is contradictory to the interpretation that certain captive insurance companies were intended to be considered multi-state companies subject to the existing accreditation standards. With that in mind, it is concerning why such proposed revisions are justified based on the premise that the preambles are “unclear as to whether reinsurers The Self-Insurer | September 2014

organized under captive laws and reinsuring business written in other states are considered multi-state under the accreditation program... ”

II. The NAIC’s Own Process to Add to or Modify the Accreditation Standards is Not Being Followed with the Proposed Revisions. The April 2014 Financial Regulation Standards and Accreditation Program pamphlet (“Pamphlet”) sets forth the process to add to or modify any of the accreditation standards, including the following, in relevant part: ... The process seeks extensive input from public officials, consumers, academics, regulators and industry representatives when changes in the Financial Regulation Standards and Accreditation Program are considered. RiskThe Mitigation 1 identify three ways procedures

in which the solvency standards may be modified: 1. The development of new models or amendment of existing models; 2. Additional or more specific requirements to Parts B, C and D of the Standards; or 3. Indirect modification of current requirements through changes in manuals or books incorporated by reference in the Standards, such as modification of the annual statement blank required to be filed by all companies. The process uses a set schedule to complete the deliberation process, which allows all interested parties to clearly understand the decision timetable. Additionally, any suggested addition or change to the accreditation standards will be accompanied by the following: 1. A statement and explanation of how the standard is directly

related to solvency surveillance and why the proposal should be included in the Standards.1 2. A statement as to why ultimate adoption by every jurisdiction may be desirable. 3. A statement as to the number of jurisdictions that have adopted and implemented the proposal or a similar proposal and their experience to date. 4. A statement as to the provisions needed to meet the minimum requirements of the standard. That is, whether a state would be required to have “substantially similar” language or rather a regulatory framework. If it is being proposed that “substantially similar” language be required, the referring committee, task force or working group shall recommend those items that should be

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September 2014 | The Self-Insurer

considered significant elements. 5. An estimate of the cost for insurance companies to comply with the proposal and the impact on state insurance departments to enforce it, if reasonably quantifiable. For additional or more specific requirements to Parts B, C and D of the standards... no seasoning period is required, and these changes become effective as deemed appropriate. If FRSAC determines that a waiver of the above procedures is necessary to expeditiously consider modification or alteration of the Standards, it may upon a three-fourths (3/4) majority vote, move to recommend adoption of changes or modifications to the Executive Committee. The Report of FRSAC shall fully explain the necessity for expeditious action and attempt to summarize in an objective manner, the positions of the various interested parties. The Executive Committee and Plenary would vote on the Report, with a 60% majority required for adoption.2 (Emphasis added) Based on the current process implemented for the proposed revisions, allowing only a 45-day comment period (thus far) for these changes which would have extensive impact, as well as not providing all of the information required to be accompanied by such revisions (as emphasized in the excerpts above), it appears the NAIC is not fully following its own process for any suggested addition or change to the accreditation standards. Additional process requirements included in the Pamphlet but not detailed above, regarding amendments or additions to the laws and regulations standards, may arguably apply to changes to the proposed revisions to the preamble for Part A standards (at least one of the comment letters referenced part of that process regarding a one-year exposure period

requirement). The NAIC is in the best position to determine the particular process steps necessary for the proposed revision. Yet, as noted above it seems clear that additional processes are necessary prior to consideration for adoption. The “Drafting Note” in the proposed revisions recognized that the “... NAIC is currently considering other financial solvency mechanisms with respect to reinsurance assumed for XXX and AXXX reserves, and that it may be necessary to further revise these accreditation standards to recognize the adoption of these mechanisms by the NAIC at some future date.” Given these other efforts, plus the huge impact the proposed revisions would have on the accreditation standards and all interested parties, it does not seem prudent or appropriate to proceed with the proposed revisions without a more thorough and deliberate process to, at a minimum, work together with the other areas of the NAIC to avoid conflicts and future changes where possible. Further, as noted in various comment letters, those efforts in other areas of the NAIC seem to better address the overarching concerns that seem to have lead to the proposed revisions.

III. Conclusion. The proposed revisions should be rejected for many reasons, including, but not limited to, the reasons discussed above. Alternatively, if such revisions are deemed necessary, then at a minimum an adequate explanation as to the reasons for the revisions should be provided and the due process for such revisions should be followed in full. Further, for the many reasons noted in the comment letter from ACM and various other commenters in opposition to the proposed revisions, if revisions in the preambles for Part A and Part B are deemed necessary by the NAIC, further changes to the draft should be made and circulated for comments prior to adoption. n Dana Hentges Sheridan is Active Captive Management’s General Counsel and Chief Compliance Officer. Over the course of her career, Dana has also provided contract drafting services and risk management counsel to corporate clients, including design of insurance programs, counsel regarding regulatory compliance, privacy advice, and counsel on information risk management. Dana has extensive insurance experience with complex claims and suits involving P&C lines, excess/umbrella, E&O and D&O coverage. She frequently speaks and writes on a variety of insurance related topics, including organizational risk management, coverage and claim trends, and regulatory and compliance issues. Terisa Anderson is a Regulatory Compliance Officer with Active Captive Management. Prior to joining Active Captive Management, LLC, Terisa worked at the Utah Insurance Department as an auditor for the captive division from 2008 through 2012. Terisa received her Master of Accountancy in Tax and Bachelor of Science in accounting from Brigham Young University, Provo, UT in December, 2003. References The “Drafting Note” on the proposed revisions provided a brief statement and explanation. However, concerns with that statement and explanation were expressed in the comment letter provided by ACM to the NAIC (see specifically to section IV. The Definition Violates the NRRA and In Any Event, the NRRA Is Not Intended to Apply to Captives). 1

It is noted that part of the grandfather provision, as written in the proposed revisions, would be effective before the actual adoption of the changes to the accreditation standards takes place, which presents major concerns. See the comment letter from ACM to the NAIC for further details. 2

The Self-Insurer | September 2014

SIIA would like to recognize our leadership and welcome new members Full SIIA Committee listings can be found at www.siia.org

2014 Board of Directors CHAIRMAN OF THE BOARD* Les Boughner Executive VP & Managing Director Willis North American Captive and Consulting Practice Burlington, VT PRESIDENT* Mike Ferguson SIIA Simpsonville, SC VICE PRESIDENT OPERATIONS* Donald K. Drelich Chairman & CEO D.W. Van Dyke & Co. Wilton, CT VICE PRESIDENT FINANCE/CFO* Steven J. Link Executive Vice President Midwest Employers Casualty Co. Chesterfield, MO

Directors Jerry Castelloe Vice President CoreSource, Inc. Charlotte, NC Robert A. Clemente CEO Specialty Care Management LLC Bridgewater, NJ Ronald K. Dewsnup President & General Manager Allegiance Benefit Plan Management, Inc. Missoula, MT

September 2014 | The Self-Insurer

Elizabeth D. Mariner Executive Vice President Re-Solutions, LLC Wellington, FL

SIIA New Members Regular Members Company Name/ Voting Representative

Edison Raphael Cardea Health Solutions Limited Port of Spain Florentino Versoza Senior Sales Executive Enquiron Boston, MA

Jay Ritchie Senior Vice President HCC Life Insurance Co. Kennesaw, GA

Bill Nordmark Sr. Vice President Payer Economics PaySpan Inc. Atlanta, GA

Committee Chairs CHAIRMAN, ALTERNATIVE RISK TRANSFER COMMITTEE Andrew Cavenagh, President Pareto Captive Services, LLC Conshohocken, PA

Silver Member Michael O’Malley Managing Director Strategic Risk Solutions Inc. Concord, MA

CHAIRMAN, GOVERNMENT RELATIONS COMMITTEE Horace Garfield, Vice President Transamerica Employee Benefits Louisville, KY

Gold Member

CHAIRMAN, HEALTH CARE COMMITTEE Robert J. Melillo 2nd VP & Head of Stop Loss Guardian Life Insurance Company Meriden, CT

John Brophy President DialysisPPO King of Prussia, PA

CHAIRMAN, INTERNATIONAL COMMITTEE Greg Arms, Chief Operating Officer Accident & Health Division Chubb Group of Insurance Companies Warren, NJ

Employer Member Robert Barrese Managing Director Urgent Care Assurance Co. RRG c/o Assurance Agency Schaumburg, IL

CHAIRMAN, WORKERS’ COMPENSATION COMMITTEE Duke Niedringhaus, Vice President J.W. Terrill, Inc. St Louis, MO

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The Self-Insurer | September 2014

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September 2014 | The Self-Insurer