Self-Insurer Sept 2011

September 2011

A

second

LOOK

at your self-insurance

ALLOCATION

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

SIIA OFFICERS Chairwoman of the Board* Freda Bacon, Administrator Alabama Self-insured Wc Fund Birmingham, Al President* Alex Giordano, Vice President of Marketing Elite Underwriting Services indianapolis, in Vice President Operations* John t. Jones, Partner Moulton Bellingham Pc Billings, Montana

SEPTEMBER 2011 | Volume 35

FEATuRES

Vice President Finance James E. Burkholder, President/cEo tPABenefits, inc.

San Antonio, tX

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Executive Vice President Erica Massey Midland, nc Chief Operating Officer Mike Ferguson Simpsonville, Sc

SIIA DIRECTORS les Boughner, Executive VP and Managing Director Willis north American captive and consulting Practice Burlington, Vt

4

A Second look at Your Self-Insurance Allocation

Donald K. Drelich, chairman & cEo D.W. Van Dyke & co.

Wilton, ct

Robert Repke, President Global Medical conexions inc.

San Francisco, cA

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The HHS’ and DOl’s View on Self-Funding

by Adam Russo

SIIA COMMITTEE CHAIRS

From the Bench: tennessee Federal court Decides Eligibility issue in Favor of Stop loss carrier

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Mather’s Grapevine

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HHS issues new Women’s Preventive Services Required Health Plan coverage Guidelines

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SiiA Grassroots & Political Advocacy Monthly Wrap Up Report: SiEF to congress caucus: Wellness Aids Self-insurance

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the new Medical Management Model: integrating claim Repricing to Drive Greater Savings

36

ARt Gallery: How ARt can soothe employers’ PPAcA pains

by Richard C. Frese

Ernie A. clevenger, President careHere, llc Brentwood, tn

Steven J. link, Executive Vice President Midwest Employers casualty company chesterfield, Mo

ARTIClES

SIIA lEADERSHIp 2 President’s Message

Chairman, Alternative Risk Transfer Committee Kevin Doherty, Partner Burr Forman nashville, tn

40

chairwoman’s Report

Chairman, Government Relations Committee Jay Ritchie, Senior Vice President Hcc life insurance company Kennesaw, GA Chairwoman, Health Care Committee Beata Madey, Senior Vice President, Underwriting HM insurance Group Pittsburgh, PA Chairwoman, International Committee liz Mariner, Executive Vice President Re-Solutions intermediaries, llc Minneapolis, Mn Chairman, Workers’ Compensation Committee Skip Shewmaker, Vice President Safety national casualty corporation St. louis, Mo

September 2011

the Self-insurer (iSSn 10913815) is published monthly by Self-insurers’ Publishing corp. (SiPc), Postmaster: Send address changes to the Self-insurer, P.o. Box 1237, Simpsonville, Sc 29681 the Self-insurer is the official publication of the Self-insurance institute of America, inc. (SiiA). Annual dues are $1495. Annual subscription price is $195.50 per year (U.S. and canada) and $225 per year (other country). Members of SiiA subscribe to the Self-insurer through their dues. copyright 2010 by Self-insurers’ Publishing corp. All rights reserved. Reproduction in whole or part is prohibited without permission.

Statements of fact and opinion made are the responsibility of the authors alone and do not imply an opinion of the part of the officers, directors, or members of SiiA or SiPc. Publishing Director - James A. Kinder Managing Editor - Erica Massey Editor - Gretchen Grote Design/Graphics - indexx Printing contributing Editor - tom Mather and Mike Ferguson Director of Advertising - Justin Miller Advertising Sales - Shane Byars Editorial and Advertising office P.O. 1237, Simpsonville, SC 29681 • (864) 962-2201 Self-insurers’ Publishing corp. officers (2010) James A. Kinder, cEo/chairman Erica M. Massey, President lynne Bolduc, Esq. Secretary 2010 Editorial Advisory committee John Hickman, Attorney, Alston & Bird David Wilson, Esq., Wilson & Berryhill P.c.

Randy Hindman, Deloitte & touche, llP Jason Davis, Global Excel Management, inc.

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The Self-Insurer P.o. Box 184, Midland, nc 28107 Tele: (704) 781-5328 • Fax: (704) 781-5329 e-mail: ggrote@sipconline.net. the Self-insurance institute of America, inc. (SiiA) is the world’s largest trade association dedicated exclusively to the advancement of the self-insurance industry. its goal is to improve the quality and efficiency of self-insurance plans through education and to create a general acceptance in the public and business communities of this viable alternative to conventional insurance.

Founded in 1981, SiiA represent the interest of self-funded employers, independent administrators, utilization review companies, managed care companies, underwriting management companies, insurance companies, reinsurers, agents, brokers, cPAs, attorneys, financial institutions, manufacturers, trade associations, retail and service companies, municipalities, and others.

SiiA designs and implements programs and services for the benefit of its members, the industry, and the general public to increase the general level of knowledge about self-insurance plans, achieve greater professionalism in the industry, and enhance the general well-being and mutual interests of its membership.

SiiA achieves its goals and objectives through several means: • international/national conferences and industry forums which provide educational opportunities, with substantial discounts on the registration fees offered to SiiA members.

• Distributed monthly, the Self-insurer, features useful technical articles as well as updates on topical issues of importance to the self-insurance industry.

• the Self-insurance Educational Foundation (SiEF) conducts statistical research regarding the industry and grants educational scholarships to promising students whose studies focus on the self-insurance industry.

SiiA enjoys federal representation in our nation’s capital through counsel and staff on key legislative and regulatory issues. SiiA is the only national voice encompassing the whole self-insurance industry. if your company is involved or interested in self-funding risk for workers’ compensation insurance programs, employee benefit plans, or property and casualty exposures, then it should be a member of the association serving the industry - the Self-insurance institute of America, inc.

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

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A

second

look

at your self-insurance

AllocAtion

by Richard C. Frese, FCAS, MAAA

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September 2011

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The Self-Insurer

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

this would allow a more detailed way to reward members that put into effect safety initiatives not reflected in the historical data. this also has the option of penalizing members for events that they may not yet be ready to handle, such as a large exposure growth when not all employees are familiar with program operations. For example, credits or debits could be given for risk management and years in the program.

• Quota share allocation system: A quota share allocation incrementally pools losses as the individual large loss increases. Members are responsible for 100% of small losses and an increasing smaller share of larger losses. For example, if a member incurred a $500,000 loss, the full first $50,000, 50% of the next $50,000, 25% of the next $150,000 and so on (see Figure 1) would be applied to the member’s allocation formula while the remainder of the loss is pooled. the chart in Figure 1 is an example of a quota share system that could be implemented to encourage loss control. the layers should be selected based on a program’s historical loss distribution.

Figure 1: Sample Quota Share Allocation Structure layer of losses

lower End of layer $

Upper End of layer $

Member layer %

Pool %

0

50,000

100%

0%

2nd

50,000

100,000

50%

50%

3rd

100,000

250,000

25%

75%

4th

250,000

500,000

10%

90%

5th

500,000

Retention

0%

100%

1st

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• Retrospective allocation system: this system would allocate costs for the policy period based on actual experience. there would be great safety incentives and members would feel they have more control of their own allocations. the downside would be assessing members with adverse experiences to return that money to members with good experiences particularly when there is a turnover in a member’s management resulting in disassociation with the prior adverse experience. Management would need to decide when the first adjustment should be calculated and how often subsequent adjustments would be made.

Other decisions Management may consider whether to implement the use of credibility in the allocation formula to add more stability. if so, how should credibility be calculated? Should full credibility be given to any one member?

Management may want to determine the credibility standard based on the largest member, frequency, or size of claims. if the credibility applied to each of the members is low, then it may be appropriate to group members and allocate to the groups. A further equal allocation to members within the group may be appropriate. Determining how to group members may be difficult and require a thorough statistical analysis. Management may consider implementing a cap on the change in a member’s allocated share between years so that any individual member’s share does not significantly change. in addition, it might also be appropriate to cap the relativity of a member’s share to the average, such as, for example, that no member can be more than

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five times the overall cost. Finally, management may decide whether to use a different methodology to allocate liabilities compared to contributions.

Implementation and review no matter how an allocation among members is determined, the sum of member liabilities or contributions must equal the total of the program. Any debits or credits given to one member must be made up by the others.

Management may value independence from the calculation by utilizing an outside party to “put the blame” on someone else, especially when members challenge their shares.

When costs of insurance are low and members are content, an allocation system may not top management priorities. Management must determine how often to review the allocation methodology to ensure goals are being achieved. Every few years at a minimum,

management should review the loss ratios or claims-to-contributions ratios of the members to test whether one member has a drastically higher or lower ratio, or whether any member has experienced severe deterioration.

Several outlying members can be a leading indicator that the allocation formula needs to be amended. A review today can encourage continued significant cost savings and can be executed quickly and with very little cost. An allocation structure for one program may not be the best for another, so customization is always recommended. With a thorough review and the right assistance, a well-designed allocation can help management ensure a successful self-insurance program and satisfied members. n Richard Frese, FCAS, MAAA, is a consulting actuary with the Chicago office of Milliman. Contact Richard at richard.frese@milliman.com or at +1.312.499.5648.

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SIIA New Members REGUlAR MEMBERS Voting Representative/ Company Name Fred turner, Founding Principle/President, Active captive Management, irvine, cA Robert tomek, Vice President of Sales & Marketing, cencorp, St. louis, Mo Stephen Allen, cEo, Delaware Valley consulting Group inc., Medford lakes, nJ lane Baker, Director, Business Development, HAA Preferred Partners, Miami, Fl William Breidenbach, President, Health Plans, inc., Westborough, MA Ryan Day, VP of Finance, HStechnology Solutions inc., newport Beach, cA William Mehus, cEo, outsource one, inc., Minneapolis, Mn Patricia Berridge, Partnerst Health Benefit Solutions, Scottsdale, AZ Kenneth Zieden-Weber, Senior VP & coo/cFo, Xchange Benefits, llc, White Plains, nY

AFFiliAtE MEMBER Voting Representative/ Company Name lee Walters, chief Marketing officer, insur i.Q. llc, Shelton, ct

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Bench from the

by Thomas A. Croft

Tennessee Federal Court Decides Eligibility Issue in Favor of Stop loss Carrier Clarcor, Inc. v. Madison National Life Ins. Co., No. 3:10-189, in the United States District Court for the Middle District of Tennessee, July 11, 2011.

Comment: the court got this one right. clarcor sued Madison national, the stop loss carrier, claiming that certain expenses paid by its Plan for the medical care of one of clarcor’s employees were reimbursable under the stop loss contract. the employee, identified in the court’s opinion only as “i.K.,” was last “regularly scheduled” to work on october 20, 2007. She elected FMlA, which preserved her eligibility through January 12, 2008. At the end of the FMlA period, i.K. was not offered coBRA, but was instead placed on “short-term disability” until June 23, 2008 when she was terminated and offered coBRA. Although not discussed in the court’s opinion except in an oblique footnote, the Madison national stop loss policy appears to have had a “late coBRA” exclusion, based on a review of the parties’ briefing.

(See Majestic Star casino, llc v. trustmark ins. co. at www. stoplosslaw.com for an example of a judicial enforcement of a stop loss policy “late coBRA” exclusion).

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t

he clarcor Plan defined eligible employees as those “who are regularly assigned, full-time employees of clarcor for at least 3 consecutive months and are regularly scheduled to work a minimum of 40 hours per week.” in addition, the Plan had standard FMlA and coBRA provisions. However, clarcor maintained that it had a “corporate practice” of continuing benefit deductions for employees placed on short-term disability and that its interpretation of its Plan allowed for continuation of coverage under such circumstances.

Unlike the court in Diversatek v. QBE ins. co., which concluded that a stop loss carrier may not second-guess a plan’s eligibility determination, this court agreed with the stop loss carrier, holding that the group’s interpretation of its Plan “cannot be correct.” Because no language in the Plan supported the notion that coverage continued following a reduction in hours except via the Plan’s FMlA and coBRA provisions, short-term disability status was fatal to i.K.’s eligibility.

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the court’s opinion does not reveal whether i.K. actually elected coBRA when it was finally offered to her in June 2008. Assuming she did so, it seems to me that a “late coBRA” issue is squarely presented. Because the Plan is liable under federal law for retroactive coBRA benefits regardless of the late offer, the argument can be made that the stop loss carrier, too, must reimburse those required benefits. See, for example, Zurich American ins. co. v.

Wisconsin Physicians Services ins. co. at www.stoplosslaw.com. However, if the stop loss policy has a “late coBRA” exclusion, as this one apparently did, then the issue becomes moot, and there is no carrier liability. the group also advanced the familiar argument that it had paid stop loss premium for i.K. during the period she was on short-term disability leave, such that the carrier should be estopped to deny coverage. notably, unlike the typical case, the claim here was that i.K.’s name was actually on a list of Plan beneficiaries furnished to the carrier. the court did not expressly consider this argument, but implicitly rejected it, given the result in the case.

TpA’s Claimed Failure to Timely File Aggregate Claim under Stop loss policy Does Not Implicate ERISA Woodruff & Sons,Inc. v. The Covenant Services Group, Inc., No. 8:11-cv-1096, in the United States District Court for the Middle District of Florida, July 12, 2011.

Comment: this state law based case was filed against a tPA for allegedly failing to meet a stop loss policy deadline for the filing of an aggregate claim, with the result that the claim was denied. the defendant tPA moved to dismiss the complaint against it, arguing that ERiSA pre-empted the group’s state law claims.

“Plaintiff ’s breach of contract claim relates to the recovery of monetary damages for Defendant’s alleged failure to timely file an aggregate claim relating to Plaintiff ’s stop loss policy. there are no allegations in this case seeking any ERiSA benefits, enforcement of any provision of the ERiSA plan, or requesting any equitable relief arising under ERiSA or the ERiSA plan against any alleged ERiSA entities. Accordingly, ERiSA pre-emption does not apply to the facts of this case.” the tPAs motion to dismiss was therefore denied, and it was ordered to file an Answer to the complaint. n

the court’s analysis was straightforward. noting that, under the

THE ODDS ARE NEVER

ZERO IN A MILLION.

clarcor also attempted to use the waiver of the “actively at work” provision in the stop loss policy to bootstrap itself into coverage. the court likewise rejected this claim, noting that this was a means of providing stop loss coverage for persons who were validly on coBRA or FMlA leave.

Finally, the group argued that a claim form used by the MGU that asked how eligibility was maintained and had a space for the claimant to indicate that it was continued by a “leave of absence” somehow validated its position that i.K.’s claims were covered. the court was not persuaded, noting that the form “suggests nothing about what the specific parameters” of the Plan or the policy were.

agreement between the group and the tPA, the latter was responsible for procuring and administering stop loss coverage, the court observed:

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Medical Stop-Loss Insurance is just one more way Ullico helps the workplace win.

For more information, contact our group sales team leader, Larry Paradise at (630) 743-4252.

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SOLUTIONS FOR THE UNION WORKPLACE

SPECI A LT Y INSUR A NCE | IN V ES T MEN T S

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

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WE JUST BULKED UP OUR STOP LOSS OFFERING.

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ESO (ē-es-oh), [from Employer Service Organization] an organization that simplifies human resource, healthcare, retirement and benefit management services, to improve business performance and significantly contribute to the achievement of your success.

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Minneapolis, MN

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Fort Worth, TX

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PPAcA, HiPAA AnD FEDERAl HEAltH BEnEFit MAnDAtES:

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

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

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

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Q&A

HHS Issues New Women’s preventive Services Required

o

n August 1, 2011, the Department of Health and Human Services (“HHS”) issued new Guidelines on Women’s Preventive Health (the “Guidelines”). Under Section 2713 of the Public Health Service Act (“PHSA”), as added by the Affordable care Act and incorporated under ERiSA, a group health plan and a health insurance issuer offering group or individual health insurance coverage must provide benefits for and may not impose cost-sharing (with certain out of network exceptions) with respect to preventive care and screening provided for under these Guidelines. these Guidelines supplement the previously adopted preventive care guidelines, and are sub ject to the same rules regarding cost sharing.

When are the Guidelines effective?

Under the Guidelines, non-grandfathered plans and issuers are required to provide the new preventive coverage in the first plan year (or, in the individual market, the first policy year) that begins on or after August 1, 2012. thus, for nongrandfathered calendar year plans, the Guidelines are effective for the plan year beginning January 1, 2013.

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(iv) provides that certain religious employers are exempt from the requirement to cover contraceptives. A “religious employer” is an organization where (1) the inculcation of religious values is the purpose of the organization; (2) the organization

primarily employs persons who share the religious tenets of the organization, (3) the organization serves primarily persons who share the religious tenets of the organization, and (4) the organization is a nonprofit organization as described in Section 6033 of the internal Revenue code. the federal exemption for religious employers was modeled on state exemptions that are already in force in a number of states that already require contraceptive services coverage. the exemption for religious employers applies only to group health plans sponsored by certain religious employers and group health insurance offered in connection with such plans. Health insurance issuers in the individual market must provide contraceptive services coverage. n

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Mind over risk: The secret weapon of visionaries, leaders and the people who insure them.

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HCC Life Insurance Company

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the HHS’ and Dol’s

ViEWon

Self-Funding

by Adam Russo

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U

nless you have been living under a rock, you know that the Patient Protection and Affordable care Act (“PPAcA”) required the Department of labor (“Dol”) and the Department of Health and Human Services (“HHS”) to create an annual report for congress that compares self-funded and fully-insured plans. After reviewing both reports in detail, i can say with confidence that every single tPA in the country should have a copy of each in their sales and marketing departments highlighting the essential findings for prospective clients. Surprisingly, these studies can be used as an important tool in the arsenal of any tPA looking to expand its business.You should be sharing this information with every broker and agent in your area.

great response to those who say that self-funded plans are cheaper because they shift costs to the employees.

“Based on 2009 data, 82 percent of large firms (500 or more employees) offered at least one self-insured plan compared to 13 percent of small firms (fewer than 100 employees).” over the past few years, ASo carriers have aggressively promoted self-funding to smaller and smaller plans as they too realize that employers are concerned that health insurance premiums continue to rise, and afraid of the looming government changes in 2014. the evidence shows that small employers are looking at the self-funding option, and i look forward to seeing if these figures begin to improve when next year’s reports come out. the reports indicate that a “mixed insured” plan is a benefit plan which offers both self-funded and fully-insured benefits. the question remains as to whether the HHS and Dol would consider a self-funded benefit plan that purchases stop-loss insurance as self-funded or “mixed insured?

When i first heard about these reports being created, one of my biggest concerns was where the Dol and HHS were actually getting their data. could it really be true that the Dol and HHS would be utilizing 5500 forms as their primary source of information? As we all know, many self-funded plans are not

While states have been able to control insurance carriers through regulations, they have had much less success with the self funded world; but you have to give them credit for their continuous efforts! the report makes it pretty clear what the federal government has in store for us and how they may be able to gain more control over our little self funded world. in my opinion, it is well worth your time to read the HHS and Dol reports as the studies include many interesting statistics regarding the demographics of self funded employers, the industries they are in and the shift towards self-funding over the years. in addition, there are many great statistics that may surprise even the experts amongst our readers. or, if you prefer to be lazy and enjoy these fleeting sunny summer days, i have outlined important highlights from the studies for your easy reading pleasure!

“At the median, the portion of health plan contributions that is borne by plan participants was lower for participants in self-insured plans (10.7%) than in mixedfunded plans (14.0%).”this statistic is a

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required to complete a form 5500, and many plans that are required to file have no idea how to complete one correctly. it is one of the unsolved mysteries of the self insured industry. one of the greatest struggles we face is proving that self-funded plans are as financially viable and cost effective an option as fully-insured plans. the carriers have the brokers, advertising dollars, provider networks, and supposed massive discounts on their side. We now have these reports on our side, since the HHS and Dol have confirmed what we have all been saying for years – self-funding provides better benefits at a cheaper cost to the plan and its members. the report states that “Workers at small employers (3 to 199 workers) in self-insured plans paid higher (but not statistically significantly higher) premiums than those in fully-insured plans. At large employers (200 or more workers), however, workers in self-insured plans paid statistically significantly lower annual

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premiums than those in fully-insured plans.” in addition, “over the period 2000 to 2005, premiums increased about equally for fully-insured and selfinsured plans, by around 72%, however, the during the latter part of the decade there were larger increases for fullyinsured plans, 35% from 2005 to 2010, versus 26% for self-insured plans over the same period.”

“From 2009 to 2010, average fullyinsured premiums increased by $808 while average self-insured premiums increased by $248.80.” in black and white, the report clearly states that self-funded plans have significantly lower premiums than fully-insured plans. Every single tPA should have this quote on their website home page, the cover of their brochures, and on their front doors! it just keeps getting better! “the study finds no statistically significant differences in plan generosity between self-insured and fully-insured plans.”

Again, for those out there that say that

the reason self funded costs aren’t as high is because we don’t cover anything, this quote should keep them quiet. the naysayers out there contend that self-funding decision makers (the plan administrators) are incentivized to deny claims, thus reducing the overall cost of the benefit plan. Well, the report indicates that “claim denial rates are similar in the two types of products. there was no perception of a greater conflict of interest in claims adjudication among self-insured than among fullyinsured plans.” take that, naysayers! in my opinion, a fully funded insurance carrier not only makes claim payment determinations but also funds those claims with its own money. therefore, it has just as much incentive to deny a claim as anyone else. if anything, a self-funded employer is less likely to deny claims because the general health and wellbeing of employees directly impacts that employer.the wellbeing and happiness of an employee means very little to a fully-insured carrier.

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According to the reports, “Because, with self-funding, the financial benefit accrues directly to the employer, stakeholders noted that the financial incentives to deny medical claims might be smaller for self-insured plans for two reasons: First, self-insured employers are generally willing to invest in medical spending because of their financial stake in the health and well-being of their employees and in employee satisfaction.

Second, although the self-insured plan sponsor often is the ultimate decision maker, industry experts indicate that employers rarely dispute claims that a tPA has approved.”

Your sales and marketing folks should really focus on selling the many features that make self-funding an attractive option to employers. the reports state that “Self-insurance may offer potential advantages to employers, including: • control over the design of the benefits program, including exemption from state mandated benefit requirements; • lower administrative services costs than would be charged by a commercial carrier; • Easier access to utilization and claims data, improving the employer’s ability to evaluate health benefit costs and implement cost containment measures; • improved cash flow generated by keeping funds in-house until needed for payment of claims; • Avoidance of state insurance premium taxes that can range from 1% to 2.5% of premiums paid; • ERiSA based equity and efficiency through standardization of plans across states (avoiding potential state-by-state insurance law differences in mandated benefits) and through economies of scale that come with offering a single set of plans to all employees regardless of location; • Ease of altering their contract with a third party administrator (tPA) or stoploss insurer without affecting their employees’ choice of providers;” i know that all of us have been preaching these points for years and years but now we have some credible sources out there backing up our stories without any hidden agendas. As i have been stating for years, perhaps the biggest cost advantage for self-funding is having access to your own claims data. By thoroughly reviewing past claims experiences, plans can make predictions regarding future risk.

Form 5500s are clearly the most glaring problem in the HHS and Dol reports.

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Both agencies seem frustrated by the lack of data available and imply that smaller self-funded plans should be required to complete 5500 filings, using standard data. i have been telling anyone who is willing to listen that 5500 forms should not be utilized to analyze the benefits of self-funding as most employers and brokers do not know how to correctly complete the forms. Relying on inaccurate Form 5500 filings to complete the reports was a complete waste of tax payer dollars. the reports state that quality issues arise in the Form 5500 data. “Subject matter specialists suggest that some companies express confusion on Form 5500 filing requirements.” How is it that self funded benefit plans completing 5500 forms indicate that they are completely insured? Huh? clearly, that is an indication that these forms are not being filled out correctly. the reports focus on the fact that the Form 5500 fail to collect information on a majority of small health plans, including a number of small, self-insured plans.the reports list the following complaints regarding 5500 forms: • “the plan sponsor does not need to specify what type or types of benefits they provide.

Health, dental, vision, disability, and life insurance benefits may be reported together in a single Form 5500 filing. As a result, it is not always clear what share of participants or which funding arrangements reported on the main Form 5500 are associated with health benefits and which are associated with other welfare benefits.”

• “Self-insured plans are required to file financial information with respect to assets they hold in trust.thus, the aggregate financial statistics provided in this report are understated insofar as they do not include amounts associated with health benefits paid directly from the plan sponsors’ general assets.”

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PROVIDING SERVICE TO THE SELF INSURANCE INDUSTRY FOR OVER 33 YEARS IN OVER 30 STATES Audits Tax Preparation, Compliance and Minimization NAIC Annual Statements, assistance and preparation Management Consultation Expert Witness Regulatory Matters

Contact: William L. Shores, CPA 17 S. Magnolia Ave. Orlando, Florida 32801 (407) 872-0744 Ext. 214 Lshores@shorescpa.com

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23

i would not be surprised if, as a result of these annual reports, there will be stricter filing requirements affecting self-funded plans of all sizes. this means that there will be more government regulation, forcing administrative costs to rise dramatically, leading to higher health insurance costs for all of us. lastly, the reports will surely alarm the stop-loss world as stop-loss insurance is often referred to as merely being a fully-insured product with a high deductible. According to the reports, “the distinction between fully-insured and self-insured is not a sharp one. For example, a plan sponsor may choose to purchase stop-loss insurance coverage that insures the plan sponsor (or plan) against unexpectedly large claims.

Under a stop-loss insurance plan, the plan sponsor pays the claims of the covered workers up to a specified threshold.” this statement indicates a belief that stop-loss pays medical claims directly, but we know that this is not the case. the risk of loss and responsibility

to pay claims remains with the plan. if the Dol and HHS believe that stoploss is health insurance, we may have a problem ahead of us. SiiA must make it a priority to educate our legislators about stop-loss because if it is more strictly regulated, it may prevent smaller employers from self-funding. the reports state that, “if employers with healthy employees opt for selfinsurance and leave employers with sicker employees in the communityrated pool, this may lead to adverse selection and increases in premiums for those in the community-rated group.” it is clear that the Dol and HHS do not want smaller benefit plans to self-fund. the reports go on to say that, “if the reinsurance market were to change, and attractivelypriced reinsurance providing coverage beginning at low levels of stop-loss became widely available, there would likely be substantial movement of small employers to self-insurance. A similar shift would likely occur in the current

market if such a product existed today, results highlight the importance of closely monitoring the availability and pricing of reinsurance, and closely monitoring decisions made by small employers to self-insure.” Wow...looks like they will be trying to prevent stoploss carriers from selling low specific deductibles, right? if stop-loss is allowed to be viewed as a high deductible fully-insured plan, then self-funding will lose ERiSA preemption and every state’s insurance commission will be able to mandate and control both the tPA’s and the self-funded industry. this is exactly what state regulators have been attempting to do for years.

Healthy benefit plans which seek self-fund will be hindered in that effort if they cannot obtain reasonably priced stop-loss protection due to government regulation. We have to ensure that selffunding is not destroyed through the regulation of the stop-loss market by state and federal government entities. n

Don’t Trust Your Claims Negotiations to Inexperience Our negotiators have many years of experience assisting payors of health insurance claims and their clients with their financial case management.

Claim Negotiations • Pharmacy Consulting • Repricing Captive Insurance • Disease Management • DRG Validation & Claim Repricing Medical Bill Review (Audit) • Medical Peer Review URAC Accredited Independent Review Organization (IRO) Case Management Utilization Review • Data Mining/Claim Scrubbing 3 Star Preferred Provider Network • (PPN) Transplant Networks

Phone 301.963.0762 • Fax 301.963.9431 Visit us on the Web at www.hhcgroup.com 24

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pAC at Work the PAc supported fundraising events for Rep. Darrell issa, chairman of the House oversight and Government Reform committee, which will examine how PPAcA will affect the employer-based health system, and Rep. Phil Gingrey, a senior member of the House Energy and commerce, Health Subcommittee and chair of the House Doctors caucus, in thanks for his opposition to PPAcA’s harmful provisions and for his support of the private healthcare marketplace.

A prize in Every pAC An expanded prize list has been announced for the Self-insurance PAc fund-raising raffle at next month’s SiiA national conference, including: • Seven-night stay at the Westin Princeville ocean Resort Villas in Princeville, Kauai, Hawaii, donated by SiiA members John and laura Youngs.

• two-night stays at the JW Marriott Desert Ridge Resort and Spa in Phoenix, site of the conference, and at the Sheraton chicago, site of the 2010 conference.

• Golf package, world-class dining, Amazon Kindle and wine basket – and the prize list continues to grow.

All PAc contributions from now until the conference will enter donors in the raffle.

SIEF panelist Esther Nash conducts an audience survey during the Congressional Wellness Caucus presentation. this outreach initiative is just started to take root with one the first tangible developments being that SiiA chief operating officer Mike will deliver a selfinsurance presentation at the central illinois Healthcare cost containment conference for Employers sponsored by the state and area chambers of commerce in East Peoria il.

Quick Trips Members of the SiiA Grassroots Project visited members of congress this month: • Beata Madey, senior vice president of underwriting for HM insurance Group met with senior health staff from Senator Pat Roomey and Rep. Mike Doyle’s offices to discuss issues related to health care reform.

• chris Kramer, director of marketing/captives for Ullico casualty Group, inc., met with Senator Rob Portman and members of his staff to discuss issues pertaining to risk retention groups and SiiA’s proposed HR 2126, the Risk Retention Modernization Act of 2011.

Employer Outreach Building a bridge to large numbers of employers with information about self-insurance/alternative risk transfer is the objective of a recently launched outreach effort to state-based business organizations such as chambers of commerce and manufacturers associations.

SiiA hopes to leverage relationships with such business organizations to help mobilize more self-insurance employers to get involved in grassroots advocacy efforts.

Taking the Message Directly to SIIA Members Yet another component of SiiA political advocacy campaign is to deliver legislative/regulatory update presentations at client events organized by individual association member companies.

Most recently, Mike Ferguson provided a health care reform presentation to more than 30 self-insurance industry executives at the tPAc Underwriters, inc. client event held in Minneapolis Mn on August 9.

please contact Mike directly at 800/851-7789, or via e-mail mferguson@siia.org if you would like a SIIA reprewsentative to speak at your event.

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i

n today’s lagging economy, companies are being forced to look for creative ways to reduce medical costs and increase margins. over the past 20 years PPos and HMos have successfully reduced provider fees and squeezed savings. the use of Medicare plus pricing and DRGs have made it challenging to gain additional savings through fee reduction. likewise, utilization review and case management companies have effectively reduced unnecessary services, while also directing patients to less expensive and less invasive modes of care. So, what is there left that can impact the cost of care?

depth of savings can vary significantly, and in some instances the result may be no discount.

pre-emptive Cost Management Fortunately, what is emerging today is a new model for driving Plan and member savings; one that combines medical care pre-certification with a negotiations process. i think all of us would agree that there is significant leverage in reducing the cost of services

before care is delivered.the challenge has been that the majority of organizations only provide one piece of the process: either pre-certification or post care negotiations. Recently, however, we have identified that there are innovative organizations that have integrated the care management with the claims repricing process.the result is significantly greater savings on oon medical claims, and in some cases, redirection of care to in-network providers PRioR to the delivery of services.

©2009 Virginia Health Network

The Status Quo our model today for cost reduction is to combine strong medical management, typically URAc Accredited, with PPo and HMo networks offering “deep” discounts, and supplementing that with organizations that can discount claims that are outof-Area/out-of-network (oon). no matter how effective analysis and selection of PPos or HMos for your covered employees or insureds, there will be oon claims. Even the best network configuration can leave 10-30% of claims oon. the result is that significant dollars are left undiscounted on medical claims that must be paid at full billed charges or a Usual and customary Rate (UcR) is applied resulting in additional patient financial responsibility. traditionally, cost-containment companies have attempted to reduce the costs associated with oon claims through negotiations or application of discounts through Supplemental PPos (these are PPos that authorize organizations to use their discount arrangements when the patient is not proactively steered to the provider). though this process does yield savings overall, the level of success and

YOU SAY,

“I could use a creative way to attract new health-plan business.”

WE SAY,

“We crafted a lower-priced PPO network.

How’s that for creativity?”

When a client wants to self-insure for the chance to keep the insurer’s profit, VHN PLUS provides the opportunity.

For the client’s employees, it provides over 12,000 healthcare professionals and 80-plus hospitals in network. To learn more, including how to use VHN PLUS through fully insured carriers, please visit www.vhn.com/plusnetwork; or contact Jim Gore at jgore@vhn.com or 800-989-3837 ext. 105.

And put our creativity to work for you.

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7400 B EAU FONT SPR I NGS DR IVE, SU ITE 505 R I C H M O N D , V I R G I N I A 2 3 2 2 5 • www.vhn.com

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the successful organization utilizes its care pre-certification process to identify potential oon care, as well as high cost services. the information is then forwarded to a claims negotiations team which reaches out to the precertifying provider and attempts to negotiate favorable reimbursement PRioR to the delivery of medical services. in the vast majority of instances, the oon provider is willing to aggressively discount the care in order to keep the case. these discounts can be dramatically greater than what would have been negotiated AFtER the care was provided. there have been instances where the discount has been as much as 500% greater than what could be negotiated after the service is provided. if the oon provider is unwilling to negotiate, the organization will then work with the referring provider and the patient to identify an in-network provider. Again, once this provider is identified the organization can still

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negotiate savings above the contracted PPo rate. Because the provider has not performed the procedure, there is nothing in their PPo contract that precludes an organization from negotiating outside of the PPo Agreement. in other words, the organization can leverage the potential of new business to obtain deeper savings. it is important to note that the negotiation is separate from the pre-certification process. once the negotiation is completed, the provider must still meet the precertification requirements for the procedure requested.

Example: A provider contacts the pre-certification company to get approval for a procedure. it is identified that the provider is outside the patient’s Primary PPo. the information is forwarded to the negotiations unit and the provider is contacted to negotiate Medicare Plus or DRG pricing, as appropriate. if the provider is willing to negotiate, a formal sign off on the discount is obtained, and the pre-certification process is continued. if the provider is unwilling to negotiate, the negotiations unit will contact the referring provider and patient and identify an in-network provider and establish a fee reduction with that provider. once this occurs the information on the new provider is passed on to the pre-certification nurse and the process continues.

Ultimately, the patient and the referring physician have the final approval to move the care to an alternative provider. However, once the patient understands the financial liability of using an oon provider who is unwilling to negotiate, he/she typically agrees to change providers.

Case Study- Knee Replacement: the following is an example of an in-network provider requesting a pre-certification on a knee replacement. Because of the high cost of the service, including the implants, the information was forwarded to the negotiations unit of the care Management firm. the negotiations team determined that the pre-certifying provider was not willing to negotiate more aggressively on

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their fees, including the implants, beyond its PPo discount. the team then identified an alternative in-network provider that was willing to negotiate in order to provide services. the impact was as follows:

Original pre-certifying Hospital total Estimated Hospital charges

$39,360

implant charges

$11,704

Estimated Discount on implants

$2,833

Final cost of implants

$8,871

% PPo Savings on implants

24%

% PPo Savings on Hospital charge

15%

totAl PRoJEctED SAVinGS

$6,980

provider of Services Actual Hospital charges

$36,757

Actual implant charges

$11,270

Actual Discount on implants

$6,920

Final cost of implants

$4,350

% Savings on implants

61%

% Savings on Hospital charges

29%

totAl ActUAl SAVinGS

$14,311

the result was greater savings to the Plan, reduced out of pocket cost to the member, and enhanced employee satisfaction.

Integration is Key one of the most critical elements to making this process work effectively and efficiently is the coordination between the pre-certification team and the negotiations team. it needs to be a seamless and timely process. Delays in communication can pose very real challenges in getting care negotiated prior to delivery. it is important that care is not delayed because of the process. obviously, this type of program is not designed to impact emergency treatment.

Generally, there is an internal electronic process for moving information from one operational area to the next, to eliminate delays and potential miscommunication. Also, this enables the organization to track the timing of the process, and provide realtime updates to the Plan Administrator and the patient. n

What kind of a carrier would you trust for your Stop-Loss coverage?

ABigKahuna If you need stop-loss coverage to protect your self-funded health plan, you can’t afford to partner with anyone but a leader—like Sun Life Financial. Not only can we offer you fair, predictable rates at issue, we can put your mind at ease with a rate cap and no new lasers at renewal, guaranteed in writing. For details, contact your benefits broker or call 866-683-6334.

Group Life • Group Dis ability • Group Dent al • M edi cal S top- Loss • Vol unt ar y Benef i t s

Group insurance policies are underwritten by Sun Life Assurance Company of Canada (Wellesley Hills, MA) in all states, except New York, under Policy Form Series 02-SL and 07-SL. In New York, group insurance policies are underwritten by Sun Life Insurance and Annuity Company of New York (New York, NY) under Policy Form Series 02-NYSL and 07-NYSL. Group insurance policies are underwritten by Sun Life and Health Insurance Company (U.S.) (Wellesley Hills, MA) in all states under Policy Forms Series GP-A and GP-D (or appropriate state edition).

Product offerings may not be available in all states and may vary depending on state laws and regulations. © 2009 Sun Life Assurance Company of Canada, Wellesley Hills, MA 02481. All rights reserved. Sun Life Financial and the globe symbol are registered trademarks of Sun Life Assurance Company of Canada. Visit us at www.sunlife-usa.com.

SLPC 19273 08/08 (exp. 08/10)

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31st AnnuAl Self-inSurance inStitute of america, inc.

NatioNal EducatioNal coNfErENcE & Expo J.W. Marriott Desert Ridge Resort & Spa • Phoenix, AZ • October 9-11, 2011

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ConferenCeOvErviEw

The SIIA national Conference & Expo is the world’s largest event focused exclusively on the seelf-insurance/alterneative risk transfere market place and typically attracts more than 1,600 attendees from around the united States and from a growing enumber of countriese around the world.

Consistent with thee theme of this year’es conference – Innoveationaping Sh The Future of Self-Insurance – SIIA has assembled a truly impressive collection of speakers who will share their expertise on the most innovative strategies to effectively manage all types of self-insured programs.

ConferenCeSCHEDULE

(Subject to change)

Sunday, OctOber 9, 2011 SIEF Golf Tournament Exhibitor Registratieon Open Attendee Registratione Open Annual Membership Meeeting 1st Time Attendee/ e new Member Reception Welcome Reception & Exhibit Viewing SIIA Approved e Hospitality Suites eOpen

7:00 a.m. ‐ 1:00 p.em. Exhibitor & Attendeee e e Registration Open 7:30 a.m. – 4:30 p.em.

7:30 a.m. – 7:00 p.m. networking Continentael Breakfast8:00 a.m. – 8:30 ae.m.

12:00 p.m. – 7:00 p.m.

General Session 8:30 a.m. – 10:00 a.m.

3:30 p.m. ‐ 4:00 pe.m.

Refreshment e e 10:00 a.m. – 10:15 a.m. & networking Break 4:00 p.m. – 5:00 pe.m.

Educational Breakouet Sessions 10:15 a.m. – 11:30 a.m.

5:00 p.m. – 7:00 p.m. e e 8:00 p.m. – 11:00 p.m.

MOnday, OctOber 10, 2011 Exhibitor & Attendeee Registration Open

tueSday, OctOber 11, 2011

7:30 a.m. – 6:30 p.em.

luncheon in Exhibit eHall / Exhibit Viewing

11:30 a.m. – 1:30 pe.m.

Educational Breakouet Sessions

1:45 p.m. – 3:00 pe.m.

Refreshment & networking Break 3:00 p.m. – 3:15 p.m.

Educational Breakouet Sessions

3:15 p.m. – 4:30 p.m.e

SIIA national Conference Party

6:30 p.m. ‐– 9:00 ep.m.

networking Continentael Breakfast8:00 a.m. – 8:30 ae.m.

Welcome Remarks & Keynote Address

8:30 a.m. – 10:00 a.m.

Refreshment e & networking Break

e e 10:00 a.m. – 10:15 a.m.

Educational Breakouet Sessions 10:15 a.m. – 11:30 a.m. luncheon in Exhibit eHall/ Exhibit Viewing Educational Breakouet Sessions

e e 11:30 a.m. – 1:30 pe.m.

1:45 p.m. – 3:00 pe.m.

Refreshment & networking Break 3:00 p.m. – 3:15 p.m.

Educational Breakouet Sessions

3:15 p.m. – 4:30 p.m.e

networking Reception e & Exhibit Viewing

e 4:30 p.m. – 6:30 pe.m.

SIIA Approved Hospitality Suites eOpen

8:00 p.m. – 11:00 p.m.

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Can Your Plan Withstand Unlimited Risks?

35 th

s–ary r e v i AnnEst.  –

You can risk less by knowing more. Health reform could drive catastrophic medical claims and costs to record levels. Now, with self-funded health plans removing benefit maximums, one of the only things standing between unlimited exposure and an employer’s liability is the security of medical stop loss insurance coverage. Risk less by knowing more about your stop loss insurance carrier.

The product portfolio offered by the companies of OneAmerica®

Medical stop loss insurance Life insurance & annuities Employee benefits Asset-based long-term care solutions

R.E. Moulton, Inc.:

401(k), 403(b) & 457

• Trusted for 35 Years.

• Clear, Consistent Contract.

• Flexible Philosophies.

• Financial Strength.

Defined benefit & esop

Contact R.E. Moulton, Inc. at 781-631-1325 or visit us at remoultoninc.com.

Life Insurance | Retirement | Employee Benefits www.OneAmerica.com —--

The companies of OneAmerica®: American United Life Insurance Company®, The State Life Insurance Company, OneAmerica Securities, Inc., McCready and Keene, Inc., R.E. Moulton, Inc., Pioneer Mutual Life Insurance Company and AUL Reinsurance Management Services, LLC. © 2010 OneAmerica Financial Partners, Inc. All rights reserved. OneAmerica® and the OneAmerica banner are all registered trademarks of OneAmerica Financial Partners, Inc.

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WHAT IF YOUR MEDICAL MANAGEMENT PARTNER...

Focused on 100% alignment with evidence-based cancer care?

Was dedicated to avoiding progression to dialysis?

Prevented the placement of unnecessary cardiac devices?

WOULDN’T THAT BE inVentiv?

If you are interested in partnering with the medical management solution that promotes quality care at appropriate costs and positive patient outcomes, contact AWAC® at 877-447-2778 or john.powers@awac.md ©AWAC, LLC Aug2011 DIR01

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

Still searching for solutions to today’s healthcare challenges?

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

Symetra Stop Loss, filed as a group Excess Loss policy, and Select Benefits group insurance policies are insured by Symetra Life Insurance Company, 777 108th Ave. NE, Ste 1200, Bellevue, WA 98004 and are not available in all states or any U.S. territory. Policies may be subject to limitations and exclusions. Select Benefits is not a replacement for major medical insurance or other comprehensive coverage.

Symetra® and the Symetra Financial logo are registered service marks of Symetra Life Insurance Company. Reach for great things® is a registered mark of Symetra Life Insurance Company.

LMC-5586 3/2011 38

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INSIDER inFoRMAtion pHX Announces Addition of Gregory Choy - Vice president, Account Management BEDMinStER, nJ – PHX, a leading provider of healthcare cost management solutions, is pleased to announce that Gregory choy has joined the company as Vice President of Account Management. in this newly created position, Greg and the account management team will be responsible for expanding the superb client service which PHX currently delivers into the best value in the healthcare cost management field. the PHX approach places a very high value on personal service to drive optimum results on every claim from every client. Greg’s previous experience with insurance brokers, consultants, and healthcare carriers provides him with a unique perspective of the needs of those healthcare stakeholders and will be instrumental to PHX as it strives to fulfill the needs of its clients in the evolving healthcare marketplace.

About PHX Premier Healthcare Exchange (‘PHX”) was incorporated in 2001. the company provides advanced cost management solutions for health plans that combine claim processing automation with professional services to deliver a timely, centralized approach to healthcare cost management. PHX portfolio of services include: data analytics, benchmarking, predictive modeling, PPo network management, clinical bill review and audit, out-ofnetwork negotiations and claims editing. the firm’s solutions are utilized by industry leading insurance companies, taft-Hartley Funds, Health Maintenance organizations (HMos) and third Party Administrators (tPAs).

For more information, please visit us at www.phx-online.com.

myMatrixx Celebrates Ten Year Anniversary tAMPA, Fl – myMatrixx®, a full-service pharmacy and ancillary medical benefits management company, is excited to announce they are celebrating their ten year anniversary. myMatrixx was founded in 2001 in a small office in Ybor city (tampa), Florida with one client. A decade later myMatrixx is a leader in the workers’ compensation industry serving customers across the country.

“We are very excited to celebrate our ten year anniversary,” commented Steve MacDonald, cEo of myMatrixx. “our customers, partners and employees are the reason we have reached this milestone and we are extremely thankful for their support.” Founded by MacDonald with a handful of employees, today myMatrixx has a world class team with over 115 employees in tampa and is opening a new location in Austin, texas. myMatrixx was also recently ranked third overall for growth in revenue dollars among tampa Bay area companies in the 2011 Fast 50 Awards. myMatrixx’s services began with pharmacy benefit management and now include a mail order pharmacy, a compounding pharmacy, integrated and transparent clinical programs, advanced reporting functions and ancillary medical services and devices.

MacDonald added, “We are committed to maximizing the potential of our customers and we look forward to another decade of delivering great customer service.”

OneAmerica’s financial strength ratings and stable outlook affirmed by Standard & poor’s Rating remains AA(Very Strong) despite turbulent national economic conditions inDiAnAPoliS, in – Standard & Poor’s has affirmed its ratings of

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oneAmerica and its life insurance operating companies, American United life insurance company® (AUl) and the State life insurance company and maintains a stable outlook. For the nineteenth consecutive year, the financial strength ratings of the insurance companies remain at AA- (Very Strong). in May, A.M. Best co. upgraded its financial strength rating of AUl, State life, and Pioneer Mutual life insurance company (PMl) to A+ (Superior).

About AUL American United life insurance company® (AUl) is the founding member of oneAmerica® and is focused on providing a strong portfolio of products for individuals, families and small businesses. AUl uses a national network of experienced professionals utilizing an extensive menu of financial products, including life insurance, annuities and employee benefit plan products. the company helps consumers prepare for tomorrow by helping to protect their financial futures.

About OneAmerica oneAmerica Financial Partners, inc., is headquartered in indianapolis, in. the companies of oneAmerica® can trace their solid foundations back more than 130 years in the insurance and financial services marketplace. oneAmerica’s nationwide network of companies offers a variety of products to serve the financial needs of their policyholders and other clients. these products include retirement plan products and services; individual life insurance, annuities, long-term care solutions and employee benefit plan products. n

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Is your OON solution firing on all cylinders?

Global Excel. Your OON solution, SuperCharged.

Global Excel Management Inc. Toll Free: 877-298-3623 | Tel.: 819-566-1130 www.globalexcelusa.com | information@globalexcel.com 50 01 ADV EUS 0211 SIM

COST CONTAINMENT DONE RIGHT