2024 SIIA NATIONAL CONFERENCE ROUND-UP
As your business grows, so will your healthcare expenses. Customized captive insurance from QBE makes it easier to self-fund your employee healthcare coverage, allowing you to increase transparency and reduce the cost of risk.
Take advantage of QBE solutions like:
• The QBE Captive Curve service model, which removes barriers to entry and allows you to move easily to new strategies.
• Agora, an all-new open MSL group captive that makes it simpler to participate in a group program.
Together, we’ll find a solution so no matter what happens next, you can stay focused on your future.
By Bruce Shutan
By Caroline McDonald
2024 SIIA NATIONAL CONFERENCE ROUND-UP
Written By Bruce Shutan
Mwas rising as a record number of attendees gathered for the Self-Insurance Institute of America’s (SIIA) 44th Annual National Educational Conference & Expo at the JW Marriott Desert Ridge in Phoenix, where unseasonably high temperatures were recorded.
In the opening keynote address, pollster Kristen Soltis Anderson sought to handicap the 2024 presidential election and explain how polls haven’t squared with outcomes over the past several decades. Anderson, a founding partner of Echelon Insights and author of “The Selfie Vote: Where Millennials Are Leading America (And How Republicans Can Keep Up),” was both informative and entertaining in her assessment of generational and partisan differences among American voters.
What followed were a series of workshops and panel discussions on the current state of reinsurance and captive markets, TPA trends, the latest AI applications, behavioral health, prescription drugs, regulatory and compliance matters, mentoring and partnership opportunities. Below is a smattering of coverage from some of those noteworthy sessions. – Bruce Shutan
REINSURANCE MARKET RIPE FOR SIGNIFICANT CAPITAL INVESTMENT
Healthcare continues to pique the imagination of venture capitalists and entrepreneurs alike who are looking to disrupt a staid industry by pouring significant dollars into meaningful solutions. Selfinsurance appears to be riding those coattails, serving as an incubator for innovative partnerships and consolidation across this growing ecosystem.
Samantha Engel, global head of accident and health for Renaissance Reinsurance U.S., Inc., noted that “a lot has changed over the past 100 years, and it’s important to recognize how the market has adapted, stepped up, offered new products and found new solutions.”
She cited a number of historical developments spanning that time frame. They included the emergence of stop-loss wraparound products following the passage of ERISA and PPOs seeking to manage uncontrollable growth in healthcare costs. Other key markers included small group market reforms in the early ‘90s that allowed self-insured solutions to trickle down the market, premium trend dropping from double digits nearly down to zero, then rising again, while states like Vermont and Massachusetts took action on universal healthcare coverage, the Affordable Care Act passed in 2010 and elective care being deferred during the pandemic.
About 80% of reinsurance premium is written by the top 20% of market players, according to Dan Bolgar, CEO of Carbon Stop Loss Solutions, who noted the growing role of group captive managers. He also said about 50 managing general underwriters have invested in this space with about $2.5 billion in premium.
Considering that the reinsurance space is valued at about $35 billion to $36 billion, with double-digit annual growth being reported, Bolgar noted that M&A activity is heating up. Notable developments include private equity investment from big players like Sequoia and the Carlisle Group, as well as acquisitions by Blackstone and KKR. The sector is also drawing additional sources of capital other than private equity, he added, noting that the organic growth of this market stimulates interest in investment.
While reinsurance continues to generate interest among major investors, Bolgar said it represents a tiny slice of a much broader market estimated at $4.5 trillion, with about 18% of gross domestic product being spent on healthcare – an amount that’s projected to reach $7 trillion by 2030.
“We work in an extraordinarily inefficient sector,” he observed, noting that private equity loves opportunities to turn around poorly run operations. While the impact of this influx of capital into the market has yet to be determined, he said it’s an attempt to create greater efficiency and competition through better data quality.
Captive insurance, an alternative risk transfer arrangement that has gained traction in recent years, finds its way into about half of all conversations in the self-insurance market, observed Thomas Leonardo, global head of accident and health for SiriusPoint America Insurance Company. Typically, he sees a partnership approach wherein captives issue a policy with reinsurance behind it.
“We’ve seen that from time to time, though probably not as prevalent as an MGU taking risk on their captive or finding a strategic partner in their work stream that is interested in participating in the risk and seeking additional revenue on the same premium base,” he reported.
corporatesolutions.swissre.com/esl
Leonardo said collateralization is critically important, noting that letters of credit are very common and used in some combination with buying reinsurance on the top end. “There are things the carrier can do to protect themselves that allows them to then take credit for that reinsurance on our balance sheet,” he explained.
The importance of this issue was spotlighted in the past year or so when he noted that a financial technology company issued $4 billion in letters of credit in the property and casualty market that were later discovered to be fraudulent, and therefore,
attempts were made to replace that collateral. An ability to protect downstream policyholders is critical when working with a captive solution, he added.
Leonardo looks for longevity, integrity and discipline in new business opportunities. “A very smart man once told me that he likes chaos, which drives market opportunity, and I think that is going to be tested here in the next few years,” he opined.
Those words rang true for fellow panelists. “When something catastrophic happens, I always consider it an opportunity,” said Paul Skrtich, senior vice president of accident and health at Odyssey Reinsurance Company.
One such area that has generated growing interest involves cell and gene therapy, whose sky-high cost he believes ultimately will be built into reinsurance coverage with access to a network of specialists to make it more affordable vs. carving it out, which was done with organ transplants years earlier.
THE CASE FOR IMPROVING ACCESS TO BEHAVIORAL HEALTHCARE
Four years after pandemic lockdowns seeded social isolation and loneliness, the effects of a national behavioral health epidemic are still being felt. Sandra Stein, M.D., chief medical officer of Banner Health Plans, cited the emergence of rising levels of anxiety, depression and substance abuse associated with an opioid crisis, as well as greater awareness of social determinants of health. Since then, she has been working closely with employers to remove obstacles to care for people suffering from mental illness and substance use disorder and eliminate the stigma associated with seeking treatment.
With COVID-19, MINES and Associates CEO Daniél Kimlinger, Ph.D., noted several care-access challenges tied to provider shortages, especially in rural areas, and industry consolidation. Since providers drop in and out of networks all the time and administrative overhead can be significant, she said it’s important to know how networks connect patients with providers, as well as measure the effectiveness of treatment.
Sometimes behavioral health services aren’t connected, and patients are confused about where to seek care, which Kimlinger said can be a missed opportunity. She suggested that health plans do whatever they can to integrate care networks and keep care barriers low by charging low co-pays or no out-of-pocket costs. With so many working Americans living paycheck to paycheck, she said it’s challenging to afford $150 per session for treating behavioral health conditions in the face of rising out-of-pocket costs.
Another concern is that there are no guardrails on what facilities charge for behavioral health claims, which vary widely, nor is there any transparency on that pricing information, explained Ira Weintraub, M.D., chief medical officer for WellRithms, Inc.
In searching online for luxury rehab centers in California, for instance, he found that cash customers may expect to pay $54,000 for a month’s stay, whereas the price tag may be $141,000 for those with insurance coverage. Patients have the option of anything from a private villa to a shared room. In evaluating another inpatient facility, he noted that the American Hospital Directory suggested an average cost per day of $693, though charges can be as high as $3,000 to $5,000.
“What’s the right number?” he asked. “No one even knows what they get because you can’t get an itemized bill like you could get for hospital care. These prices, like everything else in medicine, have gone overboard.”
As a physician, Weintraub believes doctors should be paid fairly, but it’s difficult to determine how – and for what –patients are being treated based on the billing. This is why he said it’s important to include in the summary plan description exactly what will be covered. The most difficult obstacle he sees is that behavioral health facilities are loath to provide medical records.
Nowadays, consumers are becoming more sophisticated about these conditions. Many of Kimlinger’s clients started watching Tik-Tok videos, which she described as “incredibly digestible,” and became more knowledgeable about trauma, eye movement desensitization and reprocessing of distressing experiences and specialty networks, some of which sought to remove care barriers for marginalized communities.
With the pandemic shining a spotlight on the importance of mental health treatment, some unconventional approaches have shown promise. One such example involves the use of ketamine, which the Drug Enforcement Administration describes as “a dissociative anesthetic that has some hallucinogenic effects.”
Nearly 200,000 members of Enthea, which provides access to safe and affordable psychedelicassisted therapy, reported significant reductions in anxiety, depression and PTSD after a year
of ketamine therapy, according to Enthea CEO Sherry Rais. She said clinical trials among prestigious universities have reported similar results, while ketamine also has shown promise with smoking cessation programs.
However, there are certain obstacles that may stand in the way of any progress. She noted, for instance, that there’s a stigma associated with the use of psychedelics for certain ethnic and blue-collar groups. Her recommendation for overcoming this challenge is twofold: educate employees about treatments that are being provided and promote a healthy culture at work.
Depression alone cost U.S. employers $200 billion in lost productivity last year, which Rais said raises concern about the direct and indirect cost of untreated mental health. “The more interesting story comes from looking at improvements in employee absenteeism, engagement, productivity and retention,” she added.
Although telehealth has revolutionized care delivery, especially on the behavioral health side, where privacy is deeply valued, not everyone is comfortable receiving virtual care. Last year, Kimlinger noticed that 52% of her clients elected in-person care, which all employee assistance program providers she works with are also experiencing. Another point to consider is that people in rural areas may have poor access to wi-fi or live in crowded homes with little to no privacy.
Western and Northeast states have had the largest rise in telehealth, while it’s about the same in the South and the Midwest has decreased slightly, according to Weintraub. He said as many as 65% of those virtual visits involve mental health conditions. Telehealth commanded a higher payment than in-office visits, with the biggest price tag in the Northeast and lowest in the West. “These kinds of statistics make you understand that the numbers coming in are really astronomical,” he noted.
Telehealth increases capacity for psychotherapy and psychiatric services, as well as assessment of medication, Stein added. Her company also uses urgent care centers to decrease the need for crisis intervention in the E.R., as well as primary care physicians who are educated about behavioral health – mindful that those visits can help reduce the stigma around these conditions.
NQTLS SEEN AS COMPLICATING PUSH FOR MENTAL HEALTH PARITY
While the Department of Labor ramps up its mental health parity compliance audits, a panel of experts noted that the self-insurance community continues to struggle with developing non-quantitative treatment limitations (NQTLs) analyses.
Recently issued regulations require the collection of specified data and a detailed evaluation to assess the impact of NQTLs on behavioral health benefits relative to medical/surgical benefits covered under the plan along the road to achieving parity.
The issue dates back 28 years ago with the passage of the Mental Health Parity Act of 1996, which prohibited large group health plans from imposing annual or lifetime dollar limits on mental
Advocacy in Action
health benefits that were less favorable than those on the med/ surg side. It was followed by the Mental Health Parity and Addiction Equity Act of 2008, which extended those protections to health plan members being treated for substance use disorder. A final regulation implementing that law was published in 2013, while new final rules that amended certain provisions of the regulations and added others were released on September 9, 2024.
Compliance with NQTLs is being staggered over the next few years, the panel noted. For example, employers must certify for 2025 that an expert was hired to do an NQTL analysis. Also, a new data evaluation requirement and nondiscrimination component as part of the NQTL analysis, as well as determining any material differences between behavioral health and med-surg benefits, have been delayed until 2026.
“What I’m finding from these types of audits is the regs, and department interactions are sometimes subjective, and it’s very difficult to understand what the departments are believing from a client perspective where you and your counsel, or your client, believe you are complying and putting together a comparative analysis that required by these rules,” SIIA General Counsel Chris Condeluci said.
There’s a lot of word salad with the NQTL requirement with regard to what constitutes a “meaningful” benefit, explained Lisa Campbell, a principal at Groom Law Group. Since definitions that served as the framework for NQTL analysis have changed, she said it poses a compliance challenge for employers.
The hope is that additional guidance will be forthcoming, along with more of a standard framework for relevant data. Plan sponsors need to consult with their counsel about what plan information they currently have and what’s expected to comply with these requirements, she added.
Noting that the documentation requirement is very serious, Campbell said more than 150 NQTLs were requested to audit in the first year. “The departments are being aggressive, and I don’t think that’s going to stop,” she cautioned.
Another complication is that Condeluci believes the recently overturned Chevron-deference judicial precedent that courts have followed for decades will open up the floodgates on litigating all regulations. Specific to the mental health parity regs, he said, there could be an argument that the government exceeded its authority by challenging definitions of material differences between behavioral health and med-surg benefits.
The rub on compliance is that employers rely almost entirely on their service provider for guidance. He says that means they’ll need to be more diligent about ensuring compliance with the law when designing a suite of benefits and provider networks.
Condeluci added that provider network accuracy is a core issue when it comes to access to behavioral health services. Some providers aren’t being reimbursed at a fair and reasonable rate, which he said is an issue to consider, and it may not be a resolvable problem unless payers are willing to increase those reimbursements.
At least one of the panelists expressed optimism about the final rules, believing they offered some blessings in disguise. Jordan Smith, chief compliance officer for Healthcare Reporting, said they provide plan sponsors a hands-on approach that gives them more control over benefits design. “For someone who is making decisions for a selfinsured plan, this was meant to be a wake-up call,” he said. “The fiduciary certification was a really important place to start.”
In offering context about the complexity of these rules, Smith noted that “we have to take a step back and realize that this is a really difficult thing to write regulations on because there is a tightrope around navigating the concept of ERISA preemption for self-insured plans and requirements of the ACA.”
One impactful area that Smith said is hidden in the regs is that if a health plan is found to be noncompliant, there are real financial consequences in that behavioral health claims that were denied will need to be reprocessed.
Campbell said federal agencies also can require plan sponsors not to impose prior-authorization requirements on behavioral health benefits if there’s a determination that their data is insufficient for complying with the NQTL analysis.
Smith warned that receiving an insufficient ruling on the NQTL analysis could be a P.R. problem for employers with their employees that can undermine a company’s reputation and affect retention.
That is because benefit plan participants must be notified if the Department of Labor determines that their employer conducted what it considers an insufficient comparative analysis, Condeluci reported.
Looking ahead, Smith believes NQTL analysis should be something that’s reviewed annually during open enrollment, and with vendors updating their data each year, mental health parity should be on every employer’s annual benefits-compliance checklist.
It’s also important that health plan data is buttoned up for HIPAA compliance and that plan sponsors are mindful of the need to protect personally identifiable information given that this type of data is targeted daily by hackers, added Colbey Reagan, a partner with Holland & Knight LLP. He said there should be separate security agreements made with vendors to protect large amounts of data, which should never be stored in a repository where it’s not encrypted to lessen the risk of a breach of such information.
“It’s important to verify who you are giving your data to because that data there is worth billions of dollars throughout the year,” he said.
If these newest mental health parity requirements are seen as overly onerous and costly over time, then Campbell warned that they could produce unintended consequences. Amid the well-intentioned quest for mental health parity, she said employers may decide not to offer behavioral health coverage for fear of running afoul of the law since these benefits are not required.
STOP-LOSS CAPTIVES SEEN AS BUSINESS-DEVELOPMENT OPPORTUNITY
Medical stop-loss group captive programs represent the fastest-
a Leading National TPA
Innovative solutions, unparalleled service. That’s the HPI difference.
In-house teams for seamless support— implementation through renewal
Tailored point solutions and a la carte programs
Personalized, high-touch attention
The latest in navigation tools and concierge services
Guided performance analysis and consultation
Member advocacy solutions
growing segment within the self-insurance marketplace, serving as an important business development opportunity for TPAs, brokers and numerous specialty service providers. However, a panel of experts pointed out that their complexity poses challenges that make it important to understand how these programs operate before they’re positioned and priced for self-insured employers. Any collaboration seeded within these partnerships ultimately will help avoid landmines along the rocky road to risk mitigation.
SIIA’s recent captive survey shows four-times growth from 2021 to 2023, reported Kari Niblack, president of Blackwell
This season, we’re grateful for our self-funded community who share our passion for evolving healthcare.
hpiTPA.com
Captive Solutions. “We see a complete migration over to this solution, which shows no sign of slowing down,” she said, noting that a captive pulls out the middle-layer risk and there’s no group too small or large to implement this solution.
“The group captive model gives underwriters something they can lean on in terms of credibility and like-minded employers that have the same strategy in mind,” added Dale Sagen, vice president and business development leader of QBE North America.
Other industry players are also sharing in the spoils. For example, he noted that risk managers who turn captive insurance into a profit center through a superior approach to medical claims management can differentiate themselves in the market. A similar competitive edge is being realized by forwardthinking advisers who he said are embracing so-called agency captives that are owned or controlled by an insurance agency or brokerage.
While 90% of Fortune 500 companies have their own captive, Sagen noted that singleparent captive solutions are piquing the interest of smaller employers.
As service providers in the selfinsurance industry are able to get their hands on more data, they’ll be better able to predict and manage risk – and captives are
a tool for just that, observed Anna Quarum, co-founder and president of WellRithms. These strides in data collection allow employers to become more granular when putting into place a meaningful riskmitigation plan, she said, noting that “it’s exceptionally powerful when you have tools in place like a captive that can aggregate risk.”
According to Niblack, it’s critical in the captive space to measure savings based on data analytics. She said six-figure savings in organ transplants, for example, can help seed a captive program surplus. And any surplus that a captive captures from its claims-management experience can be earmarked toward reserves or reinvested to improve the benefits package, she added.
In order to reap the full benefits of a captive, transparency is imperative. Whatever partner that’s connected with this ecosystem has to be willing to share both good and bad news because of the risks involved, according to Quarum. The more employers are able to get excited about risk assessment, the more she said they’re able to drill down into a captive solution.
Echoing an often-repeated line that “if you’ve seen you’ve seen one captive, you’ve seen one captive,” Quarum lauded these vehicles for providing self-insured employers an ability to think creatively without being locked into a cookie-cutter solution. However, standard practices are also necessary. A summary plan description, for instance, serves as a manual for risk mitigation by featuring strong language and guidelines on what exactly the captive will and will not cover, Quarum said.
There’s a migration to customized solutions with specialty areas driving high-cost claims, Niblack observed. Being open to complete innovation without boxing oneself into a single solution can help leverage the power of a captive, which she said helps make benefit plans more competitive – and as such – can be used as a talentmanagement tool.
Sagen described captives as a more efficient and stable experience in managing group health plan risk, which is why so many employers are embracing them. What a captive can do very well for an adviser or TPA, he added, is streamline solutions and enable advisers to grow their book of business, removing variability from the market.
While direct primary care (DPC) is a trend that provides better access to healthcare on a daily basis, Sagen noted that there’s not much credible data on the merits of this approach. He said captive insurance, however, can help build out the DPC model. He’s also working on a few RFPs for an 11,000-life group that will use captive
insurance without stop-loss to smooth out the volatility of cell and gene therapies and assume their own risk.
Noting a tenfold growth in captive regulator involvement, Niblack explained that reserve requirements and regulator receptiveness to these vehicles differ from one state to the next. Therefore, she said it’s important to vet these terms with various state insurance departments when deciding where to domicile a captive.
NON-TRADITIONAL STRATEGIES TO CONSIDER FOR PHARMACY SPEND
The prevalence of “diabesity,” a combination of diabetes and obesity, is clearly driving the prescription drug market. Since as many as 70% of U.S. adults are considered overweight or morbidly obese, virtually all employers cover drugs for diabetes, and about 30% do for weight loss, David Blair, CEO of LucyRx, noted in a panel discussion about non-traditional strategies self-insured employers can consider reining in their group health plan’s pharmacy spend.
He said GLP-1 receptors, which were created in 2005 for diabetes before pivoting to weight loss and are now the nation’s top drug category, have the potential to deliver tremendous health benefits to millions of patients.
“I can tell you a tsunami of drug costs are coming,” he reported, noting that 16 drug manufacturers are working on GLP-1 scripts. He also referenced Rx developments to treat stroke, substance abuse, liver and kidney disease and believes a new pill form of this burgeoning drug category that’s being developed will be a game changer for millions of Americans on injectables.
According to Blair, there are two strategies that should be employed to contain GLP-1 costs. One is a rigorous three-month prior authorization window. The second is required behavior modification such as nutrition and exercise. He said patients must play a role in helping contain these costs, noting that it’s not a drug that can just be shipped out. Clients that have adopted this approach have reaped 56% savings over the past two years.
Blair said a memorable quote in the corporate office of a Catholic hospital system client, “No margin, no mission,” applies to GLP-1s. These drugs “play a critical role in our mission to deliver outstanding care to our employees and their families. But together, we need to be financially responsible,” he added.
Another promising approach for Rx cost-containment involves patientassisted programs (PAPs), also known as manufacturer assistance
programs, which allow drugs to be offered free to patients based on income eligibility up to double the median household income. Michael Jordan, chief business officer of Payer Matrix, noted that a rigorous application and approval process are involved, including physician engagement. The motivation for big pharma to offer a PAP is that it widens market access, reduces their tax liability, earns corporate goodwill, and improves public perception about their company, he opined.
For plan sponsors, Jordan said the chief issues involve affordability of prescription drugs, health plan sustainability, wage impact and risk protection. An avalanche of litigation is expected to shape the future of this industry, he opined, especially since drug costs are rising.
A third area for helping bend the Rx cost curve involves 340B programs, a federal subsidy set up in 1992 to support hospitals that care for a disproportionate number of low-income patients by discounting outpatient drugs by as much as 20% to 50% off the list price.
Safety-net hospitals or clinics were the ones that initially were supposed to derive value from offering 340B programs, explained Kerri Tanner, PharmD, chief pharmacy officer of PayerAlly. Nowadays, 340B is the second-largest federal prescription drug program behind Medicare Part D – and with good reason.
She said pharmacies became involved and would share in that value with specialty pharmacies –allowing hospitals access to their claims data for an administrative cost. PBMs also wanted access to the claims information and leverage it – also for a price, she added. A tug of war has since ensued between pharmaceutical manufacturers miffed about lost profits and safety-net hospitals wanting to preserve a lifeline for cash-strapped facilities.
A fourth approach for helping lower Rx spending involves drug importation, which can be a breeding ground for confusion. Indeed, there are several myths
about importing drugs from other countries, explained Andrew Miller, chief delivery officer of RxFree4me. For example, he said there’s no Food and Drug Administration prohibition against personal importation of drugs, which can help significantly reduce their price tag, nor does it violate the terms of a pharmacy benefits management contract. As powerful as PBMs are, he noted that they cannot control the flow of drugs. Also, he said concern about the efficacy of drugs flowing into the U.S. from other nations is unfounded because the same ingredients are being used.
At one point, about 80% of his clients that imported drugs were government entities, but it has since caught on among self-insured employers in the private sector.
Miller told attendees a humorous story to illustrate that it is not illegal to import a drug from abroad to save money or for an employer to incentivize a health plan member to import their drugs. His wife’s grandfather remarried several months after his spouse passed away, and knowing he worked in the Rx field, asked him for a prescription of Viagra. So, Miller called in a favor for a script to be overnighted in his name.
FedEx sent the package, and it had an obnoxious neon green tape wrapped around the package. The tape indicated that it was opened and inspected by U.S. Customs and Border Patrol, which he said is fine as long as a copy of the prescription and any necessary paperwork is included.
HOW PUBLICLY AVAILABLE PRICING DATA CAN HELP SAVE ON COST
As more medical pricing data becomes publicly available through federal and state initiatives, self-insured health plans will seek to use this data in provider contract negotiations and as a tool to help lower healthcare spending. A panel of experts weighed in on this issue and shared their collective insight into how plan sponsors can leverage that information.
The expectation was that making available public pricing data to healthcare consumers under the No Surprises Act and Transparency in Coverage rule would be transformative, but SIIA General Counsel and panel moderator Chris Condeluci said that’s not the case.
Trying to find a complete set of data is a whack-a-mole game, observed Peter Schultz, vice president of actuarial and underwriting services for Marsh McLennan Agency.
Gathering a trillion medical records a month whose information is cluttered can be overwhelming, noted Matthew Robben, co-founder and chief technology officer for Serif Health. He said having access to the right filters, such as national claims access, can result in useful records for consumers. He believes carriers will face pressure to provide more useful information as publicly available data doesn’t square with what’s being shared.
An employer coalition or employers banding together in some way to create a meaningful data repository to obtain better quality pricing data would create “a super powerful asset” that Robben sees as enriching for the self-insured community.
Cheryl Matochik, managing director of market analytics for Third Horizon Strategies, has found that using publicly available pricing information in very specific ways is quite useful. For example, it’s being used to create a bundled payment for maternity benefits for a large Midwest employer and to contextualize some of the pricing that was set up for that program. Her firm is also helping a third-party administrator price a section of their network on specialty care so that they can cut episode-based contracts with those provider groups.
There’s a lot of filtering and cleaning on the front end of the data processing that must be
done, according to Matochik. Examples include an outlier protection methodology, providertype exclusions, a Medicare benchmark, modifier treatments and modeling per diems for apples-to-apples comparisons. She said that what’s missing are optimal files for ambulatory surgical centers and imaging and radiology facilities, which complicate the ability to perform network performance analyses or network selection.
Matochik described the pricing data as extremely sophisticated and requires a lot of nuances that even a jumbo employer doesn’t have the internal resources on hand to make sense of this data set. While there are various solutions coming online, she cautioned that they’re not yet at a point where the information can be trusted. This is why finding good consulting and a deep understanding of the data is key.
Schultz hopes that as healthcare claim files improve, employers will hold carriers more accountable by demanding that the information actually represents claims experience. “There’s a lot of good work that still can be done to have more enforceable requirements,” he said, adding that “significant change is on the horizon.”
He’s also hopeful that more publicly available pricing data will continue to inform what provider discounts will look like and how employers can steer their covered lives to the highest discount. For
all their flaws, he said discounts are still “the best representation of relative network outcomes because the data that we have currently cover enough of the plain data set that makes up an employer spend because the data that we have currently cover enough of the plain data set that makes up an employer spend.”
Schultz predicted that publicly available pricing data would be modified in about three to five years with different versions featuring many specifications and believes that having a large all-payer claim file from multiple payers would be extremely helpful. Better calibration of the quality of this information will result in a real utility in the files that can be leveraged, he said, while knowing how much of the data is useful will help employers be confident about its value.
Bruce Shutan is a Portland, Oregon-based freelance writer who has closely covered the employee benefits industry for more than 35 years.
Expect More
“You have become a key partner in our company’s attempt to fix what’s broken in our healthcare system.”
- CFO, Commercial Construction Company
“Our clients have grown accustomed to Berkley’s high level of customer service.”
- Broker
“The most significant advancement regarding true cost containment we’ve seen in years.”
- President, Group Captive Member Company
“EmCap has allowed us to take far more control of our health insurance costs than can be done in the fully insured market.”
- President, Group Captive Member Company
“With EmCap, our company has been able to control pricing volatility that we would have faced with traditional Stop Loss.”
- HR Executive, Group Captive Member Company
People are talking about Medical Stop Loss Group Captive solutions from Berkley Accident and Health.
Our innovative EmCap® program can help employers with self-funded employee health plans to enjoy greater transparency, control, and stability.
Let’s discuss how we can help your clients reach their goals.
This example is illustrative only and not indicative of actual past or future results. Stop Loss is underwritten by Berkley Life and Health Insurance Company, a member company of W. R. Berkley Corporation and rated A+ (Superior) by A.M. Best, and involves the formation of a group captive insurance program that involves other employers and requires other legal entities. Berkley and its affiliates do not provide tax, legal, or regulatory advice concerning EmCap. You should seek appropriate tax, legal, regulatory, or other counsel regarding the EmCap program, including, but not limited to, counsel in the areas of ERISA, multiple employer welfare arrangements (MEWAs), taxation, and captives. EmCap is not available to all employers or in all states.
TheTSIIA CAPTIVE SURVEY SHOWS STEADY INDUSTRY GROWTH
Written By Caroline McDonald
2024 SIIA Captive Industry Survey & Trend Report by the Self-Insurance Industry of America, Inc., continues to show consistent growth and a positive outlook for the captive industry.
This year 40 individual captive companies, service providers, brokers and owners – up from 30 last year – provided feedback on important topics in the world of captives.
The survey was divided into three areas: general industry trends, SIIA activities, and captive and policy owners.
Anthony Murrello, government relations manager at SIIA, explained that “the captive committee has really focused on using the survey to gather data that reliably shows year-over-year trends.” The best way to do this, he said, is “consistency in the survey, both in the
questions being asked and the respondent pool.” Now that the current survey format has been in use for several years, “we are beginning to see some of these market trends take shape. Some trend results confirmed previously held beliefs, while some were eye-opening,” Murrello said.
Simon Kilpatrick, president at Captivedge LLC, who heads the captive survey working group, noted, “For me, the standout trend is continued growth. Everyone is bullish about captives. The average last year was nine out of 10 were very bullish and this year it’s also nine out of 10, and interest in captives will continue for a while, no sign of it waning.”
SURVEY STANDOUTS
What stood out, Murrello said, were the responses to the captive client growth question. “Over the last few years, the results showed marginal year-over-year increases in the average number of captive clients being served by their organization,” he said. “However, this past year saw a huge increase, nearly doubling the previous year’s total.”
Murrello said that he particularly noticed this year that staffing and hiring were down. “Considering the majority of survey responses and industry sentiment indicates growth, it is interesting that hiring would
be down,” he said. “This year 64% of respondents reported staff hirings in 2023, down from 74% the previous year,” he noted. “This is the first time in the last 3 years that the response to the question, ‘have you hired staff?’ decreased from the previous year.”
On the other hand, “There is still a high demand for workers, and unemployment is historically low, and that is not unique to this industry,” said George Belokas, president at GPW and Associates, Inc.
CAPTIVE FORMATIONS
“A common trend with captives is that they continue to be in vogue,” Kilpatrick said. “The interest in captives and the new
formations has been high, and that is continuing. So those in the captive industry and those that use captives are doing well.”
He also observed that “We are seeing a lot more captives being formed than being closed. Closures are slowing down.”
What’s more, Kilpatrick added, “Captives are growing across the board, from single-parent to rent-a-captive cells to joint group captives. Every mode is being utilized.”
EMERGING RISKS
This year, property stood out as an emerging risk, Belokas said.
“From a client standpoint, what I’ve seen is that we have a lot of clients struggling with their property insurance.”
In some catastrophe-prone areas, he added, many property policies are not being renewed, or their rates are substantially higher. “They are struggling to get flood or wind and hail coverage at all, at any rate. We’ve been working with clients to develop more unique solutions using captive insurance to either layer into a property program or somehow leverage them to participate in the risk,” he said.
“From an emerging risk standpoint,” Belokas said, “I would say that was somewhat expected, but certainly a shift from what we’ve seen in past surveys.”
Kilpatrick noted that one of the changes is that property has become a bigger concern than cyber. “Cyber is less of a concern because the traditional industry has finally created solutions for cyber.”
There is also “a problem insuring property in the commercial market – property in general,” Kilpatrick said. “There are natural disasters –fires and floods, things are more extreme environmentally than they used to be.”
Also, he added, “A hurricane in Florida doesn’t just affect Florida rates. The way insurance works is that they reinsure globally, so everyone feels the pain if there is a large hurricane or fire.”
The hope is that “a captive can come in and maybe share that risk with the commercial market. Maybe use the captive for the small stuff – on a million-dollar property, maybe the captive covers the first $100,000 - $200,000 to cover the small fire or small damage,” Kilpatrick said. “Then still buy insurance to cover catastrophic damage.”
INFLATION
While not a major concern, “Inflation is happening all around us, at the grocery store, in insurance purchasing and in captive insurance,” Belokas said. “As inflation happens and exposure bases go up, and as premiums go up in commercial markets, people might be more willing to put that risk into the captive at the higher premium rate because now they are getting more premium for the coverage being provided.”
Inflation is in its own category, he said. For example, “If you’re using payroll as an exposure base for pricing workers’ compensation insurance, and inflation is causing payroll to go up, you have the same number of employees, but you are having to pay them more because it’s more expensive for them to live.” The reason, he said, is that “workers’ compensation premium is a rate per $100 of payroll.”
And later when claims happen, Belokas added, “Not only are you having to cover that higher payroll for workers’ comp, but if they’ve got to seek medical care, medical inflation is right alongside the inflation we’re seeing everywhere else. So, it’s causing claims to be more expensive and as a result, it’s causing premiums to rise.”
SERVICE PROVIDER REPORTS
This year’s survey is the first one reaching out to brokers specifically, Kilpatrick said. “All the brokers that use them expect captives to continue to be interesting and for demand to continue over the next five years,” he said.
Although he had previously believed that those brokers that didn’t do captives “didn’t do so because they were not being compensated. That did not come across in the survey.”
The majority of brokers in the survey, Kilpatrick explained, “said they think captives could help their clients, they just weren’t sure how to get involved or learn about captives in a way that they could present them to clients.”
The takeaway, he said, “is that people need to get educated. SIIA has a wealth of information and a library with resources –discussion papers, articles, short videos of interviews and things available on the website for anyone interested.”
Murrello noted that SIIA and its captive committee “remain actively involved in advocacy and education for its members and the broader captive industry.” He added that SIIA “works to develop and release materials such as resource documents, presentations, and webinars in order to keep administrators and participants updated on a consistent basis.”
Additionally, “SIIA’s staff works to maintain constant communications with industry leaders and stakeholders and are always available to answer questions and/or discuss the latest updates concerning the captive Industry,” Murrello said.
SURVEY HIGHLIGHTS
• Captive Formations Again Outpacing Closures For the fourth year in a row, captive formations have significantly outpaced closures. Survey respondents reported an average of nearly 3 new captive formations for every 1 captive closure per respondent in 2023. This was slightly down from last year’s survey when respondents reported an average of 4 new captive formations for every 1 captive closure.
• Group Captive Formation 38% of respondents reported cell captives as the captive structure most formed in 2023, with group and single-parent captives coming in a close second at 29%. This is the third straight year in which respondents have selected a different structure as the most formed (Group in 2022, Single Parent in 2021).
• Captive Client Growth The average respondent reported 548 captive clients being served by their organization in 2023. This is a large increase from last year’s survey, which reported an average of 206 clients served, as well as 2021 which reported 137 served. The total number of captive clients served by all respondents in this year’s survey was 7,665. This is a significant increase from last year’s total of 5,377.
• Broker Insight The majority of brokers (without Captives) reported they believe offering captive insurance could enhance relationships with clients.
Caroline McDonald is an award-winning journalist who has reported on a wide variety of insurance topics. Her beat includes in-depth coverage of risk management and captives.
HCIQ’s SaaS platform helps self-insured entities to gain access to critical insights:
Uncover high-cost medical and Rx claims, encounters, and utilization patterns
Track past, current, and future member and group risk status
Identify claims payment irregularities, fraud, abuse, and costly inefficiencies The cornerstone of effective health plan management is a data-driven approach. Armed with the tools and data insights available through HCIQ, organizations can engage in evidence-based decision-making.
ADDRESSING VENDOR FATIGUE, MANAGING MULTIPLE POINT SOLUTIONS
Written By Laura Carabello
AAphenomenon known as “vendor fatigue” is a very real challenge for self-insured employers, brokers, and benefits consultants. The term refers to the overwhelming feeling that arises from sifting through numerous vendors, their claims and potential partnerships -- a frustrating process for the Company and one that often creates confusion.
The multitude of point solutions can be exhausting, although plans are always searching for innovative, specialized services that employers can utilize as part of their benefits programs to address specific health issues. These point solutions can be standalone platforms ranging from virtual physical therapy, fitness and primary care to nutrition support, fertility assistance,
alternative Rx funding solutions, expanded employee assistance programs, diabetes, weight loss, GLP-1 management and more.
Sometimes, these programs offer broader condition inclusion with wellness, provider networks or hybrid approaches. According to a Wellframe survey, 50% of organizations offer access to between four and nine healthcare and well-being point solutions, with some employers presenting up to 12 offerings.
For Richard J. Fleder, president, ELMCRx Solutions, addressing vendor fatigue is the goal of his current model to support TPAs and their clients. It is basically a continuum of offerings, enabling the employer to choose the solutions that best suit their needs, obviating some of those issues such as multiple integrations and multiple contracts which cause fatigue.
“In all candor and full disclosure, this topic fulfills everything we’re trying to accomplish as a company,” says Fleder. “I would like to compare what we are accomplishing with Rx to what Zelis and others may be doing with TPAs to create multiple-point solutions for medical space. We are essentially doing all the homework for TPAs: when they get in the door with one product, our platform of point solutions gives them multiple products to present to customers.”
As a board member of HCAA, Caryn Rasnick, CEBS, CSFS, understands the challenges their members face with vendor fatigue and the complexities of managing multiplepoint solutions.
“To overcome these issues, I recommend partnering with preferred vendors that can offer comprehensive solutions using the same file interfaces already in place,” she suggests. “This approach reduces the operational burden on TPAs, who often struggle with tight margins and the high costs associated with managing multiple vendor relationships.”
Rasnick advises that reducing point solution fatigue not only simplifies operations but also has the potential to better control healthcare spending.
“By consolidating vendors, we can minimize data file charges and reduce the need for manual interventions by administrators,” she continues. “And from the plan member’s perspective, having a single point of contact simplifies their experience, helping them understand
their benefits more clearly and make informed decisions about their care. This not only leads them to become wiser healthcare consumers, but it also helps employers control their healthcare spending.”
THE REALITIES OF VENDOR FATIGUE
Some companies experience vendor fatigue, while others do not. For those that do, there are some innovative approaches to resolving the issues.
For example, third-party administrators (TPAs) are increasingly grappling with vendor fatigue. This occurs when TPAs are required to work with numerous point solution vendors, often at the behest of benefit consultants who promise excellent outcomes with these specialized services.
Rasnick, who also serves as chief client relations officer, MedWatch, explains, “TPAs are being forced into a position where to secure a piece of business, they must engage with multiple vendors brought by the referring benefit consultant. This not only increases operational complexity but also adds costs, such as implementation and ongoing file feed fees, that TPAs are unable to recoup.”
She believes a smarter approach is to partner with a preferred vendor that offers multiple-point solutions via existing interfaces with the TPA.
Caryn Rasnick, CEBS, CSFS
Depend on Sun Life to help you manage risk and help your employees live healthier lives
By supporting people in the moments that matter, we can improve health outcomes and help employers manage costs.
For over 40 years, self-funded employers have trusted Sun Life to help them manage financial risk. But we know that behind every claim is a person facing a health challenge and we are ready to do more to help people navigate complicated healthcare decisions and achieve better health outcomes. Sun Life now offers care navigation and health advocacy services through Health Navigator, to help your employees and their families get the right care at the right time – and help you save money. Let us support you with innovative health and risk solutions for your business. It is time to rethink what you expect from your stop-loss partner.
Ask your Sun Life Stop-Loss Specialist about what is new at Sun Life.
For current financial ratings of underwriting companies by independent rating agencies, visit our corporate website at www.sunlife.com. For more information about Sun Life products, visit www.sunlife.com/us. Group stop-loss insurance policies are underwritten by Sun Life Assurance Company of Canada (Wellesley Hills, MA) in all states, except New York, under Policy Form Series 07-SL REV 7-12 and 22-SL. In New York, Group stop-loss insurance policies are underwritten by Sun Life and Health Insurance Company (U.S.) (Lansing, MI) under Policy Form Series 07-NYSL REV 7-12 and 22-NYSL. Policy offerings may not be available in all states and may vary due to state laws and regulations. Not approved for use in New Mexico.
© 2024 Sun Life Assurance Company of Canada, Wellesley Hills, MA 02481. All rights reserved. The Sun Life name and logo are registered trademarks of Sun Life Assurance Company of Canada. Visit us at www.sunlife.com/us.
BRAD-6503-z
#1293927791 02/24 (exp. 02/26)
“This strategy reduces the number of vendors involved, simplifies operations, and helps TPAs protect their margins by minimizing costly data processor fees,” says Resnick. “Reducing the number of point solution vendors is key to simplifying healthcare operations and controlling costs.”
From an operational standpoint, she points out that fewer vendors mean reduced costs, including data file charges and manual interventions by administrators. From the member’s perspective, a single 800 number for comprehensive plan benefits and care navigation simplifies the experience, making them more informed consumers, which in turn helps control healthcare spending.
Markus Waite, President, Empara, provides this perspective, advising, “Overcoming vendor fatigue requires a strategic shift – more deeply integrating solutions and simplifying the user journey. Fatigue is created because there are too many points – hence, point solution fatigue.”
He recommends one effective approach is to enable all solutions into a single cohesive platform, adding, “This reduces the complexity of managing multiple portals, user action points and disjointed benefit information, fostering a streamlined experience for members. By selecting a tech solution that brings all benefits under one roof, organizations can enhance engagement and efficiency. Ensuring that members are aware of and can easily access all available benefits encourages utilization, improves user satisfaction and drives better health and cost outcomes.”
Markus Waite
Waite believes that point solutions themselves are not a negative thing.
“Many are designed to simplify aspects of healthcare and control spending in a specific area,” he shares. “The breakdown comes when members have no access or understanding of how the solution helps or that they even exist.”
He projects that cutting-edge technology will play a huge role in reducing fatigue and predicts that virtual AI assistants have a big role to play.
“These customized agents have access to member-specific plan information and accumulator data,” says Waite. “Collectively, this data can instantly deliver personalized answers to member questions and steer them towards critical benefits and cost-saving solutions that are available to them. This can all be achieved with no back and forth with HR teams or member service call centers – further increasing efficiency and the ability to scale.”
AVOIDING VENDOR FATIGUE
“Only then do we begin the process of evaluating bringing on a new solution provider,” she states.
Many employers are discovering ways to evade this weariness. Julie Mueller, president & CEO, Custom Design Benefits, says, “We do work with several solution providers which have a major impact on our ability to service our clients, brokers and members. A few years ago, several of our strategic vendor partners were experiencing service issues, many related to M&A activities, which was impacting our ability to provide excellent service to our clients.”
At that time, she and her team developed and implemented a quarterly ScoreCard for their key strategic partners.
“It is sent directly from me to the CEO, regardless of the size of the partner,” continues Mueller. “The quarterly feedback has been welcomed and appreciated by all of our vendor partners. Service has improved greatly, and our relationship is much stronger.”
When looking for a solution, Mueller first goes to current strategic partners to understand where their business is headed and how they can or plan to fill our identified need.
Todd Archer, president of Concierge Third Party Administrator, offers this advice: “As with most TPAs, we work with multiple point solution vendors. The decision on point solutions should be driven by claims data that shows a need in that employee population for specific intervention(s).”
He says the dilemma of vendor fatigue is fueled by requests from a client or broker to use a specific vendor to either retain an existing group or write a new group, noting, “If unchecked, the constant set up and maintenance of the data feeds and other workflows necessary to operationalize these programs can negatively impact the quality of the service you are able to provide the client and their members.”
Julie Mueller, President & CEO
Todd Archer
Archer advises that the easiest solution is to offer a robust “vendor stack” to the clients and their brokers that effectively addresses the needs of the populations you serve and be disciplined about not chasing the “newest shiny ball.”
“The stop-loss market can help you assess the value of the given solution, and then educating the client and broker on that value enables you to control the number of point solutions you are asked to support,” says Archer. “To the extent you can reduce the number of vendors involved will reduce some of the complexities in the market, which should have a positive impact on costs. While this certainly won’t solve all of the issues inherent in the current market environment, it is certainly a way to improve things without compromising the needed cost controls.”
Nick Soman, CEO of Decent shares that his organization is building out a suite of pointsolution vendors for their level funded health plans built around
Direct Primary Care (DPC). These vendors provide convenient and affordable care delivery and care management to their members in the form of virtual visits, asynchronous recommendations, and remote patient monitoring to support preventive care and chronic care management. The top priorities include musculoskeletal health, diabetes and behavioral health.
“We are not experiencing vendor fatigue because of our unique approach and the support of our partners, including Health Rosetta and Architect Health,” says Soman. “The vendor experiences of the incumbents before us have taught us about the dos and don’ts of vendor identification, evaluation, procurement, contracting, and management. As a result, we are taking a very specialized approach to working with vendors.”
Soman defines his requirements as three-fold:
1. Is this affordable for our members?
2. Will the member experience be exceptional?
3. Do we like you - do we see the world in a similar way and have that trust?
“This includes ensuring the solutions we work with exceed the expectations of our members and will we want to and be able to stand behind it, in full confidence,” he expands. “Health Rosetta guides us on learnings from other plan architects historically, and Architect Health helps us navigate the complex world of virtual care.”
He points out the benefits of working with Architect Health, a virtual care point-solution aggregator, evaluator, and vendor manager, in providing vendor fatigue defense infrastructure and protection.
“As a trusted vertical platform that identifies, evaluates, curates, contracts with, manages, and reports on virtual care point solutions, Architect enables us to introduce the right solutions to the right members at the right time for the right price,” he attests. “This ensures we are relieved of any admin burden and are bringing on the most efficacious and high ROI solution for our members with transparency information and data - saving us time and money.”
Soman characterizes point-solution fatigue as a nightmare, adding, “Not only does it slow down the path of innovation, but it also contributes to the snowball effect of uncontrolled costs and spending. With an excess of vendor point-solutions, plan architects experience a bottleneck effect with any new high need solution that needs to be adopted.”
Nick Soman, CEO
He describes the challenge of working with existing solutions that continue to bleed the organization dry of capital and lead to an administrative catastrophe of solution performance and ROI that remain unchecked and unaudited. He also says the weight of the solutions leads to a collapse of the organization as active vendor contracts become lost within the organization with no management and utilization or engagement and, worse, duplicative purchasing.
“The work we’re doing with Health Rosetta and Architect Health to reduce point solution fatigue by making select curated and wellevaluated vendor decisions at the right time helps us manage vendors easily and ensure they are extracting value from the solution with a clear and transparent ROI,” says Soman.
PBM POINT SOLUTION CHALLENGES
Pharmacy Benefits Managers are under attack. The Federal Trade Commission recently issued a much-anticipated report slamming the PBM industry for manipulating the drug supply chain to profit at the expense of patients and independent pharmacists. Top executives at the “big three” have even been threatened with criminal charges and now face FTC lawsuits. Employers are now getting sued for bloated drug costs because they’re not performing as a responsible fiduciary.
Many self-insured companies are hoping that point solutions will get to the truth of their PBM program, with payment integrity vendors looking to make sure that the PBM is adhering to the contract.
Mary Ann Carlisle, Chief Revenue Officer and Chief Operating Officer, ELMCRx Solutions, observes, “Maybe 10% of employers that have self-funded Rx programs actually hire an auditor at the end of the year to review these programs and ensure that PBMs live up to their promises. But the fact is that PBMs don’t live up to any of their promises, and 90% of the plans aren’t even checking to see whether they’ve delivered. So, you have a number of point solutions out there dealing with transparency and fiduciary responsibilities, and that’s a big deal.”
She describes a perfect example: the craze about weight loss drugs.
“Until this year, the PBMs just approved all the Ozempic-GLP-1 claims that came in, which is only approved by the FDA for type two diabetes,” explains Carlisle. “As a result, a tremendous number of claims were paid on the non-specialty side of the house, which had been flat for a long time and all of a sudden were going through the roof – largely from these drugs.”
She says that while the PBMs have put in some type of screening for these claims, it’s still very weak.
“That’s where our program and others carve out that particular area with the addition of an improved service,” she continues. “In terms of a point solution, the objective is to put in something that improves the PBM services, with results that demonstrate far better outcomes for the member and for the plan, replacing what the PBM is offering.”
Carlisle and others are trying to combat escalating cost and promote adherence to treatment. But they are also trying to deal with the fiduciary responsibilities of the plan to make sure there’s optimal compliance.
“We also want to address prior authorizations,” she says. “If the PBM performs the prior authorizations, then often it’s too late to implement the point solution because they’re already putting people on these drugs without any intervention. And keep in mind that the PBMs are not only doing the prior authorizations, but they’re also actually fulfilling the prescriptions. A point solution intervenes before the care is approved, and employers can ultimately control the costs that are going to be paid. This is where prior authorization becomes an extremely big part of business.”
For the most part, she contends that most brokers and TPAs aren’t thinking about these issues and just assume the PBM does the prior authorizations and now the payment follows.
“That approach misses out on a whole lot of wonderful prior point solutions, not all of which we own, by the way,” says Carlisle. “There are a lot of really good ones out there that have nothing to do with our organization, but the best way of implementing those point solutions is by having an intervening, external prior authorization process.
A good part of vendor fatigue is maintaining multiple contracts. She believes employers should be looking for a consolidated approach with all these different vendors under one hood to tackle these issues, adding,
SIMPLIFYING HEALTHCARE
As plan sponsors tackle an increasingly complex healthcare landscape, they encounter a myriad of challenges in managing multiple-point solution vendors. The resulting vendor fatigue poses barriers to consolidating data, choosing the best possible solutions to minimize overall healthcare spending and optimizing member engagement to improve care and health outcomes.
Today, there is growing consensus that a single, integrated platform of solutions is far more convenient, effective and efficient, enabling self-insured employers to communicate and collaborate with one touchpoint and simplify all healthcare processes.
Chris McLellan, Director of Operations, MedWatch, highlights the benefits of working with a consolidated platform: “This approach reflects the dedication of considerable resources to sourcing, reviewing, and operationalizing high-quality vendors, ensuring clients receive solutions tailored to their health plans. This ensures seamless implementation, ongoing support and enhanced reporting.”
McLellan also emphasizes the importance of proper vendor vetting, adding, “While vendors are essential in the healthcare continuum and can offer significant savings to health plans, alignment with the health plan’s goals is crucial. Effective vendor management ensures seamless operations and optimal outcomes.
Since healthcare coverage is often an employer’s largest expense, McLellan observes that pursuing savings across multiple vendors can “…fragment care, undermine outcomes, and diminish the member experience.
Employers need a trusted partner in cost containment, one that continually evolves to provide solutions that maximize client value. Meticulous vetting is a key process that saves companies time and effort, ensuring that only the highest-quality vendors meet quality standards.”
The need for healthcare simplification is captured in the perspective Rob Gelb, Chief Executive Officer of Vālenz® Health, “We continuously hear about the challenge of point solution fatigue and desire to simplify healthcare. Everyone agrees the self-insured community needs a smarter, better, faster path to consolidating solutions rather than managing multiple vendors and data streams.”
To accomplish this goal, Gelb has expanded its configurable solutions to optimize the cost, quality and utilization of high-value care.
“With the recent acquisition of Healthcare Bluebook™ – and America’s largest cost and quality data set – we are addressing the unmet needs of the market and solving point solution fatigue by simplifying healthcare with one platform, one source of transparent data and one partner,” concludes Gelb.
Laura Carabello holds a degree in Journalism from the Newhouse School of Communications at Syracuse University, is a recognized expert in medical travel and is a widely published writer on healthcare issues. She is a Principal at CPR Strategic Marketing Communications. www.cpronline.com
Chris McLellan
Rob Gelb
Proud to be a Diamond Member
FIDUCIARY
BEST PRACTICES PART II: ESTABLISH A PRUDENT PROCESS FOR SELECTING SERVICE PROVIDERS AND ASSESSING FEES
Written By Alston & Bird Health Benefits Practice
InIlast month’s article on best fiduciary form, we considered best practices for establishing a health and welfare committee to oversee plan administration in light of fiduciary duties under the Employee Retirement Income Security Act (ERISA). Once you have established a fiduciary committee and have monitored your service providers, what should you do if the committee finds some of the providers to be lacking? Even if you are satisfied with your service provider, do you periodically conduct an RFP to see if the service provider is still the best value for the plan? Does your RFP break down questions about fees in order to make comparisons more easily? This month, we look at some best practices for selecting a new service provider and comparing provider fees.
Introducing Amwins Gene Therapy Solutions (GTS-15)
Scientific breakthroughs in gene and cell therapies are miraculous, however, the costs can be staggering –reaching up to $4.25 million. Amwins Gene Therapy Solutions (GTS-15) is an innovative reimbursement program which provides access to 15 FDA-approved gene and cell therapy treatments. We ensure first-dollar protection to the plan sponsor, portability and simplified billing. Our experts continuously monitor the FDA landscape so employers can confidently prioritize employee health without compromising the bottom line.
By way of review, last month we noted that ERISA imposes a duty of prudence and a duty of loyalty on fiduciaries, as well as an implied duty to monitor service providers to whom fiduciary responsibilities have been delegated. The duty of prudence focuses on the process, not on the outcome. Fiduciaries may not always know if they made the right choice, but the outcome can be defended if the process is prudent and well-documented. The uptick in litigation against health and welfare plan fiduciaries includes not just allegations of breaches in fiduciary duties but also allegations of prohibited transactions when service provider fees appear unreasonable.
SELECTING A SERVICE PROVIDER
When selecting a new service provider, or even when re-assessing an existing provider, the following best practices should be incorporated into the process:
• Variety of Proposals. A prudent process should be competitive and should obtain information from more than one provider—ideally, at least three. Brokers, consultants, attorneys, and other professionals who service your plan can provide recommendations, as well as chambers of commerce, industry associations for certain types of providers, and trade publications. Be aware, however, of relying too readily on the recommendations of brokers or consultants who may have financial arrangements or ties to a particular provider. When receiving a recommendation from, for example, a broker or consultant, always ask if compensation of any kind, either direct or indirect, would be exchanged between the broker or consultant and the provider.
• Provide Identical Data. All competing providers should have the same information about the plan and be asked about the same services needed. Include enough information about your own plan for the provider to respond meaningfully. Examples include:
o funding method (e.g., insured or self-insured, stop-loss, VEBA, trust)
o plan size
o complexity and plan design (e.g., controlled groups, participating employers, integrated HRAs, carve-out specialty drug program)
o expected fiduciary status of the provider (if any)
o any other features that may deviate from a standard plan that may require special services or experience on the part of the provider
• Keep a Level Playing Field. Evaluating responses from competitors will be much easier if decisions are based on the same information, such as services offered, experience, and costs. Consider the format of the RFP as well. For example, an RFP in grid format with specific, pointed questions and limited space for responses will discourage generic responses (or at least make them easier to spot) and enable you to create a side-by-side comparison of responses from each provider. Although there will be some advantages to remaining with the same service provider, try to evaluate all competitors based on the responses in the RFP.
Provider History. Ask providers about their history (e.g., what their corporate structure is, how long they have been in business, who their predecessor is), and whether any mergers or acquisitions are underway that can be disclosed. Require a provider to submit information about its financial condition (e.g., leverage, loans, debt, and bankruptcies) and its experience with health plans like yours. The more detailed information you can provide about the plan, the more helpful the
provider response will be in comparing the capacities and abilities of various providers. Also, ask if the service provider locks its client into other relationships with specific providers (e.g., banks or insurers).
Review the Quality of the Provider. Carefully examine information about the quality of the service provider, even providers that previously or currently service your plans. Examples of what to ask include:
o Who will be providing services, and what is their experience and qualifications;
o What is the turnover rate of the employees who will be providing the services;
o Does the provider use subcontractors, and if so, does the provider guarantee and indemnify the work of the subcontractor;
o What are the provider’s data feed and IT requirements or limitations with respect to the data that will be routinely shared between the plan and the provider (or between the plan’s other service providers that may share data with the provider);
o Any recent litigation or enforcement action taken against the provider;
o Any recent litigation in which they have been named, even if not as a defendant, as providing services to a defendant accused of breaches of fiduciary duty or prohibited transactions;
Compliance Services for Self-Insured Plans
Reporting proudly supports SIIA members with our most recognized brands. Great seeing everyone at the conference.
Five Decades of Excellence
Growing with confidence. We continue to expand and diversify, with over 100 classes of speciality insurance provided through approximately 4,000 experts around the world, contributing to our global success. TMHCC is a leader within our industry and trailblazer in the specialty insurance landscape. After half a century of successful expansion, we now have a presence in over 180 countries. We want to express our deepest gratitude to all of our employees, clients, brokers, and agents who have contributed to these five decades of excellence. To be prepared for what tomorrow brings, contact us for all your medical stop loss and organ transplant needs.
o The provider’s experience or performance record, including whether it offers performance guarantees;
o Customer service access and procedures to promptly address and resolve participant questions and complaints;
o Where are the employees providing the services located, and what kinds of disaster plans and backup plans are in place for the services;
o Data confidentiality (including HIPAA) processes and procedures, including cybersecurity and any breach incidents;
o Does the provider use artificial intelligence in its provision of services, and if so, how;
o Participant satisfaction reports or statistics;
o Require assurances that any required licenses, ratings or accreditations are up to date (insurers, brokers, TPAs, healthcare service providers)
o Require assurances for liability insurance, including cybersecurity, in appropriate amounts.
Document the Selection Process. The statute of limitations for a breach of fiduciary duty is six years. The plan may have changed providers within that time, or key personnel at your organization involved in the selection process may no longer be working for you. Document the selection (and monitoring) process, and, when using an internal administrative committee, educate committee members on their roles and responsibilities. Increased litigation in this area focuses on provider fees, so documentation may be especially important if the provider with the lowest fees is not chosen.
ASSESSING THE REASONABLENESS OF PROVIDER FEES
The reasonableness of fees is an important consideration for fiduciaries because agreements with service providers may be a prohibited transaction if the plan is paying exorbitant fees. ERISA §406(a)(1) prohibits a fiduciary from causing a plan to engage in a transaction that involves the exchange of goods or services between the plan and a party in interest, but the statutory exemption at ERISA §408(b)(2) allows plans to enter into contracts with services providers, so long as the exemption requirements are met. Two of the key exemption requirements are (1) that the arrangement itself be reasonable and (2) that provider compensation be reasonable. A prudent fiduciary does not need to choose the lowest-cost provider but does need to explain (and document) the reasoning for choosing a higher-cost provider.
Given the complexity of fee arrangements, it may be difficult to make apples-to-apples comparisons of fees. When drafting questions for the RFP, try to be as pointed as possible and hire an expert to help with drafting if the plan does not have any in-house experts in a given area. For example, it may be difficult, if not impossible, to compare the fees of two providers when those fees are based, in part, on “shared savings,” especially if each provider defines “shared savings” differently. Pricing for PBM services and prescription drugs can also be difficult to understand. An expert in PBM pricing may be able to incorporate questions into the RFP that get at issues specific to PBM pricing, such as benchmarks for pricing prescription drugs, how rebates are defined, and when rebates are credited back to the plan.
Strong relationships. More solutions.
Partner with Nationwide® to simplify Medical Stop Loss for you and your clients. Save time and effort with easy access to experienced underwriters who offer a broad range of solutions. Our flexible plans are tailored to fit your clients’ needs and reduce future risk. Plus, claims are backed by a carrier with A+ financial ratings.*
As a leader in Medical Stop Loss coverage for 20 years, and in the health business for more than 80 years, you can trust Nationwide to take care of you and your clients.
To learn why top Medical Stop Loss producers and underwriters choose Nationwide, email stoploss@nationwide.com or visit nationwidefinancial.com/stoploss.
ranking from AM Best received 10/17/02, affirmed 12/7/23, and A+ ranking from Standard & Poor’s received 12/22/08, affirmed 5/16/23.
Below are some general topics to consider addressing in your RFP regarding provider fees:
Get a proper breakdown of fees based on services requested. When comparing estimates from prospective service providers, ask which services the estimated fees cover and which they do not. Take into account “bundled” service arrangement versus separate charges for individual services. Be mindful of hard-to-quantify services fees, such as fees based on litigation or subrogation recoveries or “shared savings.”
Compare all services to be provided with the total cost for each provider. Some providers may be more expensive than others, but their fees may include higher levels of the same type of services. This should be documented in any decision that takes higher-level services (and high fees) into account.
Consider whether the fee estimate includes services that were not requested or are not wanted.
Ask about differences in fees for different arrangements. For example, in an RFP for a PBM, ask for estimates based on a traditional PBM model, pass-through model, and carve-out for specialty drugs.
Also, ask if provider fees (and not just drug prices) would be different based on which benchmark is used for drug pricing (e.g., AWP versus NADAC). As noted above, input from an expert would be helpful.
Include important or non-negotiable defined terms that may impact provider fees. For example, include a definition for “rebates” in an RFP for PBMs and ask if the PBM can agree to use the definition in the service agreement without any change to the proposed fees.
If not covered under the Consolidated Appropriation Act’s ERISA §408(b)(2) disclosures, ask prospective providers whether they receive any third-party compensation, such as finder’s fees, commissions, or revenue sharing. (Note: also establish a process to regularly monitor plan fees for reasonableness.)
Look at payments to subcontractors and any related parties.
Get confirmation from the provider that early termination without penalty will be part of the service agreement. (This is an ERISA requirement)
AUDIT RIGHTS ALONE ARE NOT ENOUGH
Self-insured plans need to audit their service providers regularly in order to ensure that services are properly provided and fees are properly calculated. Audit rights alone may not guarantee a plan’s ability to thoroughly and efficiently monitor a provider. Some providers include restrictions on which auditors can be used, limit audit rights to a small sample size, and limit audit rights after termination of the agreement. Make sure certain potentially “deal-breaking” audit requirements are included in the terms of the RFP itself. Insist on audit rights that provide enough sampling to determine whether the provider is adhering to the service agreement. Exercise these audit rights and document. Be mindful of audit provisions that limit access, frequency, or post-termination access to plan information or that limit the plan’s choice of auditor. Also, be mindful of audit provisions that give the provider the right to review and approve the audit report before the plan sees the report.
HOW OFTEN DOES A PLAN NEED TO CONDUCT AN RFP?
Currently, there are no rules or cases that set forth any guidelines on how often fiduciaries of a health and welfare plan need to conduct an RFP. A best practice would be to conduct an RFP every few years to compare available pricing options and service providers. Plans understandably get comfortable with specific providers who have come to know their plan well over the years, but fiduciaries still have a duty to review these arrangements and document their reasons for continuing to use a specific provider. Using a consultant to benchmark fees may also be helpful at regular intervals, but conducting an RFP from time to time may provide more relevant, accurate, and meaningful data for purposes of evaluation and comparison.
KEY TAKEAWAYS:
Remember, demonstrating a prudent process, not the “best” outcome in hindsight, will generally satisfy the duty of prudence. Some best practices for the prudent selection of a service provider include:
Include a variety of providers in the RFP.
Provide identical data about the plan to each provider.
Create a level playing field by tailoring your questions to elicit specific, rather than generic, responses.
Collect information on provider history and the quality of the provider.
Draft the RFP to break down the fees into their most basic elements and hire an expert to assist with this drafting if necessary.
Include dealbreaker terms in the RFP, including audit rights and key definitions.
Document the entire selection process.
About the Authors
Attorneys John Hickman, Ashley Gillihan, Steven Mindy, Ken Johnson, Amy Heppner, and Laurie Kirkwood provide the answers in this column. John is partner in charge of the Health Benefits Practice with Alston & Bird, LLP, an Atlanta, New York, Los Angeles, Charlotte, Dallas and Washington, D.C. law firm. Ashley and Steven are partners in the practice, and Ken, Amy, and Laurie are senior members in 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 John at john. hickman@alston.com.
STOP LOSS INSURANCE WE’LL HELP MANAGE THE RISK.
Prudential’s Stop Loss insurance helps reduce unpredictable risks from self-funded medical plans. This way you can focus on giving your employees the coverage they deserve, while helping to reduce your worries about the increased frequency of catastrophic claims.
Get Stop Loss insurance from a partner you can rely on:
• A highly rated, experienced carrier recognized for nearly 150 years for strength, stability, and innovation
• Efficient, responsive service with streamlined processes across quoting, onboarding, and reimbursements
• A dedicated distribution team that works hand-in-hand with your existing relationships
• Flexible policy options so we can build a coverage plan that meets the unique needs of your organization
Did you know, 1% of people account for a quarter of healthcare spending in the U.S.* See how Prudential can help you manage the risk from your self-funded medical plan.
For more information, contact us at stoploss@prudential.com or visit our website: www.prudential.com/stoploss
CAPTIVE INSURANCE ARRANGEMENTS: WHEN ARE THEY INSURANCE FOR FEDERAL INCOME TAX PURPOSES? (PART 2)
Written By Alan J. Fine, Brian Johnson, Donna Eldridge, Kerrie Riker-Keller, Michael Teichman, and Rick Eldridge
AsAnoted in Part 1 of this two-part series examining when captive insurance arrangements are considered a legitimate insurance structure for Federal income tax purposes (published in the October edition of the Self-Insurer), we examined various Tax Court decisions and IRS Revenue Rulings and other proclamations to help business owners, their advisors, tax professionals, and policymakers better understand what factors need to be present to effectively show that a captive insurance arrangement has a legitimate insurance purpose and structure.
Our focus in Part 1 was on the concepts of Exposure Units, Risk Shifting, Risk Distribution, and the Law of Large Numbers. In Part 2 of this article, we will address the subjects of Risk Pooling and the unwarranted concerns over the appearance of a circular flow of funds, including the accounting for Risk Pooling. But first, we will re-review the concept of the Law of Large Numbers.
Editors Note: This is Part 2 of a two-part article. Part 1 appeared in the October edition of the Self-Insurer.
THE LAW OF LARGE NUMBERS
As we explained in Part 1, the Law of Large Numbers is a statistical term that says the larger the sample size, the more accurate one can measure the mean and the variance thereof, thereby allowing an insurer to price the risk more accurately and hopefully less expensively. Said another way, using loss and exposure data is the ability to accurately estimate the expected losses relative to the number and type of risks insured. Hence, the larger the pool of data (i.e., sample size), the more accurate the estimates can be relative to accurate exposure data, legal climate, costs, etc.
In Revenue Ruling 2002-90, the IRS focused on the significant volume of independent, homogeneous risk, explaining that:
• [P]rofessional liability of risks of 12 operating subsidiaries are shifted to S. Further, the premiums of the operating subsidiaries, determined at arms-length, are pooled such that a loss by one operating subsidiary is borne, in substantial part, by the premiums paid by others. The 12 operating subsidiaries and S conduct themselves in all respects as would unrelated parties to a traditional insurance relationship, and S is regulated as an insurance company in each state where it does business. The narrow question presented is whether P’s common ownership of the 12 operating subsidiaries and S affects the conclusion that the arrangements at issue are insurance for Federal income tax purposes. Under the facts presented, we conclude the arrangements between S and each of the 12 operating subsidiaries of S’s parent constitute insurance for federal income tax purposes.
As noted in Part 1 of this twopart series, we do not know how the number 12 was derived in Revenue Ruling 2002-90. That said, in statistics, a random sample may be 12, 15, or 20 different opinions of whatever is being tested. In a captive, 12, 15 or 20 different risks with proper actuarial analysis where the pricing of risks can be compared to larger data sets available from sources such as ISO rating classes, the pricing of risk may be fairly accurate even though it is not “large” as the Court defined it in, for example, RentA-Center. Thus, an insured with 12 different unique risks can have an appropriate level of Risk Distribution, and the application of the Law of Large Numbers can be applied to the pricing of the risks based on individual historical performance and industry rating data for classes of business to be insured.
RISK POOLING
Most mid-sized businesses (defined here as those with revenues of between $50 to $250 million annually) will likely not have 12 operating subsidiaries to qualify as an insurance company for Federal income tax purposes under Revenue Ruling 2002-90. Hence it is necessary for these businesses’ captive insurers to join a reinsurance pool, whereby premiums and losses are shared with other participants in order to properly distribute risk.
Risk Distribution necessarily entails a pooling of premiums, so that a potential insured is not in significant part paying for its own risks. Note that this comment is reinforcing the spread of risk, as opposed to the pricing of said risk.
Pooling is an arrangement that originated in the earliest insurance markets and is common today. One of the most well-known pooling arrangements is Lloyds of London, where underwriters subscribe to an individual risk by literally signing their name and a percentage to accept a given risk. And through the International Group of P&I Clubs, today approximately 90% of ocean-going tonnage is covered for liability risks by 12 protection and indemnity “clubs” that pool their risks through a pooling agreement.
What we don’t see in the background is all the accounting and bookkeeping that takes place to account for these transactions.
Three aspects of pooling are worth mentioning:
• If an individual risk is actuarially sound, meaning it is priced adequately for the risk being assumed, then when this risk is assumed or pooled with other actuarially sound risks, it solidifies the Law of Large Numbers – two risks may be very different, but the individual pricing is adequate, and over time the losses will revert to the mean.
• Because risks and insurers are different (but actuarially sound), they can participate in a pooling arrangement where the size and complexity of the insured risks are accounted for based on the premiums. For example, if there was a pool with 10 insurers and if the exposure units were identical and the premiums therefore identical, then each member would be responsible for 10% of any covered loss. If a single member of a pool was 3 times the size of each of the other 9 single members (due to either larger exposure units and or risks with a higher probability of loss), then the larger member would be responsible for 25% of a loss, whereas the other 9 member would be responsible for 75% of the loss (or 8.3% per member = 75%/9 members).
• Pooling is beneficial to an insurer if done correctly because the pool creates risk diversification and independence, similar to the investment portfolio diversification example referenced in Part 1 of this two-part article. Pools that contain a single type of risk, such as wind or earthquake for example, may have some geographic diversity but fail to provide broad enough risk diversification unless the insurers are able to charge enough premium to be financially sustainable over time, given the premiums generally cannot sustain the losses.
Put another way, in the absence of independence, there would likely be positive correlation of risks. Positive correlation arises from common exposure among risks (frequently called “contagion risk”), such as many insured buildings being in close geographic proximity. As an example, if there was one claim for losses due to hurricane damage, there would likely be multiple claims. Positive correlation creates fluctuation and unpredictability in an insurer’s claims experience, effectively reducing risk distribution.
Negative correlation, on the other hand, would mean properties located in a geographically dispersed manner would distribute the risks and minimize claims. This is why it is difficult, even for commercial insurers, to provide catastrophic coverage in certain geographic areas (e.g., California earthquake or Florida wind, and hence why the commercial insurance market continues to reduce its exposures to accounts with wind (hurricanes) and earthquakes and hence why insureds turn to captive insurers to provide coverage and finance these risks).
THE CIRCULAR FLOW OF FUNDS AND THE ACCOUNTING THEREOF
In Swift v. Commissioner (“Swift”), the Court stated that it is required to determine: “whether [each] quota share arrangement was a true arrangement for the distribution of risk.” In this evaluation of Swift, the first topic the Court discusses is the “circular flow of funds” factor.
Insurance pools – for accounting purposes – have a circular flow of funds between the insurer and the pool (reinsurers). This occurs through ceded premiums to the pool (and its respective members) and retroceded premiums back to the insurers. Without this accounting methodology, it would be impossible to determine the economic participation of each insurer/member, as described earlier. This is directly addressed in the American Institute of Certified Public Accountants’ Auditing and Accounting Guide, Pursuant to Chapter 6, Paragraph 610, which provides:
• Pro rata reinsurance is a sharing, on a predetermined basis, by the insurer and reinsurer of premiums and losses on a risk, class of risks, or particular portion of the insurer’s business. For a predetermined portion of the insurer’s premium(s), the reinsurer agrees to pay a similar portion of loss and loss adjustment expenses (LAE) incurred on the business reinsured. The reinsurer’s participation in the claims is set without regard to the actual frequency and severity of claims. For example, under a 50% quota share treaty, the reinsurer receives 50% of the insurer’s premiums
and is obligated to pay 50% of each claim and claim-adjusted expense incurred by the insurer. Furthermore, this accounting creates the mixing/diversification of risks within the pool, and ultimately back to the insurer.
A lynchpin of a reinsurance pool is what happens when there is a loss. Are claims submitted to the pool? Are members paying their proportional percentage of losses for participation? Are these claims reviewed at arm’s length to protect all the pool members paying the claim? After all, there is a fiduciary responsibility on the part of the reinsurance pool manager and claim adjusters to protect members against fraud (intentional or not) and the general self-serving interest of the insurer submitting the claim.
Interestingly, the circular flow of funds referenced in the Rent-A-Center case involved the insurer (Legacy) purchasing the treasury stock of Rent-A-Center. The Court stated:
• The [IRS] contends that Legacy was not an independent fund but an accounting device. In support of this contention, [the IRS] cites a purported “circular flow of funds” through Legacy, RAC, and RAC’s subsidiaries. [The IRS’s] expert, however, readily acknowledged that he found no evidence of a circular flow of funds, nor have we. Legacy, with the approval of the BMA, purchased RAC treasury shares but did not resell them. Furthermore, [Rent-A-Center] established that there was nothing unusual about the manner in which premiums and claims were paid. Finally, [the IRS] contends that the netting of premiums owed to Legacy during 2003 is evidence that Legacy was a sham. We disagree. This netting was simply a bookkeeping measure performed as an administrative convenience.Further, there seems to be confusion as to what constitutes a “circular flow of funds” when considering the tax posture of a captive insurance company. In FSA 199945009, the IRS National Office chose to concede a captive insurance case in which “a significant portion of the premiums paid…to C were borrowed by H, thereby raising concerns about circular flows of cash.”
In other situations, however, “circular flows of funds” has been used to describe the mechanism by which participants in an insurance pool exchange those risks in order to distribute those risks amongst all of the participants, which is not only prudent, but also necessary for the viability of the reinsurance pool’s financial health, regardless of the tax consequences associated with doing so. Further, these flows of funds are the only mechanism for distributing risk in a pooled arrangement.
What seems to be missing in the Rent-A-Center opinion and the discussion of the “circular flow of funds” is the following question: Are funds from the insurance company being circulated back to the insured (as opposed to other insurers/reinsurers as illustrated by the accounting principles referenced above) for other reasons than a claim payment, policy dividend, or qualified loan? If so, there very well could be a “circular flow of funds,” and the facts are necessary to determine if the transaction has moved beyond what is common in the notion of insurance.
CLOSING REMARKS
Outside of the tax world, the concepts around what constitutes valid insurance and reinsurance arrangements are anything but simple. For the past 5 decades, the IRS has taken it upon itself to define what does not constitute insurance (and reinsurance) for Federal income tax purposes. To date, the only current guidance for owners of captives (particularly those who have availed themselves of the election under Section 831(b)) is to not follow the examples set by the taxpayers in the cases decided by the Tax Court.
The authors developed Part 1 and Part 1I of this two-part article with the intent to help educate business owners, tax professionals, and policymakers as to the particular concepts that are critical to that of an insurance arrangement. This is of great importance given that there are presently in excess of 1,000 captive insurance cases pending in Tax Court. Given the behavior of the commercial insurance marketplace, we can unequivocally say that the market for captives and, specifically, for 831(b) captives has become a critical component of the risk management strategy for an untold number of businesses. Captives are here to stay, and as the business world continues to evolve, captives will help businesses insure new risks efficiently and offer flexibility that the commercial markets lack.
Citations for the Tax Court cases noted in this article, along with any other related information, can be provided to you by contacting the authors below.
About the Authors
Alan J. Fine, CPA, JD, Tax Partner at Armanino LLP; Brian Johnson, ACAS, MAAA, ARM, Managing Director of Risk International Actuarial Consulting; Donna Eldridge, CPA, Chief Financial Officer of The Intuitive Companies; Kerrie Riker-Keller, Chief Compliance Officer of The Intuitive Companies; Michael W. Teichman, JD, Director at Parkowski, Guerke & Swayze, P.A.; Rick J. Eldridge, President & CEO of The Intuitive Companie s
NEWS FROM SIIA MEMBERS
2024 NOVEMBER MEMBER NEWS
Provided below are news highlights from these upgraded members. News items should be submitted to membernews@siia.org.
All submissions are subject to editing for brevity. Information about upgraded memberships can be accessed online at www.siia.org.
If you would like to learn more about the benefits of SIIA’s premium memberships, please contact Jennifer Ivy at jivy@siia.org.
SIIA boasts a very active and dynamic membership. Here are some of the latest developments from the companies powering the selfinsurance industry.
ELMCRX SOLUTIONS NAMES AMY GASBARRO AS PRESIDENT
ELMCRx Solutions (“ELMCRx”), a leading provider and consolidator of pharmacy benefit management (PBM) point solutions, is pleased to announce the appointment of Amy Gasbarro as President. `
According to an announcement, Amy brings decades of leadership and experience in the healthcare space and is poised to help lead ELMCRx into its next phase of strategic growth. Amy’s appointment solidifies ELMCRx’s commitment to delivering innovative point solutions that provide enhanced, value-driven, transparent pharmacy benefit and prescription drug services for employers, brokers, and TPAs.
Amy comes to ELMCRx with an extensive background in healthcare management, having served in various executive roles that focused on operational excellence, client relations, and strategic development. “Amy’s leadership and vision align perfectly with our mission to provide high-quality prescription drug solutions,” said Richard Fleder, CEO and Chairman of the Board of ELMCRx. “Her experience in driving growth and passion for healthcare innovation make her the ideal choice to lead ELMCRx as we continue to expand our services and partnerships and make acquisitions. We are confident that Amy’s contributions will positively impact the future of our organization.”
“I am thrilled to join ELMCRx at such an exciting time in the company’s journey,” said Amy Gasbarro, President of ELMCRx. “There is a tremendous opportunity to push the boundaries of
traditional pharmacy benefit management and prescription drug services and bring transformative solutions to our clients. I look forward to working with the talented team at ELMCRx to build on the company’s impressive momentum.”
PENFIELD EXPANDS INTO SUBROGATION BUSINESS
Penfield Medical Cost Containment Inc., a leading medical claims negotiation and medical bill review company, has announced the acquisition of subrogation experts, Transworld Claims Solutions (TCS).
TCS is a provider of a full range of subrogation and recovery services geared to the needs of the insurance industry. Their founder, Doug Clement, has joined Penfield as the SVP of Subrogation. The other TCS team members have also transitioned over to Penfield.
Penfield’s President & CEO, David S. Rennie, said, ‘We are thrilled to welcome Doug and the TCS team to Penfield. This acquisition represents a fantastic opportunity to further enhance the full range of services and expertise that Penfield currently provides for our clients and signifies our continued growth. “Penfield is committed to developing our client services and attracting new clients, ensuring our long-term success and growth.”
Amy Gasbarro
Brad Hansen VP of Provider Relations
WELLRITHMS RECOGNIZED AS
ONE OF THE FASTEST
GROWING COMPANIES IN THE U.S.
Inc. revealed today that WellRithms ranks No. 1078 on the 2024 Inc. 5000, its annual list of the fastest-growing private companies in America.
“It is gratifying to again be listed in the top quartile of the Inc. 5000 list for the fourth consecutive year, ” said Merrit Quarum, M.D., WellRithms CEO. “Our growth reflects the enormous problem we address of medical overbilling and the unique approach we bring to carefully scrutinize bills to reduce healthcare costs for employers, unions and other payors. This Inc. 5000 distinction reflects our spirit of innovation, advanced AI, physician expertise and legal insight used to combat medical billing errors, abuses and fraud.”
BERKLEY EXPAND GROUP CAPTIVE SALES TEAM
Berkley Accident and Health, a Berkley Company, has appointed Eric Bunce as Regional Sales Manager for its EmCap business. In this role, Eric will be responsible for cultivating growth and developing new Stop-loss Group Captive programs in the southeast territory.
“I’m excited to continue the expansion of our EmCap business in the southeast, and Eric’s background in both Stop-loss and Group Captive programs will be an asset to our clients,” said Brad Nieland, President
REAL PEOPLE. REAL SAVINGS.
At HHC Group, we believe in the power of human expertise over impersonal algorithms. Our attorney negotiators meticulously scrutinize every claim, going beyond what an algorithm dictates, considering its unique aspects to determine its true value. Armed with this information, years of negotiating experience and bulldog tenacity they secure deep discounts on both in and out of network claims. Real people, delivering real savings.
Eric Bunce
and CEO of Berkley Accident and Health. “Bringing on an individual like Eric, who has an outstanding reputation in the industry, is an exciting win for our team.”
Eric joins Berkley Accident and Heath with over 20 years of experience in sales, starting with a large national carrier. He has also held sales leadership roles in the medical and ancillary/voluntary industries and, most recently, in the captive space. Eric is a graduate of Drake University and resides in the St. Petersburg, FL area.
ASHLEY SHEBLE JOINS BLACKWELL CAPTIVE SOLUTIONS
Blackwell Captive Solutions, a leading U.S.-based provider of innovative group captive solutions, has announced the appointment of Ashley Sheble as its new National Vice President of Sales. This strategic addition to the team comes as Blackwell continues its expansion, celebrating its second anniversary and recent industry recognitions.
“Ashley’s proven track record in exceeding sales goals and her deep expertise in the healthcare and benefits sector make her an invaluable addition to our team,” said Kari L. Niblack, Esq., President of Blackwell Captive Solutions. “Her leadership and vision will be instrumental as we continue to expand our services, forge new partnerships, and drive strong top and bottom-line impact across the organization.”
MARKET LEADERS COMBINE TO FORM CARBON STOP LOSS SOLUTIONS
Sequoia Reinsurance Services, IOA Re and Rockport Benefits — subsidiaries of NSM Insurance Group—announced they are uniting under a new brand, Carbon Stop Loss Solutions (Carbon), to deliver the industry’s leading reinsurance and stop-loss solutions.
NSM acquired all three entities in March 2023 and strategically merged them to create a unified sales and service platform to deliver increased value and enhanced resources to brokers, TPA partners and clients.
“By uniting the cutting-edge risk solutions and expertise of three trusted legacy organizations, we are now formally joining forces as the singular leader for employer stop-loss and managed care solutions that deliver financial security,” said Dan Bolgar, CEO of Carbon Stop Loss Solutions. “Like the essential element, Carbon represents the critical solutions that we deliver for brokers and their clients that embody the strength, resilience and innovation that we are known for across the reinsurance industry.”
Bolgar added, “Our partners and clients can rely on us for the same market-leading solutions, expertise, and service they have always received from us. Our combined teams will allow us to deliver even faster service, competitive pricing and a broader portfolio of solutions for a wide range of clients.”
VBA APPOINTS MICHELLE BOUNCE TO KEY EXECUTIVE POSITION
Virtual Benefit Administrators (VBA) has announced the appointment of Michelle Bounce as the new Senior Vice President (SVP) of Business Transformation. In her new role at VBA, Michelle will leverage her extensive project management skills, deep product knowledge, and customer use-case expertise to refine VBA’s approach to understanding buyer timelines, objections, and decision-making processes.
Michelle most recently served as the President of The J.P. Farley Corporation and has been a transformative leader in the healthcare industry. Her dedication to transparency, costeffectiveness, and improving healthcare outcomes aligns perfectly with VBA’s mission to deliver innovative and clientfocused solutions.
“We are delighted to welcome Michelle Bounce to the VBA team,” said Mike Clayton, President & CEO of VBA. “Her
extensive experience and passion for enhancing healthcare administration will be invaluable as we continue to innovate and improve our customer engagement approach. Michelle’s strategic insights will help us better understand our customers and drive our business forward.”
ANNA HANSEN JOINS MEDWATCH
MedWatch, LLC, a leader in healthcare cost containment solutions, announced the appointment of Anna Hansen as Senior Vice President of Business Development. With over 20 years of experience in the healthcare industry, Anna brings extensive expertise in driving business growth, creating client-focused solutions, and fostering strategic partnerships.
In her new role, Anna will be leading new initiatives in MedWatch’s business development, expanding client relationships in additional market segments and driving the company’s commitment to innovative, customized solutions for healthcare providers and payers. Her proficiency in sales strategies, account management, and cost containment will be instrumental in MedWatch’s ongoing growth and success.
Anna Hansen
Anna joins MedWatch from MultiPlan, Inc., where she served as Vice President, Client Executive, and played a pivotal role in expanding cost containment solutions, including analytic-based payment and revenue integrity services.
“We are thrilled to have Anna Hansen join the MedWatch team,” said Sally-Ann Polson, President & CEO of MedWatch, LLC. “Her deep industry knowledge and proven track record in business development make her a valuable addition as we continue to expand our services and deliver exceptional value to our clients.”
ALLIED BENEFITS SYSTEMS TAPS DINA TANK TO LEAD REGIONAL SALES
Allied Benefit Systems, LLC, the nation’s leading healthcare solutions company, announced the appointment of Dina Tank, as Senior Vice President, Sales, for the United States Western Region. Dina brings over 30 years of experience in the health insurance industry and will be instrumental in expanding Allied’s presence in the Western market
Dina joins Allied from a national TPA, where she served as Vice President, West Coast Sales Division.
“We are thrilled to welcome Dina to the Allied team,” said Andrew (Drew) Rozmiarek, Chief Revenue Officer of Allied. “Dina’s proven record of success and great reputation on a national level, along with her strong ties to our valued broker partners, will be vital as we continue to execute our proven strategies in the Western market. Dina’s expertise and leadership will be key to driving our strategic
initiatives and expanding our reach in this important region.”
D.W. VAN DYKE RELEASES STOP-LOSS SURVEY RESULTS TO PARTICIPANTS
D.W. Van Dyke & Co., Inc. has released the results of its Medical Stop-loss Industry Persistency and New Business Survey to the twenty-seven participants (MGUs and Direct Carriers) representing over $13.7B in annualized Stoploss Premiums.
Stop-loss MGUs and Carriers interested in learning more about DWVD’s Industry surveys and services should contact Joe Sabol at jsabol@ dwvd.com or Michelle Marzella at mmarzella@dwvd.com.
ALICE JACKSON JOINS HEALTH PAYER CONSORTIUM (HPC)
HPC has announced the hiring of Alice Jackson. With over 25 years working for and managing TPAs and running EDI for TPAs and PPOs, Alice brings a wealth of knowledge to HPC’s EDI team. At HPC, she will lead and develop our talented team of EDI experts.
Dina Tank
“I’m excited to join the team at HPC. They’re a great group of people who are extremely passionate about their work and their fun. I look forward to the future,” said Alice Jackson.
“Alice will fit in great at HPC. We searched for a long time before we found Alice to fill this key position in our organization,” said Patrick J. Crites, President and Co-founder of HPC. He continued, “Strategically, she will grow and develop our EDI Team for the next 10-plus years.”
RINGMASTER TO PARTNER WITH BENECON
Ringmaster Technologies, Inc. has announced a strategic partnership with Benecon, a leader in self-funded consortiums and cooperatives. This new collaboration aims to introduce an innovative level-funded marketplace, combining the strengths and expertise of both companies to deliver unparalleled value to clients.
This partnership will integrate Ringmaster’s software capabilities, which are designed to simplify and streamline the quoting and placement procurement cycle, with Benecon’s extensive experience in providing level-funded health plan solutions. The collaboration promises to deliver significant benefits to clients, including faster processes, improved customer experiences, and optimized financial outcomes.
“This partnership aligns perfectly with our vision of leveraging advanced technology to offer superior solutions to our clients. Together, we will empower our clients, enhance operational efficiencies, and unlock new growth opportunities,” said Todd Roberti, CEO of Ringmaster Technologies, Inc.
Benecon’s CEO, Matt Kirk, shared, “We are very excited to support Ringmaster in launching a level-funded solution backed by the VERIS Consortium. Benecon looks forward to the partnership and supporting Ringmaster’s efforts to bring technology efficiencies to the self-funded space.”
CENTIVO ANNOUNCES NEW CAPITAL RAISE
Centivo, a pioneering healthcare company dedicated to making highquality healthcare more affordable for employers and their employees, announced it has secured $75M in equity and debt financing.
The financing includes participation from new strategic investors Cone Health Ventures and MemorialCare Innovation Fund, as well as existing financial investors, including B Capital, Cox Enterprises, F-Prime Capital, Ingleside Investors, and Morgan Health (a division of JPMorgan Chase).
“We are thrilled to have this level of financial support toward the continued growth of our radically affordable healthcare solution in America,” said Ashok Subramanian, CEO and Co-Founder of Centivo. “Our next step is to expand the number of Americans who can finally have a health plan that they can afford to use and to make more heroes out of those employers who are restoring healthcare affordability in their workplaces.”
Alice Jackson
2024 SELF-INSURANCE INSTITUTE OF AMERICA
BOARD OF DIRECTORS
CHAIRMAN OF THE BOARD*
John Capasso
President & CEO
Captive Planning Associates, LLC
CHAIRMAN ELECT*
Matt Kirk
President
The Benecon Group
TREASURER AND CORPORATE
SECRETARY*
Amy Gasbarro
President
ELMCRx Solutions
DIRECTOR
Mark Combs
CEO/President
Self-Insured Reporting
DIRECTOR
Orlo “Spike” Dietrich Operating Partner
Ansley Capital Group
DIRECTOR
Deborah Hodges
President & CEO
Health Plans, Inc.
DIRECTOR
Mark Lawrence
President
HM Insurance Group
DIRECTOR
Adam Russo
CEO
The Phia Group, LLC
DIRECTOR
Beth Turbitt
Managing Director
Aon Re, Inc.
VOLUNTEER COMMITTEE
CHAIRS
Captive Insurance Committee
Jeffrey Fitzgerald
Managing Director, SRS
Benefit Partners
Strategic Risk Solutions, Inc.
Future Leaders Committee
Erin Duffy
Director of Business Development
Imagine360
* Also serves as Director
Price Transparency Committee
Christine Cooper
CEO
aequum LLC
Cell and Gene Task Force
Shaun Peterson
VP Head of Worksite Solution
Pricing & Stop Loss Product
Voya Financial
2024 BOARD OF DIRECTORS
SIEF CHAIRMAN
Nigel Wallbank President New Horizons Insurance Solutions
2601 Sheltingham Drive Wellington, FL 33414
Email: NigelWallbank@msn.com Cell: 305-632-3334
SIEF PRESIDENT
Dani Kimlinger, PhD, MHA, SPHR, SHRM-SCP Chief Executive Officer
MINES & Associates, Inc 10367 W. Centennial Rd. Littleton, CO 80127
Email: dckimlinger@ minesandassociates.com Office: 303-952-4985 Cell: 303748-3010
DIRECTORS
Les Boughner Chairman
Advantage Insurance Management (USA) LLC 12 Gillon Street Charleston, SC 29401
Email: l.boughner@aihusa.com Cell: 312-315-3166
Matt Hayward Office President Ryan Specialty Benefits 5660 Greenwood Plaza Blvd, Suite 500 Greenwood Village, CO 80111
Email: matt.hayward@rsbenefits.com Phone: 619-992-8907
Elizabeth Midtlien
Vice President, Emerging Markets AmeriHealth Administrators, Inc. 2051 Killebrew Drive, Suite 300 Bloomington, MN 55425
Email: elizabeth.midtlien@ahatpa.com Phone: 612-849-4657
Jonathan Socko Senior Vice President
East Coast Underwriters, LLC 121 W. Main Street, Suite B Spartanburg, SC 29306
SIIA NEW MEMBERS
NOVEMBER 2024
REGULAR CORPORATE MEMBERS
Beau Harling Vice President
BSI Companies Greenville, SC
Jake Velie CPT CEO National Integrative Health West Des Moines, IA
Rob Wood III Director of Business Development Sovereign Edge Solutions Saint Charles, MO
David Wood Regional Vice President Sword Health Draper, UT
SILVER MEMBERS
Leigh Ann Furr Director of Compliance Angle Health San Francisco, CA
Richa Mittal Associate Manager –Brand & Communications AVIZVA INC Reston, VA
What if you could save your clients money and make healthcare feel effortless?
At Zelis, we turn that vision into reality.
Unbeatable Savings: We’ve saved healthcare carriers, TPAs, and self-insured carriers over $27 billion in network and claim costs.
Next-Level Experience: We’re not just cutting costs, we’re transforming healthcare finance management for a smoother, more efficient experience.
Your Trusted Partner: With Zelis, you have a partner who understands the intricacies of healthcare finance. We’re here to boost your financial performance and expertly manage risk.
Become part of the Zelis transformation
Ready to save up to 75 percent on healthcare claims? Call us today at 888.311.3505 or scan the QR code to get started.
Catastrophic claims can arise unexpectedly. Gene therapy to treat a child’s beta thalassemia costs more than $2.25 million.* When the self-funded employer has the right Stop Loss protection in place, focus can remain on achieving business goals and supporting Ivy and her family in this di cult time.
When you work with the experts at HM Insurance Group, you can be con dent that claims will be paid. We process 99% of Stop Loss claims within six business days, with more than 99% technical and nancial accuracy. Find more at hmig.com.