The Self-Insurer - October Issue

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TABLE OF CONTENTS

OCTOBER 2022 VOL 168

W W W. S I P C O N L I N E . N E T

FEATURES 4

SIIA ENDEAVORS: ON THE RECORD WITH SIIA PRESIDENT & CEO MIKE FERGUSON

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BOUTIQUE VS. BUNDLED WHILE EXPERTS DEBATE THE MERITS OF BEST-OF-BREED SERVICE RELATIVE TO SCALING PACKAGED PROGRAMS, THEY AGREE THAT SOLUTIONS SHOULD BE TAILORED TO INDIVIDUAL CLIENT NEEDS By Bruce Shutan

ARTICLES 16

CAPTIVE INSURANCE FACES WIDESPREAD REGULATORY CHANGES EMERGING TRENDS FORECAST AN EVENTFUL 2023

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ACA, HIPAA AND FEDERAL HEALTH BENEFIT MANDATES THE AFFORDABLE CARE ACT (ACA), THE HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996 (HIPAA) AND OTHER FEDERAL HEALTH BENEFIT MANDATES

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DIGITAL THERAPEUTICS TRANSFORMING TREATMENT, MANAGEMENT AND OUTCOMES PARENTS ARE IRATE WHEN THEIRCHILDREN SEEM OBSESSED WITH PLAYING VIDEO GAMES, BUT THEY SHOULDN’T BE SURPRISED IF THE PEDIATRICIAN PRESCRIBES A DIGITAL THERAPEUTIC TREATMENT FOR A CHILD WITH ADHD DELIVERED THROUGH AN ACTION VIDEO GAME EXPERIENCE.

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STRATEGIES FOR SELF-INSURERS MANAGING WORKERS’ COMP AND LIABILITY RISK DURING AN ACQUISITION

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IN SUBROGATION: SUPERIOR CONTRACT LANGUAGE MATTERS

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NEWS FROM SIIA MEMBERS

The Self-Insurer (ISSN 10913815) is published monthly by Self-Insurers’ Publishing Corp. (SIPC). Postmaster: Send address changes to The Self-Insurer Editorial and Advertising Office, P.O. Box 1237, Simpsonville, SC 29681, (888) 394-5688 PUBLISHING DIRECTOR Erica Massey, SENIOR EDITOR Gretchen Grote, CONTRIBUTING EDITOR Mike Ferguson, DIRECTOR OF ADVERTISING Shane Byars, EDITORIAL ADVISORS Bruce Shutan 2022 Self-Insurers’ Publishing Corp. Officers James A. Kinder, CEO/Chairman, Erica M. Massey, President, Lynne Bolduc, Esq., Secretary

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F E AT U R E

SIIA

ENDEAVORS SIIA Endeavors: On the Record with SIIA President & CEO Mike Ferguson SIIA President & CEO Mike Ferguson

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he Self-Insurer Editor Gretchen Grote sat down with SIIA President & CEO Mike Ferguson for a wide-ranging interview to talk about how the association continues to evolve and play an increasingly important role in helping its members be successful in the self-insurance marketplace. GG: Now that we are in the fourth quarter, how would you describe the year SIIA has been having so far? MF: I am very pleased with how 2022 has been playing out from a SIIA perspective. Given that this has been the first full year with COVID in the rearview mirror, we have been very excited to have such great participation for our in-person events during the first half of the year. The association’s volunteer committees and task forces have also been able to get to in-person meetings, so our various membership service initiatives have gotten back on track. GG: SIIA rolled out three new events earlier this year, how did they go? MF: Yes, we wanted to come out strong this year with fresh programs. We were very pleased with the results and that we were able to diversify our educational and networking offerings and therefore provide greater value to the membership.

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ENDEAVORS First up was the new Transparency Forum. We created this event in response to the fast-evolving regulatory environment to help our members get prepared for how the self-insured health care marketplace is being affected. We were then very excited to produce the SIIA Future Leaders Forum, designed specifically for the association’s younger members. We held a virtual SFL event last year, so this was a natural next step. Participation was excellent, with nearly 200 young industry professionals from around the country attending. We were also pleased that 12 member companies supported the event as corporate sponsors. The third new event was SIIA’s Corporate Growth Forum. This was developed given the pace of mergers, acquisitions and other corporate financial transactions taking place withing the self-insurance industry. We felt there was a need and opportunity to educate SIIA members about these transactions and to help them connect with various sources of capital if and when they are ready to take that step. Based on the success of each of these events based on attendee feedback, they will be back next year in 2.0 versions. We expect to announce our 2023 calendar of events soon so everyone should watch for this. GG: This brings us to the National Conference here in Phoenix this month. Is there anything you would like to highlight about this event? MF: Well first, we are excited to be back at the JW Marriott Desert Ridge as this is probably the favorite location with our members. This will also be the fully in-person National conference post-COVID so it’s great to get back to this format and bring everyone together with the theme of “Engage.” That said, there are some new features that are worth highlighting. First, we have incorporated several “Engagement Accelerator” sessions as part of the educational program. These will be open discussion forums focused on various hot topics and will be unique opportunities for industry professionals from around the country to learn from each other in very organic settings. The conference will also include educational content and networking events specifically for younger SIIA members as part of the association’s Future Leaders initiative. Based on early registration data, it looks like we will have the largest contingent ever of future leaders at this event. One last thing to mention is the return of SIIA’s famous conference party, and this year’s could be the best ever based on what our team has come up with. It’s a great way to end the conference and will offer a truly unique networking experience. GG: You have made a few references to the Future Leaders, can you provide our readers with a status report on this initiative?

MF: Let me first say that this remains one of the association’s most important strategic initiatives as the generational shift continues to accelerate in our industry. And in fact, we’ve accelerated things this year to make a more meaningful impact. As I mentioned earlier, the inaugural SIIA Future Leaders Forum was a big success and that has provided additional momentum. A few months ago, the board of directors challenged the Future Leaders Committee to develop the equivalent of a business plan to help guide the evolution of this initiative in the coming years. I am pleased to report that the committee is making great progress and we expect to make announcements soon on what younger members can expect from SIIA in 2023 and beyond. GG: Turning to other committee news, can you tell us about the Transparency Committee? MF: Of course. This was originally a task force we put together last year to help guide association policy and programs in anticipation of new federal health care transparency regulations. Given the ongoing importance of these developments, the task force was changed to a standing committee earlier this year and works closely with SIIA's professional staff with the goal of helping our members be successful in this evolving regulatory and business environment. The composition of the committee includes industry experts representing many of the association’s major membership constituencies, including TPAs, stop-loss carriers, brokers/ consultants and key service providers.

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ENDEAVORS GG: Since we spoke last year, SIIA has added two people to its government relations team. Can you tell our readers about them? MF: Yes, we were very excited to be able to expand our team. To shore up our capabilities at the state level, Catherine Bresler, formerly Vice President and Counsel for a leading TPA, joined SIIA as State Policy & Regulatory Advisor. Catherine brings years of experience on state legislative and regulatory issues, including relationships with key regulatory staff across the country. The other new addition was Anthony Murrello, a recent graduate of American University, as Government Relations Coordinator. He interned previously in the U.S. House of Representatives for Rep. Mike Sherrill (NJ). Anthony will help manage the day-to-day operations of the Self-Insurance Political Action Committee (SIPAC), as well as supporting federal and state advocacy work. This team expansion is part of a larger coordinated effort within SIIA to proactively strengthen policy and regulatory engagement on behalf of the self-insurance/ captive insurance industry in the years to come. GG: You have commented publicly on several occasions about how important it is for SIIA to become more of a major player in terms of political contributions. Can you elaborate a bit on why this should be such a priority and give any progress that has been made to move in this direction? MF: I have been saying this for the past several years and this objective has continued to move up the list of association priorities.

There are two primary reasons for this emphasis, with one reason being fairly obvious for most members, and the second reason less obvious for those who are not creatures of the DC lobbying world. The obvious reason, of course, is that it is much easier to make and keep friends on Capitol Hill if you provide financial support for their campaigns. This does not mean that if you contribute to a specific member of Congress that they are certain to vote a specific way, but it’s certainly easier to get a meeting with the member and/or their senior staff to explain your issues. Not so obvious to those outside the beltway is that when an organization establishes itself as a political financial player, it raises your “street cred,” so to speak, with other important organizations in town that we may need to partner with on various lobbying efforts. Our progress has been somewhat slow but steady since we established the Self-Insurance Political Action Committee (SIPAC) about eight years ago as a vehicle for SIIA members to channel political contributions to key members of Congress. Things have accelerated over the past few years thanks to this more dedicated focus, combined with increased staffing resources, and you are now starting to see SIIA really establishing itself as a money player in DC. Obviously, we are not the biggest name by any means, but it’s solid progress that has already directly complemented advocacy efforts and we expect even more positive results after the upcoming election.

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ENDEAVORS GG: I have seen that SIIA notched two wins in court this year. Can you bring our readers up to speed on this? MF: For those who may not be aware, SIIA has a long history of either leading or supporting litigation efforts to support the interests of our members when legislative/ regulatory advocacy opportunities are not viable. These efforts are financed though the association’s Legal Defense Fund (LDF), which in turn is funded by voluntary contributions from the members. Since we talked this time last year, SIIA’s LDF funded the filing of several important Amicus Briefs at the federal and state level. One case was focused on protecting health plan sponsors and participants from nefarious hospital billing practices, with another amicus brief focused on appropriate reimbursement rates for surprise medical billing protections being enacted under the No Surprises Act. A third amicus involved the ability of plan sponsors to continue to put in place specialty cost containment opportunities. I am pleased to report that we received favorable rulings from both the Colorado and U.S. Supreme Courts -- so two more wins for the good guys! Of course, we’ll continue to keep our radar turned on for new cases that may require our involvement for the benefit of the industry.

GG: The association continues to see an increase in its captive insurance membership constituency, so how do you view SIIA’s role in this segment of the marketplace? MF: My view is that SIIA continues to play a unique and useful role in the captive insurance space by integrating its stakeholders into the much broader selfinsurance world. This is important because mid-market employers are becoming increasingly sophisticated in how they manage risk, understanding that they can integrate multiple self-insurance strategies that may include the formation of a captive insurance company. SIIA brings this all together, giving captive insurance professionals more educational, networking and advocacy resources.

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ENDEAVORS I am particularly pleased to see how much progress SIIA has made over the past year with political advocacy in Washington, DC to better position the captive insurance market segment with key policymakers.

MF: Canoe’s value continues to increase as now SIIA members have easy access to nearly 200 pieces of unique content. I like to call it the “Netflix for Self-Insurance” and all employees of SIIA member companies can access it for free. For those members who have not already checked it out, I encourage them to do so at www.siiacanoe.org. It's really a great benefit that can be utilized by all employees of SIIA member companies.

Unfortunately, many of those who influence the legislative and regulatory process affecting captives, have minimal or no understanding of why an increasing number of employers rely on them to deal with risk management strategies. We are making real progress and look forward to even more positive results in 2023.

GG: There certainly sounds like a lot of exciting things going on at SIIA. What advice would you give industry executives who want to become more active in the organization? MF: Well of course, become a member if you are not already. Showing up at association events – as they are available-- is a big deal because SIIA is a very interactive and social organization and there is no substitute for being there.

GG: Switching gears just a bit, can you update our readers about Canoe, SIIA’s on-line educational platform?

We also recruit members to serve on our various volunteer committees and participate in periodic grassroots lobbying campaigns, which are great involvement opportunities. I like to say we are happy to put our members to work, so be on the lookout for announcements. For more information visit www.siia.org.

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F E AT U R E

Boutique

vs. Bundled

WHILE EXPERTS DEBATE THE MERITS OF BEST-OF-BREED SERVICE REL ATIVE TO SCALING PACKAGED PROGRAMS, THEY AGREE THAT SOLUTIONS SHOULD BE TAILORED TO INDIVIDUAL CLIENT NEEDS

Written By Bruce Shutan

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he fate of a self-insured health plan is invariably linked to the quality of partnerships that serve that particular employer. There has been a long-running debate across the industry about the merits of a boutique vs. bundled-services approach. The former builds a suite of best-in-breed expertise that’s both nimble and independent, while latter offers massive scale that streamlines partnerships to close coverage gaps, simplify benefits administration and deepen savings. Experts suggest that whatever approach is ultimately decided upon should be tailored to the unique needs of each plan. Whether a boutique or bundled approach is chosen will be largely predicated upon the advice that’s being dispensed. There are generally two groups of benefit advisers that match up to the strategies of unbundling or bundling for self-funded health plans, according to Bob McCollins, VP of sales with Edison Health Solutions (EHS).

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Boutique vs. Bundled way in recent years to carving out more boutique solutions, even on a high-volume transactional program, says Brian Wroblewski, EVP of sales for ClearHealth. “It’s like the adage of as you experience life a little bit, you start to identify, through wisdom, where your specific preferences lie,” he observes.

Bob McCollins Roughly 20% of them have the staff support, bandwidth and vendor vetting process to manage an unbundled approach, he observes. In essence, they’re “playing upstream” for a more sophisticated self-funded buyer that also has the staff depth to manage and monitor the various risk management strategies of an unbundled and customized benefits strategy, he adds. The idea behind this arrangement is about integrating and managing all the bolt-on solutions and strategies with an independent third-party administrator (TPA) acting as the hub and holding those vendors accountable for their service performance and results. The remaining 80% prefer a bundled approach of best-in-class solutions, as well as centers of excellence, transparent PBMs, medical management, concierge services and data analytics, according to McCollins. He says the bundled approach is a great way to provide benefit advisers alternative financing solutions for their small and midsize employers that feel stuck in a fully insured world.

As the marketplace matures and employers become savvy about the benefits they offer, brokers or consultants increasingly want to talk about something special, unique or tailored to the groups they serve, Wroblewski reports. “If a given employer group has maybe more experience than they would prefer to have had in a modality like dialysis or behavioral health, then they may want to be more targeted in their approach on handling those claim types,” he explains. While bundling serves delivers both scale and simplicity to self-insured employers, it’s “an easy Brian Wroblewski way out” relative to hiring boutique shops with a deep bench of wise and intelligent experts, notes Nigel Wallbank, a risk management consultant who’s also chairman of the SelfInsurance Educational Foundation, Inc. Expertise is critically important considering that “the biggest waste of money is something not being treated properly” early on from a clinical standpoint, he notes. One such example would be contracting with a cancer specialist whose benchmarks pale to Sloan Kettering or similar clinics or centers of excellence. Wallbank believes the boutique approach ensures that the most qualified people will be in place at all times to prevent any missteps, adding that “the best savings are the ones that you don’t have to pay.” Where boutique shops have a competitive advantage is that they can select bestin-class vendors to better meet the needs of self-funded health plan sponsors and participants alike, opines Dorothy Cociu, president of Advanced Benefit Consulting & Insurance Services, Inc. whose 35-plus years in the health insurance business includes running a TPA for 12 of them. “That’s one of the best advantages of self-funding in the first place; being able to creatively design your plan, select vendors to meet your needs and make sure it’s working,” she explains. “If you just want it simple and packaged maybe you don’t want to really self-fund. Maybe you want to go back to that fully-insured arrangement or using one of the big BUCAH providers when you bundle. In my opinion, you’re taking away your primary advantage of self-funding, which is that flexibility and that creativity.”

Initially, the industry seemed to favor a broad-stroke rule that has given

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Boutique vs. Bundled PLUGGING GAPS

Tom Sass

Tom Sass, VP of business development at Gravie who has also worked for a managing general underwriter and large insurance companies, sees value in the integration of various expertise under one roof. His firm serves as both the administrator of services and stoploss carrier. Streamlining partnerships this way guarantees no gaps in coverage because plan designs are a direct reflection of what the TPA knows will be covered, he explains.

Direct access to the owner of an organization is also possible with boutique shops. “You certainly can’t do that with Amazon or Google or even at a big insurance agency,” she notes. “With boutique vendors, you have that ability to pick the brains of the people who helped you make that decision to go with selfinsurance in the first place.”

“We’re not out trying to negotiate with four or five different stop-loss carriers or two or three different TPAs, trying to convince them that this program was right and then marry them up to the right risk taker,” Sass says. McCollins spots power in numbers that trickle down market. “I believe in the bundled, plug and play for employers with between 25 and 250 to 300 employee lives,” he says. “Very simply, it’s kind of a one-call easy button approach. You’ve got all of the solutions and people in place that the independent TPA has assembled for a seamless health plan replacement the employer is used to in a fully insured plan. But now it’s with the added benefit of having access to data and control of their second or third-largest business expense after payroll.” All of the services that EHS offers – admin, care navigation, centers of excellence, ancillary services and custom network design, virtual medicine and an Rx pharmacy benefit solution – can be bundled for self-insured health plans that want to pursue that approach. But they also can be cherry picked for customers who prefer to work with several solutions partners with one scenario being that EHS serves as the TPA hub that manages the implementation and ongoing service of those relationships. Whatever approach is taken, personalization of service is becoming increasingly important. Working with independent suppliers offers employers more of an option to converse with actual case managers and review their notes to determine exactly what’s needed, Cociu believes. Another benefit for her is that it’s easier to use data analytics and predictive modeling on utilization trends with boutiques. Moreover, she says that when services are tied to a package, customers don’t have the flexibility to replace a bad component in the service bundle.

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Dorothy Cociu In handicapping the ever-changing vendor landscape, Cociu predicts that many of the smaller boutiques will continue to be gobbled up by bigger players. “If you’re working with good vendors that still have their own large blocks to work with,” she surmises, “then you probably will still be able to get a lot of that scalability.”

PUTTING THE MEMBER FIRST The bottom line is that no matter how self-insurance is structured the focus always should be on the health plan member, according to Sass. As part of that mission, Gravie created a plan design that covers 85% of services at no cost in the face of rising deductibles and copays.


Boutique vs. Bundled Another program rolling out this fall will actually help finance out-of-pocket expenses with an interest-free loan over 12 months, he reports. These efforts address mounting concern across the marketplace about the affordability of health insurance among working Americans who are struggling to make ends meet, especially in the face of inflationary pressures.

Membership in an organization like SIIA helps industry experts forge strategic partnerships and refer business, Wallbank observes.

This issue is what ClearHealth built its business around. “When somebody goes outside of their Nigel Wallbank network and a $4,000 or $5,000 MRI is billed to the health plan, we price and manage that claim so that the member doesn’t end up bearing the brunt of an inflated charge and the health plan can offer an affordable product,” Wroblewski explains. He points to the emergence of an important megatrend that’s driving this activity. Since the pandemic, more people are working remotely or moving to a different geographic area. “Now all of a sudden, we live in and traverse the country and maybe the world,” he says, “so we need to be able to administer plans where somebody could feasibly be anywhere.”

“It’s like walking into a library or speed dating with professionals whose expertise complements your own offering,” he says. “It really is a relationship business. I truly built my business going to SIIA and being part of committees because I got to know people who, once they trusted you, would actually send you business. I was with Lloyds of London on a risk management basis from the other side of the Pond who truly didn’t understand a thing about medical insurance when I arrived in the United States.” Bruce Shutan is a Portland, Oregon-based freelance writer who has closely covered the employee benefits industry for more than 30 years.

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OCTOBER 2022 15


CAPTIVE INSURANCE FACES WIDESPREAD REGULATORY CHANGES Emerging trends forecast an eventful 2023

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overnment regulation is one topic that tests the mettle of chief compliance officers and general counsel at captive insurance companies nationwide. Looking at the current regulatory environment and what will quickly unfold in 2023 and remembering that a captive is self-financing of risk, the proliferation of state and federal regulations often challenges the most experienced industry leaders. Leading analysts and consultants forecast numerous areas that require attention, with consensus on several key topics that merit particular consideration in this trends review.

Written By Laura Carabello

CLIMATE AND SUSTAINABILITY In the area of Environmental, Social and Governance (ESG), captives can expect sweeping regulatory changes that are likely to continue into 2023 under existing and expanded jurisdictional authority. They will remain a central focus for regulators as Federal financial agencies develop and execute strategies to quantify, disclose and mitigate the financial risk of climate change on public and private assets. Although the past few years have seen regulators and standard-setters attempt to better understand these multidimensional issues and their economic and societal impacts, additional regulatory clarity is expected in the years ahead.

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KPMG advises that the associated challenges are not easy to navigate and will require a concerted response from all stakeholders to avoid unintended consequences: “Public policy seeks to advance consistent, clear, intelligible, comparable, and accurate disclosure of climate related financial risk,” and “to mitigate that risk and its drivers, while accounting for addressing disparate impacts on disadvantaged communities and communities of color.”

ROLE OF CAPTIVES Experts at Business Insurance (March 2022) believe that captives can help to formulate a strategy, provide funding for ESG activities and use these issues to help secure reinsurance capacity. Fueled largely by significant and widespread investor demand and facilitated by pressures from regulators, investors, activists and others, they say corporations and their captive insurance partners must be seen to be working to identify and report what they are doing on ESG initiatives. Today, captive companies are striving to better measure, monitor and mitigate climate-related risk.

According to Karen Hsi, program manager-captive insurance programs for the University of California, office of the president, in Oakland, California, US insurers are less concerned about ESG issues than European insurers and reinsurers. However, she says captive surpluses can also be used for various environmental infrastructure projects, such as installing solar panels on buildings, Insurance industry regulators in the US have been proactively reviewing existing supervisory tools that might be applicable. At the same time, they have been seeking to identify and understand what new tools, standards and guidance might also be needed. The US Department of the Treasury, through the Federal Insurance Office (FIO), announced its own response to President Biden’s May 2021 executive order on climate change. Specifically, in August 2021, it issued a request for information to solicit public feedback on the FIO’s future work on climate-related financial risks in the insurance sector. Going forward, FIO is likely to continue assessing the impacts of climate change on the US insurance industry, with a focus on the sector’s financial stability and on market vulnerabilities, especially for minorities and low-income communities. Although the FIO is not a regulator, the information it collects can help inform and shape regulatory policy development both domestically and internationally – and this will impact the captive industry.

“The biggest risk about ESG is ignoring it,” said Michael Douglas, Newtown Grant, Pennsylvaniabased director of business development for Aon PLC’s captive management operations. Douglas points to the role of captives, which are designed to solve problems for their parent companies, as well-positioned to act as a focal point to identify ESG issues and implement and document a company’s strategy for addressing them.

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CRYPTOCURRENCY, DIGITAL ASSETS OR ‘VIRTUAL CURRENCY’ The digital asset ecosystem is growing in scope and complexity, including innovations such as blockchain and cryptocurrency, triggering regulatory concerns about customer protection, economic loss and consumer education. Last year, the Wall Street Journal, among other media, reported the Security and Exchange Commission Chairman Gary Gensler called for more investor protection in crypto and compared the cryptocurrency market to the Wild West: “What is needed is more active policing of crypto trading and lending platforms, as well as so-called stablecoins…this asset class is rife with fraud, scams and abuse.” In fact, Reuters reports that in July 2022, issuers of so-called "stablecoins," virtual currencies whose value is pegged to traditional currencies, would face bank-like regulation and oversight under a draft bill from senior U.S. House lawmakers.

But it appears that a single framework of rules guiding oversight of the space has stalled, as the House Financial Services Committee charged with issuing draft legislation on the subject delayed decision-making. However, this pause has not stopped regulators from using existing regulations in attempts to govern digital assets while the Justice Department (DOJ) and SEC are investigating entities for insider trading, regulatory compliance and information security aspects of certain assets.

Increased regulations and scrutiny reflect the well-publicized collapse and anxieties experienced by some prominent stablecoin issuers in recent months. Regulators seem to be very concerned that consumers could be harmed.

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Congressional gridlock during the midterm election season may delay this further, but regulatory guidance and legislative changes are certainly on the near horizon. Beyond this volatile environment, Mercer suggests that captive insurers look at other related issues, including whether or not to accept digital assets as forms of payment or to actually take ownership of these assets in their private portfolios. Considerations such as exposure related to theft or loss of such assets that may not have been priced can be problematic. There may actually be a market to help provide protection of these assets. Finally, firms will need to determine the best way to implement any of these efforts. Integrating a digital asset strategy into existing compliance programs is a must-have, recommends KPMG, advising captives to develop a corporate/product capability assessment and risk and compliance strategy for the appropriate licensing, issuance and/or use of digital assets. Going forward, this will be especially important as the IRS is instituting reporting requirements for cryptocurrency and other digital asset transactions beginning in 2023.

PRIVACY AND CYBERSECURITY Cybersecurity is turning into a social phenomenon, asserts the Gartner Group, as cyberattacks have earned high priority status among US regulators amid the rising incidence of cyberattacks and the growing number of high-profile data breaches associated with malware (e.g., ransomware), supply chain risk and sophisticated Distributed Denial-of-Service (DDoS) attack. Amid the flurry of regulatory attention to cyber and data issues in 2022, focused attention is now placed on customer data privacy and protection. The term "Privacy by Design" was first coined in the 1970s by Ann Cavoukian, Ph.D. Information & Privacy Commissioner, Ontario, Canada, and simply means data protection through

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technology design and setting a baseline for robust data protection by embedding privacy into the design, operation, and management of new applications -- including IT systems, AI platforms, and digital business practices, with the goal of preventing privacy vulnerabilities. The concept is that data protection in data processing procedures is best adhered to when it is already integrated in the technology at the time it was created. Regulatory response to cybersecurity breaches has been swift. April 2022 marked the one-year anniversary of Executive Order 14208, requiring improvements in the cybersecurity of the United States, including the creation of standards, supply chain security, standard responses to cyber incidents and the creation of a Cybersecurity Safety Review Board (CSRB). Today, stepped-up government scrutiny of cybersecurity is evident, with increasing calls for regulation to address the numerous risks posed by a cyberattack, including – according to the National Association of Insurance Commissioners (NAIC) -- but not limited to: • Identity theft • Business interruption • Damage to reputation • Data repair costs • Theft of customer lists or trade secrets • Hardware and software repair costs • Credit monitoring services for impacted consumers • Litigation costs It is expected that the complex regulatory environment will endure in 2023, particularly around the growing adoption of the NAIC Insurance Data Security Model Law (#668), which seeks to establish data security standards for regulators and insurers in order to mitigate the potential damage of a data breach. Relevant to the captive insurance space is a patchwork quilt of state-based requirements that creates a multifaceted operating, risk and compliance environment as the law applies to insurers, insurance agents and other entities licensed by the state department of insurance. Model 668 has been adopted in the following 21 states as of June 2022: AL, AK, CT, DE, HI, IA, KY, LA, ME, MD, MI, MN, MS, NH, ND, OH, SC, TN, VT, VA, and WI. While the purpose and intent of this law is to establish standards for data security and address how insurers and licensees protect personal information, it does not provide sufficient guidance regarding penalties that should be imposed by regulators for violations. The healthcare sector is particularly vulnerable to assaults, with one firm (Sophos) reporting that ransomware attacks on healthcare organizations increased 94% from 2021 to 2022. The criminality of cyber-attacks is acknowledged, with reporting by the International Criminal Police Organization (INTERPOL) showing an alarming rate of cyber-attacks during the pandemic and a significant target shift from individuals and small businesses to major corporations, governments, and critical infrastructure.

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Implementing risk mitigation and resilience initiatives relative to both the frequency and impact of cyber threats indicate the growing extent of current or emerging threats to the captive industry. New Federal Financial Institutions Examination Council's (FFIEC) guidance outlines effective risk management principles and practices for access and authentication, including:

Monitoring, logging, and reporting of activities to identify, track, respond, and investigate attempted or realized unauthorized activities. Layered security and multiple controls to compensate for the weakness of a single control; multifactor authentication may protect accounts from being compromised by threats, such as credential stuffing, phishing attacks, and spearfishing attacks. Access and transaction controls, including account maintenance; transaction value, frequency, and timing; rate limits on log-in attempts; and application timeouts. Authentication solutions are employed before system access, including solutions such as devicebased public key infrastructure (PKI) authentication, one-time passwords (OTP), behavioral biometrics software, and device identification and enrollment.

DIGITIZED TRANSFORMATION AND COMMUNICATIONS

While some insurers increasingly interact with stakeholders via automated, digital communications and may be starting to utilize digital technologies to improve



their compliance programs, insurer transformation to a digital approach is still in its early stages. But this hasn’t held back regulators from raising red flags about various aspects of digitized communications and transactions. KPMG Advisory forecasts regulatory attention on data and privacy that are expected to include:

• • •

Proposed rulemaking from the Consumer Financial Protection Bureau (CFPB) to facilitate the portability of consumer financial transaction data and a review of Big Tech practices related to consumer data capture, use, and restrictions in the context of their payments systems. An FTC rulemaking addressing unfair data collection and surveillance practices impacting competition, consumer autonomy, and consumer privacy. SEC focus on investor protections, predictive data analytics and digital engagement practices. Expansion of state data privacy and protection laws.

Digital interaction with customers will require insurers to source, hold, and use data that is often extremely sensitive – including health Personal Health Information, health-related data and claims payments. An abundance of customer-facing portals and the implementation of advanced modeling techniques, coupled with some nefarious ransomware gangs honing their targets, point to trends that are raising regulators’ eyebrows about whether data use is, according to Deloitte, “…fair and impartial, transparent and explainable, responsible and accountable, robust and reliable, safe and secure, and respectful of privacy.” The use of data is fraught with multiple concerns around ethics, discrimination and permission to actually use the data. Many state regulations, including the California Consumer Privacy Act (CCPA), feature elements of permission and preference, while the New York State Department of Financial Services (NYDFS) and the Department of Labor have issued data-related cybersecurity guidance that extends to third parties. Ensuring that data is protected and properly classified by the insurer and all affiliated parties is critical for complying with state and federal regulators.

FORM 5500 UPDATE According to the Department of Labor (DOL) website, the DOL has announced its alignment with the IRS and Pension Benefit Guaranty Corporation (PBGC) to release a Federal Register Notice announcing changes to the Form 5500 Annual Return/ Report of Employee Benefit Plan and Form 5500-SF Short Form Annual Return/ Report of Employee Benefit Plan, and related instructions, that apply beginning with 2022 plan year reports.

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The Notice focuses mainly on improvements in reporting on the actuarial and retirement plan schedules (Schedules MB, SB, and R) filed by defined benefit pension plans subject to Title IV of the Employee Retirement Income Security Act of 1974. There are several significant changes, including a new group filing alternative for certain single-employer Direct Contribution plans and a new schedule for multiple-employer plan reporting. Mintz law firm advises that in a group captive, each participating employer maintains its own self-funded group health plan and stop-loss coverage is purchased from a commercial medical stop-loss carrier that cedes a portion of the risk to a group captive insurer. Many mid-sized employers can selffund health benefits but interpose a separate layer of stop-loss coverage under a "group captive" arrangement that includes other, similarly situated employers. If the stop-loss policy is a plan asset, then it must be reported as such on a schedule to the plan's annual report -- Form 5500. Filings for the 2022 plan year generally are not due until seven months after the end of the 2022 plan year, e.g., July 31, 2023, for calendar year plans, and a 2½-month extension is available by filing IRS Form 5558, Application for Extension of Time to File Certain Employee Plan Returns, on or before the normal due date.

D&O COVERAGE: DELAWARE IN THE SPOTLIGHT

The American Bar Association headlines this significant news: January 27, 2022, the Delaware Legislature


passed legislation designed to make captive insurance a viable alternative to traditional D&O insurance. This new development should mean that, over time, the cost of D&O insurance should decline.

"First, I found it interesting that the law change appeared to be primarily in Delaware's corporate law vs. the captive insurance code. Given the number of corporations in Delaware, it probably makes sense. But in Montana, our domestic captive companies could provide the coverage if it was not prohibited by the parent company's corporate domicile."

It appears that while a corporation with a small balance sheet wanted to purchase D&O insurance, why were corporations with hefty balance sheets buying this insurance, often referred to as Side B/C coverage, instead of simply self-funding losses?

Matthews makes it clear that any advice he would offer regarding D&O coverage is similar to the advice he would give to anyone that is looking to a captive to make them whole. "First and foremost, do your homework. Is the captive properly funded, who decides if/when claims are paid, and what happens to the coverage if the parent company becomes financially troubled?"

Some of the answers can be found in Business Law Today (https:// businesslawtoday.org/2022/02/dogame-changer-delaware-approvesusing-captives-for-do-insurance/) where legal analysts tackle the issues in detail. Under Delaware General Corporation Law (DGCL) Section 145(b), corporations are not permitted to provide indemnification for breach of fiduciary duty suits brought derivatively. “This explains the popularity of “Side A” D&O insurance even for very large, well-funded companies. Side A D&O insurance provides first dollar coverage when something is insurable but not indemnifiable, such as the settlement of derivative suit claims.” The reason the cost of D&O insurance has gone up so dramatically, they say, is that losses have been outpacing premiums for years. The volatile, highseverity nature of outcomes for D&O claims makes underwriting a particularly difficult challenge—especially for the biggest companies. Montana Captive Insurance Regulator Steve Matthews reviewed the D&O coverage issues impacting Delaware and reports some interesting findings.

The bottom line is that the change just passed by the Delaware legislature amends DGCL Section 145(b), to clarify that as the term is used by the DGCL, the definition of insurance includes captives. This makes captives a viable alternative to traditional D&O insurance, even Side A D&O insurance, for claims that are not directly indemnifiable by the corporation due to DGCL Section 145(b). Companies that are the best candidates to use a captive as an alternative to D&O insurance should reflect a strong corporate balance sheet and the desire to retain significant, unpredictable D&O risk.

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Corporations using their captive to cover D&O risk should expect to deposit sufficient risk capital into the captive to satisfy regulatory capital requirements and cover claims beyond the actuaries’ estimates up to the full policy limit.

protection against litigation risk.”

These issues created by the Delaware legislation are generating attention in many states. Lori Gorman, Deputy Commissioner, North Carolina Department of Insurance reports that North Carolina captive insurers have had the opportunity to write D&O coverages from Day 1, with the passage of the Captive Insurance Act in 2013.

“The strategic use of captives can assist both public and private companies of all sizes in meeting the challenges of capacity and pricing as our economy continues to recover from the impact of the COVID-19 pandemic,” says Gorman.

Recently, however, she says that obtaining this coverage, including Side A (or protection of directors’ and officers’ personal assets), has become an industry focus.

Even as D&O coverages have gained importance in risk management practices, recent large settlements for breach of duty and oversight, along with inflation, have contributed to more costly pricing and difficulty obtaining this type of insurance in the traditional marketplace.

Looking at the advice from Marsh and McLennan, captives are a natural option when companies face capacity and pricing challenges, especially when commercial pricing is viewed to be higher than the perceived risk. “Using a captive to provide D&O insurance has been limited to date and has involved mainly Side B and C coverage. The primary reason for the lack of captive involvement has been the abundance of capacity in the traditional market, available at a low cost. In addition, there is a concern that the use of a captive is not appropriate for the provision of Side A D&O (non-indemnifiable loss) due to the potential for conflicts to arise and questions surrounding bankruptcy remoteness and potential indemnification issues.”

BUSINESS OUTLOOK FOR CAPTIVES “This has gained significance with the shift toward greater individual accountability in corporate wrongdoing,” she explains. “As a result of this shift, qualified individuals may be hesitant to serve on governing boards without this

Putting aside the regulatory issues, Steve Matthews foresees an increase in the amount of program-type business coming into captives. From his perspective, Managing General Agents (MGAs) and producers are forming captives to participate in the program risk they have developed.

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"Our reinsurance captive is a perfect vehicle to accommodate these transactions," he explains. "As regulators, we are comfortable with these transactions since the policies are written by admitted insurers with a portion of the risk then ceded to the captive. The captive becomes an unauthorized reinsurer of the admitted carrier and required to post collateral to secure payment to the admitted carrier." 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.

Sources https://www.dandodiary.com/2022/01/articles/d-o-insurance/rare-do-insurer-win-indelaware-court-but-should-do-insurers-celebrate/ https://www.eisneramper.com/about-us/ https://www.dol.gov/newsroom/releases/ebsa/ebsa20220520 www.marsh.com https://businesslawtoday.org/2022/02/do-game-changer-delaware-approves-using-captivesfor-do-insurance/ https://www.irs.gov/newsroom/us-court-of-appeals-ruling-affirms-irs-position-that-abusivemicrocaptive-insurance-transactions-are-shams https://bit.ly/3AT4Qqc https://www.mintz.com/why-mintz https://www.reuters.com/markets/us/stablecoins-face-bank-like-us-regulation-under-drafthouse-bill-source-2022-07-20/ https://humaninterest.com/learn/articles/secure-act-2-understanding-proposed-legislationsecuring-a-strong-retirement-act/ https://www.jdsupra.com/legalnews/naic-insurance-data-security-model-law-1854646/ https://www.forbes.com/advisor/retirement/secure-act-2/ https://www.theguardian.com/technology/2022/jul/14/ransomware-attacks-cybersecuritytargeting-us-hospitals#:~:text=The%20number%20of%20ransomware%20attacks%20 on%20healthcare%20organizations%20increased%2094,up%20from%2034%25%20 in%202020. https://content.naic.org/cipr-topics/cybersecurity https://www.businessinsurance.com/article/20220309/NEWS06/912348424/Captivescan-play-key-role-in-ESG-initiatives https://www.gartner.com/doc/reprints?id=1-29FBE5ZT&ct=220317&st=sb https://www.whitehouse.gov/briefing-room/presidential-actions/2021/05/12/executiveorder-on-improving-the-nations-cybersecurity/ https://content.naic.org/sites/default/files/inline-files/MDL-668.pdf https://advisory.kpmg.us/articles/2021/ten-key-financial-services-regulatorychallenges-2022.html https://gdpr-info.eu/issues/privacy-by-design/#:~:text=The%20term%20 %E2%80%9CPrivacy%20by%20Design,in%20the%20technology%20when%20created.

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A QQ& A

ACA, HIPAA AND FEDERAL HEALTH BENEFIT MANDATES:

PRACTICAL

T

&

he Affordable Care Act (ACA), the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and other federal health benefit mandates (e.g., the Mental Health Parity Act, the Newborns and Mothers Health Protection Act, and the Women’s Health and Cancer Rights Act) dramatically impact the administration of self-insured health plans. This monthly column provides practical answers to administration questions and current guidance on ACA, HIPAA and other federal benefit mandates. Attorneys John R. Hickman, Ashley Gillihan, Carolyn Smith, Ken Johnson, Amy Heppner, and Laurie Kirkwood provide the answers in this column. Mr. Hickman is partner in charge of the Health Benefits Practice with Alston & Bird, LLP, an Atlanta, New York, Los Angeles, Charlotte, Dallas and Washington, D.C. law firm. Ashley, Carolyn, 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 Mr. Hickman at john.hickman@ alston.com.

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JUST THE FAQS (ON NSA) AND NOTHING BUT THE FAQS On August 19, 2022, the U.S. departments of Health and Human Services, Labor and Treasury (the “Departments”) issued FAQs About Affordable Care Act and Consolidated Appropriations Act, 2021 Implementation Part 55 (“the FAQs Part 55”), which addressed several issues, including those related to the surprise billing provisions in the No Surprises Act (“NSA”), adopted as part of the Consolidated Appropriations Act, 2021 (“CAA”). The NSA provides protections against surprise medical bills for certain out-ofnetwork services—emergency services, certain non-emergency services at certain types of network facilities, and air ambulance services. These protections took effect for items or services received as of January 1, 2022. In the interim final rules issued in July 2021 to implement the NSA (“IFR Part I”), the Departments limit cost-sharing for participants who receive these out-of-network services to the in-network rates based on the “recognized amount.” Generally, the recognized amount for self-insured group health plans is going to be the median in-network rate for the item or service, unless the billed charge is less (or unless the self-insured plan opts in to state law). NSA requirements are more easily applied to plans with in-network and out-ofnetwork coverages, but reference-based pricing plans have no networks by design and closed-network plans have no out-of-network coverage. In this article we focus primarily on the FAQs Part 55 guidance involving application of the NSA to selfinsured reference-based pricing plans and plans with no out-of-network coverage.

REFERENCE-BASED PRICING PLANS Reference-based pricing plans do not have contracted or negotiated rates with providers. Instead, the plan typically reimburses providers based on a set price for each covered health care service, and the provider can bill the patient for the balance. For NSA covered services, participant cost sharing (e.g. deductibles and coinsurance) is calculated using in-network rates based on the qualifying payment amount (“QPA”). QPA is then calculated based on the median contracted in-network rate for the service. Reference-based pricing plans raise two primary issues for emergency and air ambulance services: there is no in-network cost sharing that would be applied in lieu of out-of-network cost-sharing and there are no median contracted in-network rates. Nonetheless, the agencies conclude that the NSA provisions, including the prohibition against surprise billing and balance billing for emergency services and air ambulance services, still apply to these types of plan designs.

Q1 and Q2 from FAQs Part 55 make it clear that, for emergency and air ambulance services, the surprise billing prohibitions of the NSA do not depend on whether the health plan has a network of providers. The provisions in the NSA that limit cost sharing for out-of-network emergency services apply if a plan covers any benefits for emergency services. An outof-network provider is any provider that does not have a contractual relationship directly or indirectly with the group health plan. Likewise, an out-of-network emergency facility means an emergency facility that does not have a contractual relationship directly or indirectly with the group health plan. For “pure” reference-based pricing plans, all providers of emergency services, and any emergency facility, or any air ambulance services will be outof-network, and the NSA prohibitions will apply to covered services received from those providers. In contrast, the NSA provisions that limit cost sharing for non-emergency services apply only to services provided by an out-of-network provider at certain types of in-network health care facilities, such as network hospitals and ambulatory surgical centers. In order for this prohibition to be triggered, the plan would need to have a contractual relationship, directly or indirectly, with the health care facility. Because reference-based pricing plans have no network facilities, the provisions of NSA that limit cost sharing and prohibit balance billing for these types of services from out-of-network providers at network facilities would not apply.

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CALCULATING THE QPA WITHOUT A NETWORK Group health plans without networks will still have to calculate cost sharing for outof-network services subject to the NSA. In general, self-insured plans with networks calculate cost sharing for these out-of-network services as if the total amount that would have been charged for the services by a network emergency facility or network provider were equal to the “recognized amount”. As already noted, the recognized amount for self-insured group health plans generally is going to be QPA, the median in-network rate, (for the item or service, unless the billed charge is less. (For insured plans and self-insured plans that opt into state law, an All-Payer Model Agreement or specific state law may apply) For plans without networks, there is no median in-network rate. Q3 of FAQs Part 55 confirms that a plan without a network would lack sufficient information to calculate a median contracted rate, and consequently would have to calculate the QPA using an eligible database. Using underlying fee schedules or derived amounts is permitted, but only for plans that have contractual agreements when payments under those agreements are not on a fee-for-service basis. Plans without contractual agreements cannot calculate the QPA based on underlying fee schedules or derived amounts and are instead required to use an eligible database to calculate the QPA.

99282 is $900. Because the participant’s deductible has been satisfied and the plan does not impose other cost-sharing requirements for emergency services, the participant owes no cost sharing and cannot be billed or held liable for the $400 difference between the amount billed by the facility ($1,200) and the plan’s reference-based amount ($800). Presumably under this example costsharing (e.g. the deductible and any co-insurance) would be based on the plan’s normal cost sharing but using QPA instead of the reference based price.

CALCULATING THE OUT-OFNETWORK RATE TO BE PAID

TO THE PROVIDER FOR PLANS WITHOUT A NETWORK

The Departments provide an example in Q3 involving a reference-based pricing plan that pays for covered services based on a fee schedule. The plan imposes no cost sharing once the deductible is met, and no All-Payer Model or specified state law applies to the plan.

For emergency and air ambulance services, Q4 of FAQs Part 55 addresses the calculation of the out-of-network rate for plans with no networks but provides no new information and reiterates the rule from the Interim Final Regulations Part II, issued in September 2021.

In the example, a participant, after satisfying the annual deductible, is taken to a hospital emergency room for emergency services, and the facility bills the plan $1,200 for CPT code 99282. Under the plan’s terms prior to the NSA, the plan would pay a reference-based amount of $800 for CPT code 99282 and the facility presumably could bill the participant for the remaining $400. However, under the NSA, the emergency facility is prohibited from billing the participant for an amount that exceeds their cost-sharing requirement.

Under that rule, the out-of-network rate is the amount the out-of-network provider, emergency facility, or provider of air ambulance services and the plan agree upon as the amount of payment (assuming no All-Payer Model or specified state law applies).

The Departments explain in the example that under the NSA, the participant’s cost-sharing requirement must be calculated as if the total amount that would have been charged for the services by the emergency facility was equal to the recognized amount for the services. The plan must calculate the recognized amount using the QPA (because neither an All-Payer Model Agreement nor a specified state law applies in this example). Because the plan does not have a network from which to calculate median contracted rates, the QPA is calculated using an eligible database. Using an eligible database, the plan determines the applicable QPA for CPT code

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This agreement can take place when the provider or facility accepts initial payment sent by the plan, or through negotiations with respect to such item or service. However, if the parties enter into the Federal independent dispute resolution (IDR) process and do not agree upon a payment amount before the IDR entity makes a determination, then the amount determined by the IDR entity is the outof-network rate.


As a result, a plan that utilizes a reference-based pricing structure and does not have a network of providers may be required to make a total payment that is different from the plan’s reference-based amount for items and services that are subject to the NSA.

MAXIMUM OUT-OF-POCKET REQUIREMENTS FOR REFERENCEBASED PRICING

According to previous Affordable Care Act (“ACA”) guidance, a reference-based pricing plan would not be treated as failing to comply with ACA’s maximum out-ofpocket (“MOOP”) requirements if the plan treated providers that accept the reference amount as the only in-network providers, on the condition that such plans use a reasonable method to ensure that it offers adequate access to quality providers at the reference-based price. The one exception under the ACA was emergency services that would always count toward MOOP, regardless of whether the provider or facility accepts the reference price. Q5 of FAQs Part 55 notes that the NSA’s new definition for “emergency services” now applies, and that new definition now includes post-stabilization services provided as part of outpatient observation or an inpatient or outpatient stay with respect to the emergency services. These post-stabilization services can be excluded if certain conditions are met, including notice and consent, but these conditions assume the availability of a network facility and network providers. The new definition reflects that, when patients receive these post-stabilization services, they may not have an opportunity to seek a participating provider.

Accordingly, the Departments clarify that limiting or excluding out-of-pocket spending from counting toward the MOOP with respect to providers that do not accept the reference-based price would not be considered reasonable for post-stabilization services included in the definition of “emergency services.” One of the conditions for poststabilization not to count as emergency services is that the attending/treating physician determines that the patient can travel to a participating facility within a reasonable travel distance. Assuming a participating facility is one that accepts the reference-based price, it would seem rare that the physician could know the pricing of the other facility in order to make that determination. Consequently, as a practical matter, cost-sharing for these post-stabilization services in reference-based pricing plans may always count toward MOOP.

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CLOSED-NETWORK PLANS In Q6, the Departments address plans which have networks but provide no out-ofnetwork benefits. The Departments confirm that such plans are also subject to the NSA with respect to emergency services, non-emergency services from an out-ofnetwork provider at certain types of network facilities, and air ambulance services, so long as those services are otherwise covered under the plan if they were in-network. The items and services must be covered in accordance with all NSA requirements related to cost sharing, payment amounts, and procedural requirements related to billing disputes, including the federal IDR process. Q6 specifically addresses plans that have network facilities but, absent the NSA, would never cover an out-of-network provider in that facility and conclude that the NSA requirements “may result in a plan or coverage providing benefits for out-ofnetwork items and services subject to the surprise billing provisions, even if the plan or coverage otherwise would not provide coverage for these items or services on an out-of-network basis.”

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DIGITAL THERAPEUTICS TRANSFORMING TREATMENT, MANAGEMENT AND OUTCOMES

Parents are irate when their children seem obsessed with playing video games, but they shouldn’t be surprised if the pediatrician prescribes a digital therapeutic treatment for a child with ADHD delivered through an action video game experience.

P P

hysician prescriptions for a digital therapeutic may also be on the way for people suffering with abdominal pain associated with Irritable Bowel Syndrome (IBS) --a chronic condition that affects 10-15% of adults in the United States. Look for the first FDA-authorized Prescription Digital Therapeutic that provides self-administered Gut-Directed Hypnotherapy (GDH) through a convenient iOS and Android app that can be used at home along with other IBS treatments.

Written By Laura Carabello

Digital Therapeutics (DTx) now emerge as a new category of medicine and the process of obtaining them should look much the same as getting a bottle of pills from the pharmacy. Most providers want to add DTx in combination with other current therapies and use them as a sole intervention or as an alternative to drug therapy. For those unfamiliar with DTx, the Consumer Technology Association (CTA) recently published a report, "Assessing the Landscape for Digital Therapeutics,” and proposed this definition which helps clarify this designation for consumers, healthcare providers, payers and industry stakeholders:

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Digital therapeutics harness the power of technology to impact health by enhancing traditional medical practices, encouraging behavior change and, in some instances, serving as a direct, stand-alone therapy for a health condition. Digital therapeutics are validated by clinical evidence to demonstrate an effect on health outcomes for specific treatment pathways, as well as primary and secondary disease prevention.

The DTx Alliance https://dtxalliance. org/, a not-for-profit organization that sets standards and advocates for the industry, advises that DTx deliver medical interventions directly to patients using evidence-based, clinically evaluated software to treat, manage, and prevent a broad spectrum of diseases and disorders. Broadly defined, DTx products are used independently or in concert with medications, devices, or other therapies to optimize patient care and health outcomes. Incorporating advanced technology best practices relating to design, clinical evaluation, usability, and data security, DTx are reviewed and cleared or certified by regulatory bodies as required to support product claims regarding risk, efficacy, and intended use. It is suggested that DTx empower patients, clinicians, and payers with intelligent and accessible tools for addressing a wide range of conditions through high-quality, safe, and effective data-driven interventions.

The Alliance recommends that all products claiming to be a digital therapeutic must adhere to these foundational principles: • Prevent, manage, or treat a medical disorder or disease • Produce a medical intervention that is driven by software • Incorporate design, manufacture, and quality best practices • Engage end users in product development and usability processes • Incorporate patient privacy and security protections • Apply product deployment, management, and maintenance best practices Keep in mind that DTx delivers evidence-based therapeutic interventions via software, like mobile health and wellness apps, that replace or complement the existing treatment of a disease. They diverge from the broader digital health market since they must be approved by regulatory bodies and display proof-of-concept.

CAVEAT EMPTOR Patient engagement with these apps is a top-of-mind concern for the many companies selling these solutions and the people purchasing them. According to a new paper published in the Journal Frontiers in Psychiatry which scrutinized six clinical trials supporting four mental health apps cleared by the Food and Drug Administration, “there’s an urgent need to close the gap between intention and real-world efficacy for digital therapeutics.” Specifically, the authors refer to the shortage of data on how much people use digital treatments and ultimately concluded that some apps may be of fleeting interest to users. P. Murali Doraiswamy, a professor of psychiatry at Duke University School of Medicine and lead author of the study, said he’s elevating the issue as an opportunity to fix the evidence gap but not to deflate the industry. The authors point out that only a few clinically tested software devices have been authorized by the U.S. Food and Drug Administration for treating specific mental health disorders, excluding devices marketed under pandemic-related emergency use authorization. These include:

• • • • •

reSET for substance abuse disorder reSET-O for opioid use disorder Somryst for chronic insomnia EndeavorRx for pediatric attention deficit hyperactivity disorder. SaMDs and MMAs for treating mild cognitive impairment, Alzheimer's disease, schizophrenia, autism, depression, social anxiety disorder, phobias, and PTSD are in clinical trials and may also come to market soon.

Another new report published in the Journal of Medical Internet Research shows many digital health companies have avoided rigorous clinical evaluation of their products.

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Simon C. Mathews, MD, of the Johns Hopkins University School of Medicine and the study's senior and corresponding author advises, “For digital health to be taken seriously and seen as legitimate clinical tools, far more companies need to be engaging in the rigorous processes that are required to show efficacy.”

“DIGITAL” CARRIES SEVERAL MEANINGS The term “Digital” can be paired with many healthcare technology delivery models, so it is important to understand the differences or similarities since not all digital health products are the same. According to the Digital Medicine Society:

DIGITAL HEALTH Digital health is a broad category, including all technologies used for health-related purposes. Examples include online lifestyle platforms and wellness apps, such as step counters or meditation apps. Clinical operations systems also use digital health products and technologies to store or transmit health data. They do not need clinical evidence that they work, and government bodies may not regulate them as medical devices. This is because digital health products have a low risk.

DIGITAL MEDICINE

Source: https://www.dimesociety.org/about-us/meet-the-team/team-dime/

Digital medicine is one part of digital health and refers to products that measure or intervene in human health or can help monitor and diagnose certain conditions. These products must have clinical evidence that they work, with government groups regulating some of these products as medical devices because digital medicine products have more risk than digital health products.

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DIGITAL THERAPEUTICS Digital therapeutics (DTx) is one part of digital medicine, referring to technologies that prevent, manage, or treat a specific disorder or disease. People can use DTx products alone or with other treatments. DTx products must have clinical evidence of benefits and safety, with government agencies certifying and regulating these products since they pose a higher risk. Regulation helps make sure they work as intended.

employers, plan sponsors, and all benefits intermediaries. This legislation reflects the growing recognition of the clinical and health economic value that DTx products provide to patients, caregivers, and clinicians – particularly with the recognition of increased barriers to care that include social determinants of health that confront patients throughout the United States during and beyond Covid-19. Stakeholders view this legislation as an important step toward expanded access and appropriate reimbursement for DTx and may be the turning point for marginalized or rural populations to access necessary therapies. By creating a DTx benefit category and access pathway for treatment, many patients – especially those with chronic and mental conditions – will benefit from remote access to care that can improve outcomes and quality of life. Expanded coverage for these innovative products will also assist health systems and clinicians to scale their services across broad geographic areas, better manage capacity, drive value and serve communities.

DTX CODING AND REIMBURSEMENT Establishing a statutory benefit category for prescription DTx took a giant leap forward with the introduction of bipartisan legislation earlier this year: Access to Prescription Digital Therapeutics Act 2022 would give CMS a path to reimburse for the technology and set out instructions for a payment methodology. If and when passed, the legislation would establish benefit categories for DTx, and create a coverage and reimbursement framework providing necessary healthcare access for millions of Medicare and Medicaid beneficiaries. If passed, the Act will establish a payment methodology for manufacturers of prescription digital therapeutics, product-specific HCPCS codes, and a DTx manufacturer reporting process to CMS. It is likely that commercial payers will follow the Medicare/Medicaid lead, making this legislation important for self-funded

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CPT CODING It is important to remember that CPT codes, the uniform, technical language for healthcare services that serve as the basis for most healthcare billing, do not necessarily guarantee reimbursement— particularly Category III codes intended for “emerging” technologies. However, a distinct CPT code is often a necessary requirement, establishing legitimacy and credibility in the


healthcare space – especially among payers. The code signifies official recognition that a service is different from what is currently available and merits ongoing review, especially when it comes to collecting targeted data. What is noteworthy is the American Medical Association CPT Editorial Panel moved last year to establish a new Current Procedural Terminology (CPT) code. It will take effect in January 2023 and apply to remote monitoring of cognitive behavioral therapy. This allows physicians to bill for the time they take to support patients who are leveraging these digital tools. More recently, CMS established the first Level II Healthcare Common Procedure Coding System (HCPCS) code for prescription digital behavioral therapy. The code, which became effective April 1, 2022, describes ‘Prescription Digital Behavioral Therapy, FDA Cleared, per Course of Treatment,’ which includes DTx. The coding decision reflects the growing recognition that DTx products are an important element of care for patients with mental and behavioral health conditions and facilitates options for payers to provide access to these innovative treatments. This also makes it easier for providers to bill private insurers for prescribing the emerging software systems earlier in the treatment trajectory. A standardized coding mechanism is needed to ensure that payers can cover these interventions under existing reimbursement pathways, providing an important step toward establishing a standard for the coverage and payment of DTx products. This code facilitates options to reimburse prescription digital behavioral therapies through either pharmacy or medical benefits and eases the way for payers to cover DTX as well as for clinicians to deliver the treatment and patients to access these treatments. HCPCS Code A9291

Description Prescription digital behavioral therapy, FDA cleared, per course of treatment

For conditions like depression, anxiety disorders, opioid and substance use disorders and insomnia, this new designation clears the way to treatment and makes it more affordable for vulnerable and marginalized populations. It also advances initiatives for reimbursement that support wider integration of DTx products into the larger healthcare ecosystem.

HURDLES AHEAD While getting FDA clearance and CMS coding are important, industry experts identify several challenges to DTx adoption, including getting physician uptake, building more pathways to reimbursement, and most importantly, developing software that patients will want to use.

“There’s still a lot of foundational work that needs to be done,” says Maya Desai, director of life sciences for Guidehouse, global provider of consulting services. “There’s a lot of behavioral change that needs to happen across the stakeholders and their mindsets to think about digital therapeutics as a category of its own.” Differentiating DTC from literally hundreds of thousands of health and wellness apps and other software products also remains a challenge. Every app sponsor is trying to capture the attention of employers and benefits executives and attempting to differentiate their product offerings. The term "prescription" often appends digital therapeutics as a way to distinguish these products. Many DTx companies are focused on behavioral health, given the enormity of the problems associated with this area and the spotlight on mental health from government and private sectors. Today, there’s also software to help cancer patients manage their symptoms, and virtual reality to treat chronic lower back pain. There’s even one for Type 2 diabetes patients who require insulin injection to manage their disease -- the first insulin-management phone app that can titrate personalized doses for all types of insulin regimens and deliver recommendations directly to the patient. Today, there’s a platform for managing respiratory diseases, including Asthma and chronic obstructive pulmonary disease (COPD). It is paired to a smartphone app to automatically track medication use and provide personal insights that help manage and reduce symptoms.

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Of course, there’s a prescription DTx mobile app intended to help cancer patients manage their symptoms and allow remote progress monitoring. Most recently, Amerisource Bergen, a leading global healthcare company with a foundation in pharmaceutical distribution and solutions for manufacturers, pharmacies and providers, launched a DTx Platform that will provide a secure connection between developers and physicians by way of the Electronic Medical Record. During a pilot phase that is expected to last six months, just three companies will have products on platform.

contributed to the high availability of funding and investments -- a promising digital therapeutics pipeline. Many telehealth companies are now leveraging digital therapeutics. As an example, Biogen Inc., an American multinational biotechnology company that considers itself a pioneer in neuroscience, announced a new licensing agreement with the digital therapeutics firm to develop and commercialize an investigational prescription therapy designed to treat gait deficits in patients with multiple sclerosis (MS). The deal provides a clear commercialization pathway for the digital therapeutics firm, and also bolsters Biogen’s footprint in the digital space. The international pharmaceutical giant Pfizer is teaming up with an Icelandic-based start-up DTx company to launch a new solution for patients with atopic dermatitis (AD). According to Pfizer, the new platform is designed to boost treatment adherence among patients with AD. This is just another partnership in the latest string of DTx investments by Pfizer.

A HIGH-GROWTH INDUSTRY Some industry analysts (Arizton) advise that the U.S. DTx market is expected to reach $8.8 Billion by 2027 with a compound annual growth rate (CAGR) of 33.15% during 2022-2027. Other market researchers (Grandview) state the global DTx market size was valued at USD 4.20 billion in 2021 and is estimated to grow at a CAGR of 26.1% from 2022 to 2030. The emergence of new DTx products in the U.S. is attributed to constant research and innovation, growth in the prevalence of chronic diseases, increased public awareness, regulatory approvals and an increase in smartphone usage. Analysts also cite the rising need to control healthcare costs, growing demand for healthcare applications, the rising importance of Artificial Intelligence, and evolution of digital treatment using virtual reality. The expanded number of start-ups, strategic acquisitions and collaborations with pharmaceutical companies has

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Accompanying this boom are concerns regarding privacy of patient data, technical challenges, high cost, impact of clinical validation, and stringent regulatory guidelines that are expected to limit the growth DTx in the U.S. However, employers are included on the list of likely end-users, coupled with a favorable trend toward reimbursement for digital medicines. The research states that 25% of organizations are covering them presently and another 45% are planning to do so in the future.

WHAT’S AHEAD FOR EMPLOYERS AND DTX As payers, self-insured employers will want to see how digital therapeutics affect reimbursement models and overall budgeting. Concurrently, they will be exploring how the patient data collected through such products can be leveraged to inform coverage.


As more self-insured companies incorporate telemedicine, virtual primary care, behavioral telehealth and artificial intelligence (AI)enabled medical devices into their benefits packages, it is likely that DTx will take a seat in their digital transformation playbook to influence how and when decisions are made about treatment plans and health outcomes. 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. Sources https://www.statnews.com/2022/08/02/pear-akili-mental-health-app-attrition/?utm_source=STAT+Newsletters&utm_ campaign=0c53953c10-MR_COPY_01&utm_medium=email&utm_term=0_8cab1d7961-0c53953c10-151821581 https://jmir.org/2022/6/e37677 https://www.frontiersin.org/articles/10.3389/fpsyt.2022.900615/full https://www.managedhealthcareexecutive.com/view/amerisource-bergen-launches-digital-therapeutics-platform-that-links-to-emr https://www.amerisourcebergen.com/manufacturer-solutions/digital-therapeutics https://www.amerisourcebergen.com/newsroom/press-releases/amerisourcebergen-to-launch-digital-therapeutics-platform-to https://www.managedhealthcareexecutive.com/view/digital-therapeutics-emerge-into-uncertain-regulatory-payment-landscape https://mhealthintelligence.com/features/how-digital-therapeutics-will-evolve-in-2022-and-beyond https://seniorcarecorner.com/digital-therapeutics-seniors-caregivers https://www.cbinsights.com/research/digital-therapeutics-outlook/?campaignid=15758797084&adgroupid=135389753 487&adid=572656651898&utm_term=&utm_campaign=marketing_adwords_dsa_research&utm_source=google&utm_ medium=cpc&utm_content=adwords-dsa-research&hsa_tgt=dsa-393993048853&hsa_grp=135389753487&hsa_ src=g&hsa_net=adwords&hsa_mt=&hsa_ver=3&hsa_ad=572656651898&hsa_acc=5728918340&hsa_kw=&hsa_ cam=15758797084&gclid=Cj0KCQjwof6WBhD4ARIsAOi65agNIO7MQIyEIOSm9kq_Wpv9pmh42T_xq9XSRUM8gP_jPEzXm_ ZoDzkaAi6xEALw_wcB https://dtxalliance.org/ https://www.grandviewresearch.com/industry-analysis/digital-therapeutics-market https://www.globenewswire.com/en/news-release/2022/06/10/2460718/0/en/The-U-S-Digital-Therapeutics-Market-is-Expected-to-Reach8-8-Billion-by-2027-Arizton.html https://www.mystrategist.com/market-pathways/article/docs_of_the_month_cpt_coding_panels_digital_shift.html https://dtxalliance.org/2022/02/25/the-digital-therapeutics-alliance-welcomes-decision-by-cms-to-establish-a-hcpcs-code-for-prescriptiondigital-behavioral-therapy/ https://www.medtechdive.com/news/digital-therapeutics-commercialization-challenges/621820/ https://www.medtechdive.com/news/pear-therapeutics-cms-code-reimbursement-digital-health/619435/ https://parkinsonsdisease.net/clinical/digital-health-versus-digital-therapeutics https://www.linkedin.com/pulse/digital-therapeutics-definition-characterisation-examples-badong https://www2.deloitte.com/us/en/pages/life-sciences-and-health-care/articles/digital-therapeutics.html https://www.digitalauthority.me/resources/state-of-digital-transformation-healthcare/

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STRATEGIES FOR SELF-INSURERS MANAGING WORKERS’ COMP AND LIABILITY RISK DURING AN ACQUISITION

M

Written By Carly Rowland, FCAS, MAAA

M

ergers and acquisitions (M&As) are on the rise, particularly over the past year. In 2021, global M&A volumes reached $5.9 trillion—a record high with a 64% increase from 2020.1

Businesses and organizations are driven to future-proof by current economic and social landscape transformations. Despite inflation, rising interest rates, and the expected slowdown of global economic growth and investment of 2022, the environment is still considered favorable, and dealmakers are continuing to move forward with M&A transactions.2 Acquiring new business, however, comes with challenges chief risk officers (CROs) and other risk management professionals should consider, especially when adding newly acquired business to existing self-insured or large deductible insurance programs.

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UNDERSTAND THE RISK PROFILE OF THE ACQUISITION Risk management of self-insureds or large deductible programs should first consider the acquisition’s risk profile. To start, is the acquisition a stock or asset sale? A stock sale involves buying the entire entity, which includes unpaid claim liabilities arising from claims prior to the transaction date. An asset sale allows for more flexibility in structure than a stock sale and typically does not include unpaid claim liabilities arising from claims prior to the transaction date. Depending on the magnitude of prior liabilities, this distinction may hold high importance for the unpaid claim liability booked on financial statements. Having a thorough understanding of the acquisition’s risk profile compared to the purchasing company’s risk profile is important. Is the exposure to risk similar regarding both the nature and severity of claims? Perhaps a sales and distribution company with equal weights of clerical and warehouse workers acquires a business mostly comprised of warehouse workers. A business with a higher percentage of warehouse workers and a smaller percentage of clerical workers will have a significantly higher workers’ compensation cost per payroll. Or perhaps a restaurant franchise purchases a delivery business. The delivery business has a significantly lower general liability cost per revenue compared to restaurants serving patrons, which have greater exposure to slip and fall claims.

Additionally, what is risk management expected to look like on a go-forward basis for the acquired business? Risk management may continue under separate administration and stay consistent with the reserving and claim handling strategies used prior to the transaction. It is more common, however, for the new business to be managed under the acquiring business’s risk management team and transition to those reserving and claim handling strategies. Understanding the historical and potential future risk profile of the acquired company and its risk management strategies is valuable for not only self-insureds and program managers, but also for actuaries when estimating future losses. The same question and concept can be applied to third-party administrators (TPAs), or any other vendor involved in the program.

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UNDERSTAND ACQUIRED EXPOSURES: ACTUARIAL APPROACH WITH LITTLE TO NO HISTORICAL DATA AVAILABLE

For self-insureds or large deductible programs, an actuarial analysis is an important first step in understanding the potential current and future liability costs of the acquired business and is part of due diligence. However, the availability of historical data, along with the risk profile, will determine an actuary’s approach. Options are much more limited if historical loss and exposure information is not available. Without the ability to analyze the acquisition’s historical cost per exposure, some approaches include:

1. 2. 3.

Bring the acquired risk into the existing self-insured or large deductible insurance program assuming a similar cost per exposure. Start with the existing program’s cost per exposure and adjust based on any relevant knowledge related to the acquired business’s risk profile or historical loss experience. Base the initial cost per exposure on industry data. For example, workers’ compensation losses can be estimated by weighing the new business’s payroll distribution by state and class code with industry loss costs published by the National Council on Compensation Insurance (NCCI).

A combination of these approaches may also be used. Regardless of which approach is utilized, all approaches should be monitored over time and estimated losses should

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be adjusted appropriately as future loss experience is observed. Because these approaches involve a certain level of discretion, as all actuarial estimates do, risk management should have discussions with its actuary to provide as much detail about the acquired business’s risk profile and historical loss experience as available. Risk management may also wish to discuss its desired level of conservatism, also referred to as “risk appetite.” Perhaps risk management believes that the new business has a lower cost per exposure, but they prefer to take a more conservative approach and therefore the new business is priced at a similar cost as the existing business. This may provide some reasonable extra “cushion” built into the loss estimates. Or perhaps risk management would like to be more aggressive and apply some credit to the expected more favorable loss experience. It is important to mention that not all acquisitions will have a material impact on a program’s combined cost per exposure, regardless of the availability of historical data. Thus, sometimes the more simplistic approach may be the best.

ACQUISITION ANALYSIS IN ACTION

Take a hypothetical transaction of a large national retailer acquiring a smaller regional retailer. Let’s assume the asset sale occurs on January 1, 2022 and includes workers’ compensation exposure. The regional retailer’s program size is 25% of the national retailer’s program size and is expected to have a 50% lower cost per $100 payroll based on its risk profile and location.


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Figure 1 shows the estimated cost per $100 payroll for accident year 2022 two ways: adding the regional retailer to the program at the same cost as the national retailer (green line), as well as adjusting for the assumed 50% more favorable loss experience (orange line). The blue bars represent the national retailer’s historical experience put on level with 2022 dollars. The larger the program size of the regional retailer compared to the national retailer, the lower the orange bar would move. The difference between the two lines could have a significant impact on the budget for the 2022 accident year depending on the amount of payroll involved. Figure 1: Workers’ Compensation Cost per $100 Payroll

UNDERSTAND ACQUIRED EXPOSURES: ACTUARIAL ANALYSIS WITH HISTORICAL DATA AVAILABLE

If there is enough historical loss and exposure data available to be credible (assuming the size of the acquisition compared to the existing company is material), then an actuary can complete a full analysis and estimate a cost per exposure for the acquired business. The results could show a significantly higher or lower cost per exposure than the existing program, or the acquired business could in fact have similar loss experience as the existing program. Some factors that may impact results include risk profiles or mix of business, retentions, state jurisdictions, and historical risk management strategies. Based on the initial study’s results, risk management can discuss subsequent analysis approaches with its actuary. Approaches may include continuing to analyze the new business separately or combining the new and existing business’s exposures. If the initial results show a cost per exposure that is similar to the existing program, it is reasonable to roll the acquired exposures into a single analysis with the existing exposures. If results show a significantly different cost per exposure, but risk management would still prefer one combined analysis, a mix of business adjustment based on the results of the initial study could be used until the new business is fully integrated into the overall program’s loss experience.

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When choosing an actuarial analysis approach, self-insureds and program managers should consider whether estimated unpaid claim liabilities and projected losses need to be recorded separately between the acquired business and existing business. Of course, separate analyses provide separate results. However, separate results can also be estimated for a combined analysis with the use of allocations. Allocations are a handy tool when analyses are completed for a program as a whole, but the program also needs results broken down into separate units or divisions. An allocation can provide actuarial support for charging losses back to the acquired and existing business based on actual losses and exposures (assuming the data is available and credible).

INTEGRATING ADDITIONAL EXPOSURES

Does the acquired business have additional types of exposures of credible size not covered by the existing program’s self-insured or large deductible insurance program? Or perhaps, once the existing company combines a type of exposure with the same type of exposure from the acquired business, it is more cost-effective to change coverage structure. For example, the existing company has a small fleet of vehicles and commercially insures the exposure with guaranteed cost coverage. However, the acquired business has a much larger fleet. Selfinsuring or moving to a large deductible insurance structure may be more costeffective than paying the premiums under the current guaranteed cost coverage for the new larger combined fleet.


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An actuary can perform a feasibility study by projecting estimated losses under various retention layers. The projections can then be compared to quoted insurance premiums for similar layers to aid risk management in decision making. This can be done for combined exposures of existing and acquired business as well as for new exposure types that did not exist previously for the purchasing company (as long as historical data is available).

References 1 Port, C. (May 27, 2022). Mergers & Acquisitions: The Secrets to Succuss. Forbes. Retrieved August 2, 2022, from https://www.forbes.com/sites/ forbesbusinesscouncil/2022/05/27/

CONCLUSION

mergers--acquisitions-the-secrets-to-success/?sh=2a57289056bd.

CROs and other risk management professionals face a number of critical decisions when adding acquired exposures to an existing self-insured or large deductible program. The availability of historical loss experience and exposures plays a major role in how to approach an actuarial analysis.

2 Wiley, R. (June 29, 2022). Thought Not as Frenzied as Last Year, M&A Remains Strong. Forbes. Retrieved August 2, 2022, from https://www.forbes.com/sites/

Risk appetite, size of the acquired business, risk management strategies, and the use of results could also have material impacts on the program’s risk management decisions and approach. Overall, self-insurers and program managers should have detailed conversations with their actuary about the new business’s risk profile and historical loss experience. These conversations can lead to a more thorough understanding of the new business’s risk profile for the actuary and aid in the analysis to ensure adequate estimated losses arising from the additional exposures. Additional confidence in estimates may be gained from independence and full transparency, as well as a fresh set of eyes provided by a detailed actuarial analysis.

Carly Rowland FCAS, MAAA is a consulting actuary in the Chicago casualty practice of Milliman. Carly’s area of expertise is property and casualty insurance, including loss reserving and ratemaking. Her expertise primarily involves loss reserving and forecasting for self-insured clients. She has extensive experience in commercial lines including workers’ compensation, professional liability, general liability, auto liability and extended warranties (service contracts). Carly’s clients include Fortune 500 corporations, healthcare institutions, privately held companies, public entities and commercial insurers.

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forbestechcouncil/2022/06/29/thoughnot-as-frenzied-as-last-year-ma-remainsstrong/?sh=304eab4a67df.


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IN SUBROGATION: SUPERIOR CONTRACT LANGUAGE MATTERS

T

Written By Scott Byerley, Esq.

T

he United States Congress enacted the Employee Retirement Income Security Act ("ERISA") in 1974 to protect employees and place requirements on pension and health care plans. The legislation arose from the discourse and fallout that occurred after Studebaker-Packard (Studebaker), an automobile manufacturer that was very poorly fiscally managed, closed its plant in South Bend, Indiana, effectively eliminating employee pensions for thousands of employees. The problem wasn’t a new one or limited to Studebaker’s closure, which came about in 1963, but rather a systemic one: the lack of corporate accountability in financial reporting and management of pension and health care plans poses significant risks, prompting Congress to protect employees nationwide.1

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THE SELF-INSURER


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Since that time, ERISA qualified employer-sponsored pension and health care plans preempt state laws and, as such, are exclusively regulated by ERISA (and the resultant federal cases that interpret ERISA throughout the jurisdiction of the United States). To be clear, ERISA is by no means a simple piece of legislation, and courts have often been called to interpret provisions of the statute in relation to employer-sponsored pensions, health plans and their respective beneficiaries. In fact, over the past six decades, the U.S. Supreme Court has made several landmark rulings on health care subrogation cases, specifically impacting the interpretation and understanding of ERISA’s reach in this area, as well as its restrictions on both employers and employees. This article will focus on health care subrogation from an employer’s perspective under ERISA, highlighting key ERISA requirements and outlining the best way to protect the assets of an employer-sponsored fund expressly in the plan’s contract with the plan member. From the outset, when a confirmed ERISA plan member has been injured due to an accident potentially caused by a third-party (someone other than the plan member), it is important to gather as much information about the accident and the plan as possible. As an employer-sponsored plan, it should be easy to determine of which plan the member is an active participant and accordingly eligible for benefits. However, for employees of larger organizations, there may be different plan designs and coverage options, so it is always best to confirm exactly which plan

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THE SELF-INSURER

the member is participating in and therefore which plan they are eligible for benefits under when an accident or injury has occurred. It is important to note, however, that not all health care plans are ERISA plans. ERISA, as will be discussed in depth below, has granted protections to plans and plan beneficiaries that improve a plan’s ability to recover against a responsible third-party if the right steps are taken to protect the plan. First, in order to qualify as an ERISA plan and to maintain a cause of action under ERISA, § 502 (a) (3) (B)2, the plan needs to be defined as an “employee welfare benefit plan” or “employee pension benefit plan.”3 Furthermore, the ERISA-governed plan must be established by the plan sponsor and maintained by a “written instrument.”4 Lastly, while almost all private employer plans are subject to ERISA, church, governmental and state plans are generally excluded.5 For the sake of subrogation claims, once the employer or its recovery agent has confirmed the plan is governed by ERISA, then the plan fiduciaries, plan participants, and beneficiaries must look to § 502(a)6 to determine the applicable causes of action. Moreover, ERISA § 502 (a)(1)(B) allows a “participant” or “beneficiary” to bring an action (1) “to recover benefits due under the plan,” (2) “to enforce rights under the terms of the plan,” or (3) “to clarify his/her rights to future benefits under the terms of the plan.”7 The § 502 (a)(1)(B) claim may be brought in either state or federal court.8 ERISA § 502(a)(3) allows a “fiduciary, participant, or beneficiary” (1) “to enjoin any act or practice which violates the terms of the plan,” or (2) “to obtain other appropriate equitable relief to either redress violations or to enforce the provisions of ERISA or the terms of the plan.”9 With respect to actions brought under ERISA § 502(a)(3), the statute grants federal courts exclusive jurisdiction over these claims.10 An employer or its recovery agent should be careful to confirm the ERISA status and to not make the costly mistake of trying to treat a fully insured health plan the same as a self-funded ERISA plan. To be clear, a fully insured health plan exists when the employer has purchased a group insurance policy from a health plan, insurer, or HMO to cover the health care claims that arise under the plan. The other defining feature of a fully insured health plan is that state law would apply to its reimbursement rights.11


Since health care subrogation law varies from state to state and is often more restrictive to a plan’s recovery rights than ERISA federal law, every attempt to clarify the ERISA status and preemptive rights should be made. It’s often not easy to tell by the outward observance of plan operations, without delving into the plan documents and founding instruments of the plan. In short, a self-funded ERISA plan is a plan sponsored by the employer and funded by contributions directly from its employees.12 In most scenarios, self-funded plans contract separately with a third-party administrator ("TPA") to administer claims under the plan (although the claims are funded and paid with the employer’s and employee’s contributions alone and not by any purchased insurance policy). Utilizing a TPA is allowed under ERISA because although the TPA assists the plan in processing and paying claims, it is still the self-funded plan that bears the risk for the claims.13 Furthermore, self-funded plans also preempt state laws (not federal) that relate to employee benefit plans or regulate insurance.14 To determine the employer plan’s rights, the contract between the plan (employer) and the beneficiary is the first place to look.15 The contract, the Master Service Agreement ("MSA") or Summary Plan Description ("SPD"), typically includes a provision which outlines the rights of each party to the

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contract under multiple benefit related scenarios, including payment of claims and/or responsibility for payment of claims or reimbursement of monies paid for claims when an injury or accident has occurred that may be deemed the responsibility of a third-party. Once you have the document, be prudent in making sure that it is the actual plan document that governs the benefits being paid and is not simply an SPD. In Cigna v. Amara, the Court found that the CIGNA SPD was not a “plan document,” as it was only a summary and therefore did not properly outline all applicable plan provisions of an actual “plan document.” Moreover, the Court held that only the terms of a plan (MSA and/or plan document) are enforceable, not the terms set forth in summaries.16

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57


When an accident or injury involves a member of an ERISA plan, the employer-sponsored health plan must have expressly stated its very strong recovery rights in the plan document, addressing key issues that have been litigated through the years, many of which have been decided by the U.S. Supreme Court. Additionally, the recovery provision addressing the plan’s rights when an atfault third-party causes injury to the plan member is critical for determining the employer’s right to be reimbursed from any recovery made from said third-party for claims paid on the injured employee’s behalf. In U.S. Airways, Inc., v. McCutchen, a landmark U.S. Supreme Court case, the Court addressed the enforceability of a plan’s contract head-on when ascertaining each party’s respective

rights when a recovery is made by an injured plan member. The case in McCutchen17 arose, when James McCutchen, an employee of U.S. Airways, participated in and received benefits from the company’s self-funded health plan. Unfortunately, McCutchen, while covered under the plan, was injured in a motor vehicle accident, sustaining significant injuries that necessitated the plan paying $66,866 for medical treatment on his behalf. As a result of his injuries, McCutchen filed a lawsuit against the third-party who caused the accident. He subsequently recovered $110,000 from the third-party’s liability policy and his own underinsured motorist coverage. The plan (employer) sought from his recovery the amount which they had expended on his behalf, relying on the following plan language from the contract: If [the plan] pays benefits for any claim you incur as the result of negligence, willful misconduct, or actions of a third-party…[y]ou will be required to reimburse for amounts paid for claims out of any monies recovered from third-party, including, but not limited to, your own insurance company as a result of the judgment, settlement or otherwise.18

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The Court held that the “clear and unambiguous” contract language in the actual plan document/agreement between the employer and the employee controls a plan’s right to be reimbursed from the settlement against the at-fault third-party.19 Key Issues that should be addressed and included in the plan language in support of the Employer’s recovery rights:

• •

• •

The plan has a first priority right to recovery from the settlement/monies available to the injured plan member as a result of the accident or injury. The plan should require recovery from the plan member’s recovery or directly from the at-fault third-party regardless of whether the plan member has been partially or fully compensated for third-party injuries from the available total recovery. The member’s recovery shall not be construed as being only for pain and suffering and must include the medical claims paid by the employer. The plan will not participate in the common fund (paying for the employee’s personal injury legal fees) or in the ascertaining of the settlement or recovery on behalf of the member. The member shall bear sole responsibility for the costs of obtaining the recovery. What is expressly written in the plan document matters as where the plan is silent or ambiguous, the plan member will have an equitable defense where there is a “gap” in the language.20

While McCutchen was a great result for those responsible for protecting the plan’s assets when a plan member has been injured because of a third-party accident, it does place a responsibility on the plan to have the proper recovery language expressly written into the plan document’s subrogation provision.

By not having the right language in the contract with the employee, the employer may be unable to recover from the thirdparty settlement and subject itself to a claim for breach of its fiduciary obligation to ALL plan members of the fund for inadequately protecting plan assets. Indeed, this is a tricky landscape to navigate properly. For that reason and given what’s at stake for the plan, employers are strongly recommended to consult with experts to ensure they are doing all they can to protect plan assets in such matters that are often litigated by plaintiff’s attorneys seeking to maximize recovery for their client, the injured plaintiff/employee. End Notes 1 Sarah Steers, ERISA History, Jurist, (Oct. 4, 2013, 12:01 PM), http://www.jurist.org/ feature/2013/10/erisa-history.php. 2 § 502(a)(3), 29 U.S.C. § 1132(a)(3). 3 29 U.S.C. § 1002 (3). 4 29 U.S.C. § 1102 (a)(1). 5 ERISA § 4, 29 U.S.C. 1003. 6 29 U.S.C. § 1132 7 ERISA §502(a)(1)(B), 29 U.S.C. §1132(a)(1)(B). 8 Id. 9 Id.

The plan must have clear and strong terms of reimbursement in its written contracts for when these accidents and injuries to the plan’s beneficiaries arise. Ignorance of the law or how to address it is no excuse. The language is either there or it’s not. If it’s not in the contract, then the employer may not be able to recover the benefits that it paid out for the accident. Additionally, in that instance of missing language, the Court allowed plan beneficiaries to argue equitable defenses against the plan’s alleged recovery rights.21 So, what does all this mean for employers and sponsors of self-funded ERISA health plans? First, the plan has a fiduciary obligation to protect the fund, and, secondly, unlike when there is an insurance policy, this money is contributed by employees and set aside for them to actually “fund” the plan to pay for coverable claims from the “fund” when an employee/plan member requires medical treatment. It is the plan’s fiduciary responsibility to proceed in the best interest of the plan and its participants and beneficiaries to protect plan assets.

10 Id. 11 FMC Corp. v. Holliday, 498 U.S. 52 (1990). 12 John MacDonald, Health Plan Differences: Fully-Insured vs. Self-Insured, Employee Benefit Research Institute, www.ebri.org/.../ ffe114.11feb09.fin. 13 Id. 14 FMC Corp., supra note 15. 15 U.S. Airways, Inc., v. McCutchen, 133 S. Ct. 1537 (2013). 16 Id. 17 Id. at 1543. 18 Id. at 1543. 19 Id. 20 Id. 21 Id.

OCTOBER 2022

59


QBE finds the leading cause of stop loss claims, neoplasms, increased in both frequency and severity in 2021. Data shows increases in claims for neoplasms and respiratory illnesses outweighed declines in claims for mental health and circulatory diseases.

The increase was driven by more claims for neoplasms and respiratory illnesses, which were only partially offset by fewer claims for mental health and circulatory system diseases.

All conditions Frequency/10,000 employees

In QBE’s 2022 Accident & Health Market Report, QBE notes an increase in the frequency of $200,000+ claims, when comparing annual policies that started in the first quarter of 2020 against those that started in the first quarter of 2021. This time period serves as a proxy for claims coming in before and after the onset of the COVID-19 pandemic.

60.0 50.0 40.0 30.0 20.0 2017

2018

2019

2020

Q12021

Policy year * Data as of April 30, 2022

Neoplasms continue to be a top consideration for stop loss claims. Neoplasms remain a leading claims concern, driving 41% of claims in excess of $200,000. They were by far the most common of such claims both before and after the pandemic. Meanwhile, the decline in claims frequency throughout the pandemic may be the result of missed and delayed cancer screenings, which could lead to an increase in treatment costs and complications in the future. The effects of COVID-19-driven deferral of care may be felt for years to come as healthcare systems struggle to resume normal operations and contend with supply chain issues and staffing shortages.

55%

of QBE’s policyholder claims include cancer.

Medical op loss

Captive medical op loss

• Direct access to underwriters • Regional underwriting centers, active thought leaders in local markets • Deep technical and clinical expertise • Collaborative solution-based approach to risk with distribution partners

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Claims frequency by primary diagnosis for members exceeding $200,000 in annual claims.

“The total frequency of claims for all 5.0 4.0 3.0 2.0 1.0 0 2017

2018

2019

2020

conditions rose 17% in 2021 versus

Mental illnesses claim frequency Frequency/10,000 employees

Frequency/10,000 employees

Diseases of the respiratory system 1.5

7% in 2020.” said Tara Krauss, Head

1.0

of Accident & Health at QBE North

0.5

America. “The overall increase is likely due not only to claims

0

Q12021

2017

2018

Policy year

2019

2020

Q12021

Policy year

directly related to COVID-19, but also indirectly related through the impact of delayed care.”

Diseases of the circulatory system Frequency/10,000 employees

Frequency/10,000 employees

Neoplasms 25.0 20.0 15.0 10.0 2017

2018

2019

2020

Q12021

6.0 5.0 4.0 3.0 2.0 2017

Policy year

2018

2019

2020

Q12021

Policy year

* Data as of April 30, 2022

To learn more about QBE Accident & Health and access our full report, visit us at qbe.com/us/ah.

For more key findings, read

This literature is descriptive only and should not be construed as legal or professional advice. QBE makes no representation or warranty regarding the information contained herein or the suitability of this information for a particular purpose. Any reference to prior QBE claims is illustrative only, trends are based on QBE claims data and should not be perceived as a representation that such type or frequency of claims will continue. This document is not a policy document. Actual coverage is subject to the language of the policies as issued. QBE and the links logo are registered service marks of QBE Insurance Group Limited. © 2022 QBE Holdings, Inc. 428117 (8-22)

the full QBE 2022 Accident & Health Market Report.

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NEWS

NEWS FROM SIIA MEMBERS 2022 OCTOBER MEMBER NEWS SIIA Diamond, Gold, and Silver member companies are leaders in the self-insurance/ captive insurance marketplace. 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.

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NEWS DIAMOND MEMBERS ZELIS TO ACQUIRE PAYER COMPASS TO DELIVER ADVANCED CLAIMS MANAGEMENT SOLUTIONS

BEDMINSTER, NJ -- Zelis, a leading healthcare payments and pricing company, announced it entered into a definitive agreement to acquire Payer Compass, one of the healthcare industry’s leading providers of reimbursement and claims pricing, administration, and processing solutions. Navigating the rising costs and ever-changing healthcare regulations in the United States is extremely complex and challenging for all participants. Like Zelis, Payer Compass has proudly and effectively developed innovative solutions to help price, explain, and mitigate healthcare costs, helping members better navigate the oftencomplex financial journey without sacrificing quality of care. Together, Zelis and Payer Compass will leverage advanced technology and bestof-breed approaches to create reference-based pricing solutions to manage rising healthcare claims cost for clients and their members. “We’re committed to our mission of making care more affordable and transparent for all. Combining Payer Compass’ innovative platform with our existing network solutions and payment integrity offerings will do just that,“ said Amanda Eisel, CEO of Zelis. “Through our combined assets, we’ll have the people, technology, and shared energy to generate more savings for our clients and continue to positively impact healthcare’s rising costs and complexity.” Jay Deady, President of Claims Cost Solutions at Zelis, added, “Healthcare costs continue to increase without an end in sight. The burden on consumers to understand, navigate, and address these expenses is overwhelming. The combination of these outstanding companies will drive technical and service innovation to make a difference.” Greg Everett, CEO of Payer Compass couldn’t agree more, stating, “We’ve been at the forefront of tackling rising costs and healthcare spend for more than two decades. We’re thrilled to join an organization who has shared this vision for just as long. With our assets combined, we stand well-positioned for an even greater impact in the next chapter.” The transaction is expected to close in the third quarter. Specific terms of the transaction were not disclosed. Spectrum Equity, a leading growth equity firm, and Health Enterprise Partners, a healthcare-focused investment firm, have been investors in Payer Compass since 2019. Triple Tree, LLC. served as the exclusive financial advisor for this transaction. Payer Compass was represented by Latham & Watkins, LLP and Zelis was represented by Kirkland & Ellis. About Zelis As a leading payments company in healthcare, we guide, price, explain, and pay for care on behalf of insurers and their members. We’re committed in our pursuit to

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THE SELF-INSURER

align the interests of payers, providers, and consumers to deliver a better financial experience and more affordable, transparent care for all. We partner with more than 700 payers, including the top-5 national health plans, BCBS insurers, regional health plans, TPAs and self-insured employers and millions of providers and members, enabling the healthcare industry to pay for care, with care. Zelis brings adaptive technology, a deeply ingrained service culture, and a comprehensive navigation through adjudication and payment platform to manage the complete payment process. Visit www.zelis.com About Payer Compass Payer Compass is dedicated to restoring rationality to the cost of care. We focus squarely on tackling the most elusive problems in today’s healthcare landscape: spiraling costs and associated lack of price transparency. For health plans, we are minimizing overall spend on claims pricing, administration, and processing. And for self-insured organizations, our innovations and services are driving down the costs of healthcare claims reimbursement. Our multi-faceted, SaaS platform, Visium™, yields 99.9% pricing accuracy on more than $200 Billion in repriced claims and is the cornerstone of our comprehensive suite of solutions that address the need for cost control while bridging the gap between payer and provider. Payer Compass does this with reference-based pricing, patient advocacy, balance billing, and appeals services, value-based payments, care management, predictive modeling and analytics, and tools for provider search and price transparency. Combining our next-gen technology with an emphasis on client success, Payer Compass is dramatically reducing overall healthcare spend. Visit www.payercompass.com.


“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.

Stop Loss

|

Group Captives

|

Managed Care

©2022 Berkley Accident and Health, Hamilton Square, NJ 08690. All rights reserved.

|

BAH AD2017-09 2/22

Specialty Accident www.BerkleyAH.com


NEWS VĀLENZ® ANNOUNCES ACQUISITION OF CERTUS MANAGEMENT GROUP AND LAUNCH OF MEDICAL STOP LOSS INSURANCE SOLUTION

Phoenix, AZ - Vālenz® announced it has acquired Certus Management Group Stop Loss, Inc. (CMG), a managing general underwriter providing certainty of stop loss protection to self-funded employee benefit plans since 1998. CMG will become a Valenz Affinity Company and part of the Valenz Healthcare Ecosystem Optimization Platform, a fully integrated suite of solutions that simplifies the complexities of self-insurance through data transparency and decision enablement throughout the life of a claim. Additionally, the acquisition creates a new private label medical stop loss insurance solution, launching in market as a Valenz V-Rated solution. This solution enables the more efficient delivery of medical underwriting and risk mitigation services tailored to the needs of Valenz clients. All other CMG underwriting services will continue to be offered under the CMG trade name. The Valenz V-Rated solution is an additive benefit for self-insured employers who engage with Valenz for a full ecosystem solution, including care management, member navigation enhanced with Care Value Optimizer (charity care and centers of excellence bundles), specialty drug solutions, contracted and open access success networks, and high-cost claim cost containment programs.

When partnering with Valenz during the presale process, clients realize the full value of the ecosystem which allows them to contain medical costs more aggressively than less innovative offerings, while also potentially resulting in more competitive stop loss costs. “We’re thrilled to welcome CMG to the Valenz family,” said Rob Gelb, Chief Executive Officer of Valenz. “Our companies are a great match for each other in their commitment to transparency, risk management, and financial protection from high-cost claims and escalating pharmaceutical and treatment costs. As Valenz continues to evolve and expand, we are excited to begin this new collaboration in delivering on our core promise: engaging early and often for smarter, better, faster healthcare.”

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NEWS CMG will retain its trade name and adopt a new tagline: “A Valenz Affinity Company,” with a slightly updated logo to facilitate a more rapid association with Valenz. The core team of 18 will continue to remotely support CMG-integrated products and services at its current headquarters in Indianapolis. “CMG and Valenz share a deep commitment to financial assurance for the self-insured industry, while also advocating for plan members and ensuring high-quality, cost-effective care,” said Brad Lewis, President and Chief Executive Officer of CMG. “As we join the Valenz team, we look forward to protecting and serving our clients as an integral part of their innovative, datadriven ecosystem.” CMG’s line of stop loss products limits liability and eliminates the pitfalls that many employers view as obstacles to self-funding. It offers plan design and risk analysis, stop loss underwriting, firm renewals, and a guaranteed “no laser” contract for groups of all sizes – for plans of 11 participating employees and larger with specific retention levels from $10,000. CMG’s claim procedures also protect self-funded employers from cash flow issues that can result from unpredictable claim activity. About Valenz Vālenz® simplifies the complexities of self-insurance by offering an end-to-end Healthcare Ecosystem Optimization Platform that manages the cost and quality of care for employers and their members. To balance the relationship between healthcare quality, advocacy and cost, the Valenz enterprise-level solution suite aligns the member, provider and payer. Supported by a dynamic, innovation-first culture and a steadfast commitment to data transparency and decision enablement,

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THE SELF-INSURER

Valenz leverages its technology infrastructure and enterprise data warehouse to drive value across clinical and member advocacy, network development and the validation, integrity and accuracy (VIA) of claims. Learn more about how Valenz engages early and often for smarter, better, faster healthcare. Valenz is backed by Great Point Partners. About CMG Certus Management Group has developed a line of stop loss products that limit the liability of a self-funded employer and eliminate the pitfalls that many employers view as obstacles of self-funding. With more than 350 years of combined experience in the stop loss business, the CMG staff is among the most qualified in the industry. This experience enables CMG to provide employers with stop loss solutions that bring certainty to their self-funded plan. CMG maintains a strong relationship with two carrier partners, SiriusPoint America Insurance Company (Rated A- (Excellent) by A.M. Best), and Gerber Life Insurance Company (Rated A (Excellent) by A. M. Best). Each carrier shares CMG’s vision of the stop loss marketplace and offers the stability of a well-established insurance company. Visit www.certusmg.com.

VĀLENZ® PROMOTES MAURICE STEENLAND AS CHIEF PRODUCT OFFICER

PHOENIX, AZ — Vālenz® is pleased to announce Maurice Steenland has been promoted to Chief Product Officer. Leading innovation and investment strategy for the Vālenz® Healthcare Ecosystem Optimization Platform, Steenland is highly engaged in synchronizing departments to accelerate strategic initiatives that bring greater value to clients. Steenland also offers deep expertise in uncovering operational efficiencies and engaging data and analytics to enable better decisions. “With 20+ years of senior leadership experience at leading healthcare organizations, Maurice is our catalyst for ecosystem innovation and scale,” said Rob Gelb, Chief Executive Officer of Valenz. “Through a highly strategic and data-driven approach, he leads our investment strategy, uncovering new solutions to deliver a powerful data platform that enables more proactive decision-making and identifies opportunities to boost plan performance for our customers.” “A firm believer in the company culture of one, Maurice inspires us every day to engage early and often to deliver smarter, better, faster healthcare,” Gelb added. Steenland also has held leadership positions at CIGNA Healthcare, Coventry Health Care and Intracorp, with specialization in operations, utilization management, strategy, and business development. He earned his master’s in business administration from the prestigious Wharton School of the University of Pennsylvania. About Valenz Vālenz® simplifies the complexities of self-insurance for employers through a steadfast commitment to data transparency and decision enablement. To balance the relationship between healthcare quality, advocacy and cost, the Valenz



NEWS approach aligns the member, provider and payer. We deliver this synergy through a strong foundation with deep roots in clinical and member advocacy, alongside decades-long expertise in claim reimbursement and payment validity, integrity and accuracy. By establishing “true transparency” and offering data-driven solutions that improve cost, quality and outcomes for you and your members, Valenz engages early and often for smarter, better, faster healthcare. Valenz is backed by Great Point Partners. Visit www.valenzhealth.com

TOKIO MARINE HCC - STOP LOSS GROUP ENTERS THE LEVEL FUNDED STOP LOSS MARKET

For over 45 years, Tokio Marine HCC – Stop Loss Group (TMHCC) has been a leading provider of medical stop loss insurance, Taft-Hartley, captive, and organ transplant solutions, provided through brokers, consultants, and third-party administrators. Rated A++ (Superior) by A.M. Best Company, AA- by Fitch Ratings (Very Strong), and A+ (Strong) by Standard and Poor’s, TMHCC is backed by the financial stability of its parent company, Tokio Marine HCC. By listening to the demands of the market, we have developed exceptional products, unparalleled resources, and value-added services to set us apart in the industry. For effective dates of January 1, 2023, TMHCC is pleased to announce a level funded,

At HPI, we’re investing in the future— so we can help our clients provide even better solutions to their work families.

aggregate-only stop loss solution to help clients coming from fully insured insurance coverage control their healthcare costs. With our Level Funded Stop Loss product, employers will receive the benefits of selffunding by keeping unused funds, while also receiving lower maximum costs, no lasers, flexibility in plan design and control of their health plans. TMHCC is proud to partner with TPAC Underwriters (TPAC), capitalizing on their expertise, helping us with the day-to-day logistics of level funding. TPAC pioneered one of the first level funded products in the nation and has successfully helped employers establish a fixed monthly budget for claims coverage within the client’s selffunded health plan for almost 25 years. *The Level Funded Stop Loss product is not available in all states.

We can’t wait to see you at the SIIA22 – Engage National Conference! HPI is a proud sponsor of the SIEF Golf Tournament Fundraiser

People

Partnerships

Programs

We hire the best, so our clients get the best.

We seek out partnerships to move us all into a brighter future.

We build new programs and concierge services for better outcomes and increased savings.

Deb, Drew, Paul, Rocko, and Keith look forward to catching up with you. Join us as we attend the conference, take part in the golf tournament, and speak at the sessions below: Sunday October 9th: The SIEF Golf Tournament Fundraiser, at the Wildfire Golf Club Monday October 10th, 1:30pm: Keith Hodges: Engagement Accelerator: Charting Successful Careers in the Self-Insurance Industry Tuesday October 11th, 3:15pm: Paul Forte: Direct Contracting in the Real World – Lessons Learned

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Technology

Brand Brick & Mortar

We provide a world-class experience with nextgeneration technology.

We updated our office space and our brand to better reflect who we are.

THE SELF-INSURER

hpiTPA.com


NEWS About Tokio Marine HCC A member of the Tokio Marine HCC group of companies. Tokio Marine HCC is the marketing name used to describe the affiliated companies under the common ownership of HCC Insurance Holdings, Inc. Tokio Marine HCC’s products are underwritten by American Contractors Indemnity Company, HCC International Insurance Company PLC, HCC Life Insurance Company, HCC Specialty Insurance Company, Houston Casualty Company, Lloyd’s Syndicate 4141, United States Surety Company and U.S. Specialty Insurance Company. Visit www.tmhcc.com

value to its clients and better health outcomes to its members.

SILVER MEMBERS

The acquisition is expected to more than double Marpai's revenues (exclusive of third parties' share of revenues), number of customers and number of members it serves. "We are committed to continue delivering the high level of customer service that both Maestro's and Marpai's customers are used to. We believe that this combination will create long-term benefits for our members, clients as well as our stockholders," said Gonzalez.

MARPAI TO ACQUIRE MAESTRO HEALTH

NEW YORK -- Marpai, Inc., an AItechnology company transforming the $22 billion TPA market supporting self-funded employer health plans, announced it has signed a definitive agreement to acquire Maestro Health ("Maestro"), a leading TPA servicing over 80 self-insured employers, based in Chicago, Illinois. Highlights of the transaction include: At the closing the combined company will serve over 40,000 employee lives with expected combined proforma annual revenues of approximately $40 million in 2022. Significant cash of over $20 million on the combined balance sheet expected at closing, which is expected to finance the integration of the two companies. While up to date Maestro has posted substantial operating losses as it invested in growth, the joint company expects to target positive EBITDA within 18 months. Maestro's Clinical Management and Cost Containment in-house capabilities will enhance Marpai's ability to deliver better

Purchase Price of $22.1 million is due in April 2024, but, subject to the Company meeting its obligations under the agreement, may be financed over four years by the seller. Together, the companies will continue to provide innovative health plan administration for self-insured clients driven by technology. "Maestro shares our vision on how to improve healthcare for employees and family members covered by self-insured plans," said Edmundo Gonzalez, CEO of Marpai. "There are tremendous revenue synergies. Maestro has in-house care management that helps members live healthier lives, and we intend to roll this out to the Marpai member base. The Maestro cost containment solutions will also be rolled out to our client base. Marpai's proactive match making of members to the best care will also be introduced to the Maestro client base."

"Combining our TPA experience with Marpai is incredibly exciting. Over the last couple of years, we have made significant investments in cost containment and clinical solutions that are delivering outstanding results for our customers. Marpai brings deep TPA domain expertise, expanded discount network options and incredibly sophisticated approaches to data analytics," said Brandon Wood, CEO of Maestro Health. "The combined organization will help employers proactively provide benefits that are expected to lead to healthier and more satisfied member populations. This will be unmatched in the market." Marpai management will discuss the transaction on the previously announced second quarter operating results conference call which is scheduled for Thursday, August 11 at 8:30 a.m. ET. The call can be accessed as follows: Live Call: US: 1-866-652-5200 / CAN: 1-855-669-9657 / INT TOLL: 1-412-317-6060. Webcast: https://app.webinar. net/0EJlBnd6mVz About Marpai, Inc. Marpai, Inc. (Nasdaq: MRAI) is a technology company bringing AI-powered health plan services to employers that directly pay for employee health benefits. Primarily competing in the $22B TPA (Third Party Administrator) sector serving self-funded employer health plans representing over $1T in annual claims, Marpai maximizes the value of the health plan as measured in health outcomes. Marpai takes a membercentric approach that uses AI and big data to connect members to health solutions predicted to have a high probability of positive outcomes and aims to bring valuebased care to the self-insured market. With effective early intervention, disease management, claims processing and proactive member outreach, Marpai works

OCTOBER 2022

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NEWS to deliver the healthiest member population for the health plan budget. Operating nationwide, Marpai offers access to provider networks including Aetna and Cigna and all TPA services. Visit www.marpaihealth.com. About Maestro Health Maestro is a Third-Party Administrator (TPA) for employee health and benefits servicing approximately 25,000 employee lives. Maestro offers end-to-end health plan solutions, integrating in-house care management and cost containment services. Maestro has over 80 customers in over 40 states with a 93% client retention rate, indicating high level of customer satisfaction. Visit www.maestrohealth.com

RINGMASTER® TECHNOLOGIES ANNOUNCES ITS COLLABORATION WITH OPTUM RX® TO ADVANCE ITS HEALTHCARE STOP-LOSS PROCUREMENT PROCESS

Boca Raton, FL -- Ringmaster® Technologies (RMT) announces its collaboration with Optum Rx®, the pharmacy care services business of UnitedHealth Group, to provide enhanced connectivity and increase transparency between Optum Rx, third-party administrators and stop-loss carriers/MGUs.

manage cost and deliver meaningful PBM sourcing solutions and clinical programs to drive superior outcomes for all stakeholders. Ringmaster is the only technology solution built exclusively for stop-loss procurement from market to bind to administer to renew. By stepping into the ring, TPAs and carriers/MGUs take advantage of modernized technology that revolutionizes an antiquated process, efficiently manages RFP/Quoting and claims management workflow, enables “real time” communication and data access and now integrates the PBM resources of Optum Rx which will add value through the supply chain ultimately benefiting the consumer.

The combination of Ringmaster’s cloud-based, integrated technology, enterprise data warehouse and extensive strategic partnerships and Optum Rx’s PBM advantages will significantly improve workflow, simplify the stop-loss procurement process, help

Enter at our risk, and your reward. TPAC is changing the way healthcare is financed, disclosed and delivered. Join us to discover the TPAC difference and open the door to a better stop loss solution for your business.

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THE SELF-INSURER


Level funded plans that are as easy to sell as fully insured. Level Funded Plus™ makes it easy for brokers and consultants to access transparent, reliable level-funded insurance for groups as small as 10 enrolled employees. Competitive rates with no IHQs and 0-3 day turnaround on quotes

Access to national PPO networks including Aetna, Cigna, & United

100% return of claims fund for all groups whether they renew or not

Issued by Great American, rated A+ by AM Best

Visit levelfundedplus.com to learn more.

info@levelfundedplus.com

1-888-820-8328

Refer to the actual policy for a full description of applicable terms, conditions, limits and exclusions. Policies are underwritten by Great American Insurance Company, 301 E. Fourth St., Cincinnati, OH 45202. The word marks Great American® and Great American Insurance Group® are registered service marks of Great American Insurance Company. All other trademarks are the property of their respective owners, which are not affiliates of Radion Health, Inc. or Great American Insurance Company. AM Best rating affirmed December 3, 2021. AM Best rating of "A+" is second of 16 ratings. AM Best rating affirmed December 3, 2021. AM Best rating of "A+" is second of 16 ratings.


NEWS “We are extremely excited to be collaborating with Optum Rx to deliver a solution to the marketplace that provides consistent, unmatched coordination between stop-loss, PBM’s and TPAs,” stated Todd Roberti, Founder, Chairman and CEO of Ringmaster. “By working together, we’ve created a solution that provides accountability, transparency and comprehensive risk avoidance throughout the entire stop-loss procurement process while enabling access to care that puts the member first.”

RINGMASTER ® ANNOUNCES TWO ADDITIONS TO ITS EXECUTIVE MANAGEMENT TEAM, JASON WENZKE AND CRAFT HAYES

Boca Raton, FL – Ringmaster Technologies®, Inc. (RMT) a leading healthcare software provider in the U.S., announced the appointment of Jason Wenzke as President of its newly formed prescription benefits division, Ringmaster® Rx and Craft Hayes as Chief Growth Officer of Ringmaster Technologies. As President of Ringmaster Rx, Mr. Wenzke will utilize his extensive knowledge of PBM’s and related stakeholders to create the assets necessary for the newly formed division to deliver its cloud-based operating system for pharmacy consulting to the selffunded marketplace. The operating system, Rx-LinQ™, allows end clients/users to analyze pharmacy data for the purposes of reconciling, auditing and marketing pharmacy benefit management contracts and programs. Most recently, Jason served as Senior Business Development Executive with RxBenefits® where he was responsible for the formation of strategic partnerships with brokerage firms and contributed to the creation of the first “pharmacy only” stop-loss captive – RxAssurance. “I am excited to join the forward-thinking team at Ringmaster and for the opportunity to revolutionize how consultants evaluate pharmacy contracts and serve their self-funded clients,” said Jason. “My passion has always been fulfilled by helping consultants and their clients make better decisions on pharmacy so their businesses can thrive, and Ringmaster Rx is an incredible vehicle for that.” Also, joining the Ringmaster team as Chief Growth Officer is Craft Hayes. In his new role, Mr. Hayes is focused on all commercial growth aspects at Ringmaster including sales and client relationships. Craft works cross functionally to align our products into a holistic solution to meet the needs of the marketplace and our clients. His extensive experience and success in building high performing sales teams within the healthcare marketplace will be a key benefit to expanding Ringmaster’s reach across its targeted channels, the development of new competencies such as the integration of industry leading sales and operational technology, expansion of its pipeline for its current portfolio of cutting-edge products and the introduction of additional innovative products that bring value-based solutions to Ringmaster’s Clients. Craft comes to Ringmaster from Nayya which is an AI and ML platform utilizing claims data to help Consumers make more informed healthcare benefit selections. As Head of

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THE SELF-INSURER

Sales, Craft played an integral role in the development of the GTM strategy and the creation three revenue business units. “I am thrilled to be a member of the Ringmaster high performing team and bring my expertise to represent its products which are creating operational and administrative excellence with improved processes for TPAs, Brokers and Underwriters,” Craft states. “Bringing products to market that are solution based and bring measurable value that positively impacts a client’s business are motivators. Combine that with the opportunity to create the assets needed to scale our sales team and maximize our growth potential, gives us a unique opportunity to help pull the industry forward.” About Ringmaster Technologies, Inc. Ringmaster is a cloud-based healthcare software provider created to simplify and enhance administrative processes by utilizing cutting edge technologies. Ringmaster offers the first fully automated workflow optimization solution that will drastically reduce processing time and complexity while minimizing the turnaround time for StopLoss quoting, contracting, and policy administration. Additionally, Ringmaster offers an endto-end cloud-based operating system for pharmacy consulting. Ringmaster Technologies – Realize the Possibilities – Step into the Ring. Contact Leo J. Garneau III, Chief Marketing Officer, at lgarneau@ringmastertech.com and visit www.ringmastertech.com



SELF INSURANCE INSTITUTE OF AMERICA, INC. 2022 BOARD OF DIRECTORS

CHAIRWOMAN OF THE BOARD*

DIRECTORS (CONT.)

Kari L. Niblack, JD, SPHR CEO ACS Benefit Services Winston Salem, NC

Laura Hirsch Co-CEO Aither Health Carrollton, TX

CHAIRWOMAN ELECT*

Deborah Hodges President & CEO Health Plans, Inc. Westborough, MA

Elizabeth Midtlien Vice President, Emerging Markets AmeriHealth Administrators, Inc. Bloomington, MN

TREASURER AND CORPORATE SECRETARY*

John Capasso President & CEO Captive Planning Associates, LLC Marlton, NJ

DIRECTORS

Lisa Moody Board of Directors Chair Renalogic Phoenix, AZ Shaun L. Peterson VP, Stop Loss Voya Financial Minneapolis, MN

SIEF BOARD OF DIRECTORS CHAIRMAN Nigel Wallbank Preisdent Leadenhall, LLC Ocala, FL

PRESIDENT Daniél C. Kimlinger, Ph.D. CEO MINES and Associates Littleton, CO

DIRECTORS Freda Bacon Administrator AL Self-Insured Workers' Comp Fund Birmingham, AL

Thomas R. Belding President Professional Reinsurance Mktg. Svcs. Edmond, OK

Les Boughner Chairman Advantage Insurance Management (USA) LLC Charleston, SC

Amy Gasbarro Chief Operating Officer Vālenz Phoenix, AZ

Alex Giordano Chief Executive Officer Hudson Atlantic Benefits Bellmore, NY

* Also serves as Director

Virginia Johnson Strategic Account Director Verisk/ISO Claims Partners Charlotte, NC

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THE SELF-INSURER


Best in class Claims Administration System powered by state of the art technology. Serving Third Party Administrators, Insurance Carriers, Insurtech Health Plans, Provider Sponsored Plans, Medicare Advantage Plans Customization capabilities well beyond other systems Industry leading features and functionality with optimal performance Real time modification Ease of configuration Secure cloud based software - no upfront hardware costs

info@hi-techhealth.com

908-813-3440


SIIA NEW MEMBERS OCTOBER 2022 REGULAR CORPORATE MEMBERS

Mimi Choi President Advanced Risk Managers, LLC San Francisco, CA David Wetzler SVP, National Practice Leader AssuredPartners Scottsdale, AZ Jose Sucre Director of B2B Marketing Bento Boston, MA Geoff Nagle VP - Head of Distribution Chubb Whitehouse Station, NJ Perry Spinelli Regional Vice President Sales Citizens Rx Oak Park, IL Matthew Paul SVP, Value & Access COEUS Consulting Group Wayne, PA Michael Jacobs, RPh National Pharmacy Practice Leader Foster & Foster Consulting, Inc. Scottsdale, AZ

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THE SELF-INSURER

John Conkling Jr. Executive Vice President, Products & Services Fringe Benefit Group Austin, TX Keith Passwater CEO Havarti Risk Services Indianapolis, IN Amy Ball PharmD President Innovative Rx Strategies Indianapolis, IN Amanda Raitz Hebert Head of Global Marketing MORE Health San Mateo, CA Tom Falvey Partner NewHealth LLC Red Bank, NJ Annette Nix-Mellinger EVP of Operations Performance Health Avon Lake, OH Audrey Bridges CFO PRAM Insurance Services, Inc. Brea, CA

Marisa Freeden Chief Marketing Officer Wellpsyche Medical Group Los Angeles, CA Josh Simerman Dir, Employee Benefits Placement & Carrier Relations World Insurance Associates Iselin, NJ

SILVER MEMBERS Amanda Walker Chief Operating Officer Heritage Biologics, LLC Lees Summit, MO


Zelis has delivered clients

27 Billion Dollars in network and claims cost savings to our clients since inception We harnesses data-driven insights and human expertise at scale to optimize every step of the healthcare payment cycle.

Contact Zelis today at 888.311.3505 or visit zelis.com to find out how our pre-payment solutions are helping control the rising cost of healthcare.

Pay for care, with care.

zelis.com


Life Is Not Without Risk.

An infant with a 60-day NICU stay could exceed $1 million in costs.*

Amy didn’t think she’d spend her maternity leave with her baby in the NICU. Neither did her self-funded employer. Catastrophic claims can arise unexpectedly. If the plan has the right Stop Loss protection in place, focus can remain on achieving business goals and welcoming Amy back when it’s time. When you work with the experts at HM Insurance Group, you can have confidence that the claims will be paid. Find more on hmig.com.

SECURE FINANCIAL PROTECTION WITH OUR INSURANCE AND REINSURANCE OPTIONS: Employer Stop Loss: Traditional Protection • Small Group Solutions • Coverage Over Reference-Based Pricing Managed Care Reinsurance: Provider Excess Loss • Health Plan Reinsurance *

Cost estimate based on HM Insurance Group historical Stop Loss data and additional industry observations, May 2022.

In all states except New York, coverage may be underwritten by HM Life Insurance Company, Pittsburgh, PA, or Highmark Casualty Insurance Company, Pittsburgh, PA. In New York, coverage is underwritten by HM Life Insurance Company of New York, New York, NY. The coverage or service requested may not be available in all states and is subject to individual state approval. MTG-3438 (5/22)