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April 2014

CO-OPs Could EXPAND Self-Insurance Down Market


April 2014 | The Self-Insurer

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

APRIL 2014 | Volume 66

April 2014 The Self-Insurer (ISSN 10913815) is published monthly by Self-Insurers’ Publishing Corp. (SIPC), Postmaster: Send address changes to The Self-Insurer P.O. Box 1237 Simpsonville, SC 29681


10 ART Gallery: To Dream the Impossible Dream: 24/7 Coverage

Editorial Staff

12 Faddish or Short-Term Catastrophic



CO-OPs Could

Expand Self-Insurance Down Market by Bruce Shutan

James A. Kinder, CEO/Chairman Erica M. Massey, President Lynne Bolduc, Esq. Secretary

Reimbursement Strategies May Not be the Solution to Braving a Post ACA World – What are the Important Questions You Should be Asking?

by Lisa Greenblott

22 PPACA, HIPAA and Federal Health

30 Measuring the Well-Being of


2014 Self-Insurers’ Publishing Corp. Officers

Benefit Mandates: The Affordable Care Act and Account-Based Plans: Impact of the ACA on HRAs, FSAs and HSAs


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


Wellness Program by Cori M. Cook


New Captive Domiciles Are Ready to Make It Big in the Captive Sector by Karrie Hyatt

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The Self-Insurer | April 2014 3

SIIA CHAIRMAN’S MESSAGE 2014 Educational Programs and Networking Opportunities


t has been a long winter for us all! Warm up at the iconic Eden Roc Hotel in Miami Beach, FL May 20-21. Where you will “See and Be Seen” at SIIA’s 16th Annual Self-Insured Workers’ Compensation Executive Forum, the country’s premier associationsponsored conference dedicated exclusively to self-insured Workers’ Compensation funds. Expected attendees include Group Self-Insured Workers’ Comp Fund Executives/Directors, Workers’ Compensation Self-Insurers, Third Party Administrators, Excess Insurance Carrier/Reinsurers, Attorneys, Accountants/Actuaries, Risk Management Consultants and Industry Service Providers. There will be tremendous networking opportunities that are specifi cally designed to help you strengthen your business relationships within the selfinsured/alternative risk transfer industry, along with a superior educational program. This year’s keynote is not to be missed! Award winning author and business speaker Mark Scharenbroich and his “Nice Bike” principle. His presentation will be an unforgetable experience that will motivate and inspire you. Visit the conference page on the SIIA website to watch a video review of Mark Scharenbroichas


April 2014 | The Self-Insurer

a keynote speaker ( pages/index.cfm?pageid=4412). Other educational sessions include: Predictive Analytics An interactive panel with Pam Finch, Vice President, Alternative Service Concepts, LLC (ASC), Marcos Iglesias, MD, MMM, FAAFP, FACOEM, Medical Director, Midwest Employers Casual Company, and Mark Sidney, Vice President of Claims, Midwest Employers Casual Company will provide a case study of how data analytics are a critical component to pinpoint potential problem claims. Integrated Disability Management: The Value of Engaging a Total Absence Management Program Approach. “Absence Does Not Make the Heart Grow Fonder” Edmund C. Corcoran Jr., Esq., Director, Enterprise Absence Management, Raytheon Company and Josh Zirin, Casualty Actuarial Practice, Dion Strategic Consulting Inc will provide varied expert perspectives on how to create an integrated disability, effectively monitor claims and ensure regulatory compliance, promote the right amount of followup, encouragement, clinical expertise and communications to promote return-to-work. Discussions will focus on getting started, actuarial analysis and the evaluation of TAM merits and potential ROI to what it took to deploy and engage the Total Absence

Les Boughner

Management (TAM) or Integrated Disability Management (IBM) model in an organization that has 68,000 employees worldwide. Safety Training that Sticks Mark Meek, CSP, Safety Manager at Advance Auto Parts will highlight one award winning Effective Safety Training strategy that is working and provide a blue print on how to make it happen. Opioids Case Study George Furlong, Senior Vice President Managed Care Program Outcomes Analysis, Sedgwick Claims Management Services, Inc. and Kaylea M. Boutwell, M.D., Interventional Pain Management Specialist at Pain and Rehabilitation Specialists Of St Louis will present a case study of an injured worker and his family, and their struggle with his failed surgeries, depression and opioid addiction. Hearing his story leads to the question, what can we do

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to prevent opioid addiction? The next part of this session will discuss results from a predictive analytics study which used injured worker data to accurately predict who will become a long-term opioid user. Predictive modeling can more effectively examine all available historical data assets, identify a greater number of potential predictors, take into account interactions among predictors, and utilize the most impactful ones in order to accurately predict an outcome. By addressing the multiple stakeholders involved, positive impact can be made to the injured worker’s therapeutic care. Taking Your TPA From Good to Great Barry Bloom, Principal at The bdb Group will teach you how to take your good TPA program and make it great! You will hear specific and actionable tips to evaluate your workers compensation self-insured program. You’ll be given strategies to take your TPA to the next level and make it great. C-level executives, Administrators and Managers will all benefit from this session. You can’t continue to do the same things and expect different results!

Administrator of the Alabama Self-Insured Workers’ Comp Fund moderates our panel of experts including Christopher J. Burkhalter, Vice President and Principal, Bickerstaff, Whatley, Ryan and Burkhalter, Todd Greer, Senior Vice President, Insurance Program Managers Group and David G. Johnson, Esq., Corporate Counsel, Self-Insured Solutions focus on some of the biggest issues facing SIG’s. Adverse loss development, joint and several liability collection, loss portfolio transfers, regulatory changes and structured settlement options are among the issues to be discussed. n

The Human Factor: Using Integrity and Safety Related Personality Assessments to Screen Out High Risk Applicants and Prevent Workplace Incidents Dennis Fox, Founder and President of the Client Development Institute will focus on research findings and case studies on how organizations can identify prospective high risk behavior employees and those with an “entitlement mentality” through state- of- the art online testing systems. Using Captive Insurance Companies to Support Self-Insured Groups (SIGs)

For more information on SIIA’s 16th Annual Self-Insured Workers’ Compensation Executive Forum, including registration and sponsorship opportunities, please visit or call (800)851-7789.

Charles Caldwell, President and CEO, Midlands Management Corporation, William L. Shores, President, Shores, Tagman, Butler and Company, P.A., and Bill Yaeger, President, McNeary, Inc. will explore how captive insurance companies have been and might be used to supplement and enhance group funds. Additional opportunities for captive utilization may become available as more states establish themselves as captive domiciles. Occupational Wellness: Wellness and Workers’ Compensation T. Warner Hudson, M.D., Medical Director, UCLA Medical Center Occupational Health Facility, Mark Priven, FCAS, MAAA, Director, Regulatory and Alternative Risk Consulting for Bickmore will discuss how wellness factors affect workers’ compensation costs, how to gain an appreciation of factors that would indicate whether or not your institution could benefit from a workers’ compensation wellness program, and how to leverage existing resources to build an occupational wellness program. Receive a blueprint of a wellness program that has been successfully implemented to reduce workers’ compensation costs. The presenters will tell candid stories about the University of California’s innovative use of wellness programs including the roadblocks, successes and failures in implementing a workers’ compensation wellness program. Chasing the Work Comp Tail: Self Insured Group Panel You won’t want to miss our annual SIG panel discussion as Freda Bacon,

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The Self-Insurer | April 2014


CO-OPs Could EXPAND Self-Insurance Down Market by Bruce Shutan


April 2014 | The Self-Insurer

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


ith the Affordable Care Act (ACA) comes compliance headaches for employers, but there also are opportunities to expand avenues for self-insurance that trickle down market. One such solution involves consumer operated and oriented plans known as CO-OPs, which offer small businesses and individuals a competitive alternative to traditional approaches. Initially envisioned for all 50 states under the ACA, these nonprofi t entities are operational in only about half the country. Hopes are running high for CO-OPs to help reduce costs, despite their startup funding being slashed to about $2 billion in low-interest loans from $6 billion. Public health insurance exchanges that offer these plans as an option have premiums that are 8.4% to 9.4% lower than states that don’t offer them. The research fi nding was included in an analysis by the National Alliance of State Health CO-OPs (NASHCO) based on exchange weighted average premiums from 47 states and the District of Columbia that serve as the basis for determining federal subsidies. The data did not include calculations from Kentucky, Hawaii and Massachusetts.

Strength In Numbers The presence of CO-OPs in certain markets across the U.S. could not only help advance self-insurance among smaller groups, but also enable various carriers that serve this market segment grow their businesses. Any small group self-insured health plans with fewer than 50 lives that are served by CO-OPs on the public exchanges in 2014 would be confi ned to associations involving multiemployer plans, explains Martin Hickey, M.D., CEO of New Mexico Health Connections and NASHCO board chairman. The threshold, of course, would jump to 100 lives next year. Any stand-alone, self-insured group health plans that CO-OPs serve would have to be done off the exchanges and sold “basically as a TPA product,” he says. “I don’t know if any of the CO-OPs for 2014 are doing TPAs, but I think some are planning it for their 2015 fi lings.” Adam Russo, an attorney who co-founded the Phia Group, LLC, sees smaller plans, particularly municipality groups, gravitating toward CO-OPs largely in response to state legislation restricting their ability to purchase stop loss. “There’s nothing stopping a 10-life group from being self-funded,” he says, “but there’s a lot out there stopping a 10-life group from purchasing stop loss, depending on where they are in the country.” The movement is part of a larger trend he sees in the small group space to fi nd strength in numbers through COOPs, consortiums and captives for better control of health care costs. Russo predicts a signifi cant growth opportunity for stop-loss carriers, reinsurers and TPAs to administer more self-insured groups “that maybe alone would not have the ability to purchase stop loss, whether from an actuarial or legal standpoint in that particular state.” But there’s a caveat to consider. He sees potential minefi elds because many states have vague rules or laws pertaining to smaller groups banding together. Whatever ends up happening, it could take time before these market opportunities gain traction. Despite receiving more than 18,000 proposals for stoploss insurance in any given year and close associations with thousands of brokers

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and TPAs, Sun Life Financial US has not yet been approached about CO-OPs, reports Scott Beliveau, VP of the fi rm’s stop-loss division. In stark contrast, he adds that Sun Life has been repeatedly contacted by multiple employer captives to share risk.

Addressing Solvency Concerns The CO-OP model has produced decidedly mixed results, according to Brad Kopcha, executive VP of actuarial services at Benecon. While acknowledging that some of these plans are well-constructed and have been in existence for a while, others aren’t so fortunate. “There has to be a lot of due diligence and care as to where the risk transfer points are and at what price,” he says. While ACA critics have expressed concern over whether CO-OPs are adequately funded and can compete with commercial carriers, it’s worth noting that the public exchanges can set certain standards on capital requirements – not just network adequacy among other things. So says Larry McNeely, policy director for the National Coalition on Health Care in Washington, D.C., a nonprofi t and non-partisan group of more than 70 organizations representing about 150 million Americans. Another point to consider is that each CO-OP, whose startup funds range from about $10 million to $20 million, also must have solvency funds reserved at 500% of risk-based capital in a best-case scenario. Hickey describes this amount as “extremely healthy,” adding that his own CO-OP is reserved at about 800% because of expectations that there might be more risk involved in New Mexico where the plan operates. Under the ACA, CO-OPs offered on the public exchanges are eligible The Self-Insurer | April 2014



Thankfully, catastrophic and complex claims don’t happen often. But when they do, they can result in significant losses for your business and significant injury to your valued employees. A compassionate claim professional with the right resources and experience can make all the difference in bringing about a positive outcome for you and your injured worker. To learn more, ask your broker or visit


April 2014 | The Self-Insurer

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for reinsurance and risk corridors for a three-year transitional period, as well as a permanent risk-adjustor program, according to Cliff Gold, chief operating officer of CoOportunity Health, a COOP serving Iowa and Nebraska. These layers of protection against the most costly claims provide carriers with a redistribution of payment in the event that they attract a disproportionately bad risk pool, he says. In the case of reinsurance, he says CO-OPs would receive 80% reimbursement on anywhere from $40,000 to $250,000 worth of claims for those three years. Gold notes that reinsurers can sell to CO-OPs “any layers of that risk not covered by the federal government to the level at which they are comfortable in assuming all of that risk.”

OP brings in these larger market uncertainties into consideration for a self-funded plan, regardless of how good the CO-OP is, so employers likely will wait until those other items are more settled.”

Managing Volatility While CoOportunity Health will not self-insure groups below 50 lives, Gold is aware of some arrangements that go down market to 25 or even 10 lives. “Our belief is that when you start to self-insure down to the small group market, the structure of those programs looks very much like insurance,” he says. “So when you start putting a $10,000 deductible, for example, on a self-insured policy, it looks a whole lot like a $10,000 fully insured policy.”

Matt Rhenish, SVP of marketing and strategy at RBS Re, says reinsurance enables CO-OPs that may not have significant reserves “to draw on the reserves and financial positions of more established, wellcapitalized companies.” He believes self-funded employers will approach CO-OPs cautiously for several reasons. One is that some CO-OPs lack a track record of paying claims, as well as managing customer service centers and other administrative functions. “Self-insured plans today procure those services from well-established third party administrators, Blues plans and national carriers,” he explains, adding that abandoning these traditional sources for a new and untested entity could be seen as a risk not worth pursuing. Another possible explanation is that “self-funded plans are still waiting to see the exchange markets reach equilibrium in terms of cost, regulation and member experience,” according to Rhenish. “Working with a CO-

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Small groups, no doubt, would save 5% to 6% on fees associated with the ACA if they self-insure, “but they also put themselves in a much higher risk of volatility of their claims expense by not being fully insured,” Gold observes. Smaller groups of self-insured employers that end up with a sicker pool of covered lives may be better off steering those employees to public exchange plans to buy their own insurance where they’re eligible for federal subsidies, according to Hickey. He says this could be particularly true for low-wage employees who have had to pick up half the cost of their insurance. n Bruce Shutan is a Los Angeles freelance writer who has closely covered the employee benefits industry for 26 years.

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The Self-Insurer | April 2014


ART GALLERY by Dick Goff

To Dream the Impossible Dream: 24/7 Coverage


hrough the ages mankind has dwelled on fond dreams of seemingly impossible achievements: creating gold through the ancient process of alchemy; building a perpetual motion machine; or extracting hydrogen from water to run your car on Evian. My personal favorite has been managing two kinds of employer risks – workers’ compensation and health care – in the same process. My dream has seemed just as outlandish as the others because of differing government regulatory, insurance and legal networks. In recent decades there has been no common ground for the two sides – property and casualty coverage of workers’ comp doesn’t talk to management of traditional health benefi ts. The two camps can work in the same corporate edifi ce, often on the same fl oor, and have no basis for dialogue on common goals or effi ciencies. I knew there had to be an answer. Treatment for a broken arm is often the same for a man who trips and falls on his own time or for the employee who trips and falls on company time. But the employment site accident takes the path through the dark woods of workers’ compensation where hazards include both plaintiff and


April 2014 | The Self-Insurer

defense lawyers, aggressive health care specialists, government regulators and traditional workers’ comp insurers. You can readily see why that broken arm costs an employer a lot more. My daydreams centered on a system that would cover employees 24/7 – wall to wall coverage fi nding effi ciencies in accident prevention, health education, prompt onsite medical care and enlightened use of light duty and return-to-work programs. I could conjure up vast savings for corporate America while also yielding healthier, more productive employees. If I told you I found such a plan in Texas, would you believe me? That’s actually the case for a developing program by a manufacturer of oilfi eld products with employment of more than 1,000. My information comes from a confi dential source, so we can’t name names until this program is operational. Texas is currently the only state

that allows employers to opt out of traditional workers’ comp insurance as long as they self-insure their employees up to regulated standards. That’s the keystone for the manufacturer of pipelines and related products. The other enabling factor is that this company is solely owned by an individual whose vision extends beyond immediate production to long-range concepts benefi tting both employees and the company. So, with no corporate hierarchy to navigate, the business owner can manage as he sees fi t. However, the incipient 24/7 program can – when it is proved out – serve as a model for corporations and government jurisdictions everywhere who, in the future, can fi nd similar benefi ts and effi ciencies for themselves. The structure that makes the program possible for this employer is a captive insurance company established by the business owner that will be

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fronted by a brand-name national insurance company and will buy stop-loss insurance with one attachment point for traditional employee health coverage and a second, lower attachment point for workers’ comp coverage. Ultimately, the business owner believes the two attachment points can converge through nimble management of the risks. If this were only another example of ART bringing a solution to a great need that would be enough for our story. But this case is even better than that because of a comprehensive health risk abatement program. The Texas business owner has researched national health care trends that he can identify in his own employee population. Two examples: a very small percentage of people in a given group (identifi ed as “hotspotters” by a Harvard Business Review article) utilize a majority of medical expense; and up to 80 percent of all medical expense is incurred by behavioral excesses including obesity, indolence, smoking and substance abuse. Under this manufacturer’s new program, all employees and their spouses will receive annual physical exams in the company clinic – and receive the day off to do that. People identifi ed as high risks for adverse health conditions will be provided education and incentives to improve their condition. A company nutritionist will lead programs in food buying and cooking to help improve both nutrition and weight control among all members of an employee’s family. When people need medicine, generic drugs will be prescribed and provided at no cost. The company will maintain onsite medical providers and health consultants.

These kinds of employee/ dependent services follow the current national trend toward activist employers working to improve health and productivity through a variety of means that include onsite clinics and medical personnel along with testing and educational programs. Believe me, this 24/7 approach is going to save massive amounts of money for this employer through future years and possible serve as a national model for many employers who “get it.” n Readers who wish to comment on this column or write their own article may contact Editor Gretchen Grote at Dick Goff is managing member of The Taft Companies LLC, a captive insurance management firm and Bermuda broker at

Comprehensive safety training and equipment programs will respond to all injury hazards to help reduce lost-time accidents and treatment. The originator of this program believes that, over time, the frequency of workplace accidents can be reduced to the level of accidents in the greater population.


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The Self-Insurer | April 2014


Faddish or Short-Term Catastrophic Reimbursement Strategies May Not be the Solution to Braving a Post ACA World – What are the Important Questions You Should be Asking? by Lisa Greenblott, President & CEO DCC, Inc.

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


013 was a very interesting year indeed. We all witnessed the pounding waves of healthcare reform change as most of the regulations became clearer for the self-insured marketplace. Unfortunately, some of that clarity was lost in the noise from self-serving marketers preying on the market without fully understanding the rules. There are some services being provided today which purport to educate the market, and the end-user,


April 2014 | The Self-Insurer

on faddish, catastrophic reimbursement strategies that appear innovative but aren’t based on an informed, prudent understanding of the legal rules and risks, or the specific issues presented in some specialty markets. Unfortunately, they only create confusion about the value and need for more permanent, successful, long-term cost containment strategies, and put their clients at avoidable legal risk. There is much opportunity for a self-insured employer group to be creative these days but it does take some thought. It requires appropriate research, the right kind of experts and resources, an understanding of individual

plan needs, and a solid understanding of the most critical short and longterm financial risk factors associated with paying your own medical claims. It also requires control over plan design and claims data, which is not available to plans under traditional insurance. But most importantly, it doesn’t come without being involved and engaged in the implementation and renewal process and requires a truly proactive mindset and strategies that support this philosophy and way of thinking. This all sounds very familiar, logical and pretty straight forward doesn’t it? Then why is it that many of us still don’t put this into practice?

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Unfortunately, it can be a struggle to get the necessary stakeholders involved, not only the right experts but most importantly the employer group and the stop loss carrier. All these parties are needed in order to make the best informed decisions about containing costs. The fallout of this lack of collaboration is that too often reimbursement strategies and decisions are made in isolation, and more effective, less risky strategies or services are missed out on due to the pressures of putting “something” in place. This certainly continues to be true when it comes to one of the most important catastrophic claims issues today – dialysis cost containment. Let’s ponder dialysis cost containment for a minute. Does it seem logical that one of the most expensive healthcare services delivered in the United States today, which has its own peculiar set of laws and regulations in addition to all the usual rules, and has one of the highest rates of inflation in the self-insured industry, would be simple to administer on your own, inexpensively and with minimal oversight, review or assistance? This just doesn’t seem sensible. This is a high-risk specialty market, in which cost containment strategies need to be well-informed and carefully crafted. All cost containment services in this and any other market sector want market share, and some will offer appealingly simple-looking, appealingly cheap options, some of which might even work in other market sectors but don’t in dialysis. Some reimbursement strategies are just too short-sighted and short-term, and lower short-term costs may come with serious legal risks – which the plan will have to cover while the services provider may disclaim any responsibility or obligation to assist, or may even be nowhere to be found. The services provider has capitalized on its own short-term opportunities, but the real question is, at what cost to the plans? The bitterness of poor quality and service, the obligation to revisit

claims and pay them at much higher rates (even at their face value), and for the unlucky the pain and cost of litigation, remains long after the sweetness of low price is forgotten! Why would you look and rely on the least costly solution or a service for something that is so critical to the health plan’s bottom line? Some solutions out there actually propose strategies which violate the Medicare Secondary Payor Act, a law which applies very specifically and in complicated ways to self-insured plan dialysis reimbursement, and whose violation can lead to penalties including double damages awards to providers and plan disqualification. This appears to be continuing even despite federal agency guidance which clearly identifies these strategies as violations. This is very much a situation in which a simple-seeming strategy which looks too good to be true, really is. Another short-term, cheap and faddish solutions is making benefit reimbursement determinations based on a Medicare allowable. Providers understandably hate this, and have raised it in at least two major class action lawsuits. Medicare-derivative reimbursement was raised as one of the “improper ONS [Out of Network Services] Benefit Reductions” challenged in the In re WellPoint, Inc. Out-of-Network “UCR” Rates Litigation class action in California; that challenge was dismissed on a technicality in 2012 (the plaintiffs couldn’t prove they had exhausted plan remedies) and the court didn’t reach the merits of the challenge. This issue was also raised and is still pending in a New Jersey class action, Franco v. Cigna, where the plaintiffs have asked the court to enjoin the use of Medicare rates. It would not be surprising to find this issue being raised in other litigation and in plan appeals, and in fact we have seen it raised in quite a few plan appeals, and there are in fact good arguments that Medicare derivative reimbursement is not legally appropriate. CMS’s ESRD PPS (Prospective Payment System), which is used to determine Medicare reimbursements, takes multiple factors into consideration which are not published, to determine proper and appropriate reimbursement. A court might well consider using this kind of approach without analyzing or understanding the data sources would be arbitrary and therefore legally incorrect. Since the provider community has already identified Medicare derivative reimbursement as a target issue it is only prudent to assume it will be raised and litigated when a motivated provider thinks they have a good case. This is exactly what happened with the so-called “Ingenix” litigation, where the provider community’s main challenge to use of the Ingenix database to determine reimbursement was in a few class actions, while individual providers – including dialysis providers - pursued the same issue in plan appeals and litigation against plans. Since this strategy proved effective against use of Ingenix, It would not be surprising if the provider community tried it with other reimbursement methodologies they don’t like and think are vulnerable. There are obviously a number of reasons why most generalists within the cost containment world don’t have a solid solution to combat the high cost of dialysis. In addition to the legal complications, managing chronic kidney disease and the cost associated with treatment for late stages of the disease is not simple, and the dialysis sector itself is highly concentrated and dysfunctional.These real health complexities and market failures fuel the cost of dialysis services, and has led some of us to recognize that the existing paradigm for dialysis reimbursement doesn’t work anymore. One way to try to deal with this breakdown of the existing paradigm is to try narrow strategies of direct provider contracting, and just trying to get a halfway decent rate. Unfortunately, a direct contracting approach to dialysis cost containment may be appropriate in isolated instances, but won’t work as a blanket strategy in this dysfunctional market, given the dominance of only two providers, which control not only outpatient services but also many drugs and supplies. While we know there is a lot of provider concentration in some markets, in the dialysis

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The Self-Insurer | April 2014


sector this affects markets nationwide, which quite frankly is unlike any other area in healthcare. Therefore, restricting or directing care to specific dialysis providers only increases their market domination, which is what lets them raise charges at will in the first place. Again, a short-term strategy which doesn’t take the realities of the sector into account only makes the problem worse in the longer term. A better strategy is to recognize that chronic kidney disease can often be managed and dialysis delayed or even avoided. This strategy works better than simply contracting for rates because the fact is that once a member is on permanent dialysis they usually suffer many other costly medical conditions and events, especially due to their co-morbid conditions. If any health plan is experiencing a high incidence of dialysis, that population should be thoroughly analyzed and managed proactive instead of only deploying reactive claims cost containment solutions. We must look at correcting the problem by offering those members that suffer from this debilitating disease, targeted renal disease interventions that will delay or even place the disease in remission. Carve-outs and reactive reimbursement strategies are important but are really only half the equation to what continues to be a very complex and unique problem within healthcare. Faddish reimbursement strategies like Medicare plus or Medicare derivatives may appear innovative, but they don’t necessarily prove to be smart solutions in the long run and only exacerbate the litigious provider environment. Other reactive short-term solutions like specialty networks or even direct contracting may give some short-term relief and some certainty, but unfortunately cannot address the real issues at all. Overall, addressing the problem of chronic kidney disease and dialysis costs after claims become too costly for the health plan and care becomes too debilitating for the member doesn’t effectively address the linked problems of complex disease,

dysfunctional markets, inflationary costs and complicated laws and regulations. There are proven solutions and strategies in the marketplace that successfully support reactive approaches, but the future strategies that are needed for our industry require us being involved, working collaboratively with stakeholders and providing proactive solutions and approaches to mitigate catastrophic claims associated with the high cost of renal disease. This is just smart business. n Lisa Greenblott is President and CEO of DCC, Inc. the leader in dialysis cost containment consulting and newly launched Chronic Kidney Disease (“CKD”) program “Renalogic.” Renalogic focuses on delaying the onset to dialysis by utilizing intervention tools, wellness programs and educational services specialized for identified CKD patients. Lisa can be reached at or to learn more go to

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The Self-Insurer | April 2014


New Captive Domiciles

Are Ready to

MAKE IT BIG in the

Captive Sector by Karrie Hyatt


April 2014 | The Self-Insurer

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he captive insurance industry has seen an uptick in U.S.-based domiciles in recent years – at least 36 states now have legislation that allows for the formation of captive insurance companies. Since 2011, eight states have either passed captive legislation or revised their existing laws to create a more regulatory friendly environment for captive insurers. Captive insurance is still a relatively new type of insurance company and is still in the processes of carving out its niches in the fi nancial market. Some states were early adopters of captive law and begin to operate as domiciles in the late 1970s. Throughout the 1980s and 1990s, the industry continued to grow and by the end of 1999, there were 18 states that were legal domiciles to captive companies. However, since 2000, that number has doubled – with 18 more states enacting captive law. In the early part of the 2000s, many states passed captive legislation in response to the hard market affecting the insurance industry. However, the current extended soft market did not slow new states from wanting to become captive domiciles. Nine states have enacted captive law since 2007 – after

the market turned soft. The newer domiciles saw the success of states such as South Carolina, Montana, and the District of Columbia – states that adopted captive law in the early 2000s – and wanted to bring that business to their own states. Since 2011, eight states have either enacted captive legislation or improved their existing law to make it more favorable. Two of those states, Tennessee and Florida, had captive law on the books since 1978 and 1982, respectively. Oklahoma and Connecticut both enacted captive law in the early 2000s, but revised their laws in the last two years. New Jersey, North Carolina, Oregon, and Texas have all passed captive legislation for the fi rst time. While both Florida and Oregon enacted new captive legislation in 2012, neither domicile has done much to act on the law. Florida’s original captive law was enacted in 1982 and the most recent update was passed by the legislature to try to make the state more competitive, as well as to create jobs within the state. However, without a dedicated captive offi ce within the state’s insurance department and without a captive association to educate the business community, the

state has not received much interest in establishing new captives. Oregon passed its captive law in early 2012, followed by the formation of the Oregon Captive Insurance Association, but has yet to license any captives. According to Todd Hennelly, president of the association and president of Pacifi c Captive Managers LLC, “Oregon looks to establish domestic captives during 2014 and then grow from that base in future years.” The Oregon captive law was based on the law enacted in Utah, which has proved very successful. Oregon is seeking to build a captive insurance sector with the intention of keeping Oregon businesses competitive and to allow the Oregon Insurance Division to keep up with the evolution of the captive industry. The domicile’s modest intentions are to “minimize the frictional costs of both establishing and maintaining a captive in Oregon and to be very competitive with most other states.” While Florida and Oregon have been slow to get in the game, New Jersey, Connecticut, and Tennessee all got off to a quick start. New Jersey’s law was enacted in February 2011 and was aided considerably by the founding of a captive trade


Captive Law

No. of Captives

Dedicated Captive Insurance Office

State Captive Association


July 2012 (Previous law enacted 2008)




April 2012 (Previous law enacted 1982)




February 2011




June 2013




April 2013 (Previous law enacted 2004)

11 (7 since Nov. 2013)



March 2012




June 2011 (Previous law enacted 1978)

30 captives, 48 cell captives



June 2013




Florida New Jersey North Carolina Oklahoma Oregon Tennessee Texas

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The Self-Insurer | April 2014



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association in 2010 – soon after the law passed in the legislature. The state’s Offi ce of Captive Insurance, headed by John M. Talley, J.D., is focusing on developing captives based on New Jersey businesses. The department’s approach is to be open and responsive to the needs of the business community, including being “committed to approving new captive applications in approximately 30 days and redomestications within 10 to 15 business days,” said Talley. The state currently has 16 licensed captives with several applications pending. Talley continued, “We are presently working on amendments to the captive statute to keep us competitive in the captive market. We are anticipating a total of 25-30 captives domiciled in New Jersey by the end of 2014.” Connecticut originally passed captive law in 2008, but did not pursue the business right away. However,

with the aid of a trade association, the Connecticut Captive Insurance Association, formed in 2011, a revised bill was passed through the state’s legislature and the state seriously began pursuing captive insurance business. With the new legislation the Connecticut Insurance Department, already the second largest insurance regulatory department in the U.S., opened a captive division with four dedicated staff members. John C. Thomson, the insurance program manager for captive insurance, said that Connecticut’s goals are to “Facilitate growth and evolution of captive insurance in the state of Connecticut while maintaining sound regulation. There are no fi nancial or licensing targets.” He emphasized that Connecticut is approaching its new captive section with “Principals Based Regulation” and will grow based on the larger captive segments with a focus on Connecticut-based companies and fi nancial institutions. The state currently has four licensed captives. Tennessee is by far the most established of captive domiciles on this list. Its original captive law was enacted in 1978 with several years of steady captive growth following. With a change in the state government, during the 1990s and 2000s the domicile was left to languish without much direction. However, since the revised law was passed in 2011, the state has seen a comeback in its captive sector. Supported by the very active Tennessee Captive Insurance Association, formed in 2011, and with strong support from both the governor and insurance commissioner, the state now domiciles 30 captives and 48 cell captive companies. According to Michael A. Corbett, director of the state’s captive insurance division, “Insurance Commissioner Julie Mix McPeak must be given full credit for seeing the great potential that a vibrant captive domicile could bring to the development of employment and investment in the state.”

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Pursuing a goal to be the “best in class” of captive domiciles, the state is “focused on reaching critical mass. At the 200 captive level, Tennessee will clearly be a mainstream domicile worthy of consideration by anyone considering forming, redomesticating, or expanding its captive,” said Corbett. Tennessee is also committed providing the long-term commitment that captive owners and service provider’s favor. Corbett added, “Captives traditionally provide a mechanism for companies to control risk. At its essence “controlling risk” means that people go home safe at night. Any captive that comes to Tennessee that meets the spirit of this test will have the full support of the Tennessee Captive Section.” In 2013, three states enacted new captive legislation or revised their existing captive law, and all three states saw new captive trade associations open their doors. Oklahoma, North Carolina, and Texas all jumped into the captive market in 2013 and all three are off to a strong start. Oklahoma previously enacted captive law in 2004. Only licensing a few captives over the decade, they revised their law last year to reduce the tax rate for new companies. The updated captive law can provide a provisional license for new companies prior to the review of the application, requires no in-state annual board meeting, allows for the coverage of workers’ compensation risks, and has very competitive capital and surplus requirements. The Oklahoma Captive Insurance Association was established about the same time as the law was passed to help foster the new efforts. The state has licensed seven captives since November 2013 for a total of 11 captives altogether. James A. Mills, the director of Workers’ Compensation and Captive Insurance office for the Oklahoma Insurance Department, is eager to see the domicile actively pursue new captives within the state, as well as beyond the borders. He continued, saying that “Our law enables us to act quickly while allowing flexibility to meet the unique needs of each captive. Over the next few years, we intend to expand on our successes in other areas with national outreach and involvement to develop a nationallycompetitive captive insurance division.” North Carolina jumped into the captive sector in June of last year and now has four captives – three pure captives and one protected cell captive. The enacted legislation is “a state of the art captive law that allows for low operation costs for captive insurance companies,” said Debra M. Walker, director of Captive Insurance. According to Walker, the law distinguishes itself by requiring no fees, no mandatory department of insurance examinations, “reasonable and flexible” capital requirements, and competitive tax rates. For the upcoming year, “North Carolina’s goal is to educate businesses, accountants, attorneys, actuaries, trade organizations, associations, and others about the North Carolina captive program and how this program may be a useful tool in meeting their insurance needs or the needs of their clients.” In the next five years, Walker continued, the goals of the state’s captive program will be to “demonstrate our consistent, pro-business approach to regulation and our commitment to the captive program, and grow the North Carolina-domiciled captive industry.”

one of the stated goals of the new legislation was to be amenable to large Texas companies with offshore captives. The law was written to make it easy and reasonable for companies to redomicile. With no captives under their belt at this time, the captive association and the insurance department are looking “to get the regulations in order so as to not have any hindrances to any company wanting to domicile or redomicile, and then to pitch to other large companies,” said Arnold. The Texas legislature meets every other year, so captive proponents are using 2014 to license captives and build up experience so that when the legislature is back in session in 2015 they can work towards expanding the law. According to Arnold, the state’s goal is to be one of the top five captive markets in the U.S. by the end of five years. “We realize that we are late to the game, but there is a lot of opportunity in our state. It’s an ambitious goal, but Texans are known for thinking big.” n Karrie Hyatt is a freelance writer who has been involved in the captive industry for nearly ten years. More information about her work can be found at: www.

Texas’s captive law is simple – it allows only for pure captives. However, that is not keeping the newest captive domicile from thinking big. Jim Arnold, the Texas Captive Insurance Association’s executive director, believes that there are a lot of opportunities in the state for both new captives and companies looking to redomicile. Arnold explained that the state comes in second in terms of the number of Fortune 500 companies, many of those with existing captives, and


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PPACA, 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 (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.


The Affordable Care Act and Account-Based Plans: Impact of the ACA on HRAs, FSAs and HSAs


n the ever increasing pages of guidance from the federal regulatory agencies responsible for implementing the Affordable Care Act (ACA), it is easy to lose track of how the new rules apply to various types of individual account based health plans (i.e., FSAs, HRAs, and HSAs). This article cuts through the regulatory maze and provides an overview of how the ACA has changed key rules for health reimbursement accounts (HRAs), health fl exible spending accounts (FSAs), and health savings accounts (HSAs).

Health Flexible Spending Arrangements (FSAs) 1. Dollar Limit on Salary Reduction Contributions (FSA Dollar Limit) Effective for plan years starting on or after January 1, 2013, salary reduction contributions to health FSAs are subject to a dollar limit per employee per plan year. The limit is $2,500 for 2014 plan years, and is subject to infl ation adjustments in subsequent years. See Notice 2012-40 at le_ source/pub/irs-drop/n-12-40.pdf

2. New $500 Carryover Option After many years of consideration, the IRS has fi nally relaxed the “use-it-orlose it” rule, which generally requires that unused amounts in health FSAs


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benefi t payable to any participant cannot exceed two times the participant’s salary reduction election for the health FSA for the year (or, if greater, cannot exceed $500 plus the amount of the participant’s salary reduction election).

be forfeited following each plan year. New IRS guidance allows up to $500 to be carried forward indefi nitely. The amount carried forward does not reduce the next year’s $2500 FSA Dollar Limit. Employers may decide whether or not to allow the carry forward, i.e., it is optional. Health FSA plans may not have both a carry forward and utilize a grace period that allows for reimbursement of expenses after the plan year ends. Plans will need to be amended if they wish to allow a carry forward. See IRS Notice 2013-71 for further information, at irs-drop/n-13-71.pdf

For example, stand-alone health FSAs (i.e., where the employer does not offer other group health plan coverage) do not qualify as excepted benefi ts and, thus, will not satisfy the ACA requirements. This is an extremely important issue for small employers who may be considering dropping their health coverage in lieu of benefi ts under the exchange.

3. Application of ACA Market Reforms

Failure to satisfy the ACA market reforms can trigger excise taxes under the Internal Revenue Code of $100 per day per violation, and may give rise to claims under ERISA.

Are health FSAs subject to the ACA market reforms? A health FSA is exempt from the ACA market reforms only if the FSA qualifi es as an “excepted benefi t”. Federal regulators have made it clear that, if a health FSA does not qualify as an excepted benefi t, then the FSA will automatically fail to comply with the ACA requirement to offer preventive services without cost-sharing and the prohibition on annual dollar limits. In order to be an excepted benefi t, health FSAs must generally meet the following requirements:

4. Reimbursement of Over-the-Counter Medicines and Drugs

• The employer must make other group health plan coverage available to the employees who are eligible for the health FSA. The other group health plan coverage cannot consist only of excepted benefi ts, e.g., cannot be only stand-alone vision or dental benefi ts. • The health FSA must be structured so that the maximum

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Effective January 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from a health FSA (or other employer plan), unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other non-drug health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. The IRS has issued guidance with respect to this rule, including rules regarding the continued use of payment cards under health FSAs. The guidance may be found on the IRS website at

Health Reimbursement Arrangements (HRAs) 1. Application of ACA Market Reforms The compliance landscape for HRAs was signifi cantly altered by IRS Notice 2013-54 and related guidance issued by the Department of Labor and HHS, available at uac/Affordable-Care-Act-TaxProvisions.

A. Stand-alone HRAs Stand-alone HRAs for active employees, i.e., where an employer offers an HRA that is not linked to other group health plan coverage, are no longer permitted under the ACA. Such standalone HRAs automatically fail to comply with the requirement to offer certain preventive services without cost-sharing and the prohibition on annual dollar limits. HRAs may continue to be used for so-called “retiree-only” plans.

B. HRA options for employers who offer group health plan coverage Although stand-alone HRAs are no longer permitted for active employees, for employers that offer a group health plan, HRAs remain a viable option to provide additional benefi ts for persons who are enrolled in a group health plan. HRAs that meet the requirements described below will be considered to be in compliance with the prohibition on annual limits and the requirement to offer preventive care services without cost-sharing. The Self-Insurer | April 2014



April 2014 | The Self-Insurer

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the employer should obtain an attestation from the employee that he/she is covered under another plan and whether the other plan provides minimum value.

General requirements For an HRA to be ACAcompliant, the following requirements must be met: • The employer must offer a non-HRA group health plan. • The HRA must be available only to employees enrolled in a group health plan. – The group health plan does not need to be a plan offered by the employer. For example, the employee may be enrolled in a plan offered by the spouse’s employer. – The employer may limit participation in the HRA to employees who are covered under a group health plan of another employer. – If the employee is not enrolled in the employer’s plan, then

• An employee (or former employee participating in the arrangement) must be permitted to permanently opt out of or waive future HRA reimbursements at least annually. In addition, upon termination of employment, either the remaining amount must be forfeited or the employee must be permitted to opt out and waive future reimbursements. These opt out requirements are included because the HRA will generally constitute minimum essential coverage so that participating in the HRA will preclude eligibility for premium tax credits. Permitted reimbursements under the HRA If the underlying group health plan does not provide minimum value (i.e., does not reimburse at least 60% of expenses for covered benefi ts), then the HRA must be limited to reimbursement of co-payments, co-insurance, deductibles and/or premiums under the underlying group health plan and reimbursement for medical expenses that are not essential health benefi ts. If the group health plan in which the employee is enrolled is not sponsored by the employer (e.g., is a spouse’s plan), then the employer should obtain an attestation from the employee that the reimbursement meets this requirement (e.g., is a reimbursement for a co-payment under the spouse’s plan). If the underlying group health plan provides minimum value, then the reimbursements under the HRA do not have to be limited to particular medical expenses.


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Treatment of HRAs for purposes of employer penalties and availability of premium tax credits Starting in 2015, employers with 50 (subject to transition relief) or more full-time equivalent employees may be subject to a penalty if they fail to offer affordable, minimum value coverage to full-time employees and their dependents and even one full-time employee receives a premium tax credit for coverage purchased through the Health Insurance Marketplace. An employee who is eligible for affordable, minimum value group health coverage is not eligible for a premium tax credit. Amounts newly available for the current plan year under an HRA offered in connection with a group health plan are treated for affordability and minimum value purposes as follows: • If the HRA can be used only to reduce cost-sharing under the employer’s primary medical plan, then the amounts newly available under the HRA are taken into account in determining minimum value. • If the HRA can be used to pay premiums under the primary employer plan, then amounts newly available under the HRA are taken into account only in determining affordability, and may not be taken into

account for minimum value purposes, even if the HRA also may be used to reimburse cost-sharing. Note that if the HRA is integrated with group health plan coverage of another employer (e.g., the HRA supplements benefi ts under a group health plan of the employee’s spouse), amounts in the HRA cannot be taken into account for purposes of determining whether the plan of the other employer meets the affordability or minimum value standards. Retiree only HRAs

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Plans that cover only retirees (or other former employees) are exempt from the ACA market reforms, including the annual limit prohibition and the preventive care requirement.Thus, HRAs (or other group health plans) that provide benefi ts for retirees only (including pre-tax reimbursement of individual major medical coverage for retirees only) are still permissible under the ACA. Note, however, that such arrangements are considered group health plans and will preclude eligibility for premium tax credits.Thus, agency guidance requires that retirees must be offered the opportunity to opt out of such arrangements in order to give the retiree the opportunity to seek a premium subsidy.


April 2014 | The Self-Insurer

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2. Reimbursement of Over-the-Counter Medicines and Drugs The requirement for a prescription for over-the-counter medicine or drugs applies to as well. See discussion under FSAs above.

Health Savings Accounts (HSAs) 1. Application of ACA Market Reforms While the ACA impacts HSAs in some ways (e.g., increase in excise tax for non-medical disbursements to 20%), HSAs are not group health plans. Thus, HSAs are not subject to the ACA market reforms, such as the requirement to cover preventive services or the limit on annual dollar limits on essential health benefits. There are, however, a number of issues that arise with respect to the interaction of HSAs, high

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deductible health plans (HDHPs) associated with HSAs, and the ACA market reforms. Preventive services that may be offered under a HDHP In general, to be compatible with an HSA, a HDHP must have a deductible of at least a certain amount (for 2014, $1,250 for single coverage and $2,500 for family coverage), and cannot pay any expenses before the deductible is reached. However, HSAs can pay for certain preventive care services without regard to the deductible. The IRS has clarified that a HDHP may also provide preventive services required under the ACA without losing its status as an HDHP. For further information, see IRS Notice 2013-57, available at

Impact of HSA employer contributions on actuarial value Small group fully insured health plans are required to meet certain actuarial value (AV) requirements, referred to as metal levels. In general terms, the AV of a plan is the portion of covered benefits expected to be paid by the plan, determined in accordance with applicable regulations. There are four AV levels – bronze (60%), silver (70%), gold (80%) and platinum (100%). In determining the AV level of a plan, if an HSA is offered in conjunction with the health plan, the insurer may take employer contributions to the HSA into account in determining the AV of the health plan, if the amount of employer contributions is known to the insurer. Note, beginning with the first plan year starting on or after January 1, 2014, fully-insured small

The Self-Insurer | April 2014


group health plans can have a deductible of no more than $2,000 for single coverage and $4,000 for family coverage (these dollar limits will be indexed for inflation). HSA contributions cannot be applied to reduce the deductible under a plan; rather, they are taken account in determining the AV of a plan as discussed above. Impact of HSA employer contributions on eligibility for premium tax credits and employer penalties HSAs are not group health plans. Thus, employer contributions to an HSA will not disqualify an otherwise qualified individual from receiving a premium tax credit for the purchase of a HDHP though a federal or state Marketplace. For the same reason, employer contributions to an HSA will not satisfy the employer pay or play penalties that apply to large employers (i.e., at least 50 full-time equivalent employees).

2. Reimbursement of Over-the-Counter Medicines and Drugs The requirement for a prescription for over-the-counter medicine or drugs applies to HSAs as well. See discussion under FSAs above. n


April 2014 | The Self-Insurer

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

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Measuring the Well-Being of Wellness Program by Cori M. Cook, J.D., CMC Consulting, LLC

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


am often reminded of an unacknowledged fact that I shared with a room full of employers during a conference several years ago. Like it or not, employers are now responsible for the health and well-being of their employees. When it comes to impacting the trend of their health care spend and issues associated with absenteeism, employers are encouraged to invest in employee health engagement and health accountability to make an impact. Granted, there is an ongoing controversy surrounding the ROI when it comes to wellness programs, however, I think we can all agree that doing nothing or simply dabbling in wellness will have little to no impact. The U.S. departments of HHS, Labor and the Treasury recently issued the final regulations on employment-based wellness programs in compliance with the Patient Protection and Affordable Care Act (PPACA), effective for plan years beginning on or after January 1, 2014, and applicable to both grandfathered and non-grandfathered health plans. Correspondingly, wellness programs are not only permitted, they are encouraged, and employers across the country are becoming creative and utilizing a variety of different wellness approaches in their attempts at addressing health care costs and the health and well-being of their employees. However, the regulations


April 2014 | The Self-Insurer

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governing wellness programs have many nuances that come into play when tailoring a wellness program and if not done carefully they may actually become landmines.

package under which the individual is receiving coverage. This is an enrollment specific analysis.

Pursuant to the final regulations we still have two variations of wellness programs, participatory wellness programs and healthcontingent wellness programs, and the basic requirements that existed in the proposed regulations are still applicable in the final regulations. However, there are some distinct differences and the requirements vary between the two sub-categories of health-contingent wellness programs, activity-based (AB) wellness programs and outcome-based (OB) wellness programs, particularly when it comes to availability and the reasonable alternative standard, that I believe are worthy of clarification.

The AB and OB wellness programs must be reasonably designed to promote health and prevent disease. This will be satisfied so long as the program is not: overly burdensome; a subterfuge for discriminating based on a health factor; or highly suspect in the method chosen to promote health or prevent disease. Requiring an employee to complete a one-hour nutrition class each week for an entire year in order to obtain the reward is not likely to satisfy the required purpose.

To simplify matters, wellness program regulations can be broken down into five categories: Frequency; Size; Purpose; Availability; and Disclosure.

Frequency For both AB and OB wellness programs, eligible individuals must be given the opportunity to qualify for the reward and/or penalty avoidance under the program at least once per year. If an eligible individual declines the opportunity at open enrollment, the Plan is not required to provide another opportunity until next year’s enrollment.

Size Combined health-contingent rewards cannot be in excess of 30% (or 50% if designed to prevent and/ or reduce tobacco use) of the cost of coverage based on the total amount of employer and employee contributions paid towards the benefit


Availability The full reward must be available to all similarly situated individuals. This requires reasonable alternatives be made available upon an individual’s request. This is the juncture in the regulations where the AB and OB wellness programs have significantly different requirements, which are important to understand. • Activity-Based An AB wellness program must allow a reasonable alternative method for obtaining the reward for any individual for whom it is medically inadvisable to attempt to satisfy the standard or unreasonably difficult due to a medical condition. Here, it is reasonable for the Plan to require physician verification. Ultimately the Plan must provide a reasonable alternative based on the facts and circumstances, which will take into account considerations including, but not limited to, cost shifting and time commitment. In the alternative, the Plan may also waive the standard as opposed to providing a reasonable alternative.

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• Outcome-Based An OB wellness program must allow a reasonable alternative method for obtaining the reward for a much broader group of participants. It must allow ANY individual who does not meet the initial standard to use a reasonable alternative standard regardless of any medical condition. Therefore, the employer and/or the Plan cannot require an individual to provide physician verification of a need for an alternative standard. That is not to say that an individual’s physician cannot assert such claims, it is only to say that the employer and/or the Plan cannot require such. The Plan must ultimately provide a reasonable alternative based on the facts and circumstances, much like the AB requirement, and likewise, the Plan may also waive the standard as opposed to providing a reasonable alternative. The challenge here is to adhere to the requirements yet still preserve meaningful and cost-effective OB wellness programs, and with either the AB or the OB wellness programs, employers need to keep in mind that they are going to need to determine the classification of the reasonable alternative (is it an AB or an OB) and follow the appropriate rules thereof.

Disclosure The Plan must disclose in all Plan material the terms of an AB or OB wellness program as well as in any disclosure to an individual that he or she did not satisfy the initial standards (OB), the availability of a reasonable alternative, contact information and a statement that the recommendations of a participant’s physician will be accommodated. If the Plan simply The Self-Insurer | April 2014


mentions that a program is available, without mention of its terms, this disclosure is not required. Potential landmines to consider outside of the wellness regulations themselves include but are not necessarily limited to the ADA, HIPAA, ACA, GINA, COBRA, ERISA, tax implications and other state and federal laws. Everyone is in agreement that compliance with HIPAA doesn’t necessarily mean compliance with the ADA. In fact, the 2006 HIPAA regulations confirmed for us that compliance with HIPAA’s non-discrimination rules and wellness program requirements does not necessarily ensure compliance with the ADA or any other applicable federal or state law. As a side note, the EEOC recently gathered testimony on the issue that may of these regulations are not in alignment, and we are hopeful that they will be issuing guidance shortly to help reconcile some of the inconsistencies. Setting forth regulations always begs the question “what is the penalty for noncompliance?” Aside from the potential participant lawsuit regarding discriminatory practices, which could result in damages and possibly attorney fees, under HIPAA, the IRS may impose a penalty in the form of an excise tax of $100 per day per person for non-compliance. As we all know, the DOL is actively auditing plans for compliance and could bring a civil action against an employer to enforce these requirements as well. Now is a good time to get your house in order and ensure that the administration of your employer wellness programs is compliant and that your Administrative Services Agreements accurately represents the corresponding duties and responsibilities.

Compliance aside, successful wellness programs that have mastered health engagement and health accountability among their employee population typically have implemented programs in a methodical and strategic manner over a multi-year timeframe and have acknowledged early on that it will take time and a corporate commitment to build a true culture of wellness. n Cori M. Cook, J.D., is the founder of CMC Consulting, LLC, a boutique consulting and legal practice focused on providing specialized advisory and legal services to TPAs, employers, carriers, brokers, attorneys, associations and providers, specializing in healthcare, PPACA, HIPAA, ERISA, employment and regulatory matters. Cori can be reached at (406) 647-3715, via email at cori@corimcook. com, or at

PROVIDING SERVICE TO THE SELF INSURANCE INDUSTRY FOR OVER 36 YEARS IN OVER 30 STATES Audits Tax Preparation, Compliance and Minimization NAIC Annual Statements, assistance and preparation Management Consultation Expert Witness Regulatory Matters

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


April 2014 | The Self-Insurer

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We can’t stop misfortune. We can stop loss.

Becoming a top tier Stop Loss carrier doesn’t just happen. For 35 years, our dedication to creative solutions has made us the top choice for our clients. Not all Stop Loss carriers are created equal. Today’s businesses have unique needs that demand expert-level service. That’s been the foundation of our Stop Loss offering from the beginning. We know it’s not just the plan; it’s the team behind it. Your business is unlike any other. It’s time for a Stop Loss carrier that’s unlike any other, too.

For more information, contact your local ING sales representative or call us at 866-566-2316.


Your future. Made easier.® Stop Loss insurance products are issued by ReliaStar Life Insurance Company (Minneapolis, MN) and ReliaStar Life Insurance Company of New York (Woodbury, NY). Within the state of New York, only ReliaStar Life Insurance Company of New York is admitted, and its products issued. Both are members of the ING family of companies. Product availability and specific provisions may vary by state. © 2011 ING North America Insurance Corporation. LG9841 12/28/2011

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The Self-Insurer | April 2014


SIIA would like to recognize our leadership and welcome new members

Regular Members

Full SIIA Committee listings can be found at

Company Name/ Voting Representative

2014 Board of Directors

Manny Yifat, Vice President, Leading Edge Administrators, New York, NY

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

Directors Jerry Castelloe Vice President CoreSource, Inc. Charlotte, NC Robert A. Clemente CEO Specialty Care Management LLC Bridgewater, NJ Ronald K. Dewsnup President & General Manager Allegiance Benefi t Plan Management, Inc. Missoula, MT Elizabeth D. Mariner Executive Vice President Re-Solutions, LLC Wellington, FL


SIIA New Members

April 2014 | The Self-Insurer

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

Sharon Lambros, Vice President Product Management & Outcomes, MedCost, Winston-Salem, NC

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

William Low, President, Medical Review Institute of America, Salt Lake City, UT Virginia Johnson, National Account Executive, PRIUM, Duluth, GA

CHAIRMAN, GOVERNMENT RELATIONS COMMITTEE Horace Garfi eld Vice President Transamerica Employee Benefi ts Louisville, KY

Gary Baker, President, ResourceOne Administrators, Dallas, TX Jeffrey Sims, CPA, EVP & Director of Insurance Investment Management, Sage Advisory Services Ltd., Austin, TX

CHAIRMAN, HEALTH CARE COMMITTEE Robert J. Melillo VP Alternate Funding Strategies USI Insurance Services Meriden, CT

Donald Balla, Managing Principal, Simpson McCrady Benefi ts LLC, Pittsburgh, PA

CHAIRMAN, INTERNATIONAL COMMITTEE Greg Arms Chief Operating Offi cer, Accident & Health Division Chubb Group of Insurance Companies Warren, NJ CHAIRMAN, WORKERS’ COMPENSATION COMMITTEE Duke Niedringhaus Vice President J.W. Terrill, Inc. St Louis, MO

Employer Members Larisa Purdy, Director of Health Benefi ts, JELD-WEN, Inc., Klamath Falls, OR David Peters, Medical Plan Chairman, L.A. Firemen’s Relief Assoc., Los Angeles, CA Joe Clifford, Group Fund Administrator, Regency Insurance Group, East Lansing, MI Michelle Coon, General Counsel, The Townsend Corporation, Parker City, IN

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Confidence is realized when ambition meets experience

Boosted by support and proven expertise in Stop Loss. As a national leader in Stop Loss, we design innovative programs that manage each client’s financial risk. Our coverage helps self-funded groups protect their assets from unexpected large or catastrophic claims.


HM provides proven risk management expertise and a hands-on approach to develop smart solutions that meet the needs of producers and clients. And our policies provide clarity, financial protection and choice.


And take a minute to read HM InSights at


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The Self-Insurer | April 2014


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April 2014 | The Self-Insurer

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