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February 2011

Multi generational HealtH, Wellness and disability ManageMent in the


What will you feel like when you offer Sun Life’s catastrophic claim forgiveness?

ABigKahuna Sun Life is one of the nation’s leading providers of medical stop-loss. We understand that large claims happen. Our No New Lasers at Renewal product comes with a Renewal Rate Cap. We don’t impose new or higher deductibles. And we pool renewal rates for price stability. Think of it as catastrophic claim forgiveness. For more details about how we can make things easier for employers, contact your local Sun Life stop-loss specialist or call 866-683-6334.

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Group insurance policies are underwritten by Sun Life Assurance Company of Canada (Wellesley Hills, MA) in all states, except New York, under Policy Form Series 93P-LH, 98P-ADD, 02P-STD TDBPolicy-2006, 02-SL, 07-SL, and 01C-LH-PT. In New York, group insurance policies are underwritten by Sun Life Insurance and Annuity Company of New York (New York, NY) under Policy Form Series 93P-LH-NY, 06P-NYDBL, 02P-NYSTD, 98P-ADD-NY, 02-NYSL, 07-NYSL, and 01NYC-LH-PT. Group insurance policies are underwritten by Sun Life and Health Insurance Company (U.S.) (Wellesley Hills, MA) in all states under Policy Forms Series GP-A and GP-D (or appropriate state edition). Product offerings may not be available in all states and may vary depending on state laws and regulations. ©2010 Sun Life Assurance Company of Canada, Wellesley Hills, MA 02481. All rights reserved. Sun Life Financial and the globe symbol are registered trademarks of Sun Life Assurance Company of Canada. Visit us at SLPC 22507 10/10 (exp. 10/12)

Siia oFFiCerS chairwoman of the board* Freda Bacon, Administrator Alabama Self-Insured WC Fund Birmingham, AL president* Alex Giordano Bellmore, NY Vice president operations* John T. Jones, Partner Moulton Bellingham PC Billings, Montana

February 2011 | Volume 30


Vice president Finance/cFo/ James E. Burkholder , President/CEO TPABenefits, Inc. San Antonio, TX

8 From the Bench:The Fate of the PPACA Lies in the Hands of the Judiciary

executive Vice president Erica Massey Midland, NC Chief Operating Officer Mike Ferguson Simpsonville, SC

Siia DireCtorS Les Boughner, Executive VP and Managing Director Willis North American Captive and Consulting Practice Burlington, VT



Ernie A. Clevenger, President CareHere, LLC Brentwood, TN

Health, Wellness & Disability Management in the Multigenerational Workplace by stan scioscia

Donald K. Drelich, Chairman & CEO D.W. Van Dyke & Co. Wilton, CT


Mather’s Grapevine


Washington Report for Self-Insurers


ART Gallery: The SIC Blows Up Negative Myth


PPACA, HIPAA and Federal Health Benefit Mandates: Practical Q&A


SIIA Connection

Steven J. Link, Executive Vice President Midwest Employers Casualty Company Chesterfield MO Robert Repke, President Global Medical Conexions Inc. San Francisco, CA

Siia CoMMittee CHairS chairman, alternative risk transfer committee Kevin Doherty, Partner Burr Forman Nashville, TN


Siia leaDerSHip reduce Work Comp Costs and improve Health roi with proactive Wellness programs by steve kokulak

2 President’s Message 32

Chairman’s Report: Why SIIA Works!

chairman, government relations committee Jay Ritchie, Senior Vice President HCC Life Insurance Company Kennesaw, GA chairwoman, Health care committee Beata Madey, Senior Vice President, Underwriting HM Insurance Group Pittsburgh, PA chairman, international committee Liz Mariner, Executive Vice President Re-Solutions Intermediaries, LLC Minneapolis, MN chairman, Workers’ compensation committee Skip Shewmaker, Vice President Safety National Casualty Corporation St. Louis, MO

February 2011 The Self-Insurer (ISSN 10913815) is published monthly by

Self-Insurers’ Publishing Corp. (SIPC), PO. Periodical Postage Rates paid at Tustin, California and at additional mailing offices. Postmaster: Send address changes to The Self-Insurer, P.O. Box 1237, Simpsonville, SC 29681 The Self-Insurer is the official publication of the Self-Insurance Institute of America, Inc. (SIIA). Annual dues are $1495. Annual subscription price is $195.50 per year (U.S. and Canada) and $225 per year (other country). Members of SIIA subscribe to The Self-Insurer through their dues. Copyright 2010 by Self-Insurers’ Publishing Corp. All rights reserved. Reproduction in whole or part is prohibited without permission. Statements of fact and opinion made are the responsibility of the authors alone and do not imply an opinion of the part of the officers, directors, or members of SIIA or SIPC. Publishing Director - James A. Kinder Managing Editor - Erica Massey Editor - Gretchen Grote Design/Graphics - Indexx Printing Contributing Editor - Tom Mather and Mike Ferguson Director of Advertising - Justin Miller Advertising Sales - Shane Byars Editorial and Advertising Office P.O. 1237, Simpsonville, SC 29681 • (864) 962-2201 Self-Insurers’ Publishing Corp. Officers (2010) James A. Kinder, CEO/Chairman Erica M. Massey, President Lynne Bolduc, Esq. Secretary 2010 Editorial Advisory Committee John Hickman, Attorney, Alston & Bird David Wilson, Esq., Wilson & Berryhill P.C. Randy Hindman, Deloitte & Touche, LLP Jason Davis, Global Excel Management, Inc.

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the Self-insurer P.O. Box 184, Midland, NC 28107 Tele: (704) 781-5328 • Fax: (704) 781-5329 e-mail: The Self-Insurance Institute of America, Inc. (SIIA) is the world’s largest trade association dedicated exclusively to the advancement of the self-insurance industry. Its goal is to improve the quality and efficiency of self-insurance plans through education and to create a general acceptance in the public and business communities of this viable alternative to conventional insurance. Founded in 1981, SIIA represent the interest of self-funded employers, independent administrators, utilization review companies, managed care companies, underwriting management companies, insurance companies, reinsurers, agents, brokers, CPAs, attorneys, financial institutions, manufacturers, trade associations, retail and service companies, municipalities, and others. SIIA designs and implements programs and services for the benefit of its members, the industry, and the general public to increase the general level of knowledge about self-insurance plans, achieve greater professionalism in the industry, and enhance the general well-being and mutual interests of its membership. SIIA achieves its goals and objectives through several means: n International/national conferences and industry forums which provide educational opportunities, with substantial discounts on the registration fees offered to SIIA members. n Distributed monthly, The Self-Insurer, features useful technical articles as well as updates on topical issues of importance to the self-insurance industry. n The Self-Insurance Educational Foundation (SIEF) conducts statistical research regarding the industry and grants educational scholarships to promising students whose studies focus on the self-insurance industry. SIIA enjoys federal representation in our nation’s capital through counsel and staff on key legislative and regulatory issues. SIIA is the only national voice encompassing the whole self-insurance industry. If your company is involved or interested in self-funding risk for workers’ compensation insurance programs, employee benefit plans, or property and casualty exposures, then it should be a member of the association serving the industry - the Self-Insurance Institute of America, Inc.

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February 2011


PRESIDENT’S MESSAGE Fishing Where the Fish are


ften when people learn that I like offshore fishing, they ask me where I like to fish and my answer invariably is “where the fish are.” This brings a lot of blank looks because it’s obviously an oversimplification. Of course that’s where anyone would want to fish.

If you envision the whole ocean, much of it is very lightly populated with fish. The various species tend to gather and migrate through certain areas – a lot like the way people cluster in towns and cities or travel highways for various purposes. Fishing hot spots don’t change much through the years. This little piscatorial lesson is intended to set you up for the answer to why you should attend SIIA’s annual Legislative-Regulatory Conference next month in Washington (see registration details elsewhere in this issue or at This is where you can shake hands and engage in conversation with your senators and representatives.You will have the opportunity to influence their thinking on matters of vital importance to your business, your employees and your communities. You will put out your “lures” attractively comprised of the millions of people covered by employer-sponsored health plans. Except for contacting your own representatives in their home offices, this will be your only opportunity to encounter members of the Senate and House in larger groups.. You’ll be fishing where the fish are. For some historical perspective on the Washington conferences I engaged with a couple of SIIA veterans, George Pantos and Tom Mather. George, of course, was our longtime Washington lobbyist after his stint in the Ford Administration. And Tom guided the Self-Insurer for many years and still contributes his column. George reminded me that the first SIIA conference in Washington in the mid-80s was held in the White House Indian Treaty Room adjacent to the West Wing. That’s a highly ceremonial space and earlier was the scene of President Eisenhower’s first televised press conference. By contrast with later conferences, the first one was a collegial event with speakers such as Labor Secretary Ray Donovan, David Nexon, senior health policy advisor to Senator Edward Kennedy, and other speakers from the White House and Treasury Department. SIIA’s objective was to hear from members of the government how they expected self-insurance of employee health benefits to evolve and grow under ERISA. Flash forward to the early 90s and there was a whole different scene. The Clinton Health Plan (so-called Hillarycare) was in the works and SIIA was on the leading edge of opposition. In addition to the Legislative-Regulatory Conference Tom recalls making 11 trips to Washington during 1993 to testify and rally support for opposition to the plan.

This year is yet a third kind of conference. With over 100 new legislators set to begin their first year in Washington, 2011 is an especially important time for SIIA members to establish valuable relationships with their new senators or representatives. The beginning of the 112th Congress is also a critical time for members to renew relationships with senior policymakers in Washington, particularly those taking over new roles on committees with jurisdiction over selfinsurance. The common element of all SIIA conferences in Washington has been the “Walk on Capitol Hill.” “I remember SIIA members coming back from ‘The Walk’ saying it was the highlight of their conference experience and their visit to the nation’s capital,” George recalls. That’s just as true today as it was a quarter century ago. See you in Washington,

That 1993 conference became a point of attack on Hillarycare as it attracted speakers from industry and government. “They were either broadcasting that they were on our side or came forward with alternative suggestions of their own,” Tom recalls.


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February 2011


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by stan scioscia, M.ed., cdMs, crc, cpdM, Certification of Disability Management Specialist Commission

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i l


oday’s workplace is multigenerational, composed of as many as five demographic groups. As people in their seventies work alongside those in their twenties, the result is a rich mosaic of a ges, attitudes, and experiences, which further enhances workforce diversity. Appreciating generational diversity begins with understanding the various groups in the workplace today. The Silent Generation, born 1927 to 1945, includes those who are now in their late 60s and 70s and who may have delayed retirement or returned to the workforce. The Baby Boomers is the largest demographic, which is typically split into two subgroups. The “True Boomers,” born 1946 to 1955, tend to have a “whatever it takes” attitude toward work, while the “Younger Boomers,” born 1956 to 1964, often view that they did not have the same opportunities as those who came before them. Generation X, born 1965 to 1980, is usually described as wanting to “work to live” and may be juggling work/life balance. Generation Y (sometimes referred to as “Millennials”), born 1981 to 1994, typically prefers a flexible arrangement for working, believing that it should not matter where or when the work gets done as long as expectations are met. Within a culturally diverse workforce, the contributions of each generational group are valued, from the institutional knowledge and experience of mature workers to the energy and flexibility of younger employees. For example, at Aetna, a global healthcare insurer based in Hartford, Conn., diversity is defined beyond traditional categories of race, national origin, and gender and is promoted through employee resource groups (ERGs). Currently, Aetna has 15 ERGs, including four that are age-related for the Silent

Generation, Baby Boomers, Generation X, and Generation Y. “Employees in those segment groups can come together to talk about how their experiences are similar and provide these insights to help attract and retain talent and to help identify business opportunities that impact the bottom line,” explained Tracy Casey, director of diversity for Aetna. The groups also encourage inter-generational dialogue, which helps build understanding among generations and break down stereotypes. “An important part of diversity is the understanding that we all bring our uniqueness and individuality to the workplace,” Casey added. Inter-generational dialogue also allows for mentorship within the workplace. “Through mentoring, mature workers are encouraged to transfer their knowledge to younger workers, who benefit from learning from those who have more experience,” said Celeste Morgan, CDMS, M.Ed., CIR, CSSR, a recruitment consultant for Mid-Columbia Medical Center in The Dalles, Ore. “Mentoring is also a way of honoring older workers for their experience and capturing institutional knowledge.”

Disability Management in the Multigenerational Workforce From the perspective of disability management—enabling employees who are ill or injured or have an established/chronic disability to return to work or stay at work, thus minimizing the impact of absence on employees and employers—age is an important factor to consider. Nonetheless, the focus must always be on the individual. One cannot assume that all 30-year-olds or 50-year-olds are alike, just as one cannot expect two people with back injuries to have the exact experience during recovery and return-to-work. Individual differences do exist and can be significant, such as the presence of co-morbidities (e.g. diabetes, obesity, or mental health issues such as depression). Furthermore, people often do not fit the stereotypes; there are 60-yearold marathon runners and physically inactive 20-year-olds. “Whenever you are talking about segments of a population you are generalizing,” Casey observed. “Any individual within a particular group may or may not have those same attributes and perspectives.” In the practice of disability management, it is essential to look beyond generational labels to apply an individualized approach when defining and planning return-to-work accommodations or transitional assignments. Focusing on the abilities of the employee as a unique individual, as well as identifying the support, intervention, and accommodations that he/she may need to maintain or return to health and productivity, is central to the practice of a certified disability management specialist (CDMS). As The CDMS Code of Professional Conduct states, “The goal of disability management is to provide necessary services, using appropriate resources in order to promote the ill or injured individual’s maximum recovery and function.” Although the focus must always be on the individual, there are certain issues that tend to be relevant to certain demographic groups. Disability management professionals must understand differences among generations, as well as the commonalities within groups. Further, workforce demographics are an important component to designing and implementing effective health and wellness programs, as well as return-to-work and stay-at-work interventions for employees who become ill, injured, or disabled.

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February 2011


generational Differences and attitudes toward Disability

work or modified duties, recognizing them as intrinsic to the process to achieve full return-to-work.

Another consideration with generational difference is the attitude and perceptions surrounding becoming disabled, whether temporarily and permanently, which does have impact the effectiveness of disability management interventions. Gary Karp, an author and trainer who specializes in making the business case for a new paradigm in thinking around disability, believes these attitudes stem from the messages and images that surrounded each generation. For example, those who have been in the workforce the longest typically recall campaigns of the past to “hire the handicapped,” with the view toward “taking care of people” with disabilities, or worse, that retaining or hiring them represents a social sacrifice an employer must make.Younger workers, on the other hand, have experienced people with disabilities in school and the community as active, whole individuals.

Certified disability managers recognize the therapeutic value of work, including forms of work hardening to build an employee’s strength and endurance and to maintain the important social connection to work. With return-to-work or stay-at-work, employees may be temporarily assigned to lighter duty or alternative job assignments that are not as physically demanding.

“Today people with disabilities are out there and more visible,” explained Karp, who has been a wheelchair user for 37 years following a spinal cord injury. He describes disability as an objective characteristic to which a person can adapt. “Society is beginning to understand that it is possible for a person with a disability to be highly functional and highly motivated.” Lingering perceptions about disabilities can affect how an employee reacts to being off work because of an illness or injury, whether occupational or non-occupational. This characteristic is especially true for the Silent Generation or True Boomers, Karp explained. With a “live-to-work” attitude, mature workers may be so eager to get back to their jobs after an absence that they try to accelerate the normal return-to-work process instead of accepting transitional


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For the Silent Generation and True Boomers, the idea of performing light duty or alternative job assignments may feel demeaning if they view what they are doing as less than or inferior to their regular jobs. (See Sidebar – Shifting Attitudes around Disability) For the disability manager, the approach with these employees is to balance the desire to return to work with the necessity of responding to a limiting condition, if present—including potential comorbidities including chronic conditions such as asthma or hypertension or serious issues such as cancer, stroke, or heart attack. Among Generation Y, Karp has found the most accepting attitudes regarding disability and the need for transitional work. “Their attitude is, ‘I wouldn’t want it to happen to me, but if it were to happen, I understand that there are ways for this to work. I would want access to resources and to be given a chance to pursue my potential,’ ” he explained. Similarly, disability managers often find that Generation Y’ers are more receptive to transitional assignments and job modifications, including telecommuting and flexible work. For all employees, but especially this group, it is essential to communicate the steps in return-to-work process and expectations for resuming work.

Focus on Wellness and prevention In addition to offering return-towork and stay-at-work interventions, employers should emphasize health, wellness, and prevention across all generations by identifying risk factors, preventing accidents, and providing incentives for healthier employee behaviors. “If you want to prevent a disability, you need to identify people who are at risk before a claim is initiated,” explained Barton Margoshes, M.D., Senior Medical Director, Health and Productivity for Aetna. Wellness programs that target nutrition, exercise, smoking, and stress management should be multigenerational. Although employers have typically offered some type of incentive to encourage program participation, Margoshes said that the trend is now shifting to disincentives when employees do not participate. One example might be an employee who pays a higher premium for health insurance unless he/she stops smoking. Another approach to wellness targets “metabolic syndrome,” which Margoshes described as “a constellation of risk factors that influences the risk for cardiovascular disease and diabetes.” These factors include waist circumference, cholesterol and triglyceride levels, blood pressure, and blood sugar. Although the required screening is voluntary, employees who do not participate may end up paying higher premiums for health coverage. Those who are tested and identified as being at risk are given access to an array of services, such as health coaching. In order to encourage healthy behaviors, employers need to consider programs that will engage employees from all generations. Offerings should be varied, from onsite weight loss and smoking cessation programs to

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events such as five-kilometer “fun runs” and health fairs. “Wellness programs should also be evaluated every year to see if they are responsive to the needs of the entire employee population,” added Morgan, who is also a commissioner with the Certification of Disability Management Specialists Commission. The more varied the offerings the greater the opportunity to capture employees across all generations. No matter where and how they are engaged, employees receive the message that they are valued in the workplace and their health and wellness is of the utmost importance.

Shifting attitudes around Disability Attitudes around disability are shifting. In the past, the word “disability” meant a benefit program for a person who was not working. Today, disability is increasingly understood to be an “objective characteristic of an individual that may or may not impair the ability to perform a job. It is a radical paradigm shift,” said Gary Karp, a disability awareness writer and trainer and founder of As part this change in thinking, attitudes around transitional work and modified duties are being examined. For some employees there may be the perception that transitional work is demeaning (“counting paperclips”) or that people who are assigned to these temporary assignment are “getting off easy.” Employers need to promote the understanding in the workplace that transitional work is part of the return-to-work process. Through transitional work following an illness, injury, or disability, people are able to ease back into the workforce in a therapeutic process that enables them to stay engaged with their employer and co-workers. That process, Karp says, is paramount—no matter what the transitional duties involve.

“People need to understand that modified work is everybody’s right and that they would want that right for themselves should that be necessary,” Karp said. “They also recognize that privacy is also a right, so rather than wonder why someone is ‘getting off easy’ it will be understood in the culture of the workplace that there is a personal reason, and that the modified work serves a valuable purpose.”. n 1., “The CDMS Code of Professional Conduct,” May 2009, p. 5

Stan Scioscia, M.Ed., CDMS, CRC, CPDM, is a Commissioner of the Certification of Disability Management Specialist Commission (CDMS Commission), the only nationally accredited organization that certifies disability management specialists ( He is also an Account Manager for Aetna Life Insurance - Disability & Absence Management.

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Bench from the

by Michael Friedman & John eggertsen

the fate of the ppaCa lies in the hands of the judiciary


ith the onset of the new Congress, and the Republicans pressing to repeal the Patient Protection and Affordable Care Act (“PPACA”), an effort which most pundits – whether they applaud or deplore it -- agree is not likely to succeed, the fate of the PPACA may well lie in the hands of the judiciary. While it is clear that no definitive determination of the PPACA’s fate will be known for some time (likely years as the various cases wend their way up to the United States Supreme Court), we nevertheless thought it might be helpful to our readers to sort out the scope of the main arguments and summarize the scorecard to date. It is not our intention here to provide a detailed analysis of every decision, nor provide an exhaustive, detailed recounting of all the arguments and defenses raised. We would also caution that whether the PPACA will achieve the goals its proponents claim or lead to the disastrous results predicted by its opponents, is not the issue in these lawsuits. Rather, the key issue to be decided by the courts is whether the PPACA in its present form passes constitutional muster, i.e., whether it is good law, not whether it is good policy. That said, our intention here is to provide a general overview of how the debate has been joined, and some sense of how the courts have responded. We are still in the early rounds of this battle, and in the words of baseball’s famous prophet Mr. Yogi Berra, “It ain’t over ‘til its over.” So on those cautionary notes, we will begin. There have been at least 16 cases filed that have challenged the constitutionality of the PPACA, and several of its major provisions, on a variety of grounds. There have been to date three district courts that have reached a decision on the merits, one that


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may have done so by the time you are reading this. Several have dismissed the cases on procedural grounds, and several that have refused to dismiss some or all of the claims, but have not yet decided the merits of those claims that survived. The rest are still waiting to be heard from.

overview of the arguments Does the individual Mandate Violate the Commerce Clause? The opponents have focused their attack on three main fronts. First, the plaintiffs contend that the individual mandate – i.e., the requirement that from 2014 going forward every individual will be required to obtain health insurance, either through

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their employer, a state or federally established health exchange, privately or under a government-sponsored program like Medicare or Medicaid – is an impermissible extension of Congressional authority under the Constitution’s Commerce Clause because that clause only grants Congress the right to “regulate Commerce with foreign Nations, and among the various States and with the Indian Tribes.” Article 1, Section 8, Clause 3. While the Supreme Court’s Commerce Clause jurisprudence has extended this power to include any activity that affects interstate commerce, the opponents contend that the individual mandate, by penalizing the decision to not buy insurance, aims at non-economic activity, or simply “inactivity,” and so is beyond Congress’s Commerce Clause authority. The government’s response here is that health insurance is a multibillion industry that it is well within Congress’s Commerce Clause powers to regulate, and that the individual mandate is an important element in the broader regulatory scheme to extend insurance coverage to the millions of persons who are currently excluded from this market. As for the opponent’s argument that many persons are not “excluded” from the market, but merely choose not to participate, and this choice is beyond Congress’s power to regulate. the government responds that the health care market is somewhat unique in that every person at some point will need health care and whether they decide to obtain coverage through insurance, government programs, or by paying out of pocket, they are market participants. Since other federal laws require that health care providers cannot refuse to treat patients because they are unable to pay (e.g., the Emergency Medical Treatment and Active labor Act of 1086, “EMTALA”), individuals who fail to obtain coverage or pay for medical services increase the costs of those

services to other market participants. In short, the conduct regulated here is activity that affects interstate commerce directly, and is not non-economic “inactivity,” as the opponents contend. is the Fee imposed For non-Compliance With the individual Mandate unconstitutional? Second, opponents challenge the fee imposed by the PPACA on individuals who fail to become insured. A good part of the debate is whether

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this fee can properly be called a “tax,” or whether it is more correctly deemed a “penalty.” If it is a penalty, opponents challenge it as an impermissible regulatory device untethered to any Commerce Clause authority, and, hence, not justified under the Necessary and Proper Clause. If it is a tax, the opponents challenge it as an unapportioned capitation or a direct tax prohibited under Article I, Section 9, Clause 4, which provides that “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed

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February 2011


to be taken.” We would note that this Constitutional provision would prohibit the income tax were it not for the Sixteenth Amendment which expressly provides for it, but the tax (if that is what it is) imposed under the individual mandate provisions of PPACA, opponents point out, has no express constitutional amendment allowing it. The government’s response here is that imposing a financial penalty for failing to purchase health care insurance is well within Congress’s Commerce Clause authority and is fully justified under the “Necessary and Proper” clause which states that Congress shall have the power “To make all laws which shall be necessary and proper for carrying into Execution the foregoing Powers [those set forth in Article 1, Section 8], and all other Powers vested by this Constitution in the Government of the Untied States, or in any Department or Office thereof.” Article 1, Section 8, Clause 18. If this fee is deemed to be a tax,

it is a valid tax under Congress’s taxing power under Article 1, Section 8, Clause 1 – “The Congress shall have Power To Lay and collect Taxes. Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.” Further, as a tax, the courts are barred from hearing such challenges under the Anti-Injunction Act. Do the Changes to Medicaid and the Creation of Health Care exchanges represent overly Coercive intrusions on State authority? Third, opponents challenge PPACA, not on the basis of the individual mandate, but on the basis that the many changes to the Medicaid program imposed by the PPACA (some challengers also include the imposition of health care exchanges on the states here as well) are overly coercive and violate both the Spending Clause of the Constitution – Article 1, Section 8, Clause 1– and the Ninth and Tenth Amendments. The Spending Clause grants Congress very broad spending powers, and it has been construed to allow Congress to attach various conditions on the federal funds it grants to the states. Opponents do not necessarily challenge Congress’s authority to modify the Medicaid requirements, but rather assert that the PPACA requirements are just too onerous, forcing states to cover too many people at too great a cost, and the extreme consequences of the new requirements are sufficient grounds to find that Congress has overreached here. The opponents’ Ninth and Tenth Amendment arguments contend that these new Medicaid requirements and/or the regime for requiring states to establish health care exchanges by 2014 impose such onerous obligations and burdens on the states that they are, in effect, being forced to carry out this Congressional scheme, thus having Congress intrude on the powers reserved to the states under the Tenth

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Amendment, or reserved to the people under the Ninth Amendment. The government’s response is that states are not required to participate in the Medicaid program or to establish health care exchanges. Since Medicaid is a voluntary program, and mostly paid for by the federal government in any event, claims that states are being coerced by these new requirements are overblown and misplaced. No court has ever found a federal regulation to be so coercive as to violate Congress’s spending powers, and only one circuit has ever maintained that such a coercion theory is even viable, while many have questioned its viability. In short, these requirements represent hard political choices, but are not so severe as to be the Hobson’s choice that opponents characterize it. Indeed, some states have even threatened to withdraw from Medicaid, so the impossibility of such a choice may be greatly exaggerated. We would note here that given the severe budgetary squeeze felt by many states, it cannot be assumed that such “facts on the ground” will have no influence on the current jurisprudence and could lead courts to different conclusions about the viability of this argument. We are not predicting that this will happen, only that it inserts a bit of an unknown factor into the analysis. other issues We would note also that a number of these lawsuits do raise other issues, but not as consistently. Some of the plaintiffs allege that the PPACA violates rights to freedom of expression and association under the First and Fifth Amendments, due process and equal protection under the Fifth Amendment, rights to privacy and medical autonomy under the First and Ninth Amendments and under the Constitution generally, and the Free Exercise clause of the First Amendment (based on their contention that the PPACA allows federal funds to be used for abortions). For the most part, these challenges have not been the focus of judicial

consideration, though a case filed in Arizona by the Goldwater Institute, Coons, et al. v. Geithner et al., may well require that a court address some of these issues.

the Current State of the litigation landscape Standing, ripeness and the Jurisdiction of the Court As in all litigation, the best strategy for winning is to convince the court that whatever the merits of the opponents arguments, the court has no authority to hear the case, and, thus, it should be dismissed. The government has, therefore, challenged all plaintiffs on the questions of “standing” and “ripeness.” Article III provides that federal courts only have jurisdiction over “cases or controversies,” and standing is the legal concept that a party must have a valid case or controversy in order to be heard in court. To have standing a plaintiff must: (i) have suffered an “injury in fact” -- i.e., an injury that is concrete and particular, that is actual or imminent, and is not simply hypothetical -- (ii) there must be a causal connection between the injury suffered and the conduct complained of, and (iii) it must be likely, as opposed to speculative, that the injury will be redressed by a favorable decision. Ripeness is something of a corollary to standing, sort of an offshoot of the “injury in fact” requirement, that demands that the issue has been clearly defined enough to be judiciable and whether a decision can in fact resolve the issue and not be undermined by future uncertainties. There is considerable overlap between these two concepts. A number of courts have agreed with the government that since the individual mandate does not become effective until 2014, individual plaintiffs cannot show any current injury in fact to have resulted from its inclusion in the PPACA, and that it is speculative whether any of the particular plaintiffs

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in the cases in questions could definitively asset they would be forced to obtain insurance in 2014 or be penalized for failing to do so. Whether these courts reached this result because the Complaint did not allege sufficient facts on which to argue that a particularized current injury had occurred, the judge believed the government’s arguments were more persuasive, or that finding a lack of standing is an efficient way to clear the docket and avoid wading into difficult and complex determinations cannot be known. While we would never accuse any judge of taking the easy way out, the certainty that these cases were brought in multiple jurisdictions by a plethora of plaintiffs and will almost certainly not be decided before the Supreme Court has a chance to weigh in, might have made it easier for some courts to dismiss the claims, knowing that these vital issues would eventually be fully addressed and adjudicated. As Judge Dowd, in U.S. Citizens Assoc., et al. v. Kathleen Sebelius, et al., (N.D. OH 2010), in dismissing some, but not all, of plaintiffs’ claims, said: “[T]his Court does not intend to write a lengthy opinion with respect to the defendants’ motion to dismiss because the Court’s decision will, in all likelihood, be without relevance by the time this case reaches the Supreme Court.” On the other hand, in State of Florida, et al. v. U.S. Department of Health and Human Services, et al., (N.D. FL 2010), Judge Vinson issued an elaborately reasoned decision (from which Judge Dowd quoted generously) in which he dismissed plaintiffs’ claims challenging the individual mandate as violating the due process provisions of the Fifth Amendment, the penalty for failing to comply with the individual mandate as an impermissible tax, and requiring states as employers to comply with the statute violates state sovereignty under Article I and the Ninth and Tenth Amendments, but did not dismiss plaintiffs’ claims alleging

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February 2011


that the individual mandate exceeded Congress’s Commerce Clause powers and violates Article I and the Ninth and Tenth Amendment, and their claim that the new expanded Medicaid requirements are coercive and also violate Article I and the Ninth and Tenth Amendments. Though noting in this decision that “I have not attempted to determine whether the line between Constitutional and extraconstitutional government has been crossed. That will be decided on the basis of the parties’ expected motions for summary judgment, which I will have the benefit of additional argument and all evidence in the record that may bear on the outstanding issues I am only saying that (with respect to two of the particular causes of action discussed above) the plaintiffs have at least stated a plausible claim that the line has been crossed,” at least with respect to the individual mandate, Judge Vinson clearly communicated his current leaning that the mandate will not pass muster – “The power that the individual mandate seeks to harness is simply without prior precedent.” the three Decisions on the Merits Of the three courts that to date have reached the merits, two found the individual mandate to be constitutional and one did not. Were Judge Vinson to decide in favor of the plaintiffs on summary judgment on one or both of the PM until remainingEthicare_Ad claims, thefactors_01_03.pdf scorecard would1 be1/5/11 even – 1:04 at least other district courts weigh in.

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the “it is Constitutional” Decisions In Thomas More Law Center et al. v. President Obama et al. (E.D MI 2010) and Liberty University, et al. v. Geithner et al. (W.D. VA 2010), both of which found the individual mandate to be constitutional, each found that while the mandate was not to be imposed until 2014, there was a reasonable certainty that it would be imposed and that plaintiffs would need to plan for and accommodate this requirement by making current financial decisions. As noted by the Liberty University Court, “The present or near-future costs of complying with a statute that has not yet gone into effect can be an injury in fact sufficient to confer standing.” Neither court, however, accepted the government’s AntiInjunction Act defense to plaintiffs allegations that the financial consequences of failing to comply individual mandate was an improper penalty or tax. The Thomas More Law Center Court side-stepped the issue somewhat by saying that there is no authority for applying the Anti-Injunction Act where the IRS has made no effort to collect the funds in questions, and, moreover, the Act does not bar the Court from considering the declaratory relief requested by plaintiffs. The Liberty University Court, after a lengthy discussion of whether the exaction was properly deemed a penalty or a tax, determined that it was a penalty, not subject to the Anti-Injunction Act’s strictures against challenging a tax levy. As for the key issue of whether the individual mandate exceeded the Commerce Clause authority, however, both Courts rejected plaintiffs’ claims that the mandate represented an attempt to regulate only inactivity (or conduct that is not economic in nature) and sought to impose requirements on an individual’s conduct merely on the basis that the person existed as a U.S. citizen. Plaintiffs allege that allowing Congress Commerce Clause powers of this kind would grant it unlimited police powers in violation of the Constitution. In support of their position, the plaintiffs relied on two Supreme Court decisions. In U.S. v. Lopez (1995), the Supreme Court rejected Congress’s authority in the GunFree School Zone Act to criminalize possession of a gun within a defined school zone because such conduct was not economic activity within the scope of the Commerce Clause. In the U.S. v. Morrison (2000), the Court invalidated the cause of action created in the Violence Against Women Act on similar grounds, i.e., the conduct prohibited did not amount to economic activity. Plaintiffs argue that an individual’s decision not to purchase insurance is also a non-economic activity, indeed, they would say it is not activity at all, and thus cannot be regulated by Congress under its Commerce Clause authority. For its part, the government arguing the individual mandate falls squarely within Congress’s Commerce Clause authority, relies on two different Supreme Court decisions. In Wickard v. Filburn (1942), the Court upheld a penalty

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imposed on wheat grown only for home consumption that was never intended to be marketed on the basis that such actions in the aggregate could undermine the efficacy of the federal price stabilization scheme being challenged. In Gonzales v. Raich (2005), the Court sustained Congress’s authority to prohibit the growing of marijuana intended solely for personal consumption under the Controlled Substances Act because there existed a significant commercial market for marijuana and allowing such home grown efforts would undermine the government’s ability to regulate that market. In both cases, the Court found that the choice not to participate in the commercial market was insufficient to remove the activities at issue from Congress’s Commerce Clause authority. The question for all of the courts here is how the decision not to not buy health insurance should be characterized? Is it simply outside the universe of economic activity – or as emphasized by the plaintiffs, not activity at all – or is it an individual decision that has in the aggregate significant effects on the market that would undermine Congress’s reasonable efforts to regulate the health care and health insurance markets (which, under HIPAA, Congress had determined were inextricably linked and sought to regulate as a single system). Both the Thomas More Law Center and Liberty University Courts, held that individuals who elected not to purchase health insurance were, nevertheless, market participants, and that such decisions in the aggregate substantially effect that interstate health care market. As explained by Judge Steeh in the Thomas More Law Center decision: “The health care market is unlike other markets. No one can guarantee his or her health, or ensure that he or she will never participate in the health care market. Indeed, the opposite is nearly always true. The question is how participants in the health care



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February 2011


market pay for medical expenses – through insurance, or through an attempt to pay out of pocket with a backstop of uncompensated care funded by third parties. This phenomenon of cost-shifting is what makes the health care market unique. Far from ‘inactivity,’ by choosing to forgo insurance plaintiffs are making an economic decision to try to pay for health care services, later, out of pocket, rather than now through the purchase of insurance, collectively shifting billions of dollars, $3 billion in 2008, onto other market participants. As this cost-shifting is exactly what the health Care Reform act was enacted to address, there is no need for the metaphysical gymnastics of the sort proscribed by Lopez. The plaintiffs have not opted out of the health care services market because, as living, breathing beings, who do not oppose medical services on religious grounds, they cannot opt out of this market. As inseparable and integral members of the heath care services market, plaintiffs have made a choice regarding the method of payment for the services they expect to receive. The government makes the apropos analogy of paying by credit card rather than by check. How participants in the health care services market ay for such services has a documented impact on interstate commerce. Obviously this market reality forms the rational basis for Congressional action designed to reduce the number of uninsureds.” the “it is not Constitutional” Decision Judge Hudson, in Commonwealth of Virginia et al. v. Kathleen Sibelius, et al. (E.D. VA 2010) looked at the conduct at issue here and the Supreme Court cases relied on by both the plaintiffs and the government cited above, and reached the diametrically opposite conclusion from that reached by Judge Steeh in Thomas More Law Center and Judge Moon in Liberty University. In assessing both the Supreme Court’s Wickard and Raich decisions, Judge Hudson found that in each case the individuals had each undertaken some activity – either growing wheat or marijuana – and thus had “voluntarily placed themselves within the stream of interstate commerce.” In contrast, he saw the individuals here as having made a different choice – i.e., a decision not to purchase a product, such as health insurance, and he concluded that such a decision is simply not an economic activity. Judge Hudson rejected the government’s contention that requiring the purchase of insurance based upon a future contingency is an activity that will inevitably affect interstate commerce by saying “This broad definition of economic activity subject to congressional regulation lacks logical limitation and is unsupported by Commerce Clause jurisprudence. . . . Neither the Supreme Court nor any federal court of appeals has extended Commerce Clause powers to compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market.” While invalidating the individual mandate, however, Judge Hudson did not find the entire PPACA to be unconstitutional, as plaintiffs had requested, though all parties had agreed to the centrality of the individual mandate in Congress’s overall regulatory scheme.

SIIA New Members REGULAR MEMBERS Voting representative/ Company name Wesley Yang - Partner Leech Tishman Fuscaldo & Lampl, LLC – Pittsburgh, PA R. Dean Conlin - Partner Locke Lord Bissell & Liddell, LLP – Chicago, IL Mark Haarer - President Mark Haarer Consulting, LLC – Elkhart, IN Joseph Zerega - President Preferred Network Access, Inc. – Darien, IL Sean Dunroe Director of Marketing & Strategic Development, Select Health – Murray, UT Clara Yap - Manager Healthcare, Enrichment Division Singapore Tourism Board – Singapore

Where things Stand That is where the dispute is joined and currently stands. How other district courts will line up is, of course, unknown. How the various circuits will weigh in remains to be seen. What the Supreme Court is likely to decide can only be the subject of speculation. By the time this matter comes before the Supreme Court, at least a year from now (if not two or more years), there will be a lot of changes in the economic and political landscape, and many steps will have had to be taken in preparation for the state-sponsored health care exchanges and other matters that will become effective in 2014. In short, this story is far from over. More updates from the front will follow as developments warrant. n


February 2011


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ike most kids growing up on the near-South Side of Chicago in the 1940’s we had a lot of games that we played. Baseball, touch football and street hockey were regular events. But we had another game that we would play occasionally that required the help of the iceman’s or the milkman’s delivery horses that would regularly leave behind what we called the golden balls. Armed with those and a hockey stick we would have shootout sessions that we called “Return the Golden Balls.” I won’t go into further explanation since I’m sure you get the picture. Our parents were as appalled then as you are now. The other night, while watching the reports of the horrible shootings in Tucson, Arizona in which six people were killed and thirteen wounded by a mentally deranged 22 year old man, I began almost instantly to perceive a move by the media to turn this tragic event into a political harangue. By the following morning my suspicions were verified to the hilt. The left and the right media began their interviews, speculations and postulations based on the fact that a member of the United States Congress, a Federal Judge and several aides to them were victims, along with a nine year old child and numerous other innocent victims. Before the day was over, the President of the United States was involved, the FBI, the U.S. Marshalls office, members of Congress, local officials at every level and so many others that it was obvious that this event had turned into a latter-day “Return the Golden Balls” event, with everyone placing blame on everyone else with the exception of the perpetrator who at that point had not even been charged with a crime. Speculations of Muslim terrorist involvement and plots by far right-wing activists came forth. Sarah Palin had a finger pointed at her and even Bill Clinton was mentioned along with former Governor Mike Huckabee and several others. Then they ran the flag up the pole over whether the education system in Arizona may have been at fault for not reporting the man for being a troubled head case along with accusations that the United States military should have done the same when the perpetrator failed at an attempt to become a member of the Service. The Arizona gun control law came into question. Now, several days later, it still rages on in what will surely become one of the most publicized criminal cases in history.

hay and distribute it regularly have the media as the source for broad distribution. The media is the hockey stick that delivers it. Perhaps our greatest concern should be that the hype surrounding this event may be just the thing some other insane person is looking for while planning a similar action elsewhere in our great land. In the meantime the deluged American public switches the channel to a Law & Order rerun and our country ends up in the continuing mire of either not knowing what is happening next or simply not caring. My heart goes out to those who lost loved ones or were injured in the terrible events of the shootings in Tucson. My concerns for an effective government moving forward are just as great. We can’t change what occurred in that shopping center parking lot. We must change what we are doing with our government and those who control it. And that ain’t “Hay.” n Tom Mather Contributing Editor

In the meantime, Congress has put the brakes on working with each other on the national budget problems that affect our entire country, healthcare reform issues that are of extreme importance to all Americans, International issues involving our management of military involvement throughout the world, and a host of other matters that are now in the back seat with Washington being effectively shut down for the moment. It seems that the media controls our nation through a daily distribution of the political “Hay” that comes forward. That “Hay” is of course the source of the Golden Balls that we throw back and forth at each other with increasingly regularity, whipped up to be the essence of our daily news on television, in the papers, the internet or any other source. The political horses that eat that

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February 2011


Reduce Workers’ Comp Costs & IMPROVE HEALTH ROI with


WellneSS prograMS by steve kokulak


February 2011


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iven that the burden of rising health care costs, especially costs associated with workers’ compensation and absenteeism, falls hardest on self-funded employers, they are well advised to become more hands-on with their employees’ health and wellness. Creating a healthier workforce generates higher productivity while curbing health care costs and costs associated with injuries in the workplace -- including replacing workers and potential litigation expenses. The incentive for employers is greater return-on-investment (ROI). According to the American Journal of Health Promotion, wellness programs reduce health care costs by an average of 26 percent and cut sick leave by an average of 28 percent.1

On average, a medical claim involving a worker with a normal Body Mass Index (BMI) cost $7,500 while the claim total Cost of Diabetes in the united States: $98 Billion $17 B

Indirect costs: premature mortality

$44 B

the High Cost of Chronic illness

Direct cost: medical and non-medical

Workers at high risk for chronic disease cost their employers more than those who are not. In fact, nearly 90 percent of health care claims costs are due to an individual’s personal health choices.2 The Centers for Disease Control reports that one in two adults lives with at least one chronic illness like diabetes, arthritis, and heart disease.3 Obesity poses a particularly tenacious problem across the U.S. workforce. A study cited in the American Journal of Health Promotion demonstrated that obese workers at the Chrysler Corporation showed a 143 percent higher hospital inpatient use than employees with healthy weights. Furthermore, a Duke University study found that obese workers filed twice the number of workers’ comp claims and lost 13 times more days of work from job-related injuries or illnesses than non-obese workers.4 High risk employees, such as obese workers, are more vulnerable to injury and chronic diseases. (see Chart 1) outcome Measure

low risk

Medium risk

High risk




Short Term Disability




Worker’s Compensation














Medical & Pharmacy total

Medical costs related to obesity include: • reliance on heavy-duty or bariatric equipment for treating injuries • longer wait times associated with specialized equipment or for a hospital equipped to accommodate obese patients•special instructions for emergency workers • durable medical equipment related to recovery when obese individuals cannot use crutches

• higher rate of injury to lower extremities • increased chance of further injury during recovery • accessibility issues related to wheel chairs and the necessity of ramping the home or office • longer recovery times • higher rate of noncompliance in exercise prior to surgery

$37 B

Indirect costs: disability

Source: American Diabetes Association. Economic consequences of diabetes mellitus in the United States in 1997. Diabetes Care 1998: 21296-309.

associated with an obese worker cost more than $51,000.7 Employees who report having high blood glucose levels have 35 percent higher expenditures than an individual who does not. As the chart below indicates, employees at extremely high or low body weight have 21 percent higher expenditures than individuals who do not. The chart also highlights how some common health issues affect the cost of care.8 impact on individual Health Care Costs: High vs. lower-risk employees 40% 35% 30% 25% 20% 15% 10% 5% 0% Glucose




Blood Pressure


SOURCE: American Institute of Preventive Medicine

• longer rehabilitation time

Diabetes related to obesity is expensive to treat, primarily when the individual is non-compliant with taking medication or following a healthier lifestyle. They are also more susceptible to side effects, prolonged recovery times, and greater time away from work. Diabetes affects almost 16 million Americans at a cost of $98 billion a year in direct and indirect medical costs in the United States.5 Experts report that diabetes will continue to increase.6

Although expenditures that go toward health issues related to smoking and obesity vary from company to company, research clearly shows that employees at high risk for poor health outcomes have significantly higher expenditures than

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February 2011


individuals at lower risk.9 Most employers who have introduced programs, such as smoking-cessation and weight-loss programs, along with data analytics to

Designing an effective Health Management program management remains the same,

lower health care claims.

the focus has changed. More

• A comprehensive health

hospitalizations, and other major medical episodes.

While the goal of chronic care

measure progress and compliance, can Take these real-case scenarios10 :

avoided costly emergency room visits,

Companies of all sizes implement wellness programs with the larger ones showing a slightly higher percentage. on average, 62 percent of all companies offer a wellness program.

employers are taking an up-front role in providing chronic care


management program at Citibank

management to their employees

realized a $4.56-$4.73-to-$1 return-

– for the overwhelming reasons

on-investment in reduced total

outlined above. Today, just about


health care costs

every major firm offers some


sort of chronic care management


realized a $3.93-to-$1 return-

program.11 But not all chronic


on-investment in reduced health

care management programs are

choices-related medical expenses

as effective as they could be.

and disability-related claims

Some firms contract with their

• Union Pacific Railroad’s Project

insurer or an outside vendor to

• Motorola’s Global Wellness Initiatives

70% 60% 50%

0% All sizes




Source: Society for Human Resources Management, 2005

At companies like Pitney Bowes and

Health Track focused on a 1%

have a nurse occasionally call employees

reduction in 10 risk factors for

suffering from chronic illnesses to, for

Quad/Graphics, comprehensive chronic

chronic conditions achieved per year

example, remind a diabetic to have her

disease management is offered at on-

over 10 years. It calculated a $4.07-

regular blood test.

site clinics.13 Both of these employers

to-$1 return-on-investment over

With the better programs, employees

10 years if the company maintained

receive coordinated care from specialists

current performance levels.

whose goal is to prevent small health

Employers should also consider

issues from developing into full-blown

say health care costs have decreased significantly as a result. The key to successfully preventing and controlling chronic illness lies in powerful technology

the additional savings in workers’

health crises. Some companies that

compensation expenditures when

take this approach have reported a 20

employees are able to return to work

percent reduction in health care costs

snapshot of health data, including claims,


per member enrolled in the program.


pharmacy information, and laboratory

Patients experienced better health and

values. This level of information allows

and data analytics that provide a robust

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February 2011


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providers to better identify gaps in care and have a positive impact on poor health choices, leading to healthier, more productive employees. In broad terms, it can take at least 18 months from the launch of a health and wellness program

percent of workers with access to wellness programs by selected occupational group and collective bargaining status, 2008 60%

plan bottom line. This is the point



30% 25

workforce population begins to

0% All workers

negate the cost of sponsoring and

driven by the initial investment – the more time and money invested, the greater the benefit. With this in mind, the typical cost to the employer is about $3$5 per participating employee per month. Within three years of launch, this adds up to significant savings.15 Take for example the State of

states in the recent past.


at which improved health in the

general, long-term cost savings are




administering such programs. In


49 43

to see results on the health care 14



52 50%

Management professional, and related

Service Public Sector

or face 50 percent higher monthly premiums.17 This plan specifically focuses on reducing the costs of treating chronic illness, and it actively pushes employees to stay healthy. It also enables the state to keep cost increases to less than seven percent a year -- well below that of most other


Non-union Private Sector

Source: Bureau of Labor Statistics, 2009

Pennsylvania. Currently, it spends $2 billion less to run its government than it did eight years ago with help from its health management strategies.16 It did this by giving state workers greater responsibility for their own care and by mandating employee contributions toward premiums, requiring employees to fully engage in a wellness program

Conclusion Poor health choices that lead to chronic illness ultimately affect every U.S. employer by putting an ever-increasing burden on them. By encouraging employees to become more involved in their health and by implementing robust health management programs – combined with strategic data analytics – employers are better able to improve workers’ overall health and productivity and improve the company’s

Hit the mark. Every time. YOUR EMPLOYEE BENEFITS need to be right on target. At The Principal®, we offer a wide range of flexible employer-paid and voluntary benefits plus self insured options. And, with over 70 years in the business, you have the expertise of a benefits leader at your disposal. From our innovative products and solutions to our attentive service and support, count on us to help you hit the mark with your employee benefits every time.

Visit or call 800-654-4278, ext. 44116, for more information. ©2010 Principal Financial Services, Inc. “The Principal,” “Principal Financial Group,” the Edge design, “We’ll Give You an Edge” and the illustrated character are registered service marks of Principal Financial Services, Inc. Insurance products from the Principal Financial Group® are issued by Principal National Life Insurance Company (except in New York) and Principal Life Insurance Company. Securities offered through Princor Financial Services Corporation, (800) 247-1737, member SIPC. Principal National, Principal Life, and Princor® are members of the Principal Financial Group, Des Moines, IA 50392. AD1989 | GP 59547

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February 2011


return-on-investment (ROI). It’s essential

that can lead to absenteeism and litigation. On the whole, employers who self-fund

that the health management program

workers’ compensation create a win-win for themselves and for their employees. n

rely on comprehensive data that will help target poor nutrition, smoking, excess alcohol, depression, and allergens. Obesity, in particular, accounts for

Steven G. Kokulak is vice president of Workers’ Compensation & No-Fault at MagnaCare. Prior to this, he served as litigation counsel for Liberty Mutual in New York City. He earned his J.D. from Brooklyn Law School and his B.A. from Fordham University.

the highest health care costs. It not only affects productivity but leads to more injuries, long-term recovery and delayed return to work, and increased chance of re-injury, especially to knees, back, and hips. Diabetes associated with obesity is expensive to treat, and, when a patient is non-compliant, it can lead to adverse side effects and prolonged recovery times. Self-funded employers have everything to gain – as do their employees – by taking a proactive approach to workplace health and wellness. Health care management based on data has been shown to reap positive ROI by improving productivity and mitigating health care costs and injuries

1. Experts: Wellness programs help combat health care crisis; The Denver Daily News; October 15, 2010; http://thedenverdailynews. com/article.php?aID=10359; accessed November 23, 2010. 2. American Institute for Preventive Medicine. The Health & Economic Implications of Worksite Wellness Programs. Available from:; accessed November 8, 2010. 3. Claypool, Mary; Wellness Programs Save Money; Monterey County The Herald; Aug. 10, 2010; business/ci_15728489?nclick_check=1; accessed September 23, 2010. 4. Preidt, Robert; Obese File Twice As Many Workers’ Comp Claims; ABC News; March 23, 2010; Healthday/story?id=4506681&page=1; accessed September 23, 2010. 5. Centers for Disease Control and Prevention. National diabetes fact sheet: national estimates and general information on diabetes in the United States. Atlanta, Georgia: U.S. Department of Health and Human Services Public Health Service, Centers for Disease Control and Prevention, National Center for Chronic Disease Prevention and Health Promotion, 1998. factsheet.htm; accessed November 9, 2010. 6. Mokdad AH, Ford ES, Bowman BA, Nelson DE, Engelgau MM, Vinicor F, Marks J.;September 23, 2000. 7. Preidt; March 23, 2010. 8. Goetzel, R.Z., Anderson, D.R., Whitmer, R.W., Ozminkowski, R.J., Dunn, R.L., Wasserman, J; The Health Enhancement Research Organization (HERO). The Relationship Between Modifiable Health Risks and Health Care Expenditures: An Analysis of the MultiEmployer HERO Health Risk and Cost Database. Journal of Occupational & Environmental Medicine 1998;40(10):843-854. 9. Goetzel RZ, Anderson DR, Whitmer RW, Ozminkowski RJ, Dunn RL, Wasserman J.; 1998. 10. The Economic Value of Health Management Programs; The Center for Value-Based Health Managment; http://www.centervbhm. com/iv/economicvalueofhealthmanagement.html; accessed November 23, 2010. 11. Konrad, Walecia; For Chronic Care, Try Turning to Your Employer; The New York Times; July 23, 2010; http://www.nytimes. com/2010/07/24/business/24patient.html; accessed November 23, 2010. 12. Konrad; July 23, 2010. 13. Konrad; July 23, 2010. 14.; Employee Wellness Programs; August 27, 2010;; accessed November 8, 2010. 15.; August 27, 2010. 16. Rendell, Ed; Four Governors on How to Cut Spending; Wall Street Journal; October 13, 2010; 424052748703882404575520221102889934.html; accessed November 8, 2010. 17. Rendell; October 13, 2010.

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The Complete Sleep Program

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WaSHington REPORT for Self-Insurers


he Self-Insurer often contains quality editorial content focused on legislative/regulatory content of interest to those involved in the self-insurance/alternative risk transfer industry.

It will continue to do so, but given the fast pace of developments in Washington, DC and various state capitols, I wanted to let you know about some new ways that you can access developing information and related analysis in real time. I have recently launched an on-line blog that provides “insider” lobbyist reports you will not find anywhere else.The writing style is edgier than the typical legislative/regulatory update report and makes for a quick read. I encourage you to visit the blog at If that wasn’t enough, I am now sending out even quicker updates via Twitter.That’s right, you can now receive news in the form of “tweets.” Don’t be left out of this social media loop…sign up as a follower at fergusontweets. Of course, SIIA’s web site will remain a hub of information for all association activities, so please continue to visit this on a regular basis at Stay tuned! n Mr. Ferguson services as chief operating officer and federal lobbyist for the Self-Insurance Institute of America, Inc. (SIIA).

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February 2011


art GALLERY by dick goff

Destroying negative Myths about Sigs


he old adage about a few rotten apples spoiling the barrel has never been truer than for self-insured workers’ compensation insurance groups. Failures of a few groups have made headlines across the country and disproportionately struck terror into the hearts of many corporate risk managers who may have been thinking of joining a SIG.

Joining me in a conversation about the SIG were Phil Healy, executive director of AWANE, and Joe Blanche, senior vice president of TD Insurance, Inc. who serves as AICC administrator through TD’s Third Party Workers Compensation Administrator, FutureComp The AICC Group significantly has been recognized by the Massachusetts Division of Insurance as being the “model” for private self-insured workers compensation programs in the state. Its year-end 2009 total assets were greater than the total of all claims paid since inception in 1995 through 2009. It has become a lead product in attracting and retaining AWANE membership.

Those few rotten apples are a very small number of unscrupulous operators who have profited from forming insufficiently financed SIGs and then left members hanging when catastrophic claims couldn’t be paid. These operators will remain unidentified here because I do not have an unlimited legal defense budget. SIIA has recently compiled an archive of case studies of successful SIGs to serve as a rallying point for members of our industry who are providing legitimate and responsible service to self-insured groups. This column will profile another significantly successful SIG that has consistently met its obligations and returned profits to its members during a difficult period for their industry, the Automotive Industries Compensation Corporation (AICC), sponsored by the Automobile Wholesalers Association of New England (AWANE).


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My question was how is all that possible? Joe Blanche: Aggressive, unlimited, focused loss control and claims management. Plus medical care management with a professional claims manager assigned to every case. Massachusetts is not the easiest state to manage workers’ comp because the employer cannot dictate where treatment occurs. phil Healy: Then there’s the function of loss control – actually being able to reduce on-the-job accidents and injuries. The association employs a fulltime loss control consultant who schedules visits with all member companies to identify possible hazards and risk exposures and then follows up on that list to monitor improvements. This has created a member management buy-in to a safety culture that serves the best interests of the owners and the employees.

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Also, we’ve never given up on underwriting – we do not stray from our membership standards. Joe Blanche: This is not a program for everybody. We drill our staff on standards for success so that it can never become a free buffet for any company. It’s not like in some larger groups where brokers don’t know what they’re selling and there’s a “bring it in and we’ll write it up” attitude. phil Healy: This really hits at the heart of self-insurance where sharing in risk improves operations. Since 2003 the group has averaged 40 percent return of premiums to members between up front deviations, discounts and dividends. But at the same time we’re a long-term solution. If someone needs a short-term solution just to make their books look good for a year or so we don’t need them. Long-term we have beaten the commercial dividend market every year since inception and our goal is to beat the market by 7 to 10 percent every year. Joe Blanche: Obviously, this has been a tough time for the automotive industry, but that helps us make our case to members that they need to get more value from their risk management program through self-insurance. This past week (late in 2010) we announced the largest dividend in the history of the group, and that was coming off the lowest premium rates.

So, the lesson of how to structure a successful workers comp SIG appears complete. I really liked Phil’s characterization of risk and I really liked the thorough claims management and loss control programs of AICC. I’ll add one additional factor that applies to every successful workers comp SIG: know your service providers and check their past performances. As Ronald Reagan always said, “Trust, but verify.” n Dick Goff is managing member of The Taft Companies LLC, a captive insurance management firm and Bermuda broker at

phil Healy: Risk is not a four-letter word if you understand it, underwrite it, finance it, service it and reward it. That we can perform well in an industry that has never experienced such massive changes speaks to the commitment of members and is reflected in member retention. With a third of our members being automobile dealers, we still retain members in the mid-90s percent year in and year out.

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February 2011




The Patent Protection and Affordable Care Act (PPACA), the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and other federal health benefit mandates (e.g., the Mental Health Parity Act, the Newborns and Mothers Health Protection Act, and the Women’s Health and Cancer Rights Act) dramatically impact the administration of self-insured health plans. This monthly column provides practical answers to administration questions and current guidance on PPACA, HIPAA and other federal benefit mandates. Attorneys John R. Hickman, Ashley Gillihan, Carolyn Smith, and Johann Lee provide the answers in this column. Mr. Hickman is partner in charge of the Health Benefits Practice with Alston & Bird, LLP, an Atlanta, New York, Los Angeles, Charlotte and Washington, D.C. law firm. Ashley Gillihan, Carolyn Smith and Johann Lee are members of the Health Benefits Practice. Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner’s situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation. Readers are encouraged to send questions by E-MAIL to Mr. Hickman at john.


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a Busy end to 2010: irS Delays insured plan Discrimination requirements and addresses Health Debit Cards for prescribed otCs


he end of 2010 was a busy time for health benefit plan guidance. During the last two weeks of 2010, the IRS issued guidance postponing the nondiscrimination requirements for fully insured group health plans and clarifying the requirements for health debit card use for prescribed over-the-counter drugs and medicines.This article provides a summary of these year end changes.

irS postpones Compliance with nondiscrimination rules for Fully insured group Health plans until issuance of Further guidance Section 2716 of the Public Health Service Act (PHSA) as added by PPACA (and incorporated by reference into the Code and ERISA), extends nondiscrimination rules to non-grandfathered fully insured plans. Section 2716 is effective for plan years beginning on or after September 23, 2010. Section 2716 provides that rules “similar to” the nondiscrimination rules in Code Sections 105(h)(3) (nondiscrimination with respect to eligibility), 105(h)(4) (nondiscrimination with respect to benefits) and 105(h)(8) (application of certain controlled group rules) shall apply to insured plans. The sanction for failure to comply with section 2716

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is imposition of an excise tax equal to $100 per day per individual who is discriminated against (i.e., the employees who are not included in the discriminatory plan). Prior to the enactment of Section 2716, the nondiscrimination rules under 105(h) were only applicable to self-insured group health plans. The sanction for failure to comply with the section 105(h) is loss of the exclusion for the benefits for highly compensated employees. Two common strategies used by employers to avoid application of section 105(h) was to provide benefits on a fully insured basis and/ or to require that executives pay for benefits on an after-tax basis (i.e., with taxable compensation). It is unclear whether either of these strategies is available under Section 2716 On December 23, 2010, the IRS issued Notice 2011-1 delaying the application of Section 2716 until the Departments of Treasury, Labor and Health and Human Services (the “Departments”) issue further guidance. In Notice 2011-1, the Departments acknowledged that guidance must specify in what respects insured plans are subject to the same statutory provisions that apply to self-insured plans under Code Sections 105(h) (3), (4) and (8) and in what respects insured plans are subject to rules reflecting a different application of those statutory provisions. The Notice was issued in response to numerous comments that there is insufficient guidance under section 105(h) to determine how those rules should apply under Section 2716. Consequently, many employers could not determine whether their plans were considered discriminatory under the new rules. Because regulatory guidance is essential to the

operation of the statutory provisions, the Departments determined that compliance with Section 2716 should not be required until after regulations or other administrative guidance has been issued. Notice 2011-1 also indicates that compliance will not be required until a specified period after guidance has been issued to allow employers time to implement changes required to comply with

the new nondiscrimination rules. Penalties for noncompliance with the nondiscrimination rules for insured plans will also be delayed until the additional guidance has been issued. Notice 2011-1 acknowledges that the nondiscrimination rules for insured plans must include additional guidance with respect to the following a number of issues, including the following:

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February 2011


issued Notice 2011-5 that confirms that health FSA and HRA debit cards may continue to be used to purchase prescribed OTC medicines and drugs at participating IIAS merchants provided that the following requirements are met: (1) prior to purchase, a prescription is presented to the pharmacist, the OTC drug is dispensed by the pharmacist in accordance with applicable legal requirements, and an Rx number is assigned; (2) the pharmacy or other vendor retains a record of the Rx number, the name of the purchaser or patient, and the date and amount of the purchase in a manner that meets IRS recordkeeping requirements for card programs; (3) the records are available to the employer or its agent upon request; (4) the card system will not accept a charge for an OTC drug unless an Rx number has been assigned; and (5) the existing IRS requirements regarding card programs are satisfied.

• whether employer contributions toward the cost of coverage or eligibility waiting periods are included in the definition of “benefits” • whether a highly compensated employee is defined in accordance with Code section 414(q) • whether the nondiscrimination standards can be applied separately to distinct geographic locations

The debit card transaction will be considered fully substantiated at the time and point-of-sale if these requirements are satisfied. n

• whether employers will be permitted to aggregate different but substantially similar coverage options • how the rules apply to employees who voluntarily waive coverage • whether paying for the coverage of highly compensated individuals on an after-tax basis affects the nondiscrimination requirements Notice 2011-1 invites public comment on Section 2716; the comment deadline is March 11, 2011.

Clarification With respect to the use of Health Debit Cards for prescribed over-theCounter Drugs and Medicines PPACA provides that, effective January 1, 2011, over the counter (OTC) medicines and drugs may not be reimbursed under a health FSA or HRA unless the medicine or drug is prescribed. Initial guidance under this new OTC rule was issued by the IRS in Notice 201059. Notice 2010-59 caused concern by providing that, except with respect to “90-percent merchants”, after January 1, 2011, debit cards could not be used to purchase OTC medicines and drugs under an FSA or HRA, even if the OTC was prescribed. Thus, under this Notice, manual substantiation of such claims seemed to be required. On December 23, 2010 the IRS


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February 2011





ow that we have settled into 2011, it seemed appropriate to begin this year with sharing with SIIA members the resources available through the association. Over the past 17 years of working with SIIA, I have heard many different reasons why companies support the association, from the value obtained through networking events, educational resources, legislative initiatives, to being a part of an association that represents their same mission: Protecting and promoting self-insurance and ART. However, we wanted to make sure the membership was aware of all the ways to connect and benefit from the association. Therefore, at the beginning of this year, we sent a communication to the membership about the different areas SIIA represents: Health, ART, Workers’ Comp and International. Additionally, we sent a communication about the resources available to members in an effort to CONNECT our membership through education, networking, business opportunities, legislative initiatives, and other industry resources which may be beneficial to your company. As I was preparing the communication, I reviewed the history of the membership, and was overwhelmed by the many members that have supported the organization since its formation in 1981 and that over 50% have been members for over 15 years. At the same time, I reviewed the resources past and present and was equally impressed with the resources and opportunities the association has provided and it was clear that this dynamic association is bound together by a common mission and support for the selfinsurance/ART industry. This is what makes us prevail. Through the challenges, we fight and we find opportunities. As our industry has evolved, we come together to bring solutions. I feel privileged to be a part of an industry and an association that never gives up, that believes in solutions, creativity, and growth. On March 14-16, SIIA will be holding its Legislative/Regulatory Conference in Washington, DC. This is a wonderful opportunity for you to hear from legislators that are shaping the direction of the insurance industry, our businesses, and our personal lives. There is no better time than for you to join us and allow SIIA to assist you in connecting with your congressional representatives and other members that share the value of SIIA’s legislative vision. I look forward to seeing you very soon and hearing from you as a member and as we move forward with the same mission. Keeping you connected...

Erica Massey


February 2011


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February 2011


inSiDer INFORMATION Boston research group awards top 401(k) honors to oneamerica INDIANAPOLIS, IN – American United Life Insurance Company® (AUL), a OneAmerica company, has been named the number one 401(k) provider in three key satisfaction categories in the 2010 Boston Research Group DCP Plan Sponsor Study. The study is based on a nationwide survey of satisfaction and loyalty among 1,345 401(k) plan sponsors with under $5 million in plan assets. AUL Retirement Services was runner-up in four other categories of overall satisfaction. “We are committed to a high level of service and to providing value to plan sponsors,” said Bill Yoerger, senior vice president for AUL Retirement Services. “We are honored that our customers are recognizing the value we bring. We look forward to another successful year in 2011 when we plan to capitalize on our strengths and build upon these already solid results.” Published annually since 2000, the DCP Plan Sponsor Study profiles and compares all top 401(k) record keepers and provides a clear portrayal of plan sponsor needs and accurate measurement of the extent to which these needs are being met by major 401(k) providers. About AUL Retirement Services American United Life Insurance Company® (AUL) is the founding member of OneAmerica® and offers a wide range of products and services for retirement plans of individuals and employers. As a leader in the retirement services industry, AUL provides local service through a national network of experienced professionals focusing on the 401(k), 403(b) and 457 markets. About OneAmerica OneAmerica Financial Partners, Inc., is headquartered in Indianapolis, IN. The companies of OneAmerica® can trace their solid foundations back


February 2011


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more than 130 years in the insurance and financial services marketplace. OneAmerica’s nationwide network of companies offers a variety of products to serve the financial needs of their policyholders and other clients. These products include retirement plan products and services; individual life insurance, annuities, longterm care solutions and employee benefit plan products. The goal of OneAmerica is to blend the strengths of each company to achieve greater collective results. For more information contact Jim Gavin, Media Relations Managerat (317) 285-4168 or jim.gavin@ important Victory for Subrogation efforts in the Face of new York law Amidst the deluge of healthcare reform, anti-subrogation legislation was passed in the State of New York on November 12, 2009 which purported to eliminate the right of fully insured carriers and selffunded benefit plans, coming within the purview of state law, to pursue subrogation and reimbursement. Accordingly, benefit plans in New York which are not private, selffunded plans, no longer have an enforceable right to subrogation and/ or reimbursement. The Phia Group has never accepted anti-subrogation legislation without a fight. When The Phia Group received word of the statutory shift, its attorneys immediately began to seek out ways to enforce plan rights. The law in question is a collateral source rule, which bars plaintiffs from collecting funds for losses covered by a benefit plan. The Phia Group theorized that because the benefit plan is also a victim, and because the plaintiff cannot release the responsible third party from liability for damages it caused to the benefit plan, the benefit plan is entitled to intervene.

In Rink v. State, 2010 N.Y. Slip Op. 20149, 2010 WL 1686054, similarly minded attorneys made such an argument before the Fourth Department (covering portions of northwestern New York). That Court agreed with the theory that a benefit plan may pursue a claim directly against a responsible party, however, due to the limited jurisdiction of the Rink Court, and due to the constraining language utilized in the opinion, many attorneys in New York still refused to recognize a benefit plan’s right to reimbursement. In the case of Rizzo v. Moseley, et. al., Index No. 11214/07, a benefit plan that is represented by The Phia Group processed and paid hundreds of thousands of dollars in incident related claims. The Phia Group retained its CEO, Adam V. Russo’s law firm (The Law Offices of Russo and Minchoff), as well as counsel in New York (Attorneys Daniel A. Lynn and Philip H. Ziegler of Braff, Harris and Sukoneck), and filed a motion to recognize a benefit plan’s right to intervene and pursue reimbursement against responsible third parties. This case would be decided by a Court in the Ninth Judicial District of New York, less than 30 miles from Manhattan. The Phia Group is pleased to announce that it has emerged victorious. On December 21, 2010, the Supreme Court of New York, agreed with The Phia Group when it held that a benefit plan is able to intervene in a plan participant’s lawsuit without violating New York’s collateral source rule. It is now clear that, while New York law does limit rights to reimbursement, it does not prevent benefit plans from pursuing a claim directly against the responsible third party. For more information about this case, The Phia Group’s efforts in this regard, and how these laws apply to you, please contact The Phia Group’s CEO, Adam V. Russo, at 781-535-5622

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or via e-mail at arusso@phiagroup. com. To learn more about The Phia Group’s services, we encourage you to contact The Phia Group, LLC’s Director of Client Services, Andrew Milesky. Mr. Milesky can be reached at 781-535-5636, or via e-mail at You may also visit The Phia Group’s website at, or Adam Russo’s personal blog at www. the Hartford to Sell Specialty risk Services to Sedgwick CMS HARTFORD, CT & MEMPHIS, TN – Hartford, CT and Memphis, TN – The Hartford Financial Services Group, Inc. (NYSE: HIG) and Sedgwick Claims Management Services, Inc. (Sedgwick CMS) today announced a definitive agreement to sell Specialty Risk Services, LLC (SRS) to Sedgwick CMS. SRS, a wholly-owned subsidiary of The Hartford, is one of the nation’s leading third-party claims

administrators providing self-insured, insured, and alternative market clients with customized claims services. “The sale of SRS is consistent with our strategy to focus The Hartford on core protection and wealth management businesses,” said Liam E. McGee, The Hartford’s chairman, president and chief executive officer. “This transaction accomplishes the goal of creating shareholder value without impacting the earnings power of the company. “These are two outstanding organizations that will build on strong traditions of client-focused service. As we work with Sedgwick to close the transaction, we will continue to provide high quality products and services to our customers.” Sedgwick CMS is a leader in innovative claims and productivity management solutions to major employers. The company provides claims administration, managed care, program management and related services.

“SRS is a highly respected player in the industry and has established a strong reputation for serving and retaining outstanding clients,” said Dave North, CEO of Sedgwick CMS. “Sedgwick CMS and SRS share remarkably similar philosophies on issues of quality and accountability for client results. We look forward to bringing these two exceptional organizations together for the benefit of our customers, industry partners and company colleagues.” The transaction is expected to close during the first quarter of 2011, subject to regulatory approval and other required consents. Sedgwick CMS plans to extend comparable employment offers to all direct SRS employees, as of closing. More information on The Hartford and its financial performance is available at For more on Sedgwick CMS, see http:// n

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February 2011



Happy new Year!


n case anyone out there doesn’t know, the Auburn Tigers of Alabama won the BCS College Football National Championship. Not only has it been over 50 years since this team has won the title, but for the first time in history two teams have brought home both the Heisman Trophy and the National Championship from the same state back to back. To remind all of you, college football in the south and particularly to the SEC followers, is almost a religion. And now everyone is starting to talk about next year. While many were focused on football, the SIIA team was already in gear connecting with members of our 112th Congress. Positive impressions have been made with both the incumbent members and newcomers telling the self-funding story. During the course of these meetings technical questions have been asked by our representatives that indicate their interest and concern. Studies are being prepared focusing on self-insured health plans in preparation for debates regarding the repeal of PPACA.

The SIIA 25th Annual Legislative/ Regulatory Conference being held in DC on March 14-16 will be one of the most attended in the organization’s history. Guest speakers from both the House and Senate, along with other political insiders will give updates and insight into our legislative concerns. Committee meetings are also being held in conjunction with the conference. The annual Walk on the Hill is already being anticipated with urgency in getting our message heard.

“now is the time to gather our resources to further promote and protect our selffunding and alternative risk transfer methodology. our industry is strong, but can only be stronger with continued support and input from our members.” See you in DC!!

Freda Bacon, Chair

SIIA hosted a Webinar on February 2 to bring the entire membership up to date on the Capitol Hill ongoing meetings. Plans are to continue these webinars on an ongoing basis.


February 2011


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February 2011


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