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July 2017


The World’s Leading Alternative Risk Transfer Journal Since 1984

Helping Hands

Patient advocacy programs seen as engine that powers not only health engagement, but also reference-based pricing model

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The World’s Leading Alternative Risk Transfer Journal Since 1984

Self-Insurer’s Publishing Corp.


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


4 Helping Hands Patient advocacy programs seen as engine that powers not only health engagement, but also reference-based pricing model


Volume 105

20 ACA, HIPAA and Federal Health Benefit Mandates The Affordable Care Act (ACA), the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and other federal health benefit mandates 26

Taking Health Care International – The Growing Trends of Importing Care and Exporting Patients

By Bruce Shutan

EDITORIAL ADVISORS Bruce Shutan Karrie Hyatt

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

2017 Self-Insurers’ Publishing Corp. Officers


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

Cyber Threats in the

Insurance Market and Captives


Despite Mixed Reported Results, RRGs Remain Financially Stable


SIIA Endeavors


News from SIIA Members

By Karrie Hyatt

July 2017 | The Self-Insurer


Helping Hands Patient advocacy programs seen as engine that powers not only health engagement, but also referencebased pricing model


atient advocacy programs have gradually emerged as a critical link between efforts to engage self-insured group health plan participants in better decision-making and growing use of reference-based pricing (RBP) methods to control soaring costs.

By Bruce Shutan

Without assistance from a patient advocate, who acts like a concierge of sorts, “employees are accessing a complex system with one hand tied behind their back,� observes Chris Fey, CEO of Big Bang Health, a full-service health care startup that made advocacy the hub of its approach.


In fact, having access to this invaluable service could be a matter of life or death. “Unless you have a care advocate or complete trust in your physician’s diagnosis, you’re operating at a disadvantage,” he cautions, citing a recent Mayo Clinic study suggesting that 20% of diagnoses by primary care physicians are actually incorrect. “As they go down that misdiagnosis trail, they’re spending up their deductible, and then they’re getting tested or are going to trigger the employer claims data. That’s going to drive up their costs one way or the other.” Even among patients who are diagnosed correctly, Fey says the research suggests they have only about a 50/50 chance of receiving their recommended evidence-based cure guidelines.

“How do you tap into the CMS database on every known provider in the country and get the morbidity, mortality and readmission rates?” he asks rhetorically.

“That’s beyond the typical person, so I think it makes prudent sense for every single individual who is accessing the health care system to have a care advocate. It’s a no-brainer.”

The mission of a patient advocate is to send patients to the right provider who will not only accept negotiated prices, but also demonstrate quality in their practice or institution, says Tim Martin, EVP and general counsel for Payer Compass, LLC. The result will be “better clinical and financial outcomes on the back end,” he adds. One key to success is establishing a lasting relationship with medical facilities that allows health plan members unfettered access to the care they need. This collaborative approach also eliminates any worries they might have about incurring unaffordable out-of-pocket costs for critical services.

July 2017 | The Self-Insurer


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Martin, who sees see some plans with a zero deductible, cites an old adage: “It’s easier to get forgiveness than it is permission, but we find in this business, it’s generally better if you get permission than to seek forgiveness.” Patient advocacy proponents in the growing RBP space have been busy trying to build a better mousetrap for their self-insured clients. Noting that elective admissions account for more than 90% of admissions, one industry insider developed a pre-pricing technology tool that adds to the pre-authorization process. The result is less than 2% RBP pushback from providers compared to a 5% to 10% range across the industry.

“That’s been dramatic in terms of telling them what they’re going to get paid before services are rendered, and if they don’t like the number, we can negotiate it up front and they can continue with the admission,” explains the source, speaking on the condition of anonymity.

With more than 20 regionally focused databases to price all medical services nationally, his firm also negotiates safe harbor provider agreements with the hospitals to avoid balance billing.

Marketplace traction Slightly more than half of 2,544 employers surveyed provide their employees with access to a health advocate for help finding the right medical provider, compare costs and resolve claim disputes, according to Mercer’s latest National Survey of EmployerSponsored Health Plans. The number is a bit higher in Aon Hewitt’s 2017 Health Care Survey, which found that 59% of employers provide advocacy services and 29% may add them in the next three to five years. With virtually all Fortune 1,000 companies self-funding their health benefits, anywhere from 50% to 75% of them offer some sort of internal or external patient advocacy, surmises Abbie Leibowitz, M.D., chief medical officer and president emeritus of Health Advocate Solutions, a subsidiary of West Corporation. He adds that “it is a broad definition of services that doesn’t truly lend itself to standardization around any industry model.” The pain points, of course, are particularly raw for self-insured employers that take on the full risk of all medical costs, according to Fey, who also notes the possibility of an impact on reinsurance costs. But he says advocates can help steer patients to a proper second opinion and meaningful quality comparisons. They also can offer “the correct set of directions to navigate the system” en route to a better clinical outcome and improved savings, he adds.

July 2017 | The Self-Insurer



When industry pioneer Health Advocate Solutions began 17 years ago, its biggest challenge was explaining why the service was needed. But nowadays, Leibowitz says “everyone wants to be your health advocate.” Several factors have driven the company’s growth in the self-insured marketplace. They include the popularity of consumerdriven health plans (CDHPs), changes in benefit structures, narrow networks and a reluctance to hire more HR staffers to help employees navigate their way through an often confusing system. Steve Kelly, president and CEO of ELAP Services, has seen scores of players unfurl


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shingles as patient advocates. However, there must be baseline measures for which these new ventures pass muster. “Our conviction is that it really has to be durable and follow the patient for an extended period of time,” he says. That means a willingness to stand in patients’ shoes with a specific objective in mind that transcends providing general information over a toll-free hotline. It includes an awareness of how employees can acquire services without the risk of a balance bill or out-of-network charges.

“The better reference-based pricing plans out there have a strong patient-advocacy component, which I think is really critical to success,” reports Steve Gransbury, president of accident and health at QBE North America. Another key is the efficacy behind advocacy programs, he says.


RBP represents a strong cost-management technique for both self-funded plans and employees in terms of reining in out-of-pocket expenses that are rising with high-deductible health plans and CDHPs, according to Gransbury. Without patient advocacy, which arm plan participants with the necessary resources to work with providers, he dismisses RBP as simply “a tool in a vacuum.” The power of this arrangement is in promoting clear communication among several stakeholders along the way to efficacy and cost savings. “Patient advocacy works really well when there’s a three-party call with a provider, advocate and the plan participant,” he observes.

Addressing problem spots An example of where patient advocacy can make a significant difference in improving outcomes and bending the cost curve is outpatient infusion therapy, or more specifically, dialysis. Those charges tend to be quite high, Gransbury says. Patient advocates play an indispensable role in explaining re-priced benefit payments under the RBP model to providers who were accustomed to charging much higher amounts under a previous model, he notes.

July 2017 | The Self-Insurer



The thinking is that they also eliminate high anxiety associated with patients receiving a substantial balance bill through this transparent approach and can steer them to the right providers in the first place. Advocates typically analyze medical and pharmacy claims data, including biometric screening results and self-reported information, and produce a personal profile of each patient, Leibowitz explains. What’s particularly helpful is that early recommendations can be made to avoid larger concerns down the road.

A diabetes diagnosis, for instance, would require more than just a routine annual medical exam. The eyes and kidneys also need to be checked alongside a peripheral neuropathy exam and hemoglobin A1C measurement – additional appointments that a patient advocate could set up. If a health plan member wants to review her maternity coverage, Leibowitz says a health advocate can certainly explain the benefits, but the real value of this service transcends those issues. It’s in asking questions about issues that may be hidden from view. For example, did the individual already touch base with an obstetrician if she’s pregnant, or are there any highrisk factors that would require fetal maternal health expertise?

“We go to the market with ‘empowered health,’ which is a collection of data-driven, proactive outreach and intake services that attempts to engage people in the clinical discussion about how to improve their health,” he reports. “The ultimate value of health advocacy is helping people get better care and the best possible medical outcome.”


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Kelly is well aware of the “full-contact game between medical providers trying to maximize revenue, in our opinion, on the backs of employees,” which necessitates a comprehensive approach. His firm offers robust legal representation for employees or dependents who are being pressured by way of a balance bill or collection action from a medical provider. There has been “a tremendous passivity” on the part of employers in terms of how they pay for health care services, he says, including a lack of investigation into amounts charged for various medical services. What often happens is that they simply turn over these tasks to an administrator or insurance company and step out of the picture. It’s not unusual for ELAP Services to come across a CT scan routinely billed at anywhere from $3,000 to $6,000 and then discounted 30% or 40% when it costs hospitals just $200 to perform. “So we believe that employers not only have the right, but also an obligation to challenge these bills,” Kelly exclaims, noting how it’s also their fiduciary responsibility to do so.

afraid to flex their muscle so that patients might pressure their employer to cover large unpaid balances.

“You’ve got some hospitals who claim to be financially strapped, and I’m sure that’s the case,” Dendy observes. “But you’ve got hospitals making money hand over fist, as well, and they have these protective programs called certificates of need, which basically eliminates all competition that they can have in a specific market. So hospitals are unregulated utilities, for the most part.” Another problem, he says, is that so-called BUCA plans, third-party administrators and others under the PPO model have no incentive to police self-funded payments. Their focus is simply on securing hospital discounts and collecting per-employee per-month fees from employer groups. PPOs typically overpay by about 30%, which he says RBP can prevent. Without patient advocacy and RBP, he laments that hospitals will continue to act as creditors collecting grossly overcharged bills, while higher co-pays and deductibles for health plan members will remain as a misguided strategy to mitigate cost increases for employers.

In the absence of this approach, he laments that employers “have no option but to push more costs down to the employee in the way of outof-pocket costs or more premium share. So it’s kind of like a dog chasing its tail.” Revenue cycle management software platforms lack the data necessary to discern what transpired during each hospital stay, explains Mike Dendy, vice chairman and CEO of AMPS. This makes it impossible for health care payers to determine reasonable charges. He describes hospitals as “the 800-pound gorilla in most communities,” July 2017 | The Self-Insurer



“The value of the advocate is to explain to the hospital or physician, ‘here’s why you got paid what you got paid and to the member, ‘here’s how it was calculated and why you’re getting balance bills,’ ” Dendy says. Transitioning from a traditional PPO involving BUCA plans to RBP is no casual undertaking and requires careful communications for members and providers alike, according to Ed Day, CEO of HST. Patient advocacy represents the centerpiece of this model. While some firms outsource the patient advocacy component, his provides an in-house service with highly knowledgeable administrators because “it is such a critical function of client retention and persistency.” Noting an increase in fiduciary burden for employer-sponsored retirement plans, Kelly says “it seems to be rather hands-off on the health and welfare side. That’s kind of a paradox. We’re not sure why that is, but all we can do is urge employers to be more proactive and take a firmer grasp of the reins to managing their plans.”

A wise investment The price of not having patient advocacy in place may be too steep for most health care payers. Any “frictional” costs associated with these services “could be very wise investments to support reference-based pricing,” according to Gransbury. “When you’re limiting catastrophic claims to 200% or 300% of Medicare, they largely represent a more impactful discount than what the PPO may allow for. As the cost of the claim gets higher, you start to lose the power of the discount if the underlying network contract has outlier provisions,” he says.

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When determining any return on investment (ROI) for patient advocacy, results are ultimately benchmarked against control groups. “Because we have the claim data, we know what it costs,” Leibowitz explains, “and because we have that total claim data, we can look across and say here’s what the impact of that was in medical costs for the employer. So we calculate an ROI based on people that engage with us compared to people that don’t.” Although Health Advocate Solutions doesn’t outwardly promise specific savings, clients can realize up to 9:1 ROI in some cases. Leibowitz acknowledges “a healthy skepticism” of ROI and believes it’s best to focus on delivering better care and improved outcomes, which, of course, can save employers money. The company applies data and information to employee engagement in a way that’s relevant to each individual and works across various communication platforms. Having a telecommunications giant as a parent company allows Health Advocate Solutions to leverage user-friendly technology for everything from automated outbound calls to remind patients about doctor appointments to emails or text messages related to their conditions. ELAP Services has seen its clients typically reduce their year-over-year overall health care spend by 20% with the help of patient advocacy integrated into the RBP process, or as Kelly describes, “metric-based” pricing. “It’s critical that the plan members are supported and advocated for,” he explains. None of the hundreds of thousands of claims Payer Compass has processed was ever litigated because of a transparent approach with medical providers that avoids adversarial communication. It stands in stark contrast to some service providers whom Martin describes as going “nuclear” by having lawyers send threatening letters. Patient advocacy in conjunction with RBP has saved self-insured employer clients 70% to 74% on average compared to before they had patient advocates in place – savings that can be passed onto health plan members. “Many employers don’t even take a premium out of people’s checks for these plans, and when they do, it tends to be a much smaller premium,” he notes.

Bullish forecast

Leibowitz expects patient advocacy will extend to the disability and workers’ comp areas in the future, as well as behavioral health – noting that there are more than 3 million members of an employee assistance program (EAP) serving his corporate clients. While paying reasonable charges is a key objective behind patient advocacy, Fey believes there’s much more to this approach than meets the eye. “If you’re getting the wrong treatment directions half the time, that’s really a human-performance issue because you’re not getting better and you’re spending money,” he explains. Misdiagnosis can lead to stress, anxiety and depression – necessitating the involvement of an EAP and more holistic approach. Over the past 30 years, he has seen most people struggle to navigate the system, “whether it’s pharmacy benefits, medical plan design, or the cave of behavioral health.” Fey is determined to reposition these elements to mirror more of “a human performance discussion around the enterprise the peak operating performance of the individuals in the enterprise.”

Bruce Shutan is a Los Angeles freelance writer who has closely covered the employee benefits industry for nearly 30 years.

While patient advocacy programs can serve as a tremendous cost-savings tool for selfinsured employers, it’s not a standard practice. Martin believes “there’s a mindset to overcome,” noting how PPOs gradually lost their effectiveness over the past 30 years. “A lot of agreements are still tied to percentage of charges” and simply accepted as a cost of doing business, he explains. The future of RBP, powered by patient advocacy, looks bright. Day notes that CalPERS, the nation’s second-largest health plan behind the federal government’s employee benefit plan, has adopted this approach alongside GE, Walmart and Safeway. He sees more of this activity trickling down market from jumbo groups to those with between 500 and 25,000 lives.

July 2017 | The Self-Insurer


Cyber Threats in the

Insurance Market and Captives By Karrie Hyatt


argescale cyber attacks dominate the news, while more and more businesses are experiencing a large range of incidents. Insurance products are available to help companies withstand these attacks, but according to several new reports, many companies are not investing in cyber-related insurance due to expensive premiums and gaps in available products. Captives are filling in those gaps and, often times, are more competitively priced in comparison to the traditional market.


The Cyber Threat According to the Internet Security Threat Report (ISTR) published annually by Symantec, the overall number of computer system breaches was lower in 2016 than 2014, falling by more than 300. However, the number of identities exposed during each breach rose in average from 805,000 per breach to 927,000. While successful cyber attacks are becoming less frequent, those that do succeed often cause more damage. But it isn’t just big businesses that are being targeted. In a report from the National Cyber Security Alliance published during last October’s National Cyber Security Awareness Month, in 2015 43% of cyber attacks targeted small business, while during the same time 82% of small business owners said that they were not targets for attacks. One of the fastest growing forms of cyber attack are ransomware attacks. On May 12, the world was rocked by a massive cyber

attack in the form of a ransomware email that affected computer systems in at least 100 countries. Ransomware attacks, which have been gaining in frequency, is when malware, usually sent by email and unwittingly opened by an employee, is used to take over another computer system or network and then hold its data hostage. The benefit to cyber thieves is that it is easier and more profitable to hold data ransom than to steal it. So much so that in Verizon’s 2017 Data Breach Investigations Report (DBIR), they have a section titled, “Ransom Notes are the Most Profitable Form of Writing.” The report says that ransomware attacks were some of the earliest types of hacking, but have seen an uptick in usage due to the anonymity of Bit Coin payments and off-the-shelf style hacks that can easily be exploited. In Symantec’s ISTR, between 2015 and 2016 the number of detections of ransomware attacks rose 123,176 to 463,841, with the types of hacking software going from 30 samples to more than 100. Most of the time, ransomware thieves demand small amounts of money as an incentive for companies whose systems are being held captive to pay up right away. However, as these attacks become more pervasive and emboldened, the average ransom amount rose to $1,077 in 2016 from $294 in 2015, according to the ISTR. In 2016, 73% of cyber attacks were financially motivated, as stated in Verizon’s DBIR. 66% of breaches were made due to malicious email attachments. Phishing—infecting a computer through an email attachment or via a link to steal data—is still the most common way that companies and individuals are attacked. However, ransomware and pretexting have started to gain ground on phishing attacks. Pretexting is often aimed at financial companies

July 2017 | The Self-Insurer



and is highly targeted, unlike ransomware. Pretexting involves an outside party sending a specialized communication to a party with control over finances or data—often impersonating an executive or vendor—and getting them to transfer large amounts of money or reveal important information. This attack is most often achieved through email interaction. Cyber attacks that target the human factor is far more likely to happen than hack often portrayed on TV. Cyber criminals find it much easier to infiltrate a company’s systems by exploiting an unwary employee than taking the time and energy to break through a company’s firewalls and other security measures.

The Insurance Answer Another recent report sponsored by Aon Risk Solutions and independently conducted by Ponemon Institute LLC is the 2017 North America Cyber Risk Transfer Comparison Report. It found that while most companies fear a cyber attack, the uptake of cyberrelated insurance is still well below property, plant and equipment (PP&E) coverage. According to the report, “The probability of any particular building burning down is significantly lower than one percent (1%). However, most organizations spend much more on fireinsurance premiums than on cyber insurance despite stating in their publicly disclosed documents that a majority of the organization’s


value is attributed to intangible assets.” The report is based on a survey of nearly 20,000 individuals who work with their company’s cyber risk and enterprise risk management activities. Some of the highlighted findings of the study were that: 89% believe that cyber liability is in the top ten risks for their company; 56% experienced a business disruption due to a cyber attack during the previous two years; information assets are underinsured against theft or destruction; and companies, knowing the risk, are still reluctant to purchase cyber insurance. While the findings indicate that companies believe information assets to be slightly higher in value than PP&E, information assets are underinsured by comparison. “On average, approximately 62% of PP&E assets are covered by insurance…. In contrast, an

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average of 16% of information assets are covered by insurance.” However, companies who self-insure are 59% more likely to have information asset coverage. More than half the respondents (64%) believe that cyber security threats will increase in the coming years, with only 11% believing that it will decrease. Cyber risks, which are more likely to come to fruition than PP&E risks, are also far more likely to cause significant business interruption in comparison to PP&E.Yet still companies are slow to get adequate coverage. The main reasons, according to the report, for not purchasing cyber coverage are: premiums are too expensive; coverage is inadequate based on exposure; too many exclusions, restriction and uninsurable risks; and property and casualty policies are sufficient.

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The Captive Factor The reasons that companies are not purchasing cyber coverage, as cited in the Ponemon Institute’s report, can be addressed by captive insurance companies. The risks that companies find hard to insure or that are underinsured can often be attended to through a captive. Due to the flexibility of coverage that captives can offer, companies have the ability to customize the coverage to suit their needs. Health care facilities, financial companies, and government departments will all have specialized needs when it comes to cyber security threats and need insurance coverage to reflect those differences. Traditional commercial markets, while stepping up to offer a variety of products to meet cyber attacks, don’t have the flexibility to fine tune coverage to each companies’ needs. Captives can also be used to cover risks that are not available in the commercial market, by either entirely insuring the risk or by offering excess coverage where it is underinsured. Captives can also insure reputation and cyber as a package, as well as other interconnected risks, that might be overlooked in the wider insurance marketplace.

While much of the pricing in the insurance market has been declining in 2016 and 2017, the two exceptions are auto and cyber. For cyber insurance, the commercial pricing has been increasing for several reasons. Cyber is still considered an emerging product and can still be too changeable to be anything but a challenge to underwriters. The increased pricing is also due to the increase in severity and frequency of incidents, as well as the higher amount of losses. Again, this is something that captives can address with their flexibility.

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The primary obstacle for companies turning to captives to provide cyber coverage is coming up with the funding to establish the reserves needed to fund future losses. As the costs of major cyber attacks rise, it may be hard for captives to anticipate the reserves they will need to pay out claims. Equally, because of the range of potential damages—from a few hundred in a ransomware attack to potentially millions in the case of exposed customer data in a large breach—deductibles tend to be high for both captive and traditional markets. This might also rule out captives as a valid alternative for any but very large companies.

Karrie Hyatt is a freelance writer who has been involved in the captive industry for more than ten years. More information about her work can be found at: www.karriehyatt.com.

Companies without the proper reserves might find a solution by forming a rent-a-captive or establishing a cell captive. Smaller companies who are interested in the solutions captives can offer to comprehensive cyber coverage can experience many benefits of a fully-owned captive through a cell captive without the large reserves needed to start a pure captive.

July 2017 | The Self-Insurer




Q& A T

he Affordable Care Act (ACA), the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and other federal health benefit mandates (e.g., the Mental Health Parity Act, the Newborns and Mothers Health Protection Act, and the Women’s Health and Cancer Rights Act) dramatically impact the administration of self-insured health plans. This monthly column provides practical answers to administration questions and current guidance on ACA, HIPAA and other federal benefit mandates. Attorneys John R. Hickman, Ashley Gillihan, Carolyn Smith, and Dan Taylor 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 Dan Taylor are members of the Health Benefits Practice. Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner’s situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation. Readers are encouraged to send questions by E-MAIL to Mr. Hickman at john.hickman@alston.com.


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IRS Clears the Air as to Tax Treatment of Benefits Under Traditional Health Fixed Indemnity Coverage Background

Employers are constantly searching for new ways to offer additional valued benefits to employees while keeping benefit costs down. Oftentimes, this includes offering supplemental health fixed indemnity coverages alongside a more traditional medical benefit plan. While the tax attributes of such coverage have long been settled, previous IRS guidance created some confusion when addressing several abusive arrangements that purport to reduce taxable income through the use of a variation of fixed indemnity coverage. As we discuss below, the IRS has now cleared the air with regard to traditional health indemnity coverage.

As we have addressed in prior columns, there are a number of abusive tax arrangements marketed (primarily to small employers) that utilize a so-called wellness program that purport to provide tax advantages similar to the classic double dip arrangements first prohibited by the IRS in the early 2000s. In a Chief Counsel Memorandum dated December 12, 2016 (the “December 2016 CCM”),1 the IRS exposed the fatal defects under a recent iteration of the wellness program scheme involving a self-insured health indemnity program that lacked economic substance.

However, some overly broad statements in the December 2016 CCM appeared to be contrary to established law with regard to more traditional fully-insured health indemnity plans. As we discussed in a prior column,2 our belief was that these statements were limited to the abusive arrangements and could not as a matter of law impact taxation of traditional fully-insured fixed indemnity benefits as laid out in controlling authority. Nevertheless, the December 2016 CCM generated some confusion. In a new CCM dated April 24, 2017 (the “April 2017 CCM),3 the IRS has made it clear that nothing has changed with respect to the federal tax treatment of fully-insured fixed indemnity coverage.

The Applicable Law

For decades, the issue of how benefits paid under health fixed indemnity policies are taxed has been settled based on the statutory provisions in Code Section 105, regulations, and IRS rulings. If the coverage was paid for on a pre-tax basis (i.e., by the employer or through employee salary reduction), then the general rule in Code Section 105(a) is that benefit payments received under the coverage are taxable.

However, Code Section 105(b) provides an important exception to this general rule. Under Section 105(b), benefit payment amounts received under such coverage are excludable from income if such amounts represent direct or indirect reimbursements for expenses actually incurred for medical care (as defined in Code Section 213(d)) that if paid directly by the employee would give rise to a deduction under Section 213.

This article focuses on this aspect of the April 2017 CCM. [Note: The vast majority of employer wellness arrangements provide meaningful incentives to employees to encourage healthy behavior. We do not take issue with such programs. Rather, the “fatal defect” arises with respect to the incorrectly represented tax treatment of certain programs as described in more detail herein and in the CCMs and related IRS rulings.]

July 2017 | The Self-Insurer


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The applicable IRS regulation (Treas. Reg. 1.105-2) provides as follows:

Section 105(b) provides an exclusion from gross income with respect to the amounts referred to in section 105(a) (see section 1.105-1) which are paid, directly or indirectly, to the taxpayer to reimburse him for expenses incurred for the medical care (as defined in section 213(e)) of the taxpayer, his spouse, and his dependents (as defined in section 152). . . . Section 105(b) applies only to amounts which are paid specifically to reimburse the taxpayer for expenses incurred by him for the prescribed medical care. Thus, section 105(b) does not apply to amounts which the taxpayer would be entitled to receive irrespective of whether or not he incurs expenses for medical care.

during the period of illness. . . . . If the amounts are paid to the taxpayer solely to reimburse him for expenses which he incurred for the prescribed medical care, section 105(b) is applicable even though such amounts are paid without proof of the amount of the actual expenses incurred by the taxpayer, but section 105(b) is not applicable to the extent that such amounts exceed the amount of the actual expenses for such medical care.

Thus, as long as an amount is triggered by a medical event giving rise to an expense, some portion may be excludable, even if it is paid without proof of the amount of the actual expense incurred by the taxpayer. Because most traditional insured health indemnity policy benefits are only paid when a medical event has resulted in a medical expense being incurred, it cannot be said that such benefits are paid “irrespective of whether an expense is incurred for medical care.� Further support for this position can be found in IRS Rev. Rul. 69-154. In that ruling, the IRS looked at several situations in which health indemnity benefits exceeded the amount of medical expenses incurred. As with traditional insured health indemnity benefits today, the health indemnity policies in the ruling did not coordinate with other coverage or otherwise reduce benefits because the medical expense had been fully reimbursed. Yet the IRS concluded that the health indemnity coverage in the ruling would provide tax free benefits to the extent of any unreimbursed medical expenses.

For example, if under a wage continuation plan the taxpayer is entitled to regular wages during a period of absence from work due to sickness or injury, amounts received under such plan are not excludable from his gross income under section 105(b) even though the taxpayer may have incurred medical expenses July 2017 | The Self-Insurer


The December 2016 CCM

The IRS unintentionally created some confusion with respect to the well-settled law as described above in the December 2016 CCM. In the “wellness plan” arrangement discussed in the December 2016 CCM, tax free “premium” contributions are funneled through a selffunded health indemnity plan that purportedly pays a substantial tax free indemnity benefit when the participant engages in certain wellness activities provided by the arrangement (e.g., participating in a health fair, contacting a wellness coach, etc.).

Unlike more traditional fixed indemnity health insurance, the plan is self-funded and the purportedly tax free benefit payments are not triggered by events that result in medical expenses for the participant. Situations 4 and 5 in the December 2016 CCM provide further details on the underlying structure of the arrangements.


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However, as background to the wellness rulings they were trying to address, the IRS went even further, seemingly concluding that benefits under any fixed indemnity health policy would be taxable because the amount of payment does not correlate to the amount of medical expense incurred. These broad statements were inconsistent with the regulations and Rev. Rul 69-154. While our analysis was that the December 2016 CCM was limited to the self-insured scheme under consideration, the broad statements generated some confusion.

The April 2017 CCM


The April 2017 CCM again addresses abusive self-funded arrangements and concludes that benefits under such arrangements are taxable if the average amounts received by employees for participating in a health-related activity predictably exceed the after-tax contributions by the employees.

The IRS has now re-confirmed the income tax treatment to employees of benefits paid under fully-insured health fixed indemnity plans and that IRS Rev. Rul. 69-154 and the regulations under Code Section 105 continue to control. Thus, amounts payable under such health indemnity policies should be excludable from an employee’s income to the extent of any otherwise unreimbursed medical care expenses. Any claim payments (combining the total from all health and medical policies/plans) that exceed the amount of unreimbursed Section 213 medical expenses would be taxable.

The IRS lists two reasons for this conclusion: (1) the employer self-funded health plan in question does not have the effect of insurance; and/or (2) the ratio of the average amounts received by the employees for participating in health-related activities to the after-tax contributions by the employees demonstrates that the amounts received by the employees are attributable to contributions by the employer (and not employee after-tax contributions) so that the exclusion under section 104(a)(3) does not apply.

Importantly, the April 2017 CCM also eliminates the confusion generated by the prior CCM with respect to fixed indemnity arrangements. In particular, the April 2017 CCM states that the December 2016 CCM was “intended to address situations in which no medical expenses were incurred or reimbursed, and should not be read to modify the analysis or result in Rev. Rul. 69-154.” References

The April 2017 CCM also includes the following helpful example: For example, assume a traditional fixed indemnity health plan that pays fixed amounts on unpredictable health events such as a medical office visit or a hospital stay and receives premium payments on an after-tax basis, and that, unlike the arrangements presented in the situations described above [in the CCM], the fixed indemnity health plan provides insurance or has the effect of insurance. If that plan pays an individual $200 for a medical office visit and the covered individual’s unreimbursed medical costs as the result of the visit were $30, the $200 would be excluded from income.

1 https://www.irs.gov/pub/irs-wd/201703013.pdf 2 John Hickman, Ashley Gillihan, Carolyn Smith, and Dan Taylor, “Whack-a-Mole – IRS Takes Aim at Latest Wellness Program Scheme, But Overly Broad Language Can Be Taken Too Far As Applied to Traditional Coverage,” The Self-Insurer (March 2017) 3 https://www.irs.gov/pub/irs-wd/201719025.pdf

The exclusion under section 104(a)(3), however, does not apply to the extent that amounts paid are attributable to contributions by the employer which were not includable in the gross income of the employee, or paid by the employer. Thus, if a fixed indemnity health plan with premiums paid on a pre-tax basis through a section 125 cafeteria plan paid $200 for a medical office visit and the covered individual’s unreimbursed medical costs as the result of the visit were $30, $30 would be excluded from gross income under section 105(b) and the excess amount of $170 would be included in gross income.

July 2017 | The Self-Insurer


Taking Health Care International – The Growing Trends of Importing Care and Exporting Patients Written By: Andrew Silverio


steemed physicist Richard Feynman is remembered by many for the phrase

“If you think you understand quantum mechanics, you don’t understand quantum mechanics.” This sentiment rings true for the continually evolving landscape of our healthcare system as well, and the problems facing all of us, particularly as insurers, employers, and patients. For those of us within the healthcare or health risk industries, the more we learn about the problems we face and what is causing them, the more we realize just how complex the landscape is and what an impossible task it would be for any single solution to reel in the cost of care.


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In tow with the cost of care, health premiums as well as per capita healthcare spending in America steadily increase every year. This should not be news to anyone, and countless strategies have been proposed to slow and eventually reverse this inflation. But, for many, the immediate objective isn’t to “fix” healthcare or undo the decades of developments which brought us here. For many, the immediate goal is just to get care for their employees and families in an affordable way. Although this problem is not uniquely American, we spend more of our GDP on healthcare than any other country (by a wide margin), and care is more expensive here than anywhere else. As such, several newer strategies for cost containment are reaching beyond our borders into the international market – and doing so with impressive results. One strategy aims to avoid the exceedingly high prices of some prescription medications in America by simply getting them from elsewhere. Countries designated as “Tier 1” countries (including Canada, the UK, Australia, and New Zealand) have safety and efficacy standards which equal or exceed American standards, and enjoy significantly lower prices for drugs which are often chemically identical.

for sale outside the country are not FDA approved, as there is no potential for oversight in the manufacturing process. Additionally, even if the foreign version of the drug is chemically identical in every respect, FDA guidelines address more than just the chemical makeup of the drug – they relate to labeling, storage, and transportation as well. So, even a drug manufactured within the United States for sale outside of the country would be considered illegal if it was later re-imported into the country. So, if importing foreign drugs is illegal, how is it a viable option for cost containment? It’s possible, under the right circumstances, due to a well documented FDA policy of “enforcement discretion”. Under this policy, the FDA does not prosecute individuals who import a limited quantity of prescription medications from abroad for personal use. This discretion is based on several factors, including that the drug is for personal use only and that the amount imported is no more than a 3 month supply. So, if a program is set up correctly, the savings on many costly medications can be huge, with very minimal risk to the employer. Two important things to consider, though, are safety and plan document design. Regarding safety, it’s important to remember that just because a drug comes from a “Tier 1” country does not mean it is safe. Just as you (probably) wouldn’t buy prescription drugs from someone out of a suitcase on the street, it’s important to ensure that you are working with reputable people and pharmacies abroad when dealing with this type of program.

So, why hasn’t the American prescription drug market self-corrected due to this international competition? The simple answer, and the reason many employers are hesitant to take advantage of this option, is that the practice is illegal. Under federal law, drugs which are manufactured

July 2017 | The Self-Insurer


There have been incidents involving drugs which were imported from Tier 1 countries after being manufactured in other countries with more lax standards, as well as incidents were drugs were found to be outright counterfeits. Regarding plan document design, any given plan document likely has some existing barriers to making a seamless transition into reimbursing for expenses such as these. Any exclusions or language which would conflict must be removed, and these changes should be approved by the plan’s stoploss carrier and TPA (and ideally the PBM as well). But again, when set up and run properly, this type of program can generate significant savings with minimal risk to the employer or patient. Another trend picking up steam is specialized medical tourism. Medical tourism is certainly nothing new, both within the country and internationally, but we are seeing a new trend – providers gearing their business model to specifically target medical tourism, and sometimes even specific

conditions/illnesses. When a facility specializing in a certain surgical procedure or implant, or treating a disease with particularly costly treatment, sets up shop just over the boarder or just offshore, it’s surely no coincidence. A prime example of this is Health City Cayman Islands. Health City is a brand new facility (they took their first patient in 2014) that offers a broad spectrum of healthcare services, but none illustrate the savings potential better than their hepatitis C program. Of course, a medical tourism offering only helps an employer save money if patients want to utilize it. Health City seems to understand this – along with the appeal of their tropical location they offer travel planning assistance, transportation, and concierge services including arranging local activities and excursions. The leading prescription hepatitis C medications can cost nearly $100,000 in the United States for a single 12 week course of treatment. Many employers may be surprised to hear that in light of this, as compared to simply purchasing the drug at the local pharmacy, it can actually be significantly less expensive to put a patient on a plane (with a companion) and fly them to the Caribbean for treatment, including all ancillary services and testing and prescription medications dispensed onsite, all as part of what is essentially a free vacation. The same concept is being applied with increasing regularity to other treatment, including surgical procedures. Just as with drug importation, there are some practical house cleaning tasks a plan must take care of before introducing any sort of medical tourism benefit, particularly if patients will be traveling internationally. A common barrier could be any existing plan exclusions for international treatment. This and any other conflicting exclusions must be removed and cleared with interested parties, just as with an importation reimbursement benefit.

Actuarial Advisor Our Complete First Dollar and Excess Loss Pricing Manual for Medical and Rx Plans www.windsorstrategy.solutions



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Another consideration with a medical tourism benefit is potential conflicts with the employer’s network agreement. Many such agreements require that the in-network incentive be the “best” available, so if the in-network coinsurance is 20%, and the plan offers a “zero out-of-pocket” option to incentivize patients to use the new program, there could be trouble. By that same token, the limitation could only apply within the network’s service area, which would mean there is no problem. It is important to have a professional review these agreements to make sure the employer isn’t creating any liability for itself. While many great minds continue to grapple with the puzzle of bringing American health costs down, many patients and employers simply cannot afford to wait for a complete solution. These globally-minded strategies are just a few of the creative ways employer plans, vendors, and providers are attempting to make care more affordable and accessible.

The potential for savings is huge, and the quality of care can be just as high as or higher than comparable treatment domestically. Ultimately, those who reap the benefits will be those who are willing to innovate, and utilize new methods and strategies outside of the traditional employee benefit playbook.

Andrew Silverio joined the Phia Group, LLC as attorney Third Party Liability Lawyer in the summer of 2014, dealing with a variety of issues such as Medicare recovery and Medicare COB, class action recovery, and other opportunities to recoup funds for benefit plans. In addition to conducting research into novel and developing areas of the industry, his primary focus is on provider relations, dispute resolution, and cost containment. He handles many of the company’s more challenging and complex cases involving disputes between benefit plans, participants, providers, insurance carriers, employers and brokers. Andrew attended Berklee College of Music in Boston, earning his B.A. in professional music. He then attended Suffolk University Law School, graduating with an intellectual property concentration with distinction. There, he took the step into the healthcare realm of the legal world, serving first as an editor and content contributor, and then on the executive board of the Journal of Health and Biomedical Law. Andrew is licensed to practice in the Commonwealth of Massachusetts.

July 2017 | The Self-Insurer


Despite Mixed Reported Results, RRGs Remain Financially Stable Written by: Douglas A Powell, Senior Financial Analyst, Demotech, Inc. This article originally appeared in “Analysis of Risk Retention Groups – Year End 2016”


review of the reported financial results of risk retention groups (RRGs) reveals insurers that continue to collectively provide specialized coverage to their insureds while remaining financially stable. Based on reported financial information, RRGs have a great deal of financial stability and remain committed to maintaining adequate capital to handle losses. It is important to note that ownership of RRGs is restricted to the policyholders of the RRG. This unique ownership structure required of RRGs may be a driving force in their strengthened capital position.

Balance Sheet Analysis Since year-end 2015, cash and invested assets increased 3 percent and total admitted assets increased 3 percent. More importantly, over the last year, RRGs collectively increased policyholders’ surplus 4.8 percent. The level of policyholders’ surplus becomes increasingly important in times of difficult economic conditions by allowing an insurer to remain solvent when facing uncertain economic conditions. This increase represents the addition of over $216.6 million to policyholders’ surplus. During this same time period, liabilities have only 30

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increased 1.8 percent. These reported results indicate that RRGs remain adequately capitalized in aggregate and able to remain solvent if faced with adverse economic conditions or increased losses. Liquidity, as measured by liabilities to cash and invested assets, for year-end 2016 was 65.7 percent. A value less than 100 percent is considered favorable as it indicates that there was more than a dollar of net liquid assets for each dollar of total liabilities. This also indicates a decrease for RRGs collectively as liquidity was reported at 66.5 percent at year-end 2015. In evaluating individual RRGs, Demotech, Inc. prefers companies to report leverage of less than 300 percent. Leverage for all RRGs combined, as measured by total liabilities to policyholders’ surplus, for year-end 2016 was 144.4 percent and indicates a decrease compared to year-end 2015, as this ratio was 148.7 percent. The loss and LAE reserves to policyholders’ surplus ratio for year-end 2016 was 105 percent and indicates a decrease compared to year-end 2015, as this ratio was 105.9 percent. The higher the ratio of loss reserves to surplus, the more an insurer’s stability is dependent on having and maintaining reserve adequacy.

Premium Written Analysis Since RRGs are restricted to liability coverage, they tend to insure medical providers, product manufacturers, law enforcement officials and contractors, as well as other professional industries. RRGs collectively reported nearly $3.1 billion of direct premium written (DPW) through year-end 2016, an increase of 4.7 percent over 2015. RRGs reported nearly $1.8 billion of net premium written (NPW) through year-end 2016, an increase of 4 percent over 2015. The DPW to policyholders’ surplus ratio for RRGs collectively through year-end 2016 was 65 percent, down from 65.1 percent in 2015. The NPW to policyholders’ surplus ratio for RRGs through year-end 2016 was 38.3 percent and indicates a decrease over 2015, as this ratio was 38.6 percent. An insurer’s DPW to surplus ratio is indicative of its policyholders’ surplus leverage on a direct basis, without consideration for the effect of reinsurance. An insurer’s NPW to surplus ratio is indicative of its policyholders’ surplus leverage on a net basis. An insurer relying heavily on reinsurance will have a large disparity in these two ratios. A DPW to surplus ratio in excess of 600 percent would subject an individual RRG to greater scrutiny during the financial review process. Likewise, a NPW to surplus ratio greater than 300 percent would subject an individual RRG to greater scrutiny. In certain cases, premium to surplus ratios in excess of those listed would be deemed appropriate if the RRG had demonstrated that a contributing factor to the higher ratio is relative improvement in rate adequacy. In regards to RRGs collectively, the ratios pertaining to premium written appear to be conservative.

Regarding RRGs collectively, the ratios pertaining to the balance sheet appear to be appropriate and conservative.

July 2017 | The Self-Insurer


Loss and Loss Adjustment Expense Reserve Analysis A key indicator of management’s commitment to financial stability, solvency and capital adequacy is their desire and ability to record adequate loss and loss adjustment expense reserves (loss reserves) on a consistent basis. Adequate loss reserves meet a higher standard than reasonable loss reserves. Demotech views adverse loss reserve development as an impediment to the acceptance of the reported value of current, and future, surplus and that any amount of adverse loss reserve development on a consistent basis is unacceptable. Consistent adverse loss development may be indicative of management’s inability or unwillingness to properly estimate ultimate incurred losses. RRGs collectively reported adequate loss reserves at year-end 2016 as exhibited by the one-year and two-year loss development


results. The loss reserve development to policyholders’ surplus ratio measures reserve deficiency or redundancy in relation to policyholder surplus and the degree to which surplus was either overstated, exhibited by a percentage greater than zero, or understated, exhibited by a percentage less than zero. The one-year loss reserve development to prior year’s policyholders’ surplus for 2016 was -2.3 percent and was less favorable than 2015, when this ratio was reported at -4.6 percent. The two-year loss reserve development to second prior year-end policyholders’ surplus for 2016 was -8.4 percent and was more favorable than 2015, when this ratio was reported at 20.3.7 percent. In regards to RRGs collectively, the both of these loss reserve development to prior year’s policyholders’ surplus ratios would be viewed as favorable.

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Income Statement Analysis In regards underwriting gains and losses, RRGs collectively were not profitable again in 2016. RRGs reported an aggregate underwriting loss for 2016 of $44.8 million, albeit an increase over 2015, and a net investment gain of $273.7 million, a decrease over 2015. RRGs collectively reported net income of $181.7 million, a decrease of 22.2 percent over 2015. Looking further back, RRGs have collectively reported an annual net income at each year-end since 1996. The loss ratio for RRGs collectively, as measured by losses and loss adjustment expenses incurred to net premiums earned, through year-end 2016 was 78.9 percent, a decrease over 2015, as the loss ratio was 79.3 percent. This ratio is a measure of an insurer’s underlying profitability on its book of business.

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The expense ratio, as measured by other underwriting expenses incurred to net premiums written, through year-end 2016 was 23.8 percent and indicates an increase compared to 2015, as the expense ratio was reported at 23.3 percent. This ratio measurers an insurer’s operational efficiency in underwriting its book of business. The combined ratio, loss ratio plus expense ratio, through year-end 2016 was 102.7 percent and indicates an increase compared to 2015, as the combined ratio was reported at 102.6 percent. This ratio measures an insurer’s overall underwriting profitability. A combined ratio of less than 100 percent indicates an underwriting profit. Regarding RRGs collectively, the ratios pertaining to income statement analysis appear to be appropriate. Moreover, these ratios have remained within a profitable range.

Douglas A Powell is a Senior Financial Analyst at Demotech, Inc. Mr. Powell supports the formulation and assignment of Financial Stability RatingsÂŽ by providing analysis of statutory financial statements and business information. He also performs financial and operational and peer group analyses, as well as benchmark studies for client companies. Email your questions or comments to dpowell@demotech.com. For more information about Demotech visit www.demotech.com.

Conclusions Based on 2016 Results Despite political and economic uncertainty, RRGs remain financially stable and continue to provide specialized coverage to their insureds. The financial ratios calculated based on the reported results of RRGs appear to be reasonable, keeping in mind that it is typical and expected that insurers’ financial ratios tend to fluctuate over time. The results of RRGs indicate that these specialty insurers continue to exhibit financial stability. It is important to note again that while RRGs have reported net income, they have also continued to maintain adequate loss reserves while increasing premium written year over year. RRGs continue to exhibit a great deal of financial stability.

INNOVATIVE STOP LOSS AND ANCILLARY SOLUTIONS At BenefitMall, we know that employer groups benefit most from treating their health plan as an investment rather than an expense. Our team of self funded consultants can help you succeed by offering: U 1˜Lˆ>Ăƒi`ĂŠ Ă?ÂŤiĂ€ĂŒÂˆĂƒiĂŠ>˜`ĂŠ,iĂ›ÂˆiĂœ U ĂŠÂ˜ÂˆĂŒÂˆ>Â?ĂŠ*Â?>Vi“iÂ˜ĂŒ]ĂŠ“Â?i“iÂ˜ĂŒ>ĂŒÂˆÂœÂ˜ĂŠ>˜` ,i˜iĂœ>Â?ĂŠÂœvĂŠ ÂœĂ›iĂ€>}i U ĂŠ Â?>ÂˆÂ“ĂƒĂŠĂ•`ÂˆĂŒ]ĂŠ-Ă•LÂ“ÂˆĂƒĂƒÂˆÂœÂ˜]ĂŠ/Ă€>VŽˆ˜}] >˜`ĂŠ,iĂƒÂœÂ?Ă•ĂŒÂˆÂœÂ˜ĂŠ-iĂ€Ă›ÂˆViĂƒ U ĂŠ,iÂŤÂœĂ€ĂŒÂˆÂ˜}]ĂŠ ÂœÂ“ÂŤÂ?ˆ>˜ViĂŠ-iĂ€Ă›ÂˆViĂƒĂŠ>˜` *Â?>Â˜ĂŠ ÂœVՓiÂ˜ĂŒĂŠ,iĂ›ÂˆiĂœ U ˆÂ?Â?ˆ˜}ĂŠ>˜`ĂŠ*Ă€iÂ“ÂˆĂ•Â“ĂŠ ÂœÂ?Â?iVĂŒÂˆÂœÂ˜ U ˜VˆÂ?Â?>ÀÞÊ*Ă€Âœ`Ă•VĂŒĂƒĂŠ>˜`ĂŠ-iĂ€Ă›ÂˆViĂƒ




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Foundation Plays Key Role in Supporting the Self-Insurance Industry Originally established as 501(c)(3) organization affiliated with the Self-Insurance Institute of America, Inc. (SIIA), SIEF has had a vital role in supporting the self-insurance and alternative risk transfer industry for more than 20 years. The foundation’s mission is to raise the awareness and understanding of self-insurance among the business community, policymakers, consumers, the media and other interested parties, and has been modernized in way to provide more direct value to those currently involved in the industry.

The foundation is governed by a board of directors comprised of well-known industry leaders including:

Nigel Wallbank Chairman

Heidi Leenay President

Freda Bacon Director

Les Boughner Director

Alex Giordano Director

July 2017 | The Self-Insurer


SIEF has participated in many endeavors to further their mission over the years including

• sponsoring essay contests and internship programs geared for college students pursuing degrees in insurance and/or risk management

• producing and maintaining a website that serves as on online hub for objective information about selfinsurance

• sponsoring the participation of high profile, professional and government speakers to participate at SIIA conferences

SIEF has also coordinated multiple educational sessions on Capitol Hill, which have been designed to help congressional staff members understand the basics about self-insurance and captive insurance. The foundation’s financial support comes entirely from voluntary contributions and from participation in various fundraising events, including raffles with a variety of prizes and the always popular golf tournaments held in conjunction with SIIA events. All contributions to SIEF are tax deductible, so by financial supporting the foundation you can also reduce your company’s tax liability -- a true win-win situation. SIEF will be hosting one of their golf tournaments in conjunction with SIIA’s 37th Annual National Conference & Expo, on October 8, 2017 at the Wildfire Golf Club at the JW Marriott Desert Ridge Resort & Spa in Phoenix, Arizona. The golf tournament is open to all conference registrants, and promise to be an excellent opportunity to network with executive-level industry colleagues and peers. The tournament will be a scramble format and you can either sign up as an individual or reserve a foursome.

• underwriting an annual survey report of the stop-loss marketplace

• and producing high quality publications that provide reference information about self-insured group health plans, group self-insured workers’ compensation programs and captive insurance companies.


Registration & Breakfast 7:00 am – 8:00 am Shot-Gun Start 8:00 am Tournament Play 8:00 am – 12:00 pm

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$450 per person $1800 per foursome

Includes: Green Fees for 18 Holes, Golf Cart, Continental Breakfast, Beverages, PostTournament Lunch and Various Prizes. All skill levels are welcome!

Don’t miss this exclusive opportunity to better your handicap, refine your putting skills and support the foundation dedicated to ensuring the development of tomorrow’s leaders in the self-insurance/captive insurance industry. This is also a great event to promote your company’s corporate brand through a variety of sponsorship opportunities. For sponsorship information, contact Shane Byars at 800/851-7789, or via e-mail at sbyars@siia.org.

Do you aspire to be a published author? Do you have any stories or opinions on the self-insurance and alternati ve

For more information SIEF or to contribute, please visit www.siefonline.org.

risk transfer industry that you would like to share with your peers? We would like to in vite you to share your insight and submit an article to The Self-Insurer ! distributed in a digital and print format to reach over 10,000 readers around the world. The Self-Insurer has been delivering information to the self-insurance /alternative risk transfer community since 1984 to self-funded employ ers, TPAs, MGUs, reinsurers, stoploss carriers, PBM s and other service providers.

Articles or guideline to Editor Gretchen Grote at ggrote@sipconline.net also has advertising opportunities available. Please contact Shane

Byars at sbyars@sipconline.net for advertising information. July 2017 | The Self-Insurer



from SIIA



SIIA Diamond, Gold & Silver Member News

SIIA Diamond, Gold, and Silver member companies are leaders in the self-insurance/captive insurance marketplace. Provided below are news highlights from these upgraded members. News items should be submitted to Wrenne Bartlett at wbartlett@siia.org. All submissions are subject to editing for brevity. Information about upgraded memberships can be accessed online at www.siia.org. For immediate assistance, please contact Jennifer Ivy at jivy@siia.org. If you would like to learn more about the benefits of SIIA’s premium memberships, please contact Jennifer Ivy and jivy@siia.org. Diamond Members Berkley Accident and Health Hosts its Largest Captive Symposium to Date Berkley Accident and Health, a Berkley Company, welcomed more than 200 attendees and guests to the 2017 Berkley Captive Symposium. The three-day meeting is a signature event for Berkley Accident and Health. It brings together a unique mix of captive members, brokers, TPAs, and risk management experts for a powerful time of education, collaboration, and networking. 38

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Held April 23-26 in Grand Cayman, the Symposium is a dynamic time to share ideas and talk specifics about health risk management strategies and execution. The event featured:

• Educational sessions on tactics to manage first-dollar and catastrophic claims, including: specialty Rx, telehealth, obesity management, COBRA enrollments, and reference based pricing

• Mike Ferguson, President and CEO of the Self-Insurance Institute of America (SIIA), who shared insights into the current political and regulatory landscape

• Annual business meetings for several Berkley programs, focusing on: financial results, new member-driven initiatives, and collaborative risk management strategies

• Orientation for new captive members and case studies, as well as networking opportunities for attendees to connect with each other in relaxed settings The 7th annual Berkley Captive Symposium was the largest and most successful meeting to date. “It was a great opportunity to learn more about what others are doing to control medical and Rx costs,” stated one attendee. In the follow-up survey, 100% of respondents stated they were “very likely to recommend the Symposium to a colleague or friend.” The Berkley Captive Symposium is an invitation-only event for captive members and distribution partners of Berkley Accident and Health. To learn about next year’s event, please contact one of Berkley Accident and Health’s captive business development leaders about attending next year: Find your local EmCap expert.

• Adam Russo, CEO of The Phia Group, who discussed costcontainment techniques for plan documents

July 2017 | The Self-Insurer


About Berkley Accident and Health Berkley Accident and Health is a member company of W. R. Berkley Corporation, a Fortune 500 company. Berkley Accident and Health provides an innovative portfolio of accident and health insurance products. It offers four categories of products: Employer Stop Loss, Group Captive, Managed Care (including HMO Reinsurance and Provider Excess), and Specialty Accident. The company underwrites Stop Loss coverage through Berkley Life and Health Insurance Company, rated A+ (Superior) by A.M. Best. Contact Jim Hoitt, Sr. Vice President - Captive Division JHoitt@ BerkleyAH.com and visit www.BerkleyAH.com and www.benefitscaptives.com.


HM Insurance Group Announces Tom Doran as New President & COO Tom Doran has been named president & COO of HM Insurance Group (HM), replacing Matt Rhenish, who accepted a new role at Highmark Inc., HM’s parent company, as president of national and specialty businesses. As president of HM, Doran will be responsible for the strategy, operational management and executive leadership of the company. He brings more than 20 years of expertise in reinsurance, pricing, reserving, underwriting, actuarial services and network contracting to the position.

“Tom is a great addition to HM,” said Chip Merkel, chairman and CEO of HM Insurance Group. “His knowledge of our core lines of business and markets is extensive, and I am confident that he will continue to move the company forward as a leader in stop loss and managed care reinsurance.”

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YOUR BEST PARTNER EARNS YOUR TRUST EVERY DAY Employers of all sizes experience high-cost medical claims. As an independent stop-loss provider with strong financial ratings, we’re here for you. Listening to you. Helping you design a stop-loss plan that meets your needs with specialized options. Delivering hassle-free claims reimbursements. Want a partner that earns your trust every day? Go with Sun Life. Ask your Sun Life Stop-Loss specialist how we can put our expertise to work for you.

STOP-LOSS | DISABILITY | DENTAL/VISION | VOLUNTARY | LIFE For current financial ratings of underwriting companies by independent rating agencies, visit our corporate website at www.sunlife.com. For more information about Sun Life products, visit www.sunlife.com/us. Group insurance policies are underwritten by Sun Life Assurance Company of Canada (Wellesley Hills, MA) in all states except New York, under Policy Form Series 07-SL REV 7-12. In New York, group insurance policies are underwritten by Sun Life and Health Insurance Company (U.S.) (Lansing, MI) under Policy Form Series 07-NYSL REV 7-12. Product offerings may not be available in all states and may vary depending on state laws and regulations. Š 2017 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. BRAD-6503f SLPC 28097 02/17 (exp. 02/19)

Doran came to HM from Medical Risk Managers (MRM), the largest Stop Loss MGU in the country, where he served as the company’s president. Prior to that, he held the role of executive vice president at MRM and gained actuarial experience at Aetna, Hartford Life and Aon Hewitt. He has a Bachelor of Science degree in Mechanical and Aerospace Engineering from Princeton University and is a fellow of the Society of Actuaries and a member of the American Academy of Actuaries. “I’m excited to join the HM team,” Doran said. “The company demonstrates a commitment to building long-term relationships with producers and partners -- something very integral to success in this industry. We will continue to deliver on our traditions and promises to protect the financial wellbeing of HM’s policyholders.” About HM Insurance Group HM Insurance Group (HM) works to protect businesses from the potential financial risk associated with catastrophic health care costs. The company provides reinsurance solutions that address risk situations confronting employers, providers and payers. A recognized leader in Employer Stop Loss, HM also offers Managed Care Reinsurance nationally.

HM Life Insurance Company, HM Life Insurance Company of New York and Highmark Casualty Insurance Company are rated “A-” (Excellent) by A.M. Best Company, one of the country’s oldest and most respected rating agencies. HM also consistently has been named to Ward’s 50 top life and health carriers based on financial performance. Through its insurance companies, HM Insurance Group holds insurance licenses in 50 states and the District of Columbia and maintains sales offices across the country. Contact Jennifer Mahan at jennifer.mahan@ hminsurancegroup.com and visit www.hmig. com.

At Meritain Health, we are your Advocates for Healthier Living. We strive to help our members lead healthy, productive lives. That’s why we offer tools and services our members use to ensure long-lasting health and well-being.

For more information, visit www.meritain.com.


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high expectations


enhanced capabilities


peace of mind

We’ve got your back. Four words that anyone seeking to self-fund healthcare benefits needs to believe, particularly when contemplating the financial risks associated with catastrophic medical events. That’s why we’re firm believers at Swiss Rwe Corporate Solutions in building strong relationships, understanding exactly what our partners expect of us, and creating innovative ways of fulfilling those expectations. And that’s also why we’ve integrated IHC Risk Solutions into our business. The result is a powerful combination of expertise and capabilities that offers brokers, advisors, payers and their employer clients enhanced value – not to mention extra peace of mind. Now, more than ever, we’ve got your back. We’re smarter together.

swissre.com/esl Insurance products underwritten by Westport Insurance Corporation and North American Specialty Insurance Company.

Swiss Re’s Accident & Health Division Has Two Opportunities for Senior Account Managers Swiss Re’s Accident & Health division is growing! Swiss Re has two opportunities in their Scottsdale, AZ and Marlton, NJ offices for Senior Account Managers to join their team working closely with their Underwriting and Sales teams to facilitate renewals of in force business.You will be joining a fast paced and energetic team. If you are a motivated individual looking to join a leading provider of medical stop loss insurance apply on-line today! About the role Swiss Re Corporate Solutions’ Sales team is highly skilled and experienced in building, actively managing and expanding producer relationships. The Senior Account Manager is expected is have an extensive knowledge and background in underwriting and supports the Sales Team through profitable retention and in achieving their retention targets. The Senior Account Manager is also expected to deliver high quality customer service, promoting and enhancing the reputation of the Swiss Re Corporate Solutions and will work closely with their Regional Sales Executive to ensure our producers have clear understanding of our products and procedures. The Senior Account Manager is the primary contact for Swiss Re Corporate Solutions producers for all day-to-day services issues, which may include but not limited to billing, claims, contracts, and compliance. Producer interactions include phone calls, on site visits and client entertainment. This position is also solely responsible for retention on their assigned block of business.


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About the team

• Responsible for coordinating renewal including policy revision and rate negotiations

• Accountable for maintaining a 75% retention across their assigned block of business

• Complete and in depth knowledge of the underwriting process

• Maintain strong relationships with assigned underwriters to ensure a successful renewal

• Assist in providing training, direction and guidance to the Account Managers in the underwriting process

• Develop and maintain strong producer relationships in collaboration with the Regional Sales

• Executive through personal

• Responsible for adding new, update existing and deactivating contacts in DY

meetings, telephone or email correspondence

• Assist with all other duties as requested and assigned

• Investigate, coordinate and respond to service related requests in conjunction with any department

About You

• Investigate and coordinate correspondence related issues that need other departmental input such as Claims, Policy Issue and Premium Administration

• Verify and complete the Sold Case Confirmation process for new sales and renewals

• College degree, or work experience equivalent. • 5 or more years experiencing Underwriting A&H business or 5 or more years as an Account Manager.

• Ability to travel up to 30% is required. • Excellent organization skills. • Able to handle multiple priorities and work effectively under tight deadlines.

A Long Tradition of Insurance Solutions for Companies that Self-Fund Their Medical Plan Helping to better manage the risks associated with catastrophic claims

Manage the risks of self-funding.

AIG’s Group Benefits business has decades of experience in helping companies manage the risks of self-funding through stop loss, specified disease organ transplant, group captive, and Taft-Hartley solutions. Learn about all the ways AIG’s Group Benefits business is here for you. Talk to one of our representatives or visit us online at aig.com/us/benefits.

The underwriting risks, financial and contractual obligations, and support functions associated with products issued by National Union Fire Insurance Company of Pittsburgh, Pa., are its responsibility. National Union Fire Insurance Company of Pittsburgh, Pa., maintains its principal place of business in New York, NY, and is authorized to conduct insurance business in all states and the District of Columbia. NAIC No. 19445. Coverages may not be available in all states. © 2016. All rights reserved. AIGB100939 R03/16


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• Strong appreciation for the need to meet stated minimum compliance commitments within the timeframes given.

• Strong client focus and service orientation.

• Strong oral and written communication skills in English.

• Experienced negotiator. • Excellent interpersonal skills; ability to effectively manage a large block of business and achieve goals; collaborative.

• Microsoft suite knowledgeable.

The Company is an equal opportunity employer. It is the practice of the Company to recruit, hire and promote without regard to race, religion, color, national origin, sex, disability, age, pregnancy, sexual orientations, marital status, military status, or any other characteristic protected by law. Decisions on employment are solely based on an individual’s qualifications for the position being filled.

Silver Members AXIS Insurance Hires James Martin and Appoints Russ Madore as Vice Presidents within Its U.S. Property and Casualty Team AXIS Capital Holdings Limited (“AXIS Capital”) (NYSE:AXS) today announced the respective appointments of James Martin and Russ Madore, each as Vice President, U.S. Programs, within AXIS Insurance’s Property and Casualty team. Messrs. Martin and Madore will each be responsible for oversight of select AXIS Insurance programs in the Property and Casualty sector. Both are based out of the Company’s Alpharetta, Georgia, office, where they report to John Tatum, Executive Vice President and Head of U.S. Programs at AXIS Insurance.

“These appointments speak to AXIS’ commitment to further deepening our scale and relevance in specialty Property and Casualty programs, an area where the Company has long had a strong track record of success,” said Mr.Tatum. “In Jim, we’ve added a highly seasoned professional and a proven leader who brings deep experience in the construction and transportation categories. We’re also pleased to announce the transition of Russ to our U.S. P&C team and look forward to the insights and ideas that he will bring to the U.S. Property and Casualty team from his nearly 15 years with AXIS.”

During the recruitment process, reasonable accommodations for disabilities are available upon request. If contacted for an interview, please inform the Recruiter/HR Professional of the accommodation needed. About Swiss Re The Swiss Re Group is a leading provider of medical stop loss, reinsurance, insurance and other insurance-based forms of risk transfer. Founded in Zurich, Switzerland, in 1863, Swiss Re serves clients through a network of around 80 offices globally and is rated “AA-” by Standard & Poor’s, “Aa3” by Moody’s and “A+” by A.M. Best. Visit www.swissre.com.

July 2017 | The Self-Insurer


Mr. Martin has nearly four decades of insurance industry experience. Prior to AXIS, he was an Auto Product Line Specialist in Starr Companies’ Environmental Division. Previously, he spent 17 years at CNA, where he was Director of Captives and managed the group captive programs for trucking and roofing, as well as its commercial insurance programs for landcare network and building equipment installation and repair. Before CNA, Mr. Martin held casualty underwriting roles at Continental National Indemnity, Northbrook Property and Casualty, Midwestern Indemnity and The Hartford. He received his Bachelor’s degree in communications from John Carroll University, and holds multiple professional certifications, including: Certified Insurance Counselor, Certified Risk Manager, Construction Risk Insurance Specialist, and Transportation Risk Specialist. Mr. Madore, who had previously held a number of senior financial positions within AXIS Insurance, is one of AXIS’ longest-tenured employees, having joined the Company in November 2002. He most recently served as Vice President, Finance Officer, for AXIS Insurance’s U.S. Division. He is a graduate of Kean University, where he earned his Bachelor’s degree in accounting. About AXIS Capital AXIS Capital is a Bermuda-based global provider of specialty lines insurance and treaty reinsurance with shareholders’ equity at March 31, 2017, of $6.2 billion and locations in Bermuda, the United States, Europe, Singapore, Middle East, Canada and Latin America. Its operating subsidiaries have been assigned a rating of “A+” (“Strong”) by Standard & Poor’s and “A+” (“Superior”) by A.M. Best. For more information about AXIS Capital, visit our website at www. axiscapital.com. Please be sure to follow AXIS Capital on LinkedIn.


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Gold Members Indigo Seeks National Stop Loss Sales Executive Job Title Indigo National Stop Loss Sales Executive Summary As an Indigo Stop Loss Sales Executive, you’ll have the support of one of the nation’s leading insurance companies and the flexibility and growth potential of running your own business.You’ll solve clients’ needs through consultative and solution based selling, by building relationships with contacts in your territory to identify, develop and close sales opportunities.

Medical stop loss insurance from Berkshire Hathaway Specialty Insurance comes with a most trusted name and the stability of an exceptionally strong balance sheet. Our executive team has 30 years of experience and a commitment to tailoring solutions and paying claims quickly. All of which is key to ensuring your program’s success for years to come. With so many choices, you can make this one with certainty.

Asheville | Atlanta | Boston | Chicago | Houston | Irvine | Indianapolis Los Angeles | New York | San Francisco | San Ramon | Seattle Stevens Point | Auckland | Brisbane | DĂźsseldorf | Hong Kong | Kuala Lumpur | London | Macau | Melbourne | Singapore | Sydney | Toronto



• Sell Indigo Insurance Services Medical Stop Loss product through insurance brokers, third party administrators and consultants.

• Build and establish relationships with key sources to market our product to some of the nation’s leading employers.

• Construct and maintain a business plan for your designated territory based on sales and strategic initiatives.

• Call on existing and potential customers to not only prospect new customers but also to develop a book of business.

• Meet annual targets and individual sales goals. • Develop internal relationships with underwriters and internal support partners who will assist you in creating specialized plans to meet your clients’ needs.


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• Bachelor’s Degree from a four-year college or university preferred.

• Previous experience selling the Stop Loss product required.

• Commitment to attaining state required Life and Health agent license.

• Proven relationships with underwriting and technical product expertise.

• Strong organizational skills.

• Strong networking and relationship management skills.

About Indigo

• Excellent listening, presentation, negotiating and communication skills

Indigo is a full-service insurance agency that offers an extensive suite of specialty insurance products including stop loss, life, disability, vision, travel, accident, critical illness, workers’ compensation, and more.. We partner with market-leading insurance carriers that offer outstanding customer service, fast claim payments, and flexible benefits that set them apart from their competition. We only partner with A-rated carriers, and we’re a wholly-owned subsidiary of the largest commercial health insurer in Massachusetts--so we’ll be there when we’re needed the most. Visit www.indigoinsurance.com.

• A passion to succeed and challenge yourself while building a book of business • A winning attitude and interested in a career that offers independence, professional growth, and high income potential.

• The successful candidate is driven, self-motivated, consultative and a great problem solver Interested candidates should send resume to Kim Grace at Grace.Kim@bcbsma.com.

July 2017 | The Self-Insurer


SIIA Would Like to Recognize its Volunteer Leadership 2016 Board of Directors CHAIRMAN* Jay Ritchie Executive Vice President Tokio Marine HCC – Stop Loss Group Kennesaw, GA TREASURER & CORPORATE SECRETARY* Duke Niedringhaus Senior Vice President, J.W. Terrill, Inc. Chesterfield, MO CHAIRMAN-ELECT* Robert A. Clemente CEO Specialty Care Management LLC Lahaska, PAKennesaw, GA

Directors Adam Russo Chief Executive Officer The Phia Group, LLC Braintree, MA Joseph Antonell CEO/Principal A&M International Health Plans Miami, FL Kevin Seelman Senior Vice President Lockton Dunning Benefit Company Dallas, TX Andrew Cavenagh President Pareto Captive Services, LLC Philadelphia, PA Mark L. Stadler CEO BridgeHealth Denver, CO


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Mary Catherine Person President HealthSCOPE Benefits, Inc. Little Rock, AR David Wilson President Windsor Strategy Partners, LLC Princeton Junction, NJ

Committee Chairs CAPTIVE INSURANCE COMMITTEE Michael P. Madden Senior Vice President Artex Risk Solutions, Inc. San Francisco, CA GOVERNMENT RELATIONS COMMITTEE Lawrence Thompson Senior Vice President, Sales & Client Services POMCO Group Syracuse, NY

HEALTH CARE COMMITTEE Kari L. Niblack Executive Vice President of Client Engagement & Services Apex Benefits Indianapolis, IN INTERNATIONAL COMMITTEE Robert Repke President Global Medical Conexions, Inc. Novato, CA WORKERS’ COMP COMMITTEE Stu Thompson CEO The Builders Group Eagan, MN

Healthy employees build strong businesses. What are you doing to strengthen yours?

As featured in the September 2016 issue of Self-Insurer Strengthen your business with In-Sight, the first truly integrated Employee Benefits, Workers’ Compensation and Health Management program. In-Sight puts the administrative and cost control efforts of these programs into the hands of a single, integrated team. Why? Integration allows us to eliminate administrative oversight, prevent duplicate claims and address potential health issues before they become costly problems. The result? Reduced claims spending and a healthier, more productive workforce. Call IPMG at (888) 470-9569 to learn how In-Sight can strengthen your business.


SIIA New Members Regular Corporate Members


Silver Member

Brian Wroblewski EVP - Sales & Marketing ClearHealth Strategies Naperville, IL

Thomas Gilliam President/Founder IPCS Hudson, OH

Scott Swarts Vice President - Client Relations Health Cost Control, Inc. Houston, TX

Adam Dubuque, CPA, CPCU, ARM, ARe Partner Johnson Lambert LLP Burlington, VT

The Self-Insurer | www.sipconline.net

Jeff Petty President PACE Underwriters LLC Plano, TX Trenton Hiott Sky Insurance Tech Greenville, SC

Better Service. Better Performance.

Experience Zelis Healthcare.

Network Solutions

Claims Integrity


Provides Discounts and Access to Networks

Ensures Appropriate Reimbursement for Care

Efficient and Timely Payment and Data

Zelis Healthcare is a healthcare information technology company that provides solutions which address pre-payment to payment needs across the claims life cycle.

Find out what Fully Integrated Healthcare Cost Management can do for you! Visit us at Zelis.com Copyright 2016 Zelis Healthcare. All rights reserved.

High-Dollar or Dialysis claim? We can help. EthiCare saves claim payors money. Period.

888.838.4422 Savings@EthiCareAdvisors.com


Profile for SIPC

Self insurer july 2017  

Self insurer july 2017