Self Insurer January 2020

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A S I P C P U B L I C AT I O N

Captives Take the

BURN out of Lasers

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TABLE OF CONTENTS

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FEATURES 4

CAPTIVES TAKE THE BURN OUT OF LASERS

By Mike Madden

10

BUILDING A CULTURE OF HEALTH FROM THE INSIDE OUT

By Richard Safeer, MD

ARTICLES 18 REACHING A CAPTIVE AUDIENCE

SIIA ADVANCES SUGGESTED CODE OF

CONDUCT FOR CAPTIVE MANAGERS TO HELP

POLICE PERFORMANCE, PROVIDE

PROFESSIONAL BENCHMARKS AND RAISE

CREDIBILITY IN THE EAGLE EYES OF STATE REGULATORS 24

THE CAPTIVE SECTOR IN 2020

30

UNDERSTANDING THE LEGISLATIVE EFFECTS ON STATE-LAW BENEFIT PLANS

35 SIIA ENDEAVORS

40

NEWS FROM SIIA MEMBERS

The Self-Insurer (ISSN 10913815) is published monthly by Self-Insurers’ Publishing Corp. (SIPC).

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PUBLISHING DIRECTOR Erica Massey, SENIOR EDITOR Gretchen Grote, CONTRIBUTING EDITOR Mike Ferguson, DIRECTOR OF OPERATIONS Justin Miller, DIRECTOR OF ADVERTISING Shane Byars, EDITORIAL ADVISORS Bruce Shutan and Karrie Hyatt, 2018 Self-Insurers’ Publishing Corp. Officers James A. Kinder, CEO/Chairman, Erica M. Massey, President, Lynne Bolduc, Esq. Secretary

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FEATURE

Captives Take the

BURN out of Lasers

Written By Mike Madden

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here comes a time in nearly every self-funded employer’s experience when a single catastrophic claim threatens to bankrupt its health benefit plan. Whether it be the rare $1 million premature baby or organ transplant or a cancer requiring expensive chemotherapy, it can happen.

Specialty drugs, extended hospital stays and complex treatments are major cost drivers in million-dollar-plus claims, according to a claims analysis published in June 2019 by Sun Life Financial, a leading medical stop-loss underwriter with approximately 2,300 U.S. employer clients that cover more than 4.7 million people.

The number of patients with more than $1.5 million in claims surged 54 percent between 2015 and 2018, Sun Life reported. Meanwhile, the number of patients with more than $3 million in claims rose 140 percent, according to Sun Life, which analyzed nearly 37,000 high-dollar medical claims in its database.

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Taking the Burn Out of Lasers Berkley Accident and Health, a Member of W.R. Berkley Corporation that specializes in accident and health products, recently reported similar experience, with the incidence of stop-loss claims exceeding $1 million more than doubling between 2014 and 2017 from 49 per 100,000 employees in 2014 to 109 per 100,000 in 2017.

Pharmaceutical costs are major contributors to the costs of $1M claims, as new and more expensive drugs enter the pipeline. According to the National Institutes of Health, 38,175 registered clinical studies with posted results were being conducted as of August 11, 2019, 28,166 of which involved drugs or biologics.

Moreover, that number will continue to grow as improvements are made in detecting disease, understanding the root causes of acute and chronic illnesses, and in discovering new medical interventions.

More U.S. employers than ever before are feeling the brunt of these catastrophic claims since more of them are self-insuring. The proportion of self-funded employers has swelled to more than 60% today from just 48% in 2010, according to the annual Kaiser Employer Health Benefits Survey.

Typically, smaller and midsize employers that self-insure their health plans purchase medical stop-loss coverage to protect against high-dollar claims. However, since the passage of the Affordable Care Act in 2010, even the large Fortune 500 companies now buy it. This is because the ACA prohibited health plans from setting lifetime limits on benefits beginning in 2011.

Annual caps also were eliminated for plan years beginning after Jan. 1, 2014.

As a result, self-funded employers now face unlimited plan exposure unless, of course, they purchase medical stop-loss coverage.

In fact, because so many more selffunded employers are purchasing medical stop-loss coverage, the market has exploded, growing from $7 billion before the ACA’s passage to more than $18 million today. It is expected to eclipse $22 billion within the next few years.

Additionally, with the advent of new and more expensive treatments for conditions like cancer, the incidence of self-insured employers filing stop-loss claims also is growing. Sun Life’s research found that 85 percent of self-funded employers experienced a medical stop-loss claim in any given policy year, while 22 percent had at least one member with a claim of more than $1 million over a four-year period.

When a self-funded group files a stoploss claim in connection with one or more of these high-dollar claims with a potential to be on-going, that is it costs will continue into the next policy year, its medical stop-loss carrier will mostly likely require that a laser be placed on those individuals at renewal time, so that it can limit its exposure.

With a laser, the carrier either totally excludes certain individuals from stoploss coverage or raises the deductibles for those individuals.

Medical stop loss is a form of excess-ofloss coverage to protect against larger, more unpredictable risks, but when a known condition can be identified;

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YOUR BEST PARTNER LEADS THE WAY

For more than 35 years, self-funded employers have trusted Sun Life to deliver flexible stop-loss solutions and seamless claim reimbursement. And now, with our new Clinical 360 program, our clinical experts will review your claims data to identify cost savings and care optimization. With high-cost medical and pharmacy claims growing every year, you need your best partner with you every step of the way. Ask your Sun Life Stop-Loss specialist about our latest innovations.

STOP-LOSS

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DISABILITY

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ABSENCE

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DENTAL / VISION

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VOLUNTARY

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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. Stop-Loss 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, Stop-Loss 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. © 2019 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 www.sunlife.com/us.

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Taking the Burn Out of Lasers it becomes an expected or predictable risk. The practice of lasering supports the self-funding principal of retaining known, or predictable, risk and only purchasing insurance for unknown, or unpredictable, risk.

So, for example, if the employer’s specific stop-loss deductible is $50,000, an individual with a serious ongoing claim may have his or her own separate deductible of $150,000. The self-funded employer would then be responsible for paying the difference between the $50,000 specific deductible and the $150,000 laser deductible.

In recent years, due to the increasing prevalence of high-dollar claims, more stop-loss insurers are imposing lasers. Moreover, insurers that previously did not institute lasers have begun doing so.

Alternatively, the stop-loss carrier may offer a “no-laser” policy at renewal, which often comes with a hefty price tag. The no-laser renewal contract also typically has a rate cap that specifies the maximum premium increase that can be charged at renewal.

So, for example, the policy may have an initial 10% premium bump over the prior year with a renewal rate cap of 40%. However, rate caps are on the rise and what was a 40% rate cap two years ago is now 55% or more.

However, there is an alternative to self-funded employers paying for an expensive no-laser renewal or exposing themselves to picking up 100% of the tab for lasered individuals’ medical expenses.

That employer could join together with other employers and form a group captive to fund the difference between the plan’s medical stop-loss deductible and the laser level, spreading this cost among other captive members.

A "captive insurer" is generally defined as an insurance company that is wholly owned and controlled by its insureds; its primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting profits.

By grouping together and forming a captive, midsize employers also have greater leverage in negotiating more attractive long-term contracts with stop loss carriers. They can collectively purchase stop-loss coverage with a higher deductible, which costs significantly less than such coverage with lower deductibles and the higher deductible will take you most typical lasered claims.

Additionally, pooling several midsized employers’ health benefit risks in a captive creates greater underwriting credibility, or predictability, for the stoploss carrier. The larger the group, the more predictable the claims experience.

Larger participation numbers also help to stabilize the loss volatility within the layer of risk that is retained by the captive.

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: • Reporting, Compliance Services and Plan Document Review • Billing and Premium Collection • Ancillary Products and Services

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Taking the Burn Out of Lasers Then when a captive member is faced with lasers on certain plan members, they can spread this risk among the other captive participants on a quota-share basis, as determined by their prior claims experience.

For example, an employer with greater exposure to such catastrophic claims would be put in the highest tier, paying a greater percentage of the claims, while an employer with the least exposure would pay the smallest percentage of claims. The remaining employers would fall in the middle tier.

If the average group captive member has 100 employees, a typical medical stop-loss captive with 30 members/owners and 3,000 employees would have the following proportional breakdown of laser costs:

# of # of Employers 1,500 15 1,200 12 300 3 3,000 30

Tier Low Mid Hi Total

Average Additional Costs Final Final Stop Loss Initial Stop Loss for Known Premium by Premium By Premium Premium by Tier Claimants Tier Employer 300,000 4,500,000 4,770,000 318,000 300,000 3,600,000 77,500 3,924,000 327,000 300,000 900,000 732,500 1,116,000 372,000 9,000,000 810,000 9,810,000

Average

Tier Low Mid Hi Target

Increase 6% 9% 24% 9.00% 0

Claim # 1 2 3 4 5 6 7 8 9 10 Total Row Labels Mid Hi Grand Total

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Amount 50,000 40,000 30,000 200,000 225,000 125,000 70,000 175,000 150,000 160,000 1,225,000

Likelihood

Discounted Related Amount Employer 95% 47,500 Mid 75% 30,000 Mid 50% 15,000 Hi 25% 50,000 Hi 75% 168,750 Hi 60% 75,000 Hi 40% 28,000 Hi 75% 131,250 Hi 75% 112,500 Hi 95% 152,000 Hi 810,000

Sum of Discounted Amount 77500 732500 810000

Taking the Burn Out of Lasers Note that a prudent practice of the captive will be to laser on the way into the captive offering the protection of the group for on-going claimants at renewal.

The captive is protective when employers join, but then extends the benefit at subsequent renewals. Think of this as ‘saving for a rainy day’.

The captive also uses a team-based approach to managing lasered individuals’ claims to ensure they don’t get out of hand. The team, consisting of the captive program manager, thirdparty administrator, stop-loss carrier, benefit consultant, and employer, has broader access to cost containment and case management services including dialysis vendors, transplant and specialty pharmaceutical networks, and Centers of Excellence.

low-tier employers will experience a claim exceeding $1 million in any given year. By pooling this risk in a captive, it removes the peaks and valleys that might otherwise occur.

Large self-funded employers with single-parent captives also can benefit from this risk-sharing technique by placing a portion of its medical stop-loss risk in its property/casualty captive spreading the risk of an ongoing claimant across other lines of business instead of across disparate employers thereby dampening down volatility.

For example, if the benefit plan retains the first $250,000 of claims, the employer could purchase specific stop-loss coverage with a specific deductible of $1 million per-employee but use the captive to pay claims between $250,000 and $1 million.

Over time, as the captive builds loss reserves, those reserves can be used to pay the medical claims that might be lasered by the stop-loss carrier.

In conclusion, funding lasers via captives can serve as a viable alternative to paying higher premiums for no-new-laser-renewal stop-loss contracts while also providing a collective approach to risk management for self-funded employers.

By collaborating with other likeminded employers on risk management initiatives, costs associated with catastrophic claims can be better managed and mitigated.

Additionally, by leveraging the larger population of a group captive, some initiatives such as data analytics and predictive modeling can produce a better return on investment. Other initiatives such as sharing and establishing best practices among the employers can ensure cost containment measures are established within the plan documents to hopefully get out in front of the next claimant of concern.

While some of the captive members in the low tier might object to paying even a fraction of the lasered claims, it would be worth noting that eventually what goes around comes around. Based on the statistics shared earlier from SunLife, there is a 22% likelihood that even these

Michael P. Madden is the Senior Vice President – Benefits, North America at Artex Risk Solutions, Inc., a wholly-owned subsidiary of Arthur J. Gallagher (NYSE: AJG), focused on alternative risk solutions. In this role, Mike leads the Benefit Captive strategy, which provides employers with the opportunity to better manage health plan risk and costs through the development and management of captive insurance programs.

Mike Madden

Mike has over 20 years of experience structuring single-parent and group captive insurance programs for both employee benefit and property casualty coverages. Mike is one of the early innovators in the Benefit Captive space developing stop-loss group captive programs while working for both stop-loss carriers and captive management firms.

Mike is the immediate past Chairperson for the Self-Insurance Institute of America (www.siia.org) Captive Committee which, among other initiatives, promotes industry education and advancement of stop-loss captive programs, enterprise risk captives and group captive programs furthering the interests of captive owners, service providers and insurance industry professionals.

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FEATURE

Written By Richard Safeer, MD

Building a Culture of Health from the Inside Out This article is the first in a series from Dr. Richard Safeer, the Chief Medical Director of Employee Health and Well-being for Johns Hopkins Medicine

H H

aving worked with large employers over the span of two decades, here’s the number one mistake I see: employers placing all of the blame for unhealthy habits and chronic diseases on the shoulders of the employees.

Sure, these unhealthy habits and chronic diseases are certainly on the rise, and definitely cause for concern. But this dismal picture didn’t just pop up overnight. And yes, our health is a result of our own decisions. Yet nobody talks about the influence of our culture on those decisions.

Certainly, employers rarely think about what role they’ve played in the decline of their workforce well-being, even as Americans spend an average of 90,000 hours at work in their lifetimes. By looking at their own role, employers have the chance to develop a work environment that makes healthy behaviors easy, happenstance and fulfilling for all employees.

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Culture of Health To put it simply, workplaces need to focus on creating a culture of health.

Building a culture of health from the inside out gives workplaces the opportunity to tackle some of the most common health problems, from high blood pressure and diabetes to stress and mental wellbeing. Health programs will only help a few. But by reimagining the workplace as a center of wellbeing, employees won’t have to ‘sign up’ for a program to benefit. Employees can become healthier just by being part of their workplace community.

This vision is far from a utopia. At Johns Hopkins Medicine, we’ve developed a “Culture of Health” approach to make it easier for our employees to be “Healthy at Hopkins.” We’re moving beyond individual interventions towards something bigger.

By examining key aspects of the culture at Hopkins, we’ve been able to implement a wide range of strategies across 11 entities. In partnership with Wellness Corporate Solutions (WCS), a wellness vendor that supports comprehensive program management and on-site activities, we’ve been able to support our employee population and achieve meaningful cultural shifts. Many of the strategies we’ve implemented could apply across any workplace – as a proven approach to developing a healthy, thriving workforce.

find yourself in – it’s all of the traditions, norms, behaviors, practices, and beliefs that influence the people in a community. At Hopkins, we are defining “Culture of Health” as a “web of social influences that manifests itself in shared healthy beliefs and behaviors.”

There are four main reasons that focusing on building a healthy culture is a strategic approach.

1) Inclusivity. HR leaders always want to see high participation rates in their wellness programs, to reap the full benefits of a healthy population. When a wellness program is building a culture of health, employees don’t have to enroll or complete a specific action to “participate” – they are able to adopt and sustain healthy behaviors and positive feelings just from existing in a health-forward environment.

At Hopkins entities, we’ve incorporated ways for employees to be healthy as they go about their regular day. Simple messaging has gone a long way. We’ve added signs pointing towards building staircases and have built walking paths into the design of some of our buildings. The message is built right into employees’ daily routines.

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WHAT IS A CULTURE OF HEALTH? “Culture” is a broad term that is useful because its best definition encompasses behaviors and beliefs. That is, a culture is more than just the environment you

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Culture of Health 3) Helping employees succeed.

Many of the tactics that make a culture of health inclusive are simple. As another example, we’ve made it a policy to always offer fruit or another healthy choice when serving snacks or desserts at meetings. We’ve also made it part of our company culture to take walking meetings instead of the traditional sitting around a table. We look for ways that employees can accomplish a goal they already have – moving from one place to another, connecting in person, getting a mid-day pick-me-up – in a healthier way.

2) Highlighting what’s important to our leaders. Population health trends in the right direction when individuals can maintain healthier behaviors over the long-term. Short-term change is a start, but sustainable lifestyle changes are the goal. This is easier when the workplace culture consistently provides positive reinforcement for healthy habits.

Building a community of health is important, which is why we have an annual walking program that brings employees together to support each other to increase their physical activity level. We work with WCS to distribute awards for the top steppers in our step challenges. It’s important to show that employees have institutional support when they go the extra mile – whether literally as their steps increase, or in any of the ways that they reach new health milestones. We are sure to have our executives share a picture with our top steppers!

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It’s both intuitive and proven that peer support helps with any lifestyle change. People who want to lose weight or meet another health goal often succeed if their friends or family are on that journey with them.

A network of wellness champions is a great way to showcase this principle. In collaboration with WCS, who has supported wellness champions worldwide, we’ve built a strong champion program where Hopkins employees volunteer to be peer leaders. They undergo training and collect feedback from their colleagues about how Healthy at Hopkins is supporting them. Messaging to employees about healthy behavior isn’t only coming from “Hopkins” as an abstract institution – it’s coming from their coworkers, who are on the same journey alongside them.

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Culture of Health And indeed, this feeling of success is taking root. 70% of employees who completed the employee interest survey agreed that engaging in Healthy at Hopkins initiatives have helped to improve or maintain their health and wellbeing.

4) Building a positive atmosphere. Physical, emotional, and mental health are all interrelated. When employees are coming together and building a supportive environment, there are “feel good” benefits that come from helping each other. Growing a life-affirming atmosphere with momentum in a positive direction can boost morale, leading to better health and higher productivity.

One of our ongoing efforts with our wellness partner has been collecting and sharing success stories from across our entities with our employee population.

Last year, we featured 27 of these stories on an online portal so that examples of peers reaching their goals are always at employees’ fingertips.

They span topics from “How I Reversed My Hypertension” to “How I Make Healthy Choice Throughout the Day,” offering relatable content that creates a positive ripple effect throughout the community.

Some employees also like to learn new skills and information

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alongside their coworkers. For this reason, we always have opportunities for groups to engage in together, like fitness and nutrition classes. Our collaborator has helped design many of these opportunities to reinforce the day-to-day healthy atmosphere at Hopkins, showing the role that a strategic wellness partner can have in emphasizing a culture of health.

WHAT ARE THE COMPONENTS OF A CULTURE OF HEALTH? So what constitutes this web of social influences? By breaking down the different spheres of cultural influence, workplaces can implement a range of strategies that reinforce each other to build a culture of health.

Culture of Health The six spheres of influence that have informed the Healthy at Hopkins strategy are Leadership Support, Shared Values, Norms, Peer Support, Touch Points, and Social Climate.

In future articles in this series, I will explore how each of these spheres represent opportunities to build a sustainable culture of health at any organization.

Dr. Safeer is the Chief Medical Director of Employee Health and Well-being for Johns Hopkins Medicine. In this role, he leads the Healthy at Hopkins employee health and well-being strategy. He also currently sees patients in the Johns Hopkins Hospital Pediatric Cardiology department. In addition, he teaches in the Department of Health, Behavior and Society in the Johns Hopkins Bloomberg School of Public Health.

Richard completed his Bachelor of Science in Nutritional Biochemistry at Cornell University before graduating from medical school at the State University of New York at Buffalo. He completed his residency in Family Medicine at Franklin Square Hospital Center, in Baltimore, Maryland. After which, he completed a Faculty Development Fellowship at the Virginia Commonwealth University. He is also certified in Clinical Lipidology by the National Lipid Association. Prior to arriving at Hopkins, Dr. Safeer practiced family medicine in Northern Virginia.

He was then on faculty at the George Washington University, where he served as the Residency Director of the Family Medicine training program prior to his departure. He was the Medical Director of an Occupational Health Center in Baltimore and Wellness Director for the Mid-Atlantic region of the parent company, just before starting at CareFirst BlueCross BlueShield in Baltimore, Maryland as the Medical Director of Preventive Medicine. He recently finished serving on the Board of Directors for the American College of Lifestyle Medicine.

Richard achieved Fellowship status in the American Academy of Family Medicine, the American College of Preventive Medicine and the American College of Lifestyle Medicine. He is a Diplomate of both the American Board of Lifestyle Medicine as well as the American Board of Family Medicine.

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These statements are illustrative only and not indicative of actual past or future results. Stop Loss is underwritten by Berkley Life and Health Insurance Company, a member company of W. R. Berkley Corporation and rated A+ (Superior) by A.M. Best, and involves the formation of a group captive insurance program that involves other employers and requires other legal entities. Berkley and its affiliates do not provide tax, legal, or regulatory advice concerning EmCap. You should seek appropriate tax, legal, regulatory, or other counsel regarding the EmCap program, including, but not limited to, counsel in the areas of ERISA, multiple employer welfare arrangements (MEWAs), taxation, and captives. EmCap is not available to all employers or in all states.

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REACHING A CAPTIVE AUDIENCE SIIA ADVANCES SUGGESTED CODE OF CONDUCT FOR CAPTIVE MANAGERS TO HELP POLICE PERFORMANCE, PROVIDE PROFESSIONAL BENCHMARKS AND RAISE CREDIBILITY IN THE EAGLE

M

EYES OF STATE REGULATORS

M

indful of the rise in group captives and deeper scrutiny from state regulators and the IRS, SIIA’s Captive Insurance Committee has taken concrete steps to help formalize these increasingly popular alternative risk transfer arrangements.

The hope is that state-based industry associations will adopt a professional code of conduct that the 21 committee members drafted last year and ensure it’s adhered to by captive managers within their jurisdictions. The six-page document also serves as a due-diligence benchmark for the public at large to assess captive manager performance and means by which to gain credibility before state regulators.

Only one such regulator thus far is using it as a criterion for judging the acceptance of captive managers. Committee members would like to see others follow the lead of Michael Corbett, director of captive insurance for the state of Tennessee.

SIIA’s code of conduct, which is posted on the group’s website, includes five canons: integrity, conflicts of interest, confidentiality, advertising and practice management.

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FILLING A VOICE ON SELF-REGULATION “We felt there was this void within our industry from somewhat of a self-regulatory perspective,” says John Capasso, president and CEO of Captive Planning Associates, LLC who chairs SIIA’s Captive Insurance Committee, referencing similar efforts in the accounting and legal professions among others.

A driving force behind this initiative was to guide captive managers in the way they conduct their practices and better gauge what others may be doing to help them, he said. The thinking is that this, in turn, would make regulators’ jobs much easier.

The captive committee sought to build a platform that would allow captive managers and service providers to band together and leverage SIIA as an effective lobbying resource, explains Jerry Messick, a member of the committee and CEO of Elevate Captives, which ensures that all of its captive clients become SIIA members. “In fact, we pay for that on their behalf,” he adds. Many states have a “white list” of captive managers, he notes, also citing Delaware’s advanced filing process for which certain captive managers qualify based on the quality of their filings.

Kevin Doherty, another member of the committee and partner in Dickinson Wright PLLC’s Nashville office who is also president of the Tennessee Captive Insurance

“a wish list, if you will, of how managers should act and respond to circumstances while doing their jobs. We did not set it up to be mandatory with an enforcement or punishment mechanism.”

Association, describes the code of conduct as

While integrity is obviously a necessary canon, Messick cites practice management as the centerpiece of this effort. He references being asked to review multiple captives whose insurance policies were never issued, nor was a feasibility study ever done, while others had no claims protocols. Conflicts of interest also arise when some whose primary focus is investment management are looking for a vehicle to manage assets and now consulting and creating what should be an insurance company.

“It’s a little bit of the tail wagging the dog when in truth that investment management is just a component of the overall structure of the captive,” Messick cautions.

MIRRORING OTHER SPECIALISTS Considering how insurance agents in the life, accident, health or property and casualty areas must be licensed to sell those lines to the public, he believes captive managers shouldn’t be treated any differently.

“I don’t mind licensure,” Messick says, acknowledging that he may be in the minority with that view. “This is my profession. When I started in the insurance business 35 years ago, I went out and got a license, and I still have a license today with insurance. And there’s continuing education requirements that go along with that.”

In a similar vein, he’s well aware that the IRS has issues with policy forms or rates that go to develop captive premiums and doesn’t mind going the extra mile to ensure compliance. Noting that there’s already a regulatory process for that in every state involving submissions to

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rates bureaus, he admits “that’s probably anathema to most managers and is a lot of work. But for those of us who are trying to do this the right way and are using all of the resources that we have available to us, including independent actuaries, that doesn’t bother me.”

Since most captive managers have other professional designations and Doherty surmises that the lion’s share probably are also CPAs, SIIA’s suggested canons mirror the conduct that’s expected of them in other areas of expertise. “I’m an attorney governed by the bar in what I do,” he notes. “Of course, actuaries are governed by the Actuarial Society with their own standards, and I think in all of those cases, we are sort of selfgoverned.”

One related topic that the captive committee has frequently addressed is whether captive managers are prepared to create a self-governing organization like the bar or CPA Board of Accountancy. Doherty believes the captive industry does a good job of policing itself and, therefore, there’s no need to regulate the profession. He adds that most conflicts involving captives occur outside the U.S. “in domiciles that are much more lax than any of the domestic domiciles would be.”

INDUSTRY REACTION SIIA’s code of conduct spurred a lively discussion among a panel of captive regulators at SIIA’s national conference in San Francisco where John Talley, J.D., captive program manager for the Missouri Insurance Department, likened the idea to CPAs and other professionals abiding by their own industry practices.

However, he stopped short of suggesting

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a need for regulation, citing licensing and enforcement challenges.

While Corbett was eager to embrace the code in Tennessee, Steve Kinion, director of the Delaware Captive Insurance Bureau, revealed during the panel discussion that he would not do so “because it is merely advisory only. I think it’s nice if managers abide by that, but I harken back to the early 2000s when the Insurance Marketing Standards Association was trying to develop independent standards for insurance agent conduct. It never caught fire and that concept seemingly went away.”

Capasso believes Corbett sought to strengthen the core of captive manager practices from underwriting to an accounting and reporting perspective. As such, “a domicile such as Tennessee is in a position to weed out some of the weaker cap managers or give them direction,” he explains, adding that signatories to the code will be named.

Travis Wegkamp, captive insurance director for the Utah Insurance Department, considers the code “a great resource” that he would recommend all service providers do their best to adhere to, “but at the same time,” he told fellow panelists, “I’m not really interested in licensing and regulating captive managers.”

One of the industry’s educational leaders welcomes the effort to hold captive managers more accountable for their actions. “I’m supportive of anyone that wants to tell people that they should be educated,” says Mitch Cantor, executive director of the International Center for Captive Insurance Education (ICCIE), a 501(c) (3) organization operating for 16 years at the behest of the industry that provides educational courses online and two professional designations. “We obviously encourage everyone to be as highly educated as possible.”

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NEXT STEPS Meanwhile, the captive committee plans to spread the word about its suggested code of conduct at future industry conferences, including a panel discussion Doherty will lead at the Captive Insurance Companies Association’s annual international conference in March. Messick also would like to solicit industry feedback on the code as it currently exists and see a second version released in the first quarter of 2020.

The reaction committee members have received about the code so far “has just been fantastic,” according to Capasso. Most people wonder why it took so long to produce a code of conduct in the first place, he reports, but they’re also curious about the goals moving forward. His stock response is to get “one domicile at a time” on board as part of an incremental approach that will leverage the involvement of committee members on the board of various state associations.

Messick, who describes the code of conduct as a starting point, reveals that it’s “something we’ve actually been working on for quite a while.” One caveat he noted is that it was never designed for SIIA to be a self-regulatory organization, describing the effort as just an opportunity to tighten industry standards.

Assessing the conduct of captive managers is becoming increasingly important as group captives grow in popularity. Most of the self-insured community may not realize the full power of captives, Messick opines. For example, these vehicles transcend reinsurance for workers’ comp and medical stop-loss to include other lines.

Noting the level of variation and complexity among captives, Doherty says it’s critical to avoid one-size-fits-

“There’s an expression in our industry: when you’ve seen one captive, you’ve seen one captive,” he quips. “They’re like snowflakes; they’re all different.” all rules or directives.

Bruce Shutan is a Portland, Oregon-based freelance writer who has closely covered the employee benefits industry for more than 30 years.

“We’re working on a lot of captives right now that have a component to the products that they sell like an extended warranty you might buy at Best Buy,” he says. “A lot of the self-funded accounts that are members of SIIA are starting to learn that there’s another avenue that they can tap into to secure and self-fund the other risk that they have that maybe they just didn’t think about because group medical and work comp are two of the biggest lines on their P&L.”

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THE SELF-INSURER

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THE CAPTIVE SECTOR IN 2020 Written By Karrie Hyatt

T T

he 2010s saw some big changes in the captive sector—huge growth, harsh criticism and scrutiny, more domestic captive domiciles, and an overall reputation that has gone from “shadowy” to stellar. The upcoming year could see some interesting changes for captives—from the development and deployment of insurtech to precedent setting court cases.

FIRMING P&C MARKET Premiums of several key lines of the property and casualty insurance market have been rising indicating a firming insurance market. A hard insurance market is when premium rates rise while certain lines experience reduced capacity. The last hard market was more than ten years ago—from 2003 to 2007.

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Global insurance pricing has been on the increase for the last seven quarters, while capacity is tightening in certain lines of business and in some regions. According to the Willis Towers Watson survey report, Insurance Marketplace Realities 2020, “The most challenged lines of insurance (i.e., those experiencing the most widespread price increases and capacity withdrawals) are property, umbrella and public company [directors and officers].” The report predicts continued rate hikes and capacity constriction through 2020 and into the following year, although property should sort itself out by the middle of 2020.

According to The Property/Casualty Underwriting Cycle, a report released

by Fitch Ratings in November, while the P&C market has been in a phase of increased pricing, the ratings agency has found that due to “competitive forces and less favorable claims trends in some lines” that the trend of rising premiums will not lead to a long-lasting hard market.

last twelve years, despite a continuing soft market, the captive market will likely not expand significantly during this period of hard market conditions. However, existing captives might feel the pinch in rising reinsurance pricing.

INSURTECH Hard markets may become a thing of the past as insurtech takes over the insurance space. As companies become technology based, they will have the ability to have a flexible underwriting approach driven by very specific data. Being able to underwrite policies based on individual factors, rather than actuarial estimates, could create a more stable insurance market.

Insurtech is coming to the sector in a big way. In 2018, more than $2.5 billion dollars was invested in insurtech companies. The numbers for 2109 are expected to double that amount. Gone are the days when startup insurtech companies wanted to disrupt the industry. Now, large insurers to small captives are taking advantage of the accuracy and efficiencies that insurtech has to offer. With so much investment, the insurtech space is becoming more competitive, with more vendors offering services to insurance companies of all sizes—and some focusing on providing services only to captives.

2020 is going to be the year for captives to get on board with the innovations that insurtech developers are bringing to the table.

For captives, a hardening market means more companies will look to alternative sources for insurance. During periods of a hard insurance market, the numbers of captives and other alternative risk transfer vehicles see large growth.

Given that the captive insurance market has been growing exponentially over the

JANUARY 2020

25

ERCS AND THE IRS

The IRS has not decreased its interest in captives electing the 831(b) tax option.

For medium and small-sized captives, known as Enterprise Risk Captives (ERCs), this means continued scrutiny.

The IRS will likely name captives taking the 831(b) option, what they refer to as “micro-captives,” to its annual “Dirty Dozen” list for the sixth time in a row.

The captive sector is still waiting to see what the impact will be from the IRS’s settlement offer to some ERCs currently under audit. At this time, there is no information on how many captives may have accepted the offer, though it is estimated that the offer went out

to approximately 200 captives. In making the settlement offer, the IRS was using its leverage from three successful court decisions against “micro-captives” to help reduce the estimated 500 or more audits it is currently reviewing.

When “micro-captives” were named to the “Dirty Dozen” list in 2019 (release IR2019-47), delivered on March 19, 2019, the IRS used much stronger language than in previous releases regarding the entities on the “Dirty Dozen” list. The release stated, “Taxpayers are reminded that those who participate in illegal schemes may face prosecution, civil litigation and ultimately having to pay all taxes owed along with stiff penalties and interest. Participants who utilize such schemes for tax evasion also risk imprisonment.” In previous years’ iterations, the language used did not expressly threaten criminal action.

As reported on Bloombergtax.com in November, the commissioner of the Small Business/Self-Employed Division of the IRS, Eric Hylton, said during a speech at the conference for the American Institute of CPAs, that the IRS is considering sending some “micro-captive” insurance cases to the department’s Criminal Investigation office.

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THE SELF-INSURER

group Amicus brief is being put together by captive managers, SIIA, and other interested parties on behalf of Reserve Mechanical and is expected to be submitted to the court in February.

These comments from Commissioner Hylton indicates that the IRS may become even more aggressive in pursuing what they see as an abusive tax structure.

COURT CASES TO WATCH There are two cases regarding ERCs still waiting for a decision from the U.S. Tax Court. The pending cases are Caylor Land & Development v. Commissioner and Wilson et. al. v. Commissioner. The Wilson case is very similar to the Avrahami case, which was decided in 2017, and is being heard by the same Judge in that case.

There is a report that the case might be settled before the decision is handed down.

When the Caylor decision is issued, it will be deciding on what constitutes a risk pool, which could provide important guidance for ERCs. The case was tried in May 2016 and is expected to be the next decision related to ERCs to come down the pipeline.

Another court case to watch is the appeal in Reserve Mechanical Corp. v.

Commissioner. In June 2018, the Tax Court found in favor of the IRS in their case against captive insurer Reserve Mechanical. This is one of the key cases cited by the IRS in their settlement offer. The owners and managers of Reserve have appealed the case which should be heading to court sometime in early 2020. A

In a different type of case, a captive manager is taking their suit against the IRS to the U.S. Supreme Court.

In November 2016, the IRS issued Notice 2016-66 which named captives using the 831(b) tax option as “transactions of interest” and sought to require additional financial disclosures. The Notice requested specified entities to file additional financial disclosures. Industry disapproval was vocal and immediate. SIIA led the campaign to modify and withdraw Notice 2016-66, along with dozens of trade associations, captive managers, and regulators joining in.

CIC Services, a Tennessee-based captive manager, filed a lawsuit against the IRS and Treasury Department arguing that Notice 2016-66 was unlawfully issued and did not meet the authority or “reasoned analysis” requirements of the Administrative Procedure Act (APA).

CIC Services has faced an uphill battle since the suit was filed in December 2016. The case was initially dismissed by a district court in Tennessee. CIC continued pressing the issue and last summer the Sixth District Court of Appeals found in favor of the IRS. Later

JANUARY 2020

27

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that summer, the Sixth Circuit decline a petition for a rehearing. CIC Services is pursuing the case to the Supreme Court.

While their case was denied, one of the majority opinions and the dissenting opinion from the Sixth Circuit court offered CIC some hope. The ruling from each court cited the Anti Injunction Act (AIA), which pushes cases relating to tax concerns to the U.S. Tax Courts, overruling the APA. Judge Sutton, one of the judges applied to for a rehearing, said in his opinion that the issue should be taken up by the Supreme Court because previous cases did not offer guidance for these particular circumstances.

SIIA is supporting CIC in pursuing this case as far as it can go and will be submitting an Amicus Curiae brief on behalf of the captive manager.

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.

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

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JANUARY 2020

29

UNDERSTANDING THE LEGISLATIVE EFFECTS ON STATE-LAW BENEFIT PLANS

W

written by Harry Horton

W

hen it comes to subrogation and reimbursement, self-funded employee benefit plans enjoy greater latitude when it comes to enforcing the terms of the plan document.

To be certain the landmark US Airways, Inc. v. McCutchen1 case indicated that these benefit plans receiving preemption of state law under ERISA can enforce the terms of their plan, as written, despite any contrary state law or equitable principle.

As a result, ERISA plans undoubtedly obtain greater recoveries through subrogation and reimbursement. It is undisputed that these recoveries directly contribute to the plan’s cost savings and thus reduce the overall cost to the plan. These savings are enjoyed by plan participants in the form of either greater benefits or a reduced contribution dollar amount during the next fiscal year.

Not all self-funded employee benefit plans however receive these benefits. ERISA provides that four distinct types of benefit plans are specifically carved out from enjoying preemption of state law. These are government/municipality plans, tribal plans, religious affiliations, and multiple employer welfare arrangements.

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Focusing on government/municipality plans, these self-funded plans are regulated by state law rather than ERISA. A self-funded benefit plan is funded by the plan sponsor and/or employees. Since both the plan sponsor and employees of a municipality plan receive their funding or salary from state taxpayer money, ERISA logically concludes that the state would have the authority to regulate them.

However, this is where the logic appears to end when it comes to regulating selffunded benefit plans in certain states.

Take New Jersey for example – the state legislature adopted a collateral source rule which barred a plaintiff from recovering medicals that were paid by a third-party (ex: an insurer).2 The state Supreme Court held that this rule also barred subrogation and reimbursement.3 In 2010, that same Court ruled that even municipality plans are subject to this regulation despite the ambiguity in the statute.4 The logic of this decision rests on the Court’s analysis of legislative intent.

The Court states, “There is no evidence to suggest that the Legislature intended to favor public entities under Section 97 or that it was not intended to apply to amounts received by a tort plaintiff from public sources… the best indicator of [Legislative] intent is the statutory language.”

when it comes to the inflating costs of healthcare. In fact, many political hopefuls are running entire campaigns on addressing this problem. We have all heard of the “death spiral” – the idea that the affordability of healthcare will continue to spiral out of control as the “healthy” population leaves the risk pool.

With the removal of the individual mandate, millions of healthy Americans left the risk pool which, inevitably, will result in higher premiums or contributions from those individuals who choose to maintain coverage. Subrogation and reimbursement cannot fix this problem, nor can it fix other pertinent problems such as inconsistent medical billing.

With that said, it makes no logical sense why a state legislature would prohibit the state from recovering medical expenses effectively paid by taxpayer money from third-party liability cases.

The effect of these anti-subrogation rules against municipality plans goes further than one might imagine. The obvious effect is that the lack of cost savings generated by the specific plan will result in higher dollar amount contributions from the plan participants.

The employees that assist our state and local governments are forced into a situation where their paychecks take hits year after year as the plan fails to recover on thirdparty liability cases. To make matters worse, consider the source of both the plan sponsor and employee’s funding: taxpayer money.

On the topic of legislative intent, it is important to look at why the state legislature enacted a collateral source rule to begin with. The Court in New Jersey made a perfect reference to this point. “The purpose underlying N.J. Stat. Ann §2A:15-97 is twofold: to eliminate the double recovery to plaintiffs that flowed from the common-

The Legislature had not commented on whether this is true or not – the Court simply determined that since the Legislature was silent, it could not have intended a different result for municipality plans.

It is undeniable that our country is facing an unprecedented crisis

JANUARY 2020

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law collateral source rule and to allocate the benefit of that change to liability carriers.”

other similar laws is grossly unfair to the victims.

This logic makes little sense on either point. The collateral source rule does in fact eliminate double recovery to plaintiffs, however that point is moot when you consider that the collateral source rule only applies in scenarios where, usually, an insurer is the entity paying the medical bills.

In the context of third-party liability cases, health insurers are undoubtedly victims.

Of course, the nature of their injury is vastly different than the real injuries suffered by their plan participants. It makes little sense that the State would be so concerned with the increased unaffordability of healthcare costs and increased tax rates all the while shielding tortfeasors from their liability.

If the insurer was able to effectuate a subrogation/reimbursement provision, then there would be no double recovery! In fact, that is the entire rationale behind equitable subrogation.

More importantly, however, is the State’s concern with reducing the exposure of liability carriers. If you read between the lines, the State made a conscious decision to lower the cost of liability insurance at what is effectively the expense of health insurers.

The cost of liability insurance is a real problem and arguably disincentivizes certain professionals from engaging in their respective services. However, the State’s answer to this problem is currently to shift the burden onto health insurers.

Liability insurance applies in instances where an individual or entity commits an act or omission causing injury, illness, or death to an individual. By limiting a plaintiff or insurer from recovering the medical bills associated with that injury, the state is giving tortfeasors a huge shield in the amount they should be liable for.

Why shouldn’t a victim of negligence be able to hold a tortfeasor completely accountable for their actions? It can be argued that the collateral source rule and

If an anti-subrogation state was serious about addressing the affordability of healthcare, they should remove restrictions such as the collateral source rule and adopt the ERISA model for subrogation and reimbursement. Plan participants should be able to claim the full extent of their damages.

Health insurers should be able to then recover those funds from the settlements and judgements awarded to the plan participants. Reform will be necessary to help prevent the increased cost this would have to liability carriers such that professionals are not discouraged from purchasing liability coverage. However, shifting the financial burden onto the victims of negligence cannot be the state’s best answer.

If you are the plan administrator or a third-party administrator for a self-funded benefit plan subject to state law, it is imperative that you understand how your state legislature treats subrogation and reimbursement provisions within your plan document.

Having this knowledge enables you to forecast your estimated statistical recoveries ultimately

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THE SELF-INSURER

At AmWINS Group Benefits our team of specialists wakes up every morning committed to bringing your team innovative solutions to the opportunities and challenges you and your self-funded clients face.

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resulting in better financial planning.

At the end of the day, it is the plan administrator’s fiduciary duty to prudently manage plan assets. Consulting with an expert in the subrogation and reimbursement field will give you the tools you need to help your employee benefit plan thrive for years.

Harry A Horton joined The Phia Group, LLC in October of 2017. As a Senior Claims Recovery Specialist in The Phia Group’s recovery department, Harry has quickly established himself as an invaluable asset in reimbursement matters for self-funded benefit plans. Harry handles many of the company’s most challenging and complex recovery matters across all jurisdictions. Harry spearheads negotiations between plan administrators, brokers, third-party liability attorneys, and plan participants on both state and federal law matters. His focus is on ERISA preemption, stop-loss / reinsurance, plan document review, coordination of benefits, dispute resolution and cost containment for self-funded benefit plans.

Harry earned his B.S. in Criminal Justice from Northeastern University. He then attended New England Law | Boston concentrating specifically in civil matters. Harry has prior experience working in both personal injury and legal malpractice litigation. After graduating law school, Harry passed the Uniform Bar Examination with a score sufficient for admission to all UBE jurisdictions. Harry’s licensure is currently pending in the Commonwealth of Massachusetts.

References: 1) US Airways, Inc. v. McCutchen, et al., 133 S.Ct. 1537 (2013) 2) N.J. Stat. Ann. §2A:15-97 3) Perreira v. Rediger, 778 A.2d 429 (N.J. 2001) 4) County of Bergen Employee Benefit Plan v. Horizon Blue Cross Blue Shield of NJ, et al., 988 A.2d 1230 (N.J. 2010)

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THE SELF-INSURER

ENDEAVORS

SIIA ENDEAVORS

S S

IIA’s 2020 Self-Insured Health Plan Executive Forum will take place March 16-18 at the Belmond Charleston Place in Charleston, South Carolina. th

This popular SIIA educational and networking event brings together senior executives representing key business partners supporting self-insured group health plans, including third party administrators (TPAs), stop-loss carriers/MGUs, brokers/ consultants, captive managers and leading service providers, with the objective of promoting improved collaboration in order to grow the self-insurance marketplace in a responsible way.

Come in early to participate in the Self-Insurance Educational Foundation’s (SIEF) Golf Outing Fundraiser on Monday, March 16 from 8:00 am - 1:00 pm.

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ENDEAVORS SIEF is 501(c)(3) non-profit organization affiliated with the Self-Insurance Institute of America, Inc. The mission of the foundation is to create and underwrite educational initiatives that serve to promote a greater awareness and understanding of self-insurance/alternative risk transfer.

Past Foundation-sponsored educational initiatives and projects have included:

• Producing and maintaining a website that serves as on online hub for objective information about self-insurance (www.siefonline.org)

• Self-insurance briefings for congressional staff members on Capitol Hill

The full conference educational program kicks off Tuesday, March 17th with Welcome Remarks & The Hot Industry Issues Audience Poll moderated by SIIA President & CEO, Mike Ferguson.

Get off to a fast and fun start this morning by offering your anonymous opinions on the hottest industry issues for 2020 and see aggregated audience results in real time via SIIA’s attendee polling technology.

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

• Underwriting an annual survey report of the stop-loss marketplace • Published: “Understanding Group Self-Insured Workers’ Compensation Funds”

• Published: “Understanding Self-Insured Group Health Plans” • Published: “Managing Corporate Risks Through Captive Insurance

And since it’s an election year, we’ll also throw in some political questions to make it fun. You will also have the opportunity select which exhibitors should be given a five-minute live pitch opportunity during the hosted luncheon. Be sure to bring a fully-charged mobile device to this session.

Programs” Other sessions in the educational program include:

Legislative/Regulatory Update Ryan Work, SIIA’s Vice President, Federal Government Relations and Adam Brackemyre, SIIA’s Vice President, State Government Relations will provide the latest updates on federal and state legislative/regulatory developments affecting the self-insurance marketplace.

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• Consulting • Case Management • Big and Small Data Analysis & Predictive Modeling • Claims Audits • Risk Management

customerservice@arataiinternational.com www.arataiinternational.com

Call Us Toll Free: (888) 448-2470

Aratai International provides services to build and develop cost-effective and high quality healthcare strategies. We invest time in understanding your business goals, and we develop programs to help you reach them. We are committed to developing strong business relationships by exceeding your expectations.

MEDICAL LEGAL

|

C O N S U LT I N G

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MANAGEMENT

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D A T A A N A LY S I S

ENDEAVORS Stop-Loss Claims Reimbursement Best Practices – The SIIA Proposal with David Wilson, CEO, Windsor Strategy Partners SIIA has developed a collection of best practices recommendations that can be followed by TPAs and stop-loss carriers with the intent of reducing the friction associated with certain stop-loss reimbursement claims. The final draft of this best practices document will be presented to the audience, who will then have the opportunity to vote in real time, providing their opinion of whether it is ready for SIIA to officially publish.

New TPA Leader Perspective with James Vertino, CEO, Employee Benefit Management Services, James Walleshauser, President, Nova Health Care Administrators and Andy Willoughby, President & CEO, Group Resources, Inc. Several of the country’s leading TPAs have named new presidents/CEOs over the past year. We have assembled a panel of these leaders to share their perspective on TPA challenges and opportunities and comment on related industry developments.

Self-Insurance Claims & ERISA Compliance Classroom with Ashley Gillihan, Esq., Of Counsel Alston & Bird, LLP During this interactive session, attendees will be presented with various real-world scenarios triggering important legal compliance questions related to self-insured plan design, claims administration, and/or stop-loss reimbursement process…and then be requested to provide their anonymous opinions on the appropriate course of action via SIIA’s real-time polling technology. Expert analysis will be provided for each scenario along with commentary about audience polling results.

Broker/Advisor Compensation Arrangements – Implications for the Self-Insurance Marketplace with David Fear. Jr., Partner, Dickerson Insurance Services, Scott Haas, Senior Vice President, USI Insurance Services and John Kirke, Executive Vice President, CCIG Broker/advisor compensation arrangements in connection with self-insured health plans have been the subject of heightened (sometimes heated) discussion over the past year.

This session will take a deep dive into the various compensation arrangements and the implications they may have for self-insured employers, TPAs, stop-loss carriers and other key service providers.

Access to Health Claims Data – Developing a SIIA Action Plan “Audience Choice” Hot Topic Open Discussion You choose the topic via real-time polling for an open discussion among session attendees.

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A task force of SIIA Diamond member representatives has been meeting to discuss options for a SIIA action plan

ENDEAVORS

designed to make it easier for self-insured employers to obtain necessary claims data from their insurance carrier administration partners both for underwriting and claim adjudication purposes. This session will share initial task force findings and invite audience input as SIIA further considers action plan options.

Specialty Drug and Gene Therapy Costs – Developing an SIIA Action Plan Another task force of SIIA Diamond members has been meeting to discuss what SIIA and/or industry stakeholder partners can do to help stem the rapid rise in specialty drug and gene therapy costs, which are increasingly threatening the financial viability of self-insured health plans and their stop-loss partners. This session will share initial task force findings and audience input as SIIA further considers action plan options.

We look forward to seeing you in Charleston! More information, including registration and sponsorship opportunities can be found at www.siia.org.

JANUARY 2020

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NEWS

NEWS FROM SIIA MEMBERS 2020 JANUARY MEMBER NEWS 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 membernews@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 at jivy@siia.org.

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NEWS DIAMOND MEMBERS

SUN LIFE U.S. NAMES PAULA BARTGIS AS CIO

MATT TAYLOR JOINS

WELLESLEY, Mass., -- Sun Life U.S. announced that it has named Paula Bartgis as senior vice president and chief information officer (CIO). Bartgis will have responsibility for the company's Information Technology operations, focused on delivering outstanding client experiences through innovative digital, data and analytic tools and practices.

DALLAS SALES TEAM AT HM INSURANCE GROUP PITTSBURGH -- Matt Taylor has joined HM Insurance Group (HM) in the role of sales consultant, Dallas Regional Sales. In this position, he is responsible for working with brokers in Arkansas, Oklahoma and Dallas (including West Texas) to support the growth of HM’s business in those markets.

Most recently, Taylor was a senior sales representative at Voya where he sold stop loss, life, disability and voluntary benefits. Prior to that, he gained sales experience at Arthur J. Gallagher.

Taylor has a bachelor’s degree from the University of Houston where he played Division 1 baseball.

About HM Insurance Group

Bartgis joins Sun Life from Voya Financial where she most recently served as senior vice president of its Enterprise Project Management Office.

"Paula is an accomplished technology transformation leader known for creating highperforming teams and producing successful outcomes for clients," said Dan Fishbein, M.D., president of Sun Life U.S. "Our clients expect simplified interactions and continually advancing capabilities.

Paula's deep tech experience and proven track record of orchestrating complex, large-scale initiatives make her ideally suited to lead our next-generation solutions to deliver on our client commitments while fueling business growth."

Bartgis has held a number of leadership roles during her 30-year career in technology and engineering, financial and operational planning, organizational design, and project and portfolio management.

At Voya, she also served as the head of Enterprise Transformation, Technology and Project Management Office, and led teams at Massachusetts Mutual Life Insurance

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. 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 Sheposh Mahan, Marketing & Communications Consultant, at jennifer.mahan@ hminsurancegroup.com and visit hmig. com.

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NEWS Company (MassMutual) overseeing acquisition integration and business transformation.

Bartgis invented an assessment framework to measure project delivery effectiveness, which was patented for MassMutual. She holds a bachelor's degree in computer science from the Florida Institute of Technology.

Earlier, she served as vice president of engineering and information systems at The Travelers Companies.

About Sun Life U.S.

"I'm excited to join Sun Life, which is a forward-thinking organization invested in the client experience," said Bartgis.

"Technology is an area of constant change at the heart of an enterprise, connecting internal and external stakeholders and driving progress. I look forward to harnessing the creative mindset at Sun Life to help shape the future of the digital insurtech enterprise."

In the United States, Sun Life is one of the largest group benefits providers, serving more than 60,000 employers in small, medium and large workplaces across the country. Sun Life's broad portfolio of insurance products and services in the U.S. includes disability, absence management, life, dental, vision, voluntary and medical stop-loss. Sun Life and its affiliates in asset management businesses in the U.S. employ approximately 5,500 people. Group insurance policies are issued

by Sun Life Assurance Company of Canada (Wellesley Hills, Mass.), except in New York, where policies are issued by Sun Life and Health Insurance Company (U.S.) (Lansing, Mich.). Visit www.sunlife.com/us.

LEARN | PLAN | SAVE | PROTECT RECOVERY DOLLARS MULTIPLIED

PLAN DOCUMENTS PERFECTED

FIDUCIARY DUTY SHIFTED

LEGAL EXPERTISE SECURED

www.phiagroup.com | 781-535-5600 | info@phiagroup.com

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NEWS ELMC RISK SOLUTIONS ACQUIRES LEADING DIGITAL HEALTH PLATFORM TESSER HEALTH, INC., EXPANDING CAPABILITIES IN RX MANAGEMENT New York, NY – ELMC Risk Solutions, LLC, (“ELMC”) is pleased to announce that it has acquired the assets of Tesser Health Inc. (“Tesser Health”), of Miami, Florida, and has established the Tesser Health division of ELMCRx Solutions, LLC. Tesser Health is a technology driven, digital health company focused on managing prescription drug costs. This acquisition furthers ELMC’s strategic expansion through thoughtful acquisitions in the Pharmaceutical Benefit Management, Rx management, and analytics space.

The Tesser Health division will join ELMCRx Solutions in delivering state of the art outcomes by leveraging a broad range of cost containment, analytics, and consulting services. Tesser Health joins ELMC’s portfolio companies including AST Risk, ELMCRx Solutions, IOA Re, Rockport Benefits, RxReins, and Sequoia Reinsurance.

Tesser Health is led by CEO Riyaad Seecharan, CMO Ali Khoshnevis and CTO Humberto Lee, experienced digital health professionals and successful entrepreneurs. All three contributed to the growth of other innovative prescription drug companies before focusing their attention on building the Tesser Health platform. The Tesser Health management team will report to Mary Ann Carlisle, CEO of ELMCRx Solutions.

“The acquisition of Tesser Health will allow ELMC to further expand its cost containment and management offerings, with enhanced specialty and non-specialty solutions provided under our rebranded Tesser suite,” said Richard Fleder, CEO of ELMC. “These products combined with Tesser Health’s sophisticated analytics capabilities will allow us to deliver an innovative platform of smart, straightforward solutions to plan sponsors, carriers, TPAs, brokers and consultants.”

Mary Ann Carlisle, CEO of ELMCRx Solutions noted, “We are excited to leverage the Tesser Health team and the digital health platform to further develop the ELMCRx Solutions Clinical Prior Authorization service offering.

Seecharan, Khoshnevis and Lee agree, “We are pleased to combine our strengths with ELMCRx Solutions to meet the demands of the rapidlychanging pharmaceutical marketplace.

The ELMCRx Solutions platform enables us to reach a larger audience as well as round out our service offering.”

Tesser Health started its pharmaceutical cost containment business for selffunded employer health plans in 2016 with the launch of its highly regarded digital health platform.

Tesser Health will maintain its focus on prescription drug cost containment and optimization for employer plans, as well as developing new products designed to manage and optimize specialty drugs.

The company will maintain their offices in Miami, Florida.

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NEWS About ELMC

About Tesser Health

ELMC owns, manages and seeks to acquire premier Managing General Underwriters and Pharmaceutical Benefit Management service companies across the nation that specialize in delivering services for self-funded health plans, health care coalitions, labor and union groups, as well as reinsurance for providers and managed care companies.

ELMC provides a best-in-class platform for delivering solutions to brokers, carriers and clients. For more information, visit www.elmcgroup.com.

Tesser Health is a digital health platform focused on delivering cost containment solutions for self-funded employer health plans. The company’s proprietary digital health platform analyzes claims data to determine member adherence, polypharmacy, and cost savings opportunities. Using a unique combination of analytics and engagement tools, the Tesser Health platform lowers prescription drug spend for plan sponsors. For more information, visit www.tesserhealth.com.

ELAP SERVICES’ STEVE KELLY NAMED ENTREPRENEUR OF THE YEAR® 2019 FINANCIAL SERVICES AWARD FINALIST WAYNE, Pa. & PALM SPRINGS, CA -- EY announced that Steve Kelly, Co-founder and CEO of ELAP Services, a provider of healthcare solutions that reduce costs for self-funded employers, was named a national finalist for the Entrepreneur Of The Year® 2019 Award in the Financial Services category.

Now in its 33rd year, this prestigious award recognizes and celebrates unstoppable entrepreneurs who redefine the way we live, work and play. Kelly was named a finalist by an independent panel of judges, and the recognition was announced at the Strategic Growth Forum® in Palm Springs on November 16.

Mind over risk.

That’s how we properly assess risk – enabling our clients to focus on their businesses. We provide innovative stop loss solutions to protect self-funded employers from potentially catastrophic losses. We offer flexible captive solutions to help control the severity risk of your self-insured program. We have developed medical stop loss solutions specifically dedicated to meeting the unique needs of Taft-Hartley union plans. Our Organ & Tissue Transplant policy is a fully-insured option to protect your self-funded plan from losses due to transplant exposures. Our clients have been benefiting from our expertise for over 40 years. To be prepared for what tomorrow brings, contact us for all your medical stop loss and organ transplant insurance needs.

Tokio Marine HCC - Stop Loss Group HCC Life Insurance Company operating as Tokio Marine HCC - Stop Loss Group A member of the Tokio Marine HCC group of companies tmhcc.com TMHCC1112 - 01/20

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NEWS “Each year, I’m amazed by the contributions and successes of the Entrepreneur of the Year Award nominees and finalists. The competition is stiff, and I’m honored to be selected from such a distinguished field as a national finalist,” said Kelly.

“This award validates that our approach to reducing healthcare costs is redefining the way both businesses and providers approach healthcare, and it’s changing the system for the better. I’m thrilled to bring this recognition home to our company and to Philadelphia, and I’m eager to continue our work in creating more affordable healthcare solutions for the people of this country.”

ELAP Services was founded to address the national issue of employers and their plan members overburdened by skyrocketing healthcare costs and lack of representation in the ongoing healthcare debate.

Today, the company provides referencebased pricing solutions that dramatically reduce healthcare costs for more than 450 self-funded employers with some 300,000 plan members nationwide.

ELAP’s 175+ employees work with employers to custom design self-funded plans and serve as plan member advocates in ways that reduce an employer’s healthcare costs by as much as 30%.

EY has celebrated entrepreneurial excellence by honoring those innovators and prominent leaders who have contributed and inspired others with their vision, leadership and achievement since 1986.

These leaders are driven by their desire to better the world around them and stop at nothing to achieve their greatest ambitions. In 2019, the 233 award winners represented 191 entrepreneurial companies, employing more than 146,000 people with a job growth of 28 percent. They generated revenue of more than 42 billion, with revenue growth increasing more than 46 percent.

The program has continually recognized high-caliber business leaders, including Brad Keywell of Uptake Technologies in 2018. Past US winners have included Lonnie Moulder and Mary Lynne Hedley, TESARO, Inc, Howard Schultz of Starbucks Coffee Company, Robert Unanue of Goya Foods, Hamdi Ulukaya of Chobani, and Jayshree Ullal and Andy Bechtolsheim of Arista Networks.

The Entrepreneur Of The Year Award program has proven its ability to pick out particular traits within a company that will then catapult it to join the ranks of some of the world’s most successful and thriving businesses. These winners have shown what it takes to build and, more importantly, sustain a thriving enterprise.

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NEWS Kelly was originally selected as a regional Entrepreneur Of The Year winner in the Services category from the Philadelphia region. He was selected as one of 44 national finalists from over 1,300 applicants nationwide.

About ELAP Services ELAP Services specializes in healthcare solutions that reduce insurance costs for self-funded employers. The company offers a full-service program that ensures employers, their employees and health systems receive a fair price for healthcare.

From custom plan design to member advocacy, ELAP offers a portfolio of services that support clients with successfully navigating the changing health care climate and effectively managing their costs. Founded in 2003, ELAP has grown to serve more than 400 organizations, reducing their costs by as much as 30%.

Headquartered in Wayne, Pa., ELAP is a company of the Water Street Healthcare Partners, a strategic investor focused exclusively on the healthcare industry. Visit www.elapservices.com.

About Entrepreneur Of The Year® Entrepreneur Of The Year is the world’s most prestigious business award for entrepreneurs. The unique award makes a difference through the way it encourages entrepreneurial activity among those with potential and recognizes the contribution of people who inspire others with their vision, leadership and achievement. As the first and only truly global award of its kind, Entrepreneur Of The Year celebrates those who are building and leading successful, growing and dynamic businesses, recognizing them through regional, national and global awards programs in more than 145 cities in more than 60 countries.

At Meritain Health, we are your Advocates for Healthier Living!

We strive to help our members lead healthy, produc�ve lives.

That's why we offer tools and services to promote long-las�ng health and well-being.

For more information, visit www.meritain.com

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NEWS GOLD MEMBERS ECHO MAKES INC. 5000 LIST FOR SEVENTH TIME Westlake, OH -- ECHO Health Inc. has once again been named one of the fastestgrowing private companies in the nation by Inc. Magazine, earning the position of #2970 on the 2019 Inc. 5000 list. All honoree companies are individually profiled on Inc.com and receive the unique opportunity to gain national recognition.

Companies are ranked according to the percentage growth of their annual revenue over a three-year period, meaning that ECHO has been growing long before their first appearance on the list in 2012. ECHO’s continued success has resulted in a 3-year growth rate of 126%.

This prestigious list has become the hallmark of entrepreneurial success and the place where future household names first make their mark. Pandora, 7 Eleven, Toys 'R' Us, Zipcar, Zappos.com and numerous other well-known brands have been honored by the Inc. 5000. In 2007, the Inc. 500 list expanded to the Inc. 5000, giving readers a deeper, richer understanding of the entrepreneurial landscape and capturing a broader spectrum of success.

“It has been another successful period of growth at ECHO and we are thrilled to be featured on this prestigious list once again,” says William Davis, Chairman and CEO of ECHO Health, Inc. “ECHO continues to surpass all expectations and not only grow, but flourish as an industry innovator within a highly competitive and complex segment of business. We are truly grateful for this honor and are determined to continue to appear on the Inc. lists for years to come.”

About ECHO Health, Inc. ECHO Health, Inc. is the leading provider of electronic healthcare payment solutions. ECHO processes over 120 million claims and pays more than $28 billion annually to providers and members through industry-leading payers.

Founded in 1997, ECHO is a privately held company located in Westlake, Ohio.

Visit www.echohealthinc.com and call 440.835.3511, ext. 118.

SILVER MEMBERS LIZA PASTORE JOINS H.H.C. GROUP AS BUSINESS OFFICE MANAGER H.H.C. Group announced the addition of Liza Pastore as Business Office Manager.

Her responsibilities will include management of the accounting, payroll, and benefits coordination functions.

Prior to joining H.H.C. Group, Liza served as Business Manager at an architectural

firm. She also helped launch a boutique real estate firm based out of Bethesda, serving as both Sales Transactions Coordinator and Office Manager.

Liza graduated from Marymount Manhattan College in New York City in 2005 with a degree in Communication Arts and Business Management and spent the first 12 years of her career in real estate sales.

“I am honored to become a part of HHC Group’s ongoing success. The staff has given me a warm welcome. Jeanne Hurley, Supervisor of Business Services, is a wealth of knowledge with excellent client relations that she is passing along to me through intensive training. I feel valued as a new addition to the Group.”

“We are pleased to welcome Liza aboard” said Dr. Bruce Roffé, H.H.C. Group’s President and CEO “Her knowledge and experience will enable her to quickly become an important member of the H.H.C. Group Team.”

About H.H.C. Group H.H.C. Group provides containment solutions for Insurers, Third Party Administrators, Self-Insured Employee Health Plans, Health Maintenance Organizations (HMOs), ERISA and Government Health Plans. H.H.C. Group utilizes a combination of highly skilled professionals and advanced information technology tools to consistently deliver targeted solutions, significant savings and exceptional client service.

H.H.C. Group's services include Claim Negotiation, Claim Repricing, Medicare Based Pricing, DRG Validation, Medical Bill Review (Audit), Claims Editing, Medical Peer Reviews/Independent

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47

NEWS Reviews, Independent Medical Examinations (IME), and Pharmacy Consulting.

H.H.C. Group is an URAC accredited Independent Review Organization for Internal and External Reviews.

For additional information about H.H.C. Group and our services, visit www. hhcgroup.com or contact Bob Serber at rserber@hhcgroup.com or 301-963-0762 ext. 163.

INDUSTRY LEADER LAURIE HOAG-WINKLER RETURNS TO IMA FINANCIAL GROUP WITH FOCUS ON EMPLOYEE BENEFITS Denver, CO -- After six years away, Laurie Hoag-Winkler is returning to IMA Financial Group as executive vice president and national practice leader for IMA, Inc.’s employee benefits practice. Hoag-Winkler will partner with Executive Vice President and National Client Experience Leader Kristi Gjellum, who has been with IMA for more than 15 years.

“With more than 50 years of experience between them, we are thrilled to have this power team focused on the client and employee experience,” says IMA President Bob Reiter. “Together, they bring deep industry knowledge, strategic expertise, and an unmatched enthusiasm to their practice. Just as importantly, they will serve as role models, as IMA is committed to gender diversity, including in leadership positions. It’s an exciting time at IMA.” Hoag-Winkler and Gjellum say they plan to build on IMA’s service formula to listen to their clients, build a strategy that meets their clients where they are, execute, and measure results. That means financial return, employee satisfaction, and an overall successful experience for IMA clients.

“I can’t wait to hit the ground running with Kristi (Gjellum) and the team,” says HoagWinkler. “Working together, we can deliver innovative, effective services and products

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that are also unique and engaging. We want our clients to succeed and have fun while they are doing it. Here at IMA, we practice what we preach, which is one of the reasons I am returning. IMA understands its success is built on a strong workplace culture of respect, collaboration, inclusivity, and, yes, fun!”

Previously, Laurie was senior vice president and director at Lockton Companies and has held leadership positions at USI Colorado, previously Van Gilder Insurance Corp. She is a member of the Work Options for Women Board and a former member of St. Jude Children’s Research Hospital Advisory Board.

About IMA Financial Group, Inc. The IMA Financial Group, Inc., is a diversified financial services company focused on protecting the assets of its varied client base through insurance and wealth management solutions. Because IMA is 100-percent employee owned, the company’s more than 700 associates in Colorado, Kansas, Michigan, and Texas are empowered to provide customized solutions for their clients’ unique needs.

Visit imacorp.com.

SIIA 2020 BOARD of directors & committee chair ROSTER

CHAIRMAN OF THE BOARD*

DIRECTORS

COMMITTEE CHAIRS

Adam Russo Chief Executive Officer The Phia Group, LLC Braintree, MA

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

PRESIDENT/CEO

Mary Catherine Person President HealthSCOPE Benefits, Inc. Little Rock, AR

CAPTIVE INSURANCE COMMITTEE John R. Capasso, CPA, CGMA, PFS President & CEO Captive Planning Associates, LLC Medford, NJ

CHAIRMAN ELECT*

Kevin Seelman Senior Vice President Lockton Dunning Benefit CompanyDallas, TX

Mike Ferguson SIIA Simpsonville, SC

David Wilson President Windsor Strategy Partners, LLC Princeton, NJ

TREASURER AND CORPORATE SECRETARY* Gerald Gates President Stop Loss Insurance Services AmWins Worcester, MA *Also serves as Director

SIEF BOARD OF DIRECTORS Nigel Wallbank Chairman Heidi Leenay President Freda Bacon Director

Jeffrey K. Simpson Attorney Gordon, Fournaris & Mammarella, PA Wilmington, DE Robert Tierney President StarLine East Falmouth, MA Peter Robinson Managing Principal Integro Re San Francisco, CA

GOVERNMENT RELATIONS COMMITTEE Steven B. Suter President & CEO Healthcare Management Admtrs., Inc. Bellevue, WA CHAIR, INTERNATIONAL COMMITTEE Liz D. Mariner Ford Senior Vice President Re-Solutions, a Risk Strategies Company Minneapolis, MN CHAIR, SIIA FUTURE LEADERS COMMITTEE Craig Clemente Chief Operating Officer Specialty Care Management Lahaska, PA CHAIR, TPA BEST PRACTICES TASK FORCE Ron Dewsnup President Allegiance Benefit Plan ManagementMissoula, MT CHAIR, WORKERS’ COMP COMMITTEE Mike Zucco Business Development ATA Comp Fund Montgomery, AL

Les Boughner Director Alex Giordano Director

JANUARY 2020

49

SIIA new members january 2020 REGULAR CORPORATE MEMBERS Michael Reagan Partner Benefit Fixes LLC North Richland Hills, TX

SILVER CORPORATE MEMBER Timothy Teen President Broadreach Medical Resources New York City, NY

Mark Hufham Director of Marketing Benefits Science Technologies The Woodlands, TX

rmtsales@ringmastertech.com • 913.521.2204 • ringmastertech.com

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IS 1 TRILLION DOLLARS

in healthcare waste & errors too much?

YES. At Zelis, we listen to what payers and providers want and bring technology, people, expertise, and entrepreneurial energy together to create smart solutions and a better way for the industry. Integrated solutions to price, pay, and explain healthcare on a claim by claim basis, all offered by one trusted company.

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

Better Service. Better Performance.

zelis.com Copyright 2019 Zelis. All rights reserved.

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