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April 2015
www.sipconline.net
Taft-Hartley’s
Tipping Point ACA Taxation
COMPLICATES Self-Insurance Mission for Unions
800.800.4007 publicentity@midman.com midlandsmgt.com
Public Entity ProgramOffering Exclusive Access for Individual Public Entity Risks
That Prefer to Self-Insure Their Exposures.
April 2015 | The Self-Insurer 3
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Bruce Shutan
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April 2015 Volume 78
Taft-Hartley’s
Tipping Point ACA Taxation
COMPLICATES Self-Insurance Mission for Unions
10 Remembering Dick Goff
14 ART Gallery One Way to Stay Out of Trouble
with the DOL
16 Considerations When Evaluating Vendor Solutions for Electronic Adoption and Compliance
26 PPACA, HIPAA and Federal Health Benefit Mandates The Impact of Staffing Firm Employees and Contingent Workers on the Employer Shared Responsibility Requirement Under IRC 4980H
34 SIEF Golf Tournament at Camelback Country Club in Scottsdale, Arizona
36 Streamlining the TPA Licensing Process
40 SIIA EndeavorsUnderstanding Taft-Hartley Health Plans
Karrie Hyatt
22
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
Editorial StaffPUBLISHING DIRECTORErica Massey
SENIOR EDITORGretchen Grote
CONTRIBUTING EDITORMike Ferguson
DIRECTOR OF OPERATIONSJustin Miller
DIRECTOR OF ADVERTISINGShane Byars
EDITORIAL ADVISORSBruce ShutanKarrie Hyatt
Editorial and
P.O. 1237, Simpsonville, SC 29681(888) 394-5688
2015 Self-Insurers’
James A. Kinder, CEO/Chairman
Erica M. Massey, President
Lynne Bolduc, Esq. Secretary
Workers’ Compensation in The Big Easy
4 The Self-Insurer | www.sipconline.net
Written by Bruce Shutan
While self-insured employers have struggled to comply with the
Affordable Care Act (ACA), self-insured Taft-Hartley plans also face an even steeper uphill climb – with added costs that could alter the course of historically generous benefi ts and collective bargaining agreements.
Ed Smith, president and CEO of ULLICO, describes the overall market state as “very challenging,” noting a declining economic impact on the nation’s most-unionized industries since the Great Recession and medical inflation outpacing wage inflation for more than 30 years.
The ACA has imposed a transitional-rate insurance fee, also known as a “belly button tax,” which essentially amounts to a reinsurance fee on carriers that no longer are allowed to charge higher premiums to sicker plan participants. Last year’s $63 charge for each covered life fell to $44 for 2015 and will drop to $27 in 2016. Plan that are both self-insured and self-administered are exempt. It is estimated that 20% of Taft-Hartley plans fit that definition.
While self-insured employers have struggled to
Taft-Hartley’s
Tipping Point ACA Taxation
COMPLICATES Self-Insurance Mission for Unions
April 2015 | The Self-Insurer 5
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TAFT-HARTLEY | FEATURE
Smith, whose insurance and
financial services holding company
serves union members, says there’s
no way for these jointly administered
health plans to recoup that money
and fears the Taft-Hartley market
will shrink over time unless there’s
regulatory relief.
“They simply have to write a
check out of their self-insured plans
to cover this tax,” he notes. “It’s very
punitive because that money comes
either out of the worker’s pocket or
the company’s pocket, and they’re
struggling to keep their businesses
alive, and the worker is struggling to
keep his house and car, etc.”
Unfairly Penalized?Randy DeFrehn, executive director
of the nonprofit National Coordinating
Committee for Multiemployer Plans,
says organized labor’s main gripe
with the ACA is that their health
plans were already doing what the
landmark legislation sought from small
employers, which was to help them
obtain affordable, high-quality coverage
by pooling their purchasing power and
eliminating pre-existing conditions.
Industry insiders agree that the
result, even if it’s an unintended
consequence of health care reform, is
that the ACA has seriously hampered
the ability of self-insured Taft-Hartley
plans to maintain the level of operational
efficiency that they’ve long enjoyed.
“Our belly button tax was about
$933,000 in 2015,” reports Barry
McAnarney, executive director of the
Massachusetts Labor Benefit Fund
(MLBF). “That’s less money we have
to pay on our plan... We think it was
commendable that more than 11
million people have signed up [for
health insurance coverage through
Obamacare], “but we think that by
charging us the belly button tax for
something we were providing that
we’re the ones being penalized.”
Self-funded Taft-Hartley plans cover
between 10 million and 11 million
of the nation’s roughly 15 million
rank-and-file union members, as well
as another 10 million to 14 million
dependents, estimates Michael Jordan,
president in the labor and strategic
accounts division of MagnaCare,
which manages and administers
claims in the self-insured Taft-Hartley
market. He says that’s a far cry from
about 30 years ago when there were
about 18 million unionized workers
representing 20% of the workforce
and the manufacturing sector was
much stronger.
The Taft-Hartley model, though
overwhelmingly built around self-
insurance, also features a mix of fully
and self-insured plans, and single
and multiemployer plans, depending
on the market. In the steel industry,
for example, DeFrehn points to
longstanding relationships that have
been maintained with Blue Cross and
Blue Shield plans, whereas in certain
parts of Pennsylvania and New York
plans might self-insure outpatient care,
but turn over inpatient care to a Blues
plan or other major carrier that can
command better discounts.
Another critical factor is that
whereas many of these plans once
had a $1 million maximum on
major-medical expenses, the ACA
has eliminated the use of annual
and lifetime caps. So that’s one
cost-control mechanism that’s now
off the table. On top of that is the
widely anticipated 40% excise tax on
Cadillac-style health plans that takes
effect in 2018.
“No good deed goes unpunished,”
Smith quips.
There’s also a patient-research fee,
which went from $1 per covered life
a couple of years ago to $2.80 per
life, according to Jordan. Yet another
cost driver is that the ACA allows
for dependent coverage up to age
26, adds DeFrehn, describing the
added tax burden as “a transfer of
assets from self-funded programs to
commercial insurance carriers.”
He says other considerations
include a heavy mix of pre-Medicare
retiree coverage for people who
are at the high-cost end and those
who live in major metropolitan areas,
particularly in the Mid-Atlantic and
Northeastern states. Many Taft-Hartley
funds also cover retiree populations,
whose longer life expectancy costs
more than what was anticipated 10, 20
or 30 years ago, Jordan adds.
Then there’s the issue of a lagging
economic recovery that prevented
some rank-and-file members from
working enough hours to maintain
their eligibility for health care coverage
in the first place, DeFrehn notes. But
he’s sanguine that a higher demand for
skilled labor projected over the next
decade or so could enable Taft-Hartley
plans to grow again.
Staying CompetitiveEmployers that contribute to
Taft-Hartley plans, no doubt, are
facing higher health care benefit and
pension costs, which, in turn, places
tremendous pressure on wages.
“You get to the point where you’ve
maxed out on competitiveness, and
the only place to get additional cost
is to get back to the worker and
take a bigger piece of the pie for his
compensation,” DeFrehn explains. “So
you end up with some workers that
aren’t very happy because they don’t
get raises.”
ACA Taxation
COMPLICATES Self-Insurance Mission for Unions
6 The Self-Insurer | www.sipconline.net
As a result, the ACA has forced
self-insured Taft-Hartley plans to
determine better ways to remain
competitive in terms of wages and
benefits for rank-and-file members,
Jordan says. Beyond tweaking co-
pays and deductibles, he sees promise
in high-performance networks,
customizing certain benefits and
member-engagement strategies that
help plan participants become much
smarter consumers of their health care.
“Many of these plan sponsors are
going to have to take a step back and
figure out, ‘how do I stay below that
threshold where I’m going to incur
even greater cost that what I’m seeing
today?’” he explains. In anticipation of
the Cadillac tax, Jordan notes that many
of these funds will face a significant tax
above a certain threshold. “Today it’s
$27,500 a family,” he says. “It will change
by the time we get to 2018. That’s not
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anything that’s tax deductible, and that’s above the cost of the plan.”
With its back against the wall, the MLBF now needs to reach far above any
low-hanging fruit to save on health care costs. Among the strategies it is now
pursuing on behalf of its members and their families: encouraging the use of
nurse practitioners at CVS and Walgreens drug store chains, as well as urgent
care centers as an alternative to hospital ERs. Express Scripts also is used to help
manage pharmacy benefit claims.
The MLBF, which has been around since the 1960s, covers about 20,000 lives,
approximately 8,100 of whom are union members working in construction and on
roadside crews across New England who also receive a pension and annuity fund.
The union last year paid out about 250,000 medical, hospital, pharmacy dental
and vision claims totaling an estimated $80 million. Roughly 800 contractors
contribute to the union’s funds during the prime construction season. The fund’s
focus is on preventive care and wellness, with no deductibles on physicals for
member and their spouses.
Some Taft-Hartley plan sponsors and unions have encouraged mergers with the
small plans to try to better manage administrative costs by achieving economies of
scale to which the larger plans have become accustomed, DeFrehn notes.
One last piece of the puzzle is to lobby Congress to reduce the tax burden
on these plans, though it won’t be easy convincing conservative Republicans to
pursue an action that could be seen as a favor to the organized labor movement.
“We spent a lot of time with the administration to convince them that the
statute did not give them the authority to impose the temporary reinsurance
TAFT-HARTLEY | FEATURE
April 2015 | The Self-Insurer 7
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8 The Self-Insurer | www.sipconline.net
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April 2015 | The Self-Insurer 9
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fee on self-funded, self-administered plans,” DeFrehn says. “Eventually we were
successful, but only for the second two years. They had already sent out the
notices to the insurance carriers as to what their portion of the temporary
reinsurance fee would be and to build into their premiums.”
These plans have typically been “pretty well managed” because union members
view their health and welfare benefits “as a direct offset of money they would
otherwise get in their compensation,” according to DeFrehn. “So they’re typically
very cautious about not being excessive in benefit structures and also trying to
keep some kind of containment on the costs themselves by accessing discounted
provider networks, going through PBMs and formularies, those kinds of things.”
On average, Smith says 90% of union health plan contributions revert back to
workers and their dependents, while the rest covers administration costs. “That is
a great statistic when you look at how efficient these plans have run,” he says.
As such, he believes self-insured Taft-Hartley plans offer the self-funded
community at large valuable lessons in cost efficiency, as well as plan design and
personal service to the employees and their dependents. “It’s really a hands-on
approach,” he adds. ■
Bruce Shutan is a Los Angeles freelance writer who has closely covered the employee
benefi ts industry for more than 25 years.
SIIA Forum Targets Taft-Hartley Plans
Mindful that self-insured Taft-Hartley plans face an uphill battle in a post-health care reform environment, SIIA has sought to engage more directly with this market segment.
“It has become increasingly clear that
the interests of self-insured Taft-Hartley funds and employers
are closely aligned in many cases,”
explains SIIA President and CEO Mike Ferguson.
SIIA will host the Self-insured Taft-Hartley Plan Executive Forum at the Marriot Metro Center in Washington, D.C., on April 29-30– featuring leading industry experts and unique networking opportunities.
Keynoters will include Mike Ferguson and Leo Garneau, SVP of PHX. The event also will feature the following educational sessions:
- Understanding the Value of Your Self-Insured Plan
- Plan Design Strategies to Control Costs
- Knowing Your Provider Payment Option
- The Stop-Loss Insurance Carrier Perspective
- Legislative/Regulatory Update
- Approaches for Providing Coverage for Early Retirees
10 The Self-Insurer | www.sipconline.net
Remembering Dick Goff
Written by Jim Kinder
On February 28 our industry lost a real hero.
Richard C “Dick” Goff passed unexpectedly from complications
of surgery leading to cardiac arrest following a slip on ice at his
home on his 69th birthday. It was a devastating shock to all who
had the pleasure of knowing him.
Dick was a very special person, not only to our industry but to all who had
the opportunity to do business with him or know him as a friend. He was a true
“doer” and a much focused businessman. I can recall when I first met Dick some
20-plus years ago at a SIIA event where he made several suggestions on how SIIA
could expand its services and representation of the industry. After listening I said,
“well, Dick you have some good ideas and you should consider getting actively
involved and bring them to the SIIA leadership.” Dick just nodded his head and,
the next thing I knew, he took the task to heart by serving on several committees
through the following years, testifying before Congress and many state legislatures
on behalf of the industry and ultimately serving as president and chairman.
SIIA’s leadership was stunned at his sudden passing yet quick to articulate the
impact of his loss. “Dick was a hugely influential figure in our industry and our
association,” said Mike Ferguson, SIIA’s chief executive officer. “He was a constant
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and vigorous supporter of the self-insurance marketplace and a friend to all who
knew him. Our thoughts today are with his family, colleagues and many friends.”
Erica Massey, executive vice president of SIIA and president of the Self-Insurers’
Publishing Corp., said,
“Dick was not only an inspiration and a tireless supporter of the self-insurance/alternative risk
community, he was also a dear friend to all and a great mentor. His vibrant personality and
unwavering support of the industry will truly be missed but never forgotten.”
A large group of Dick’s family, friends and industry figures gathered at a north
Baltimore hospitality venue for a memorial service and, according to his wishes,
“a party.” A focal point was an antique wooden Budweiser case containing a
commemorative copper plaque and six Budweiser bottles that – following the
directive of Dick’s will – were filled with his ashes. That was Dick, who could be
playful even in serious times.
Dick was a true visionary, always thinking “outside the box” with a strong
positive attitude. I don’t think the word “can’t” ever was part of his vocabulary.
To Dick everything was possible and he proved that time and again both in
his business world and personal life as well. In business, he never feared his
competitors and was eager to share
information and extend a helping hand
if asked. Like all of us, he had his gripes
but I never heard him say a bad word
about anyone.
His company, MIMS International,
which later became The Taft
Companies, is as unique as Dick
himself. A strong independent broker,
administrator and captive insurance
management firm, Dick and his team
crafted some of the most unique
programs for his clients. There were
times his closest colleagues felt
compelled to reel him back into
the “box,” but more often than not
his innovative thinking prevailed.
His partners, Allen Taft and Mary
Claire Goff (Dick’s best friend, loving
spouse and business partner) made
an awesome team that I’m sure will
continue to follow and implement
Dick’s vision for years to come.
12 The Self-Insurer | www.sipconline.net
During his SIIA tenure Dick helped
to expand its presence in workers’
compensation, international operations,
formation of special coalitions to
advance alternative risk finance. In
addition he served as a founding
member of related organizations
including the South Carolina Captive
Insurance Association, the Captive
Insurance Council of the District of
Columbia and the Montana Captive
Insurance Association (where he
was currently serving on its board of
directors). He was also instrumental
in the expansion of SIIA government
relations work with a focus on
alternative risk financing as well as
employee benefits, serving as author of
The Self-Insurers’ monthly column “The
ART Gallery,” director/officer of the
Self-Insurance Educational Foundation
and more. To say Dick was “involved” is
an understatement!
Dick leaves a strong legacy and a
devoted family who I am confident will
carry on his vision, enthusiasm and
support. Case in point is his son Jon,
who along with his wife Karen are
dedicating their lives to helping young men who have experienced a rough time
in life through their special “ride to work” program. With the help of Dick and Mary
Claire and other supporters, Jon and Karen formed Gallant Chance Ranch, a non-
profit organization based in Montana that helps at-risk teens become productive
citizens. It was fitting that the announcement of his passing noted that in lieu of
flowers memorial donations could be made to Gallant Chance Ranch. I encourage
readers to visit www.gallantchanceranch.org and consider supporting them, not
only as a tribute to Dick but for the excellent work they are doing to help
others in need. Donations may be made online or mailed to Gallant Chance Ranch,
1097 West Dry Creek Rd., Belgrade, MT 59714. ■
R.I.P., My Friend and Colleague, Dick Goff
Jim Kinder was among the founders of SIIA and served as its Executive Director/
CEO from its inception in 1981 until his retirement in 2008. In addition to creating
SIIA he formed several other industry organizations including South Carolina Captive
Insurance Association, District of Columbia Captive Insurance Association, Montana
Captive Insurance Association and Self-Insurance Educational Foundation. Jim remains
active in the industry and currently serves on the board of directors of Montana
Captive Insurance Association and is Chairman of Self-Insurers’ Publishing Corp.
He is also active in philanthropy activities serving as president/CEO of Kinder Family
Foundation, Inc., a non-profi t organization supporting continuing education through
scholarships, children’s issues and seniors. Jim can be contacted at 864-409-8347
or jkinder120@icloud.com.
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2015Schedule of Events
Sept MaY
october
April AprilNEW EVENT! Self-Insured Taft-Hartley Plan Executive ForumApril 29-30, 2015Marriott Metro Center | Washington, DC
Taft-Hartley plans refer to the multi-employer pension plans collectively bargained by a union and a group of employers, usually in related industries. Taft-Hartley plans are governed by a trust, half of whose trustees are appointed by the employers and half by the union. This retirement plan model has enabled tens of thousands of small and medium-sized businesses to provide workers with the traditional defi ned benefi t pensions that used to be standard among larger employers, but have now virtually disappeared in the non-unionized private sector.
More Info coming soon! Self-Insured Executive Summit September 14-16, 2015 Apex City of London Hotel | London, England
Self-Insured Workers’ Compensation Executive ForumMay 12-13, 2015Windsor Court Hotel | New Orleans, LASIIA’s Annual Self-Insured Workers’ Compensation Executive Forum is the country’s premier association sponsored conference dedicated to self-insured Workers’ Compensation employers and group funds. In addition to a strong educational program focusing on such topics as analytics, excess insurance, wellness initiatives and risk management strategies, this event will offer tremendous networking opportunities that are specifi cally designed to help you strengthen your business relationships within the self-insured/alternative risk transfer industry.
SIIA’s National Educational Conference & Expo is the world’s largest event dedicated exclusively to the self-insurance/alternative risk transfer industry. Registrants will enjoy a cutting-edge educational program combined with unique networking opportunities, and a world-class tradeshow of industry product and service providers guaranteed to provide exceptional value in three fastpaced, activity-packed days.
35th Annual National Educational Conference & Expo October 18-20, 2015 Marriott Marquis | Washington, DC
› For more information visit www.siia.org
14 The Self-Insurer | www.sipconline.net
One Way to Stay Out of Trouble with the DOL
ART GalleryWritten by Dick Goff
GalleryWritten by Dick Goff
Gallery
This article was written prior to Dick Goff’s
passing and is his fi nal ART Gallery piece.
All of us at The Self-Insurer, and those in
the alternative risk transfer industry will
miss his insight, humor and kindness.
It’s no wonder that the U.S. Secret Service has had its problems in recent years. With millions of government employees it would
be impossible to keep a secret. For example, it wasn’t a secret very long – if ever – that the government dislikes self-insured employee health plans. That’s because the government fancies itself as the Big Daddy of health insurance, and doesn’t like the competition, especially competition from a system that does it better.
So we suffer interference from several levels of federal and state government, including the Treasury Department and its attack dog, the IRS, the finding-its-way Department of Insurance and the defenders of obsolescence, the National Association of Insurance Commissioners.
So, what’s a law-abiding ERISA-enabled self-insured employee health plan sponsor to do? The answer, my friends, is to keep a squeaky-clean operation that will survive any government review, especially an inquiry by the Department of Labor (DOL), serving as the enforcement
agency for ERISA plans.
“The best way I know to present a correctly run plan is to have an independent
fiduciary review every aspect, every transaction, to make sure the plan will survive
government scrutiny,” says Philip Healy, executive director of the Automobile
Wholesalers Association of New England (AWANE), which operates a multiple
employer welfare arrangement (MEWA) covering members’ employee benefits.
I think the same approach makes sense for any ERISA plan to assure that all
its financial relationships with service providers and underwriters will pass muster
under the DOL’s dreaded “prohibited transaction” rule.
“A lot of organization managers don’t think about how dealings with related
companies can look to outsiders or to the government,” says Bill Kropkof, head
of the ERISA Advisory Group in Henderson, Nevada. His resume includes several
years with the Department of Labor as investigator for the Employee Benefit
Security Administration.
“The time to make sure everything about a plan is airtight is when it’s being
structured, not when the DOL comes to call,” Kropkof says. “If a DOL review finds
what they consider a prohibited transaction, they can force a company to undo years
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of certain operations, and that is a very
expensive and painful experience.”
Of course, the obvious example
of a suspicious transaction is to buy
insurance – or any product or service
– from your bother-in-law, no matter
how attractive an idea your wife makes
that sound. But that doesn’t have to
suffer the “prohibited transaction”
verdict if rates and any commissions
are appropriate to the market and
disclosed to all parties. An independent
fiduciary can pass judgment on an
ERISA plan’s dealings way upstream
from when the DOL would take notice,
and advise a benefits plan sponsor how
to make any corrections.
“It can be a matter of making a no
into a yes,” said Philip Healy of AWANE
during our conversation on this issue.
Philip cited a couple of common
practices that can become big mistakes
in the “prohibited transaction”
category according to the DOL.
One is to put a load to help defray
operating and administrative expenses
onto an insurance rate that is sold
to members. Another is to have an
agency owned by the association
collecting undisclosed commissions,
again to help pay overhead. “Any plan
trustee could have substantial liability
if such practices were ruled out of
bounds,” he said.
With all these reasons for an
independent fiduciary to review
and, if necessary, sanitize ERISA plan
transactions one could surmise that
our industry would lead the league in
applying the services of independent
fiduciary consultants. One would
surmise incorrectly.
My impression is that a very small
portion of the self-insurance industry
avails itself of independent fiduciary
services. “We’re not a Yellow Pages
category,” says Bill Kropkof. “One
reason is that many people with
appropriate skills and background
prefer not to take on the liabilities
of making judgments about DOL
enforcement matters.”
The availability of independent
fiduciaries will likely increase as
demand grows. When you think
about it, for a plan sponsor using an
independent fiduciary can be a matter
of getting an advance reaction to the
plan’s structure from a person with
the qualifications to stand in for the
government, but with greater charm. ■
Dick Goff was managing member of The
Taft Companies LLC, a captive insurance
management fi rm.
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Organizations are faced with a variety of choices when it comes to
potential electronic payment solutions. Finding the right product
for an organization is more than checking a capabilities list; it also
needs to include evaluating service quality, implementation timelines
and associated integration costs. This report will educate the user on important
considerations when conducting a vendor review.
Electronic Adoption – Is it Really Happening?Indeed, it is. The change is occurring, in part, due to the regulatory development
of global operating rules related to the transmission of electronic funds transfer
(EFT) and Electronic Remittance (ERA). 1 Effective on January 1, 2014, the proposed
new operating rules in development by CORE/CAQH in response to Section
1104 of the Affordable Care Act (ACA) is the driver for the insurance industry to
become compliant. This legislation compels healthcare payers to have the ability to
transmit electronic payments to any provider that requests transmission of payment
and remittance data in this manner. Under the proposed new rules, each health plan
will be required to attest to their compliance with significant penalties as a deterrent.
As these requirements and rules further develop, many health plans will rely
Considerations When Evaluating Vendor Solutions for Electronic Adoption and Compliance
Written by Jennifer Plake and Tom Davis
April 2015 | The Self-Insurer 17
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on their payment administrator to
assist with this compliance. As the
payer steps in, many may find they
need help from a third party vendor
who has already achieved CORE
certification. When choosing a vendor
partner, there are several important
factors to consider.
• Do your homework –
Multi vs. Single Source Solutions
• Vulnerabilities and security risks
• Timeline for achieving compliance
Do Your Homework – Multi vs Single Source Solutions
Multi-Source Solutions Some
vendors appear to offer everything
you need. However, when more closely
examined, these vendors specialize in
only one payment resolution method.
As an example, there are many
electronic vendors offering a virtual
card driven solution. EFT capabilities,
which deliver the compliance you
seek, are often limited with insignificant
levels of providers actually enrolled to
be paid in this manner. This creates risk
and may introduce new complications
in your workflow as often time the
burden will fall back upon the payer
to engage and enroll providers or
seek additional vendors to provide the
needed EFT adoption.
These suppliers seem attractive
at first because they offer a lucrative
revenue-sharing option, generated
from the virtual card. However, the
virtual card is only a single piece
of evaluating a sustainable long-
term solution. When conducting
your vendor evaluation, important
considerations should be:
• Do they have online support for
providers to easily sign up for
compliant EFT/ERA and opt-out
of virtual cards?
• Do the various payment options
require a separate and distinct
funding process?
• Can they produce a compliant
EFT/ERA from your data file?
• How many EFT providers do
they have enrolled?
• How do they enroll
EFT/ERA providers?
Payers evaluating these solutions
should also pay close attention to the
implementation plan and payment
reconciliation workflows. Many times
multi-source solutions issue and
settle payments from three separate
sources. Your internal workflow can
become cumbersome and require
additional support to reconcile all of
your payments. Be sure to request a
documented Implementation Plan with
timelines and resource expectations.
You can avoid a failed or stalled
implementation by using a well-defined
implementation plan to set proper
expectations. However, be aware of
indicators that you are implementing
multiple payment processes with a
single vendor. If the vendor issues and
settles payments from different sources
based on payment modality, daily
workflows and processes may become
more complex from your current state.
While quality multi-source
products can produce beneficial
results, expenses can climb if you have
to add two or more multi-source
vendors that each solve a single
need. The payer may feel they need
to reinvent themselves in order to
accommodate each vendor’s separate
methodologies. Be confident that
you do not need to implement a
short-term or incomplete solution. A
multi-source solution usually cannot
manage all of your payments without
complicating your daily operations.
Single Source Solutions Single
Source solution vendors can manage
all of your payments and offer the
payer a steady reconciliation process.
A single source solution will preclude
a payer from interfacing with multiple
vendors, banks or other interfaces of
the payment stream. Effective solutions
should include important features
such as the ability to link the real-time
payment status to the adjudication
system detail and originating funding
event. This simply means that a payer
can locate all relevant details for all
payments through a single data source
including images of cancelled checks.
Additional important distinctions
should focus on a long-term vision
of migrating providers to electronic
payments without exclusive
dependence upon a virtual card. Payers
should ask very specific questions
about the number of providers
enrolled for EFT and for specifics
on their population of Provider Tax
ID’s. If the vendor cannot confirm a
match of 25% or greater, the program
will very likely achieve substandard
results. ERA capabilities should also
be properly vetted in this discussion.
Confirm the vendor’s capabilities to
produce a compliant 835 from your
current extract or print file. Ask specific
questions about their experience
with different adjudication systems,
current production volumes and if any
crosswalk or tables will be required.
Any vendor under consideration
should have well-documented
implementation plans and weekly
accountability calls. Newly
implemented payers will be a very
important reference point to confirm
associated implementation timelines.
The implementation team should have
the ability to manage and lead the
customer through a fully customized
implementation that accounts for
unique customers or plan designs.
18 The Self-Insurer | www.sipconline.net
The result of these efforts is a refined, streamlined daily operation and workflow.
A quality decision under a single source platform should include:
• Market leadership in virtual card and EFT/ERA distribution
• Provider payment preference management
• Compliant EFT/ERA from your existing data file
• Single resource for reconciling all payments – card, check and EFT
• Implementation results that can be verified through client references
Consider Vulnerabilities and Security Risks A critical step in the evaluation process is security. In healthcare payment
processing there are many possible exposures such as private health information
and banking transaction details. In your evaluation, ask how personal health
information is protected and how security breaches and financial loss are avoided.
Established vendors are comfortable providing documented support of their
security infrastructure and software protocols along with backup, failure and
redundancy programs. Further, they can offer a voluntary third party audit of
their organization proving their claims. This level of scrutiny compliance with not
only healthcare regulatory procedures such as HIPAA and ACA, but financial
transactions are protected as well through FDIC insured payments and Payment
Card Industry Data Security Standards (PCI DSS) compliance.
With the aforementioned mandate and operating rules, third party payment
services have quickly become a growth industry with many new entrants. Proper
due diligence should include specific questions about a vendors growth and
scalability. Companies committed for
the long-term should conduct regular
assessments and ensure that growth is
aligned with infrastructure capabilities.
In a world where Fortune
100 companies are subject to
data breaches, it is imperative to
understand what measures a vendor
takes to protect your data. With
user interfaces and provider portals,
there are often many access points
that expose a company to potential
breaches. Vulnerability testing and
regular static scans are indicators that
your vendor is taking the necessary
precautionary measure.
If the vendor uses a series of
vendors themselves to provide
their services, be cautious that all
parties maintain the same level of
security standards. Distinct lines of
responsibility and liability should be
clearly defined in contracts.
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Timeline for Achieving Compliance Achieving compliance quickly can be a real possibility. Once the due diligence
process is complete and you have narrowed your vendor selection, you can
verify your selections are CORE certified if you have not already by going to
http://corecertification.caqh.org/CORE_organizations. Each health plan can
begin achieving compliance on day one of production with a CORE Phase III
Certified vendor.
A fully engaged payer and vendor can complete an implementation in 6-7 weeks.
If your due diligence indicates that your vendor selection cannot perform within
these parameters with validated references, this may be an indication
to consider other options.
Electronic payment solutions range in quality and effectiveness. To ensure
your organization partners with a vendor that can deliver the capabilities your
organization needs ask the following questions: Do they provide a single source
solution to handle all of my payments seamlessly? Can they provide documented
support of their security infrastructure and programs? Does their solution allow
my company to achieve compliance quickly? If the answer to each of these
questions is yes, then you have found a quality vendor. ■
Tom Davis is the Executive Vice
President of Business Development
and Jennifer Plake is the Strategic Sales
Associate at ECHO Health, Inc., a
leading provider of electronic healthcare
payment solutions. Serving more than
50,000 ERISA health plans and fully
insured groups, ECHO processes more
than $10 billion in payments annually
to providers and members through
industry-leading payers. Founded
in 1997, ECHO is a privately held
company located in Westlake, Ohio.
22 The Self-Insurer | www.sipconline.net
After the 2008 credit
crisis, stringent credit
ratings from reputable
ratings agencies became
an increasingly important tool
for insurance companies and the
greater fi nancial sector. Even though
many credit rating agencies took a
reputational hit from the crisis, as
third-party evaluators their services
are in ever greater need. While a good
rating is crucial for traditional insurers,
alternative risk transfer vehicles,
primarily captives, do not have the
same imperative to hold a rating.
Credit Ratings and Reputation
As captives are private companies,
beholden only to their parent
companies and policyholders, having
a good credit rating is not necessarily
required to run a good business. Since
the credit crisis, it can be argued,
any company with the ability to get
a solid rating, should. For captives
this is especially true, given the
mistrust captives encounter by those
Of Credit Ratings and Captives
Written by Karrie Hyatt
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outside the industry. The New York
Department of Financial Services’
accusation that captive insurance is a
“shadow industry” may be the most
well-known recent criticism of the
captive industry, but it is also just the
tip of the iceberg in terms of the
mistrust the industry faces.
Most captive industry insiders
embrace the idea of more
transparency within the captive
industry. Yet there is a fine balance
between public and private that
captive insurance companies face.
That is where credit ratings can aid
the industry. A good rating can give
a big boost to a captive’s reputation
and solidify its standing as a profitable
business. Of course, the opposite is
true. If a captive gets a low rating it
would overshadow any good points the
company would like to promote. Often
times, when an already rated company’s
rating is lowered, they will withdraw
from the process entirely rather than
be faced with a score that reflects
poorly on their business operations.
Credit ratings can impact a captive’s
ability to do business for both good
and bad and a rating will affect different
types of captives in different ways.
Ratings AdvantagesObtaining a good credit rating can
be both time-consuming and expensive,
but it’s usually worth the benefits. For
any financial company, a good credit
rating will validate the company’s
operations, it will facilitate the raising
of capital and it helps the company to
meet benchmarks in comparison with
similar companies. For captive insurance
companies the benefits go even further.
To start, a good credit rating can
help support the parent company’s
operations and can help promote the
captive to new policyholders.
More importantly, a solid rating
can help secure reinsurance and
solidify fronting arrangements. Credit
ratings improves business relations
with service providers for captives,
especially in the reinsurance market.
Ken Barrett, chief executive of Besso
Re, the reinsurance division of Besso,
said that a captive’s rating won’t
necessarily affect it in the London
reinsurance market, but there are
U.S. reinsurers that won’t quote or
reinsure a non-rated captive or risk
retention group (RRG). However, he
continued, “A captive can probably
secure better reinsurance terms if it
has a rating of at least ‘A-‘ from A.M.
Best. It makes the reinsurer more
comfortable with the financial status of
the company.”
There can be negative effects
for a captive without a credit rating.
Securing the best arrangements with
fronting carriers or reinsurers is more
difficult. According to Derick White,
president of Strategic Risk Solutions
Vermont, a captive management
company with operations in the U.S.
and off-shore, “Some insurance buyers
have strict guidelines that they may
only purchase from ‘A’-rated carriers.
While this guideline [was] crafted long
ago and perhaps without thoughtful
cause, it still would eliminate a
nonrated insurer from even proposing
to insure these buyers.”
In the current economy, a credit
rating also gives the captive more
transparency in their business
operations. According to White, “Once
a company has a rating, that rating
is always in the minds of its officers
and directors. Thinking about how the
rating agency would react to capital
levels, dividends and premium growth
are often given major considerations.
The rating agency becomes another
regulatory body.”
It is relying on third-party credit
rating agencies as a de facto regulator
that helps put captives in good stead
with non-domiciliary and federal
regulators. Captives are only required
to financially report to their states of
domicile, part of what makes industry
detractors nervous, but a credit rating
from a third-party helps to appease
critics, to some extent.
Ratings DisadvantagesWhile a solid credit rating can
be key to providing transparency to
the industry, credit ratings are not
for every captive. If the captive is
just starting up a rating may reflect
poorly on the company – regardless
of operations. “A company would
have a difficult time in its early years
as, by definition, it would not have
any history,” said White. “This would
negatively impact a rating it would
receive. Ideally, the captive should seek
a rating after it has at least five years of
very good operations and good steady
growth. Of course, with a successful
history, it not may need a rating.”
The cost/benefit ratio should also
have an impact on whether a captive
seeks a rating. Companies have to pay
to obtain a credit rating and have to
prepare and assemble a large amount
of data for the credit rating agency
for review. For small captives or pure
captives a simple cost/benefit analysis
may determine that the cost would
outweigh any benefits.
Once a credit rating is issued, a
company then needs to work to keep
up or improve upon that rating. While
this may not be a true disadvantage, if
another crisis should hit the financial
markets, company’s credit rating could
take a major downturn. This could,
in turn, be detrimental to a captive’s
business prospects.
CREDIT RATINGS | FEATURE
24 The Self-Insurer | www.sipconline.net
Captive Types That Benefi t from a Rating
Credit ratings are less important
for single-parent or pure captives
– a captive only insuring its parent
company’s risk. “Not all captives
should or need to obtain a rating,”
said White. “Most single-parent
captives, for example, are used
only for internal purposes with no
external policyholders included in the
program, or outside entities relying on
certificates of insurance.”
Group captives are the type
of captive that benefit most from
obtaining a credit rating. Group
captives include association captives
and industry captives. These types of
captives directly compete with the
commercial market where almost all
of those companies hold credit ratings.
When trying to attract new policyholders, “A good rating can almost speak for
itself in promoting the company to new and existing insureds,” said Derick White.
In addition to group captives, RRGs on the whole benefit from having a credit
rating since they operate across state lines in non-domiciliary jurisdictions. A solid
rating for a RRG can help smooth the way with non-domiciliary regulators.
While there are many benefits of credit ratings for captive insurance
companies, working to obtain one is not always in the best interest of the
company. For pure captives or new captives, credit ratings are probably
unnecessary or unattainable. For various types of group captives, with a few years
of business history, credit ratings can be an excellent tool for growing business.
In terms of the overall industry, credit ratings can help improve the reputation of
captives with the financial transparency that comes with them. ■
Karrie Hyatt is a freelance writer who has been involved in the captive industry for
nearly ten years. More information about her work can be found at: www.karriehyatt.com.
CREDIT RATINGS | FEATURE
April 2015 | The Self-Insurer 25
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Would you navigateuncharted waterswithout a compass?
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©2015 Berkley Accident and Health, Hamilton Square, NJ 08690. All rights reserved.
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PPACA, HIPAA and Federal Health Benefi t Mandates:
PracticalQ&AThe Impact of Staffi ng Firm Employees and Contingent Workers on the Employer Shared Responsibility Requirement Under IRC 4980H
The Employer Shared Responsibility requirement under Section 4980H of the Internal Revenue Code (the “Code”) (referred to hereafter as the “Employer Mandate”) generally require applicable large employers (i.e., those with 50 or more full time employees counting full time
equivalencies) to offer group health plan coverage to their full-time employees or
face possible excise taxes.
This requirement applies to all common law employees of the employer. Whether
an individual is the common law employee of an employer is determined using the
IRS’ 20-factor test.1 The IRS has summarized the test for employers as follows:
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Under common-law rules, anyone who performs services for you is your employee if you can
control what will be done and how it will be done. This is so even when you give the
employee freedom of action. What matters is that you have the right to control the details
of how the services are performed.2
If an individual is determined to be the common law employee of an employer, the employer must satisfy the Employer Mandate requirements with respect to that employee, even if the individual is employed through a staffing firm or is short-term (i.e., a temporary employee).
This Article will describe how the Employer Mandate applies to each of various types of “contingent worker” employees and will provide practical advice for complying with the Employer Mandate.
Staffi ng Firm EmployeesWe assume, for purposes of this article, that all reasonable steps have been
taken to ensure that the individuals assigned by a staffing firm to the employer (“Assigned Employees”) will be considered to be common law employees of the staffing firm. However, as is often the case, an entity’s status as the common law employer may be unclear. Thus, we discuss below approaches for assessing and minimizing the risk under 4980H if the Assigned Employees are considered to be common law employees of the entity receiving their services (the Contracting Entity). Briefly stated these are:
Option 1: Ensure the Assigned Employees are NOT the Contracting Entity’s common law employees under IRS common law analysis (and/or if they are common law employees, that the number is small enough as to not trigger the significant 4980H(a) penalty for any month);
Option 2: Assume that the Assigned Employees will be considered as the Contracting Entity’s employees and take advantage of the IRS safe harbor3 by requiring the staffing firm to provide coverage under terms that would satisfy the Employer Mandate if they were employees of the Contracting Entity; or
Option 3: Assume the Assigned Employees are the Contracting Entity’s employees and manage Assigned Employee hours to ensure they work no more than 130 hours in any month for the Contracting Entity.
Option #1: Do Nothing Under this option, a Contracting Entity would continue to assume that the Assigned Employees are not its employees-- and assume the risk that the IRS might reclassify the Assigned Employees as the Contracting Entity’s common law employees and subsequently assess excise tax liability each month with respect to each such Assigned Employee who was a full-time employee and also received a subsidy in the exchange that month. The excise tax for which the Contracting Entity might be liable in a month depends on the following:
• Would the reclassification of the Assigned Employees as common law employees cause the Contracting Entity to fail the “substantially all” test that month?
Example: assume a Contracting Entity has 1000 regular full-time employees in a given month to which it offers coverage to 98% (i.e. 980). However, the Contracting Entity also has 100 Assigned Employees who have full-time hours of service in a month. The Contracting Entity does not offer nor is it deemed to offer coverage to any of the 100.
Net result: the Contracting Entity would only offer coverage to 89% of full-time employees in that month (for 2015, the Contracting Entity would pass the substantially all test due to the transitional 70% threshold, but not in 2016).
If the Contracting Entity fails the substantially all test, then it would pay the 4980H(a) tax with respect to all full-time employees if just one full-time employee received a subsidy in the exchange.
• If the Contracting Entity does not fail the substantially all test, then the only excise tax that would apply is the 4980H(b) tax with respect to any employee (including Assigned Employees who are re-characterized as the Contracting Entity’s common law employees) who received a subsidy in an exchange for that month. The (b) tax is $250 per month for each full-time employee who received a subsidy in the exchange.
Option #2: Require the Staffi ng Firm or PEO to Offer Coverage Under this approach, the Contracting Entity would
28 The Self-Insurer | www.sipconline.net
require the staffing firm or PEO to offer affordable, minimum value coverage to each Assigned Employee who is a full-time employee while working for the Contracting Entity.
In this option #2 (also called the safe harbor), you are assuming worst case scenario – i.e., the Assigned Employees are your employees. Consequently, you must use the same full-time employee identification method that you use for all other similarly situated employees employed by the same subsidiary.
A Contracting Entity choosing this option will need to amend its contract with the staffing firm or PEO to meet the safe harbor requirements. See Staffing Firm and PEO contracts later in this advisory for details.
Option #3: Manage Hours Worked Under this option, the Contracting Entity assumes that the Assigned
Employees are its employees but
does not require the staffing firm or
PEO to offer coverage. Instead, the
Contracting Entity manages hours
down (or requires the staffing firm or
PEO to contractually manage hours
down) to less than 130 hours in a
month so that Assigned Employees are
not full-time in any given month.
This option is valid provided that
the Contracting Entity can manage
hours down successfully enough such
that any Assigned Employees who
actually have 130 hours in a month
(i.e. those that slip through the cracks)
do not cause the Contracting Entity to
fail the substantially all test. If you are
successful enough, then the only tax
you might pay, if at all, would be the
4980H(b) tax ($250 per month) with
respect each Assigned Employee who
is considered to be a common law
employee who receives a subsidy in
the exchange.
Example: Assume Company X has 1000 full-time regular employees in a month to which Company X offers coverage to 98% (980). Company X also has 100 Assigned Employees in a month. Company X is able to successfully limit 90 of those 100 Assigned Employees to less than 130 hours of service in a month. In that case, Company X would still offer coverage to 97% of its full-time employees, which means it would satisfy the substantially all test in 2015 (where the threshold is 70%) and also 2016 (when the threshold is 95%).
Assume further that all 10 of the Assigned Employees who were full-time in a month received a subsidy in the exchange (because they weren’t also offered coverage by the staffing firm or PEO that was affordable and provided
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Stop Loss insurance products are underwritten by ReliaStar Life Insurance Company (Minneapolis, MN) and ReliaStar Life Insurance Company of New York(Woodbury, NY). Within the state of New York, only ReliaStar Life Insurance Company of New York is admitted, and its products issued. Both are members of the Voya®family of companies. Product availability and specifi c provisions may vary by state. © 2015 Voya Services Company. All rights reserved. LG12231 12/08/2014 164932
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minimum value). In that case, Company X’s excise tax for the month would be a mere $2500. Next steps with respect to this option: the Contracting Entity must determine how many Assigned Employees have historically had 130 hours of service in any given month and then:
1. Determine whether failure to offer coverage to these Assigned Employees who have 130 hours of service will cause the Contracting Entity to fail the substantially all test;
2. If it will cause the Contracting Entity to fail the substantially all test, determine whether the Contracting Entity can effectively manage the hours down for enough Assigned Employees so that it passes the test; and
3. If it doesn’t cause the Contracting Entity to fail the substantially all test, determine whether the Contracting Entity is comfortable paying the potential (b) tax if all Assigned Employees who are still full-time receive a subsidy in the exchange.
Practice Pointer: Even if hours are managed down to avoid the Employer Mandate, the Contracting Entity should check the terms of its plan to ensure the employees provided by the staffing firm or PEO are excluded.
Staffi ng Firm and PEO Contracts
If a Contracting Entity wants to satisfy the regulatory safe harbor for staffing firms, it would be well advised to amend its contract with the staffing firm or PEO to address the Employer Mandate. The regulations deem a Contracting Entity to have made an
offer of coverage if an offer is made by the staffing firm.4 To gain this protection, the staffing firm’s or PEO’s offer of coverage must meet all the requirements that would apply if the Contracting Entity were offering coverage directly to the Assigned Employees. That means that the coverage offered must provide minimum value and must be affordable. In addition, the offered coverage must extend to dependent children through the end of the month in which the child attains age 26.
The Contracting Entity should also address the newly issued 6055 and 6056 reporting requirements. Unlike the 4980H regulations, the regulations issued for the reporting requirements and the instructions for the applicable IRS forms (e.g., 1094-C and 1095-C) do not specifically address staffing firms. The common law employer of an employee must file Form 1095-C if the employee is full-time or is enrolled in coverage under a self-insured plan. Therefore, the Contracting Entity will need to specifically address whether it or the staffing firm or PEO is the employer of the Assigned Employees after applying the IRS’ 20-factor common law employee analysis. As you know, that is a facts and circumstances test, so the Contracting Entity will need to make a good faith determination regarding whose employees they are.
• If the staffing firm or PEO is the employer – the staffing firm or PEO will file a Form 1095-C for the employee and include the employee in its Form 1094-C count.
• If the staffing firm’s client (the Contracting Entity) is the common law employer – the Contracting Entity must file the Form 1095-C for the employee and include them in its Form 1094-C employee count. The staffing firm will need to provide all the information necessary to complete the Form 1095-C for the Assigned Employee, such as the months in which an offer of coverage was made, when the employee was in a limited non-assessment period, the cost associated with the least expensive employee-only coverage, etc.
The Contracting Entity may want to specify in the contract that the staffing firm or PEO will complete the filings or that they will produce the information above in a timely manner so the filings can be completed by January 31st.
Finally, the Contracting Entity may want to include indemnification language in the contract in case the staffing firm fails to offer compliant coverage and/or fails to provide the necessary information to allow the employer to meet its 6055 and 6056 reporting requirements.
The ABLE ActRecent legislation, known as the ABLE Act, that takes effect in 2016 will require
certified professional employer organizations (“PEOs”) to be responsible for a customer-employer’s employment taxes and withholding obligations.5 A PEO is a certified PEO if the PEO posts a bond, complies with reporting obligations and submits audited financial statements.
Although a PEO will be treated as an employer in the sense that it is responsible for paying employment taxes, the ABLE Act specifies that the Act “shall not be construed to create any inference with respect to the determination of who is an employee or employer”6 for Federal tax purposes or for any other purposes. This means that employers utilizing a PEO will not be able to automatically exclude PEO employees for 4980H purposes.
Practice Pointer: The ABLE Act will not affect application of the Employer Mandate to employees obtained through PEOs or staffing firms.
32 The Self-Insurer | www.sipconline.net
Temporary EmployeesThe Employer Mandate does not differentiate between permanent and temporary
employees. If a temporary employee is reasonably expected to work at least 30
hours a week, the employer must offer the employee health coverage at the end of
the waiting period, which is generally the first day of the employee’s fourth month of
employment. If the employer fails to make an offer of coverage, the employer risks
incurring an excise tax. If a temporary employee is not reasonably expected to work
at least 30 hours a week, the employer does not need to make an offer of coverage
to the employee until the end of the 1-year look-back measurement period (assuming
he/she averages 30+ hours/week during that period).
Practice Pointer: Employers will want to check their plan documents
to ensure temporary employees are not excluded. Or if exclusion is
intended, employers will want to ensure that the excluded temporary
employees do not cause the plan to fail the substantially all test. ■
The Affordable Care Act (ACA), the Health Insurance Portability and Accountability Act of
1996 (HIPAA) and other federal health benefi t 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 benefi t mandates.
Attorneys John R. Hickman, Ashley Gillihan, Johann Lee, Carolyn Smith and Dan Taylor
provide the answers in this column. Mr. Hickman is partner in charge of the Health Benefi ts Practice with Alston & Bird, LLP, an Atlanta, New York, Los Angeles, Charlotte and Washington, D.C. law fi rm. Ashley Gillihan, Carolyn Smith and Johann Lee are members of the Health Benefi ts Practice. Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner’s situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation. Readers are encouraged to send questions by email to Mr. Hickman at john.hickman@alston.com.
References1www.irs.gov/pub/irs-utl/x-26-07.pdf
2www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Employee-Common-Law-Employee
3Treas. Reg. § 54.4980H-4(b)(2)
4Treas. Reg. § 54.4980H-4(b)(2)
526 U.S.C. § 3511
626 U.S.C. § 7705(h)
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WE HAVE THE
EXPERTISEAND A COLLABORATIVE CULTURE TO HELP YOU SUCCEED.
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34 The Self-Insurer | www.sipconline.net
The Self-Insurance Educational Foundation, Inc. (SIEF) is a 501(c)(3) non-profi t organization affi liated with the Self-Insurance Institute of America, Inc. (SIIA). Its mission is to raise the awareness and understanding of self-insurance among the business community, policy-
makers, consumers, the media and other interested parties. SIEF recently announced
the launch of their new website www.siefonline.org.
SIEF held its always popular golf tournament at the Camelback Country Club
during SIIA’s Self-Insured Health Plan Executive Forum on March 4th.
SIEF would like to thank the following people for their support by participating
in the tournament:
- Thomas Belding, Professional Reinsurance Marketing Services
- Michael Branco, The Phia Group, LLC
- John Bryan, First Health
- Jason Davis, The Phia Group, LLC
- Joann DeBlasis, Navigators Management Company
- Kara Dornig, First Health
- Joseph Hodges, INETICO, Inc.
- David Huntington, Planned Administrators, Inc.
- Russ Krueger, Ocozzio
SIEF Golf Tournament at Camelback Country Clubin Scottsdale, Arizona
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- Brian Kruse, DCC, Inc. - Rob Lesko, Wilson Elser - Duane Ludden, Navigators
Management Company - Thomas Nuttle and
David Obrochta, Cottrill’s SP - Jody Potts, Helios - Rick Ritchie, RICS - David Roth, Three Rivers
Provider Network - John Sigman, First Health
1st place – Jay Ritchie, HCC Life Insurance Company, Robby Kerr, Group Resources, Inc., Duke Niedringhaus, J.W. Terrill, Inc. and Jerry Castelloe, Castelloe Partners, LLC
- Sherri Tetachuk, DCC, Inc. - Don Thaler, Bardon Insurance Group - Daniel Wolak, ULLICO
The SIEF Board of Directors would like to extend a special THANK YOU to all sponsors: Cottrill’s SP, HealthSmart, Pay-Plus Solutions, Inc. and The Taft Companies.
More Information Coming Soon!Self-Insured Executive Summit in London September 14-16, 2015, Apex City of London HotelLook for more information coming soon on more SIEF events. ■
36 The Self-Insurer | www.sipconline.net
If you work for a third party administrator (TPA) and have been charged with the task of determining the licensing needs of the fi rm, it can seem overwhelming to say the least. However, take heart because there are ways to streamline this process. I have been involved in the TPA licensing process for
many years and I will share some of my experiences with you.
Knowing the Scope of the TPA’s OperationsFirst and foremost, you need to have a complete understanding of the scope
of the TPA’s operations. There are jurisdictions that provide exemptions from
licensing or from licensing requirements for certain activities. For example, some
jurisdictions provide exemptions for a TPA that exclusively administers self-insured
plans that are governed by ERISA. There are a couple of jurisdictions that provide
a licensing exemption for a TPA that does not administer claims. There are also
a few jurisdictions that provide an exemption for a TPA that has fewer than 100
insureds residing in the state.
State LawsWith a clear understanding of the scope of the TPA’s operations, the next
step is to review the state’s definitions of a TPA as set forth in the state laws.
The majority of licensing exemptions will be set forth in these definitions. If you
Streamlining the TPA Licensing Process
Written by Scott ShefferFLMI, CLU, AIRC, HIA, MHP
April 2015 | The Self-Insurer 37
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don’t have access to an online legal service, state laws can be obtained online from the respective state insurance department website. It may be a daunting task, but the laws for each state in which the TPA will be operating have to be reviewed. With an understanding of the TPA’s scope of operations, you can determine if your TPA falls under a specific state’s definition of a TPA.
As a back-up to reviewing the state TPA definitions, you can send an email to the state insurance department that sets forth a detailed description of the TPA’s scope of operations. Most insurance departments will respond to such an email advising whether or not the TPA should be licensed based on the scope of operations. This is a good confirmation of your interpretation of a state’s definition of a TPA and it provides you with something in writing from the insurance department. By completing this first step, you may be able to decrease the number of states in which the TPA will need to apply for a license.
Once you have determined where the TPA needs to be licensed, the next step is to determine which states have adopted the National Association of Insurance Commissioners (NAIC) Model Uniform TPA License Application. If the states you are targeting for licensure are among those that have adopted the NAIC Model TPA License Application, you can significantly streamline the application process.
First, obtain a TPA license from an NAIC Uniform State on a “home state basis”. Then all that is required to apply for a TPA license in the other NAIC Uniform States is a completed NAIC Uniform Application, the applicable fee and a letter of certification from the state where the
license is held on a “home state basis”. A TPA does not need to be domiciled in one of the NAIC Uniform States in order to obtain a TPA license on a home state basis. A TPA license on a home state basis can be obtained by submitting what is required for a resident TPA license in one of the NAIC Uniform States.
The Application and Supporting Documents
The following steps can be taken to save time down the road when applying for a TPA license in other states that have not adopted the NAIC Model Uniform TPA License Application:
• Have a Plan of Operation – Most states will require that a Plan of Operation accompany the TPA license application. The more detailed the Plan of Operation, the less likely it will need to be expanded and/or revised for other states. To make sure that the Plan of Operation will be acceptable for most states, it should include the following: - Mission statement - Company history - Types of services
provided to clients - Marketing Opportunities - Competitive advantages - Description of TPA’s staff
and their competency - Strategic marketing plan - Companies that utilize
the TPA’s services - Jurisdictions in which the TPA
is currently licensed (if any)• Review Administrative Services
Agreement – Several jurisdictions require a copy of an executed or sample administrative services agreement accompany the TPA license application. Most of these states have laws or regulations that prescribe the provisions that
Do you aspireto be a published author? Do you have any stories or opinions on the self-insurance and alternative risk transfer industry that you would like to share with your peers?
We would like to invite you to share your insight and submit an article to The Self-Insurer! The Self-Insurer! The Self-InsurerSIIA’s o� cial magazine is distributed in a digital and print format to reach over 10,000 readers around the world. The Self-Insurer has The Self-Insurer has The Self-Insurerbeen delivering information to the self-insurance/alternative risk transfer community since 1984 to self-funded employers, TPAs, MGUs, reinsurers, stop-loss carriers, PBMs and other service providers.
Articles or guideline inquiries can be submitted to Editor Gretchen Grote at ggrote@sipconline.net.
The Self-Insurer also has The Self-Insurer also has The Self-Insureradvertising opportunities available. Please contact Shane Byars at sbyars@sipconline.net for advertising information.
38 The Self-Insurer | www.sipconline.net
H.H.C. Group, A Partner You Can TrustVisit www.hhcgroup.com for more information.
H.H.C. Group is a full-service health insurance consulting organization,
trusted by some of the industry’s largest insurance payors, to provide
the highest level of cost containment services.
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With H.H.C. Group’s Reference Based Pricing Solution, you will receive:
April 2015 | The Self-Insurer 39
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must be included in the administrative services agreement insofar as they apply to the scope of the TPA’s operations.
Two states that have strenuous licensing requirements are Indiana and Nevada. It is a good idea to review one and/or both of these state’s insurance department websites and download the checklist applicable to administrative services agreements. Once your administrative services agreement complies with the requirements for either Indiana or Nevada, it should comply with the requirements for most other jurisdictions.
• Audited Financial Statements – Several states require audited financial statements for two prior years. The only exception that will be made pursuant to this requirement is for a start-up TPA that has not been in existence long enough to have an income statement. A start-up TPA can use a current balance sheet with an officer’s attestation in lieu of audited financial statements.
If the TPA is a subsidiary of a parent company, the audited financial statement of the parent company is acceptable only if it provides a separate breakout for the subsidiary TPA. Our experience is that the states will not bend when it comes to the requirement for an audited financial statement. If the TPA is not a start-up company and it does not have audited financial statements, only a limited number of states will grant a TPA license.
SummaryThe licensing requirements for TPAs vary by state. Although the NAIC
Model has been adopted in many states, individual states still have their own
requirements. Having a good understanding of the TPA’s scope of operations and how many people will be serviced within a state helps in the first step of knowing how state laws may apply to your operation. ■
Scott Sheffer has been in the insurance industry for 33 years and employed as an Associate Consultant with First Consulting & Administration, Inc. for 16 years. Established in 1969, First Consulting is a leader in the industry in researching TPA licensing requirements and assisting TPAs in obtaining licenses. Scott’s areas of expertise are TPA licensing, insurer licensing, policy drafting for life and health insurance, producer education and advanced sales. Scott can be contacted at 816-391-2742 or scott.sheffer@fi rstconsulting.com
40 The Self-Insurer | www.sipconline.net
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Understanding Taft-Hartley Health Plans
SIIAEndeavors
Join us at The Windsor Court
Hotel May 12-13th for SIIA’s
Annual Self-Insured Workers’
Compensation Executive Forum.
This is the country’s premier
association sponsored conference
dedicated exclusively to self-insured
Workers’ Compensation. In addition to
a solid educational program focusing on
such topics as excess insurance and risk
management strategies, this event will
offer several networking opportunities
that are specifically designed to
help you strengthen your business
relationships within the self-insured/
alternative risk transfer industry.
Consider the implications to your
organization of possible changes
in access to care, consolidation of
providers and facilities and the use
of accountable care organizations.
All this is rapidly becoming a reality
under the changes to our healthcare
system brought on by the Affordable
Care Act (ACA). How will this impact
your business? What steps can you
take to ensure your injured workers
have access to the best care? What
issues are on the horizon? Kimberly
George, Senior Vice President, Senior
Healthcare Advisor at Sedgwick kicks
off the conference by discussing these
issues in “The Evolving Healthcare
Model: The Impact of ACA on
Workers’ Compensation and Beyond.”
Leading Self-Insured Groups are
embracing “BIG DATA” trends. Initiatives
are underway to focus the power
of machine learning on the claims
and underwriting operations of SIGs.
Freda Bacon, Fund Administrator for
the Alabama Self Insured Workers’
Compensation Fund, Steven J. Link,
Executive Vice President of Midwest
Employers Casualty Company, Stan
Smith, Predictive Analytics Consultant
for Milliman, Inc. and Stu Thompson,
Fund Manager of The Builders Group
will teach you how advanced analytics
and predictive modeling are helping SIGs
improve loss ratios, enhance dividends
and improve their market position in
the session “Looking Into the Future to
Control Your Workers’ Comp Costs.”
In the “Workers’ Comp Excess
Carrier Discussion” session Scott
Keller, Senior Vice President of Arch
Insurance Company, Stuart Presson, Vice
President of Marketing of US Specialty
Underwriters and Seth Smith, Senior
Vice President Workers’ Compensation
Underwriting at Safety National will
discuss market conditions and what
workers’ compensation self-insurers
should expect in the year head with
regard to policy pricing and availability.
Be sure to join us for the
keynote address at 8:30am on
Wednesday, May 13th. Dave
Mitchell, Founder/President of the
Leadership Difference, Inc. will give
his “The Power of Understanding
People” presentation, providing an
entertaining and enlightening way to
enhance communication, influence
and leadership. Companies including
Allstate Insurance, Novartis, Bank
of America and Hilton Worldwide
have used this course to improve
the performance of their people,
enhance communication and increase
leadership effectiveness. You will not
want to miss Dave Mitchell as he
mixes applied cognitive psychology,
practical examples and laugh out
loud humor in this entertaining and
enlightening experience.
More than 40 States have either
passed legislation for some form
of medical marijuana or have bills
pending consideration. Like it or
not, medical marijuana is here and
as an industry we need to be ready.
In the session “Take the high road.
Medical marijuana is here. Are you
ready?” Kevin Confetti, Director of
Workers’ Compensation Program at
the University of California, Albert
B. Randall, Jr., Esq. of Franklin &
Prokopik, P.C., Mark Pew, Senior Vice
President of Prium and Mark Walls,
Vice President Communications and
Workers’ Compensation in The Big Easy
April 2015 | The Self-Insurer 41
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Strategic Analysis for Safety National will discuss the impact of medical marijuana
on human resource policies and procedures, risk management practices and
claims handling. In addition, the presentation will provide an update on the
present approach of our Federal Government as well as other case decisions
regarding marijuana utilization. Please join us for this informative session on
the current status of medical marijuana and the strategies from a legal, human
resource and claims perspective.
Significant understanding of the behavioral neuroscience of pain have developed
over the past 20 years and have evolved into dynamic evaluation and treatment
models that work successfully in the workers’ compensation system. These models
show positive results not only in advanced claims with chronic pain and opioid
dependence/addiction but in early proactive claims intervention to create pathways
to better outcomes. Michael Coupland, CPsych, RPsych, CRC, CEO, Network
Medical Director for Integrated Medical Case Solutions (IMCS Group) and Becky
Curtis, Pain Management Coach and Founder, Take Courage Coaching will discuss
this in “Behavioral Medicine and Coaching Interventions in Chronic Pain.”
Jim Donelon, Commissioner of Louisiana Department of Insurance will share his
perspective on how workers’ compensation self-insurers (including SIGs) are viewed
and how best to maintain a positive relationships with those responsible for regulating
them in “Self-Insurance and Self Insured Groups: A Regulators Point of View.”
What are the biggest workers compensation issues to watch in 2015 and
beyond? “Workers’ Compensation Issues to Watch” will be an interactive session,
bringing several of our speakers back to the stage for this fast-paced discussion
on what issues have their attention and why. Audience members will also have
the opportunity to ask the speakers questions about emerging issues they are
concerned about. You don’t want to miss this engaging and informative hour!
Although Self Insured Work Comp Groups (SIG’s) have plenty of competition
from traditional carriers, the real competition for larger “best in class” accounts
are group captives. With minimum
casualty premiums of only $150,000
for Work Comp, General Liability and
Auto, group captives are having record
growth that is impacting both SIG’s
and traditional carriers. In the final
session “You Say SIG, I Say Captive:
A Panel Discussion of a Self-Insured
Work Comp Group Defending Its
Turf Against a Group Captive” Freda
Bacon, Fund Administrator for the
Alabama Self Insured Workers’
Compensation Fund and Duke
Niedringhaus, Senior Vice President of
J.W. Terrill, Inc. will discuss this surge in
captive premiums and how SIG’s can
articulate their difference to compete
against this formidable competitor. ■
For more information, including
registration forms, hotel information
and sponsorship opportunities, please
visit www.siia.org or call 800-851-7789.
We look forward to seeing you in
New Orleans!
42 The Self-Insurer | www.sipconline.net
SIIA would like to recognize our leadership and welcome new members Full SIIA Committee listings can be found at www.siia.org
SIIA New Members
Regular MembersCompany Name/Voting Representative
Richard Williams, Principal Advanced Plan for Health Irving, TX
Jerry Castelloe Castelloe Partners LLC Charlotte, NC
Anna Mathy Staffing Service Leader - Client Exec.Dell-Healthcare Staffing Services Plano, TX
Charles Osborne, President Excess Risk Solutions Inc.Lutz, FL
Virginia Johnson VP of Business DevelopmentFranco Signor LLC Brandenton, FL
Patrick Sanders, PresidentInsurance Management Services Amarillo, TX
Shellie SchoeningChief Administrative Officer National Pharmaceutical Services Boys Town, NE
David RennieVP Business Development Penfield Care Management Inc. Mississauga, Ontario
Brittani SummersChief Compliance OfficerPrecision Toxicology San Diego, CA
William Kropkof Managing MemberThe ERISA Advisory Group Henderson, NV
Silver MembersDan WestAVP of Product Marketing MedeAnalytics Emeryville, CA
Lisa Schneider, Principal Underwriting Management Experts Lansdale, PA
Affi liate MemberScott Buchanan, Vice President QBE Reinsurance Duxbury, MA
2015 Board of Directors
CHAIRMAN OF THE BOARD*Donald K. DrelichChairman & CEOD.W. Van Dyke & Co.Wilton, CT
CHAIRMAN ELECT*Steven J. LinkExecutive Vice PresidentMidwest Employers Casualty Co.Chesterfi eld, MO
PRESIDENT*Mike FergusonSIIASimpsonville, SC
TREASURER & CORPORATE SECRETARY*Ronald K. DewsnupPresident & General ManagerAllegiance Benefi t Plan Management, Inc.Missoula, MT
Directors
Andrew CavenaghPresidentPareto Captive Services, LLCPhiladelphia, PA
Robert A. ClementeCEOSpecialty Care Management, LLCBridgewater, NJ
Duke NiedringhausVice PresidentJ.W. Terrill, Inc.Chesterfi eld, MO
Jay RitchieSenior Vice PresidentHCC Life Insurance CompanyKennesaw, GA
Adam RussoChief Executive Offi cerThe Phia Group, LLCBraintree, MA
Committee Chairs
ART COMMITTEEJeffrey K. SimpsonAttorneyGordon, Fournaris & Mammarella, PAWilmington, DE
GOVERNMENT RELATIONS COMMITTEEJerry CastelloeCastelloe Partners, LLCCharlotte, NC
HEALTH CARE COMMITTEERobert J. Melillo2nd VP & Head of Stop LossGuardian Life Insurance CompanyMeriden, CT
INTERNATIONAL COMMITTEERobert RepkePresidentGlobal Medical Conexions, Inc.Novato, CA
WORKERS’ COMP COMMITTEEStu ThompsonFund ManagerThe Builders GroupEagan, MN
*Also serves as Director
April 2015 | The Self-Insurer 43
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What is it?
Pay-Plus® is it.I N N O V A T I O N T R A N S F O R M E D
I N N O V A T I O N T R A N S F O R M E DI N N O V A T I O N T R A N S F O R M E D I S
P A Y - P L U S e P A Y M E N T
P A Y - P L U S I S e P A Y M E N TP A Y - P L U S I S e P A Y M E N TP A Y - P L U S I S e P A Y M E N T
t is
CAQH CORE®, the CORE-certification/Endorser Seals and logo are registered trademarks of CAQH® Copyright 2010-2014, Council For Affordable Quality Healthcare®. All rights reserved.
©2014 Pay-Plus® Solutions, Inc. All Rights Reserved. CAQH CORE®, the CORE-certification/Endorser Seals and logo are registered trademarks of CAQH® Copyright 2010, Council For Affordable Quality Healthcare®. All rights reserved.
For more information, visit us at PPSonline.com
44 The Self-Insurer | www.sipconline.net
WHAT MAKES A LEADERIN HEALTHCARE COST MANAGEMENT?
At PHX, we offer a comprehensive solution that is tailored to fit your business – take advantage of our comprehensive suite of cost-management Products, enjoy the benefits of outstanding Performance,
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