self-insurer apr 2015

April 2015

www.sipconline.net

Taft-Hartley’s

Tipping Point ACA Taxation

COMPLICATES Self-Insurance Mission for Unions

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April 2015 | The Self-Insurer 3

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Bruce Shutan

4

April 2015 Volume 78

Taft-Hartley’s



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




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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



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


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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


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.


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 [email protected].


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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


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


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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.


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.


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


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


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Would you navigateuncharted waterswithout a compass?

As a leader in Group Captives, Berkley Accident and Health can steer you in the right direction.

With EmCapSM, our innovative Group Captive solution, we can help guide midsize employers to greater stability, transparency, and control with their employee benefits.

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Insurance coverages are underwritten by Berkley Life and Health Insurance Company and/or StarNet Insurance Company, both member companies of W. R. Berkley Corporation and both rated A+ (Superior) by A. M. Best. Coverage and availability may vary by state.

©2015 Berkley Accident and Health, Hamilton Square, NJ 08690. All rights reserved.


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


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

30 The Self-Insurer | www.sipconline.net30 The Self-Insurer | www.sipconline.net


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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.


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 [email protected].

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.

SPECIALIZING IN GIVING YOU MORE.

Just having group bene� ts expertise is not enough. At AmWINS, we have taken specializationone step further by creating a practice that enables our team of specialists to collaborate withone another quickly, helping you give the best options to your self-funded clients. That’s the competitive advantage you get with AmWINS Group Bene� ts.

80538_AMW_SIPC.indd 1 11/19/14 11:27 AM


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. ■


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


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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 [email protected].

The Self-Insurer also has The Self-Insurer also has The Self-Insureradvertising opportunities available. Please contact Shane Byars at [email protected] for advertising information.


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:


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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


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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


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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!


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


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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


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,

and together we will build a long-term Partnership.

Contact us at (888) 311.3505 to find out how PHX can add value to your business, or visit us online at www.PHX-online.com

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