jeanine

I think the point about avoiding state mandates is well taken. Are there other major tax consequences to be considered when deciding insured vs. self-funded? I'll apologize in advance for not having much of an accounting/tax background. I know (at least I think) that an employer can reduce its tax liability by the amount of premiums paid and the amount of claims paid by taking the claims from its general assets. But does it work out to a bigger tax benefit to self-fund and is this better for a smaller or a larger company? One last thought, anyone care to comment what the wave of the future may be? Thought around here is that insured will gain over self-funding especially since the Feds keep expanding ERISA mandates. I'm still inclined to believe self-funding is more attractive.

There are a couple of good chapters in the "Pension and Employee Benefit Law" text, John H. Langbein, Bruce A. Wolk, that will give you a good overview. Perhaps you can borrow it through a university/law school library instead of purchasing it. The copy I have is a Second edition, but a first edition would probably have the same material.

The legal deck is already stacked against us. The courts (state & federal) say that we have the expertise and we must say what we mean in clear, unambiguous terms. We go through a lot of trouble to drag people through the process at enrollment meetings and when they call the service center. I object to not being able to clearly state what we mean, because we have to dumb it down, and then being told by a court that we should have said exactly what we meant when we drafted our documents. Because when it gets to this point, the enrollee is not doing any interpreting, their attorney is. And, by the way, we really don't go out of our way to take advantage of anyone. As in voting and all other types of life activities, some people are not able to keep up with the rest of society. That doesn't mean that the actions of the majority are somehow invalid.

Are you asking because you (your company) are thinking of doing this or are you asking because this is being done to you? If you are thinking implementing this, forget it. The reason that I didn't respond earlier is that I didn't even know where to start in explaining how wrong this would be. Run to an attorney if someone is applying this to you, run to an attorney if you're being pressured to do something like this as part of your job so you can have backup on your decision not to apply this type of discriminatory behavior. I do agree with Paul on the smoking penalty, but even that is a tough call.

The problem with making things easy enough for grandma to understand is that when an issue comes up and your participant gets an attorney, the attorney will shred you apart in court. We have a delicate balance to maintain. On the one hand we want the participants to understand yet we are tied to the language we use if there is a dispute. Just a few examples: Our state dept of insurance requires a flesch test reading score of 40 to pass. Do you know how hard it is to dumb down a group insurance policy yet still state benefits accurately? Now, our state does external reviews for enrollees for questions involving plan language even though we can't express ourselves (and thereby protect ourselves) because it has to be easy to understand. The federal employees plan is worse. We had to challenge them to get the definition of experimental changed from their virtual non-definition to one nowhere near as detailed as we wanted--all in the name of plain language.

I would want them to be an officer of the company if possible. This is for at least 2 reasons. First, if authority is delegated to a lesser employee, all this means to me is that the employee has the responsibility for the day to day administration of the plan. I would still argue that the employer maintained all of the ultimate obligations and responsibilities. Second, if you can't escape liability, why not have the responsibility resting with an officer who at least has the proper level of discretionary authority? I also think that the liability insurance you are looking at is not enough. We have a general liability insurance for all employees. Officers have an additional, separate liability insurance and may even carry private insurance. They also have easy access to legal counsel.

I think another question you have to ask in this situation is this: What level of employee was designated as the PA to act on behalf of the employer? The plan document says the Plan administrator is the employer. To me, this is proper, unless the plan is funded by a trust in which case it would be the trustees. And if it is proper to have the employer act as the plan administrator, it should be proper to delegate that authority to an employee to act on behalf of the employer, provided the employee has the level of authority and ability to make independent decisions. I am always a bit suspicious in cases of delegated authority,(personal experience) especially if the person to whom the authority is delegated has no clear idea of the responsibility they have assumed. They just see a few more dollars coming their way. I hope this person is a high enough level of employee that they are covered under liability insurance (E&O, and a clear statement of indemnity from the company.

I think I do understand what you are saying. The employers to whom we sell insurance should have a wrap-around document describing the plan that references the fact benefits are provided through insurance. And I think that is what counsel was telling us. The problem is that we operate in a small market and control a majority of market share. Our clients expect us to do everything for them and we agree to it. So, are you saying that our clients who buy an insurance policy, even though the plan is ERISA, can allow the longer state claims time if and when the final regs are issued and have a shorter turn around time?

We have had ballots like this in Ohio before and I was never confused as to whom I was voting for. By the way, my husband saw a report on TV that Buchanan got 2900 votes in that county in 1996. Perhaps he has a loyal cluster of constituents in the area.

We are everything to all people. I wish I were only joking. We are a TPA and administer over 100 self-funded plans, plus about 1400 insurance policies issued by 2 insurance companies owned by same parent group. I understand what you are saying about the EWP. The problem is that we do everything for all our clients. We even draft SPD's for the Self-fundeds to approve and adopt. I have been in this position a little over a year. One of the first things I suggested was a wrap-around for the insured products. We got legal advice which we took to mean we did not have to draft wrap arounds. I understand you to mean that we (the insurer and TPA) don't have to do the wrap around but the client does. So in effect, since we baby our clients through the entire process of everything--every change in state and federal law--we should be getting on them to adopt a wrap around that we will provide. As for the turnaround time issue--as a TPA we are interested in both. Perhaps this is the time for me to push the ERISA compliance for the insured since we will be looking into the change in ERISA.

I'm getting clobbered on this one. We are still relying on the previous advice of counsel as per my original answer. This does bring up another issue for me though. Once the final regs are released this month regarding claim payment turnaround time, what's the effect on our insured product plans? State law states that prompt pay of clean claims is 24 days. Final regs state (probably) 15 day turnaround time. We keep saying these aren't ERISA (I know, I know, no one here agrees with that). I have already made the case that I want outside counsel to look at this once the regs are out. Any guesses at to which timeframes apply? First reaction here is to turnaround all clean claims based on final regs so that all processors are doing the same thing.

A fully insured plan would be one that provides health benefits through an insurance policy. (I guess I need to be more careful in the terms I throw out). If it is sold to the employer, the employer is listed as the "owner" of the policy under the master group policy. This is what we are told takes it out of ERISA and places it under state insurance law only. I don't quite understand this myself, but we were advised that we could get ERISA protection by providing the product to the plan, not the employer. We declined to do this. We administer many ERISA plans and we also administer 2 insurance company lines of products that are part of the same company as us. We treat the insured product plans as state law controlled with state law requirements such as a benefits booklet, copies of amendments. The information supplied is pretty much as detailed as any we would have to disclose in an SPD. Pax, your explanation is enlightening to me. However, none of our groups who offer a insured plan take any advantage in saying that the plan is subject to and protected by ERISA.

We had the insurance plan/ERISA question explained to us this way by an ERISA law firm: If the "plan" offers health benefits through an insured product plan, it is still ERISA. If you sell an insurance policy to the employer, it is non-ERISA, state law controls, and SPD is not necessary. Very abstract concept to understand. I'm not sure if I agree with it entirely, but our state sure does regulate our insured product plans.

Are you looking for a source that lists these types of things out or are you looking for a good definition? Here is some general guidance. First, if you don't already have at least one physician employed as the medical director who makes these types of decisions, get one. The medical director should be the head of your utilization management team. Here are some of our guidelines that are stated in our booklets: Experimental means services, supplies, care, and treatment which does not constitute accepted medical practice and/or are inconsistent with relevant clinical guidelines or government oversight agency guidelines at the time services are rendered. Drugs must be approved for marketing by USDA; we don't cover anything which is the subject of ongoing phase I or II clinical trials (some phase III excluded) or treatment that requires further studies for maximum dose, efficacy. We rely on our physicians and UM nurses to keep current with peer-accepted medical standards of care. The best I can tell you is to keep abreast of changing medical/government guidelines hopefully through your physicians.

Would I be correct in interpreting termination to include termination by death as well? Could the surviving spouse continue to submit expenses incurred up till the time of death? The wife and children are included in this plan as well that runs through the end of the year.

We've been trying to figure this out on some self-funded groups. What we finally decided is that once the 12 month determination rate is set it may only be changed if the plan was charging less than the maximum it could have been charging.(for example, if the plan calculated it could charge $200 per month per individual enrollment but only charged $150, it could increase this up to $200 but the change could only occur once in that 12 month period.) If the benefits level changes for the non-COBRA group and this results in an increase in premiums, then this can be passed along as well during the next 12 month determination period. We have our COBRA determination period linked to our renewal date so there should be no level of benefits changes outside of the determination period. To answer the other part of your question, I believe COBRA beneficiaries need a minimum of 30 day advance, written notice that the premium is increasing.

I think nac is on the right track here. I would cover it as medically necessary to alleviate pain and do the reconstruct based on HIPAA language. The documentation you are looking for to back up your decision doesn't really exist right now, however DOL plans to issue interim final regulations on WHCRA in August 2000, and IRS plans to issue proposed HIPAA regs in Oct. 2000 that should clear things up a bit. From what I have been reading I am inclined to believe that this will be covered. We are hoping that it will clarify external prostheses replacement as we currently have some plans that limit a woman to 1 or 2 external prostheses replacements for life whereas we think it should be more generous than that. Our insured products that we administer give much more generous benefits in this situation.

I would definitely consult an attorney on this one as Kip suggests. While you may be protected in the civil arena if you have good "hold harmless" clauses in your Admin. Services Only agreement with the client, your inaction in an instance which may or may not be insurance fraud, is not covered under any HH clauses as this would be a criminal matter. I understand the position that you are in as I also work for a TPA and my concerns are not always shared with the people here with the ultimate authority. There certainly is the pressure to keep a client but this one requires a closer look to avoid real trouble for your employer.

How does the Plan handle notification in these instances? As I understand the situation you are presenting, you have some people in a self-funded plan (ERISA disclosures, federal law & courts, federal subrogation)and some people in a fully insured plan (state mandated benefits, state subrogation, state court remedies). Are your enrollees even aware of the fact that they are being shifted from one plan to another? At least in Ohio, if they are in an insured product plan, they must be given certain documents that differ from ERISA documents. They also must have copies of all amendments to the plan before they are effective as well as notice of the state external review procedure on all explanations of benefits. Can't the company achieve a similar result by buying adequate stop-loss insurance. This sounds like a disaster waiting to happen. I would worry about: 1) state insurance department, 2) DOL, 3) fraud investigation, 4) reaction from the insurance company when it realizes what's going on.

As per my usual cautious self, I would make sure that enrollees had plenty of notice of this change before we even applied. I am of the opinion that you treat the pre-change charges according to the language in effect at the time and the new charges under the new language. In that case, we would start the time limit rolling with the first date of admission and allow the full 15 days that now controls. I understand that this change is probably meant to save money (does it?) but with all our "money saving" changes, the client usually is amenable to absorbing any small costs as a price for shifting benefits long term. Why am I so cautious all the time? Even though it is difficult to sustain a lawsuit against a self-funded it is always time consumming and expensive to get rid of plaintiff's attorneys.

Is it possible (allowable) to change the 12 month determination period for COBRA rates? We want to delink the COBRA determ period from the annual renewal of self-funded plan. Currently, plan administration renewal date is the same as the COBRA renewal date. This is causing way too much confusion with setting the premium for the 12 month period. Our thought is to extend the current 12 month rate to 14 months initially then renew again at 12 months. This most likely will be beneficial to the QB as rates inevitably increase. Could anyone tell me what reg. would allow or disallow this type of change in dates.

A non-federal govt entity is a state or local govt plan. These plans are exempt from ERISA. At least in Ohio, public employer plans (including above and more) are regulated under the Ohio Revised Code. Although I haven't had to decide whether this made any difference under COB, we are currently in the process of reviewing all of our self-funded public employer plans for state-mandated benefits and the new external review system in Ohio.

Sorry, but I just don't agree with your analysis. What's the difference if he or she put her on the COBRA plan? As long as she didn't specifically reject COBRA she automatically accepts COBRA coverage when the employee does. (this is kind of a backward reading that if an employee accepts & the others don't reject, then employee is held to have elected family coverage). The COBRA provider has the option of charging 2 individual rates or the family plan even if the 2 individual rates are more costly. I just don't think it's wise to remove her under your analysis when the enrollees clearly meant to cover both persons as QB's. I would rather be wrong in keeping her covered, especially if she is not running up hundreds of thousands of medical expenses than having to explain this position if and when she sues you.

Maybe I don't understand the regs, but why is the spouse not a QB even though she is covered as a dependent under the employee's COBRA? My understanding is that a QB is any individual, on the day before the qualifying event, is covered under the group plan as a covered employee, spouse of employee, or dependent child of employee. New spouse after election or new child of QB not the employee is a covered dependent and not a QB. Are you saying the spouse lost her QB status because the husband covered her as a dependent and not individually? Why is she not covered under the new plan? Is there a pre-ex time that applies to her?

Check the COBRA 2000 regs found on various sites that you can access from this site. (Go under Topics, choose COBRA). I believe the new regs state that each QB has the separate right to elect and reject coverage. In fact, you must offer COBRA to the employee, the spouse, and the dependent children. If the spouse and children do not decline, then they have accepted. So, your employee has a right to COBRA, the spouse also has a right to COBRA. We have a similar instance here where the spouse is continuing COBRA even though the employee has different coverage for himself because the spouse is extremely ill and does not want to leave the former health network.