1997 Schedule
Who Should Attend? Employee benefit plan professionals and/or corporate personnel responsible for health care plans, pension plans, Form 5500s, plus administrators and professionals involved in the management of labor-management employee benefit trust funds.
Each year we, the Trustees of the Social Security and Medicare trust funds, report in detail on their financial condition. The reports describe their current and projected financial condition, within the next ten years (the "short term") and over the next 75 years (the "long term"). This document is a summary of the 1997 reports.As we have reported for the last several years, one of the Medicare trust funds, the Hospital Insurance ("HI") fund, would be exhausted in four years without legislation that addresses its financial imbalance. Any trust fund exhaustion can and should be avoided, as it has been in the past. We note that both the Administration and the Congress have made proposals to address the short-term imbalance in the Hospital Insurance Trust Fund. However, no agreement has yet been reached. Further delay in implementing changes makes the problem harder to solve. We urge the earliest possible enactment of legislation to extend the life of the HI Trust Fund for the near term and thereby provide sufficient time to develop measures to solve the large financing problem facing HI over the long term.
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The Social Security trust funds, though solvent for the next ten years and many years thereafter, are not solvent over the long term. The Old-Age and Survivors Insurance ("OASI") Trust Fund, which pays retirement and survivors benefits, is projected to be able to pay full benefits on time for about 34 years. The Disability Insurance ("DI") Trust Fund, which pays disability benefits, is projected to pay full benefits until 2015. It is important to address both the OASI and DI problems soon to allow time for phasing in any necessary changes and for workers to adjust their retirement plans to take account of those changes. We recommend that the proposals in the recent Advisory Council Report and others being advanced by public officials and private organizations should be carefully evaluated by the government and the public. However, we continue to believe that there is time to discuss and evaluate alternative solutions with deliberation and care.The timing and magnitude of the financing problems among the four trust funds are distinctly different. We are urging the earliest possible enactment of legislation to further control HI program costs because of the nearness of the HI Trust Fund exhaustion date. Prompt action in the short term will provide sufficient time to assess the changes in our nation's health care system and design solutions to the more serious long-term Medicare financing shortfall. And, while we believe there is time to discuss and examine alternative long-term solutions for OASDI, we also recognize that the impact of any required changes will be less disruptive the sooner they are enacted.
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U.S. Senator Barbara Boxer (D-California) has introduced the 401(k) Pension Plan Protection Act to protect workers from under-diversified investment portfolios. Senator Boxer says her bill will "protect 23 million employees and their $675 billion in investments by increasing their investment freedom and shielding them from undiversified 401(k) plans."Legislation restricting other types of 401(k) investments would be a big boost to the mutual fund industry. As a result, there promises to be plenty of support for Sen. Boxer's bill.
Lohmann International Associates provides the only independent, fully actuarially credentialed North American retirement consulting within Japan.Leslie John Lohmann, FSA, FCIA, is its president. He has been providing actuarial consulting services to organizations in Japan since 1990, and his clients include some of the world's largest organizations, both public and private, across four continents.
The government has provided some guidance for 401(k) plans under section 404(c). I have taken major sections of this code and provided some objective commentary -- most of which delves into the area of the fiduciary liability of the company to make sure its employees are made aware of the risks and rewards of investing. Admittedly, the code is open to certain interpretation, but as an instructor for many years and having seen presentations by some groups touting their investment expertise, it is my opinion that the offerings are sophomoric -- certainly not as comprehensive as they should be -- and that many companies will retain liability for inept instruction on the significant and necessary areas of investing, particularly as they address risk.
Considerable attention has been focused on cases brought by the Secretary of Labor seeking to hold nonfiduciaries liable under ERISA. An atmosphere of "service provider beware" has all but concealed the primary responsibility of fiduciaries in plan administration and the management of plan assets. However, a recent decision sounds a reminder that fiduciary liability comes home to roost, and plan fiduciaries need to take heed. Having reviewed recent case law, I offer some easy-to-follow suggestions for fiduciaries to minimize their risk of exposure to liability.
The federal Employee Retirement Income Security Act (ERISA) is the federal law that governs employee-benefit plans offered by private employers and unions. ERISA has long hindered state efforts to expand access to health care, because it prohibits states from requiring all employers to offer benefits to their employees. States have shifted their attention from seeking universal insurance coverage for health care to regulating the benefits of people who already have health insurance. Reports describing how some managed-care organizations limit the care provided to their enrollees have prompted a rash of legislative efforts intended to protect patients from receiving substandard care. Yet here too, ERISA has prevented state laws regulating managed care from being uniformly enforced.For example, women and their physicians sought protection against so-called drive-through delivery -- the practice of severely limiting coverage for postnatal hospitalization -- by proposing state laws that would require managed-care organizations to pay for specified minimum hospital stays for mothers and their newborns after birth. More than two dozen states have adopted such laws or regulations. Yet many women enrolled in employee group health plans were surprised to learn that they were not protected, because ERISA prohibited the state from requiring their plans to pay for specific medical benefits. Thus, of two women giving birth in the same hospital (with normal vaginal deliveries), one might have health insurance that would pay for the 48-hour stay required by state law, but the other might have to pay for the second hospital day out of pocket or leave the hospital after 24 hours, because her health plan was governed by ERISA and not obligated to comply with the state law. Or the hospital and the attending physician might have to absorb the expense. A 1995 Massachusetts law, for example, prohibits hospitals from discharging new mothers within 48 hours without their consent. Accordingly, if neither the woman nor her health plan paid for the full 48 hours, the hospital and the physician would be left uncompensated.
Such unevenly applied state laws persuaded Congress to amend ERISA to require that all ERISA health plans offering childbirth benefits pay for hospital stays of at least 48 hours after a normal vaginal delivery and 96 hours after a cesarean section (as recommended by the American College of Obstetricians and Gynecologists and the American Academy of Pediatrics). Although the Newborns' and Mothers' Health Protection Act of 1996, which was signed into law on September 26, may have resolved the specific problem of premature postnatal hospital discharges, it does not affect other state laws regulating managed care. Unless Congress is prepared to legislate health benefits on a case-by-case basis for every medical condition and managed-care practice that creates controversy, patients and physicians will remain subject to rules that vary with the type of health insurance involved.
Almost 150 million Americans are enrolled in health plans governed by ERISA. Some state laws, such as those pertaining to reporting, do not apply to any of these plans. ERISA has also prevented patients from suing managed-care organizations for corporate negligence under state malpractice laws. State laws that mandate benefits, such as those regulating postnatal hospital stays, can indirectly affect ERISA plans that purchase insurance policies for employees. However, self-funded ERISA plans, which have more than 44 million enrollees, do not have to comply with these laws. Employers with self-funded plans (sometimes called self-insured plans) do not purchase health insurance policies for their employees or contracts enrolling them in managed care. Instead, these self-funded employers use their own assets to pay for health services, effectively acting as their own insurers. In this article I pursue my earlier consideration of ERISA and describe how it inadvertently handcuffs the regulation of managed care at the state level and why the act should be amended to allow states to set uniform standards for managed care.
Conclusions.--During the study period, elderly and poor chronically ill patients had worse physical health outcomes in HMOs than in FFS [fee for service] systems; mental health outcomes varied by study site and patient characteristics. Current health care plans should carefully monitor the health outcomes of these vulnerable subgroups.
Several legal obstacles to establishing the liability of Managed Health Care Organizations need to be removed by Political Means. Below are some suggested statutory changes.Actions Requiring Federal Legislation
- Remove ERISA Preemption of Medical Claims
- Remove ERISA Preemption of State Regulation
Actions Needed at the State Level
- Establish Vicarious Liability of MCO'S
- Remove MCO Control of Utilization Review
- Remove MCO Control of Arbitration
- Expedited Arbitration
- Outlaw Physician Gag Clauses
Question 26: In Q&A 25, we dealt with the proper correction when a form defect is discovered after the remedial amendment expires. But suppose it is not clear whether there is a defect in the plan document. Can the plan sponsor file an application for a favorable determination letter and ask for walk-in CAP relief only if the IRS thinks there is a defect?
The self-insurance industry claimed victory on April 17, 1997, as a federal appeals court has decided a critical regulatory issue in its favor.The United States Court of Appeals for the Fourth Circuit this week affirmed a trial court decision in American Medical Security, et. al. v. Bartlett that restricted the state of Maryland from classifying stop-loss insurance as health insurance for purposes of regulation. The appeals court agreed with the original ruling that such regulation is preempted by the 1974 Employee Retirement Income Security Act (ERISA).