Boca Benefits Consulting Group Inc.

As our prior post indicated, BBCG is particpating in the AccessAmerica initiative in China sponsored by the U.S. Department of Commerce. The white paper “Accessing International Healthcare Insurance in the Global Economy” is now posted with a Chinese language synopsis at: http://www.buyusa.gov/china/zh/aa_resources.html .


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Following a sale of group healthcare to a group of diplomats in Beijing, China, BBCG has been posted as an insurance resource in a U.S. Department of Commerce sponsored program called AccessAmerica.  That program provides Chinese language translation of our services and provides a link on the embassy web site in Beijing. As part of that service BBCG was also asked to write a related white paper which is now posted there as well.

This is the direct link to the BBCG piece: http://www.buyusa.gov/china/zh/aa_listing.html?bsp_cat=84130000&bsp_id=32 . [Note: Chinese language browser module may be required for full functionality.]

This is the link to the directory in which it is posted (Insurance Services): http://www.buyusa.gov/china/zh/aa_directory.html

This is a link to a copy of the white paper (best viewed by downloading first via right mouse click and “Save Target As” function): http://bocabenefits.com/papers/intl_health_insurance.pdf .


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Many cost strapped employers are looking for ways to have older, more costly, employees seek early retirement without violating any age discrimination statutes. Below are some healthcare considerations to think about if you are approached.

If retiring at approximately 62 years old, there are four  healthcare options that might be available to you:

• COBRA ( http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.HTML )
• Individual policy ( http://bocabenefits.com/GR 4-2009 Plans Brochure.pdf   )
• A “bridge” provided by the employer to age 65
• New employer with a group plan

COBRA with ARRA 2009 Considerations

In the case of COBRA, the expense may or may not be prohibitive depending on how your separation from service is actually defined. If “involuntary” between now and 12/31/2009 the 65% subsidy required by the American Recovery & Reinvestment Act 2009 would apply and for the nine months following the separation date your cost would be 35% of the normal 102% of true cost COBRA rates (i.e., true cost being what the total premium is for your enrollment type, not just the percentage of the cost passed along to the employee) for that period. Unless the ARRA 2009 were to be extended, the costs would go back to 102% of true costs at that point. See the piece at http://bocabenefits.com/stimulus_cobra.pdf for more info. Specifically, take a look at the income thresholds that might reduce the subsidy for you. Note: this is a zero cost subsidy for your employer.  One hundred percent of the subsidy amount is recovered via a payroll tax offset.

Individual Health Policies

Individually purchased policies are problematic for several reasons. Costs for just one person at 62 will run about $400-$500 per month (possibly less if an HSA plan). Essentially twice that for a couple. They are also not “guaranteed issue” meaning that your health status will be considered before an application is accepted and a policy issued. You can be declined, be up-rated or have policy benefit terms modified.

Early Retirement Bridge With Current Employer

A “bridge to 65” agreement with an employer is usually the best course for everyone. That is, the employer continues the employee on the health plan as if they remained an active employee until they reach Medicare eligible age. It is likely that the employee would be kept in prolonged “leave of absence” status to remain qualified for participation in the plan if no retirement health is offered otherwise. A highly paid, tenured employee can be replaced by a less experienced and less expensive new hire. Over the course of three years that could be worth in excess of $100,000 for the employer (i.e., likely substantially more). Most employers would jump at the chance to trade off three years of health care premium  for the separating employee and spouse (i.e., a guess at the cost: $36,000 pre-tax ) against the direct and indirect payroll savings. However, there is a potential downside to the employer. If the health plan is self-funded, every claim dollar incurred by the employee or spouse below some threshold per year (i.e., varies by employer size from $50,000 to $250,000;  threshold possibly higher for jumbo sized employers) will be a direct pre-tax cost to the employer. A million dollar organ transplant can eat up the entire payroll savings very quickly. It is therefore somewhat of a roll of the dice for the employer. Note: this also applies to “experience rated” insured plans to some degree where deficits from prior years are recoverable via going-forward underwriting.

It is very important that if negotiating a bridge type agreement that spouse coverage be an absolute deal breaker. You must have it if you have a spouse of roughly equivalent age who does not have a source of health care at his/her employment or who has retired earlier. You may be able to strike an agreement whereby a Medicare eligible spouse specifies that Medicare is to be “primary” and the employer’s plan will be “secondary” in claims payment order when age 65 is attained. That lessens the possible claims impact somewhat. You can also make the argument that more than likely the employer is going to own the employee and dependent claims under most of the above scenarios (i.e., stays employed, goes on COBRA, or falls under a bridge agreement).

Many large employers have canned early retirement packages on the shelf with the above kind of provisions. Human Resources professionals should be aware of them on the local/regional level. However, if that does not appear to be the case, an inquiry at the home office level might be required. HR people should also be willing to discuss these matters “off the record” to ensure no negative behavior by supervisors.

The Minimal Employment Scenario

Lastly, the new employer alternative. Many older early-retired people find work at the minimum hours and minimum skill levels required for them to qualify for health care coverage at a new employer. It occurs frequently at the ski resorts in Colorado where formerly high powered execs are now running ski lifts, acting as mountain guides or teaching lessons. If it fits your life style, it is a consideration. If it were to cramp the post-retirement life-style you envision, it obviously would not.

 Suggested Course of Action

Set up a confidential meeting with the appropriate HR person and discretely explore your options.

Many employers are struggling to determine the precise COBRA requirements under the 2009 ARRA. Employer size, state situs of the benefit plan, specific state actions, and other things, effect the answers. In addition, where certain responsibilities have been placed on carriers, their unique administrative decisions may also drive procedures.

Below is a link to a Frequently Asked Questions (i.e., FAQ) piece on this subject provided by United Healthcare. Although some of it is specific to their own client base, much of it provides generic information that benefits professionals might find valuable as they weave their way through the huge number of variables.

This subject may also be something that in-house and contracted financial professionals need to address. Who pays the 65% COBRA subsidy and how it is ultimately recovered are key items.

Non-benefit HR types may also want to spend some time with the definitions of eligibles. Although this appears at this point to be a short-term program, the costs of which are recoverable as a credit against future payroll tax liability, certain CEO’s may want to minimize participation due to the hit on quarterly cashflow or if the company is clearly in such dire straights that a payroll tax recovery may not be viable.

Link to FAQ Resource

— Speaking As a Broker 

Twelve Critical Items to Consider 

1. When replacing one stop-loss carrier with another will there be any gap in coverage or significant difference in terms? If the rates and coverage seem too good to be true, there is always a reason. The fundamentals of stop-loss underwriting are the same for every carrier and normally only differences in policy terms or claims handling can allow for large premium and/or claim limit swings. At times carriers will enter into periods of higher than market risk acceptance. This should be a major red flag for employers.  Conversely, carriers which profess to have a “premium book of business” which allows below market underwriting should also be approached with equal caution. It is rarely true, and if so, will likely not be so for long.
2. Never make a carrier change until you have addressed all the potential gaps in coverage (i.e., run-in claims, actively at work requirements, carve-outs sometimes referred to as “lasers”, on-going large claims). The protection of your prior insured carrier’s run-out when you first shifted to self-insurance may be providing you with false comfort regarding the risk of stop-loss carrier change in subsequent years.
3. Know as much as possible about what is in the pipeline on the date of stop-loss carrier change. Don’t be shocked when a large six months old delayed hospital claim comes in to your claims payor the day after you change stop-loss carriers. If your new terms are only on a 15/12 basis (i.e., covering claims three months old but nothing prior to that), it will not be covered by either the prior carrier or the new one. If it is a million dollar heart transplant claim for an out of state dependent you did not know about, a visit to you corporate counsel will likely be next. Unfortunately, neither carrier has done anything wrong. Your broker’s E&O coverage may be a source of recovery. However, even there, the majority of brokers carry E&O policies with severe limits on self-insured activities.
4. Is the stop-loss carrier going to be a “flash in the pan” participant in the excess loss marketplace? Some carriers enter briefly for a quick cash infusion but have no intention of being a long-term player. Short-term carrier strategies mean they do not have to be nearly as customer conscious (i.e., with the plan sponsor and with brokers). They may be out of the business before their poor business practices catch up with them.
5. Is the first year offer no more than a means to gaining an initial foothold with large renewal rates to follow?
6. Don’t be taken in by immature claims to mature claims comparisons. First year renewals will always be big. However, if a carrier bought the business with first year rates, its subsequent first renewal will exceed even normal immature to mature transitions.
7. If virtually every other stop-loss carrier is shying away from a particular underwriting technique, a plan sponsor should be extra diligent in vetting the carrier who offers it.
8. If it is a two-year guarantee on claims limits, or on premium, a plan sponsor needs to ask why the carrier can afford to take on that risk when most other carriers won’t? What has been built into the premium structure or the claims limits over that two year period which makes the risk acceptable to this one underwriter? The answer is likely not favorable to the employer plan sponsor.
9. What is the nature of the carrier’s investment portfolio? If there are large holdings of marginal securities generating high but risky current yields, it may have later underwriting impact on an employer’s stop-loss renewal if those investments suddenly go south.
10. How much of the risk of its book of business does the carrier hold and how much is ceded to reinsurers? If it is a fronting company only (i.e., holds minimal risk internally) employers should be cautious.
11. What is the carrier’s existing loss ratio on its entire block of existing business? If it is eroding fast, the losses will be loaded into future underwriting on all its business.
12. Is the carrier admitted into the state where the employer’s plan situs has been established? If it is a surplus lines carrier (e.g., Lloyds and others) have all the downside risk issues been considered? Has the broker explained to the employer plan sponsor the fundamental differences between the surplus lines market and the admitted carrier market? They are substantial.

Please email us at stoploss@bocabenefits.com for assistance with your self-insured plan’s stop-loss needs.


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In his November 7, 2008 New York Times Economix blog post titled “The Health Care Challenge: Sailing Into a Perfect Storm” Princeton economist Ewe E. Reinhardt tells it the way it is: health care costs accelerate faster than incomes. What he does not say is that it is not a new trend. Having been an employee benefits practitioner of one sort or another for 28 years, I have been an empirical observer of the phenomenon since Read the rest of this entry »

[Below Excepted from Recent Carrier Communication]

On October 3, 2008, President Bush signed into law H.R. 1424 – an economic stabilization, energy, and tax extenders package – that included the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008.

The new law amends the Employee Retirement Income Security Act (ERISA), the Public Health Service Act (PHSA), and the Internal Revenue Code (IRC) to prohibit group health plans that provide mental health or substance use disorder benefits from establishing more restrictive financial requirements (e.g., deductibles and co-payments) or treatment limitations (day/visit limits) for mental health or substance use disorder services than those established for medical and surgical benefits.

The legislation does not require group health plans to offer mental health or substance use disorder benefits. Rather, it establishes parity requirements between medical/surgical benefits and mental health or substance use disorder benefits for group health plans that provide mental health or substance use disorder benefits.

Scope:  Applies to group health plans that provide both medical/surgical benefits and mental health or substance use disorder benefits. Small employers (50 or fewer employees) are exempt from the requirements in this law.

Parity Requirements: Requires parity with respect to both treatment limitations and financial requirements.

• General requirements. Prohibits plans from applying specific financial requirements or treatment limitations to mental health or substance use disorder benefits that are more restrictive than the predominant (most common or frequent) financial requirements or treatment limitations applied to substantially all medical and surgical benefits. Prohibits separate cost-sharing requirements or treatment limitations applicable only to mental health or substance use disorder benefits.
• Financial requirements are defined to include deductibles, copayments, coinsurance or limits on out-of-pocket expenses.  Current federal parity requirements for annual and lifetime limits for mental health services continue to apply.
• Treatment limitations include limits on frequency of treatment, number of visits, days of coverage, or other similar limit on the scope or duration of treatment. 

Definition of Mental Health Benefits: Provides for mental health benefits and substance use disorder benefits to be defined under the terms of the plan and in accordance with applicable state and federal law. 

Medical Management: Plans may be able to utilize medical management practices since the bill states that nothing shall be construed as affecting the terms and conditions of the plan or coverage to the extent that the plan terms and conditions do not conflict with the new parity requirements, but the bill does not specify if medical management practices may vary between medical and surgical benefits and mental health and substance use disorder benefits.  Plans are required to disclose the criteria used for medical necessity determinations, upon request.  The law also requires plans to make available the reason for any denials of reimbursement for such services to participants or beneficiaries, upon request or as otherwise required.  

Out-of-Network Coverage: Plans are required to provide out-of-network coverage of mental health or substance use services in a manner consistent with the parity requirements, if out-of-network coverage is provided for medical and surgical benefits. It is expected that plans will be allowed to manage out-of-network mental health and substance use disorder benefits in a manner consistent with how in-network mental health and substance use disorder benefits may be managed, but the interpretation of this rule is not entirely clear and is likely to be subject to significant scrutiny during the rulemaking process.  

Cost Exemption: The bill includes a cost exemption for employers that experience an increase in claim costs of at least 2% in the first plan year and 1% in subsequent years.  The plan must be in place for the first 6 months of the plan year and the increased costs must be certified by a qualified actuary. 

Relation to State Laws:  Retains current law “HIPAA floor” standard, meaning that federal parity requirements are the “floor”, but state laws may apply to insured plans so long as they do not prevent the application of the federal law.   Florida’s current mental health and substance abuse treatment coverage laws are not as comprehensive as this federal law, so large group plans, whether fully-insured or self-funded, will be required to comply with the federal law. 

Effective date: Plan years beginning on or after one year from the date of enactment unless the plan is collectively bargained, then the effective date is the later of 1/1/09 or the termination date of the collective bargain agreement excluding any extensions.

[Below Excepted from Recent Carrier Communication]

On October 9, 2008, President Bush signed into law H.R. 2851, “Michelle’s Law,” which requires group and individual health plans to continue to cover otherwise eligible dependent children who take a medical leave of absence from a postsecondary educational institution (e.g., a college, university, or vocational school) due to a serious illness or injury.

Key Provisions

The bill applies to both group and individual coverage and amends ERISA, the Public Health Service Act, and the Internal Revenue Code with substantially similar provisions:

• “Dependent child” includes a dependent child who was enrolled in the plan or coverage on the basis of being a student at a postsecondary educational institution immediately before the first day of a medically necessary leave of absence.
• “Medically necessary leave of absence” triggers continued coverage for the dependent child and is defined as a leave of absence – or any other change in enrollment – that begins while a dependent child is suffering from a serious illness or injury that causes the child to lose their student status for purposes of coverage under the plan.
• Physician certification. The bill requires that health plans and insurers receive certification by the dependent child’s treating physician that the dependent child is suffering from a serious illness or injury and that the leave of absence is medically necessary.
• No change in benefits. Dependent children on a medically necessary leave of absence are entitled to receive plan benefits, and if the plan changes, these dependents are entitled to receive benefits as provided by the amended plan until their coverage ends.
• Duration of leave of absence. Dependent children on a leave of absence must be covered until the earlier of one year from the first day of the leave of absence or the date on which the coverage otherwise would terminate.
• Notice. Health plans and insurers must include a description of the requirements for continued coverage during medically necessary leaves of absence with any notice about required certifications of student’s eligibility status.
• Effective Date. Plan years beginning on or after one year from the date of enactment.

In her 10/20/2008 MarketWatch blog post entitled “Mapping the future of health-care deliveryt” Kristen Gerencher writes that at a recent meeting sponsored by the Innovative Learning Network “About 70 people were mapping out what health-care delivery would look and feel like 20 years from now, and they were doing it with colorful markers …”, etc. I felt somewhat inadequate after reading Ms. Gerencher’s description Read the rest of this entry »

[For Florida Plans Only — New State Regulation — Some State Clarification Pending]

The below legislation is applicable to all insured medical plans and all self-insured plans not otherwise exempted under ERISA (i.e., governmental, church, etc.). It is not applicable to stand alone products such as dental or vision. As of this writing the major health carriers in Florida have requested further clarification and have indicated that the protocols established to implement it on its effective date may be subject to change.

Dependent coverage legislation (FL SB 2534) enacted by the State of Florida became effective on October 1, 2008.  In new plans starting on or after this date, eligible dependents will have the option to maintain dependent coverage up to the end of the calendar year in which the dependent reaches his or her 30th birthday. For existing plans, the option to offer coverage will occur on the next renewal date after October 1, 2008.  In addition, there is a special open enrollment period between October 1, 2008 and April 1, 2009 for dependents who aged out of their plans prior to October 1, 2008.

A dependent child between the ages of 26 and 30 may request to continue as a dependent on his or her parent’s coverage even after the child reaches the limiting age under the terms of the policy if he or she:

• Is not yet 30 years old
• Is unmarried
• Has no children
• Is a resident of Florida or, if not a Florida resident, is a full or part-time student at an accredited institution of higher education
• Is not eligible for Medicare and is not actually covered under another group or individual health plan.

The employee may make the request to continue the dependent child’s coverage:

• When he or she reaches the limiting age, or
• During the open enrollment period for the group of which the parent is a member on or after October 1, 2008

If you have not been contacted by your carrier rep or broker about this important change in policy wording, you should speak to them as soon as possible.