Boca Benefits Consulting Group Inc.

In mid-2008 BBCG began sending an email newsletter with various items of topical interest to benefits professionals, business owners and senior managers. As with this blog, we got somewhat distracted during the last few months with other priorities. We intend to have the next addition of The Insight out shortly. In the interim, below is a link to the archive page that contains the prior editions.

Archive link below:

http://archive.constantcontact.com/fs009/1102162493446/archive/1102248850983.html


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[Originally written in February 2009 for publication in the Clearwater (Florida) Regional Chamber of Commerce’s Voice of Business bi-montly newsletter.]

 Governmental Affairs Committee Commentary

by

Robert W. Murphy, 2009 Chair

***************************************************************

Why So Big a Net at GAC

In December of 2008 the Governmental Affairs Committee (“GAC”) was fundamentally changed. Prior to accepting the chair, I asked that the Chamber put together a steering committee which would set the broad agenda for our work. It did so immediately and we met to determine how best to meet the perceived needs of Chamber members as expressed  in the 2008 survey of things members felt were most important. The result was the formation of six functionally based GAC standing task forces. We also held in reserve two additional task forces which could be activated at a later date.  The active task forces are listed below. We have been extremely fortunate to have some really excellent community leaders step up to head each of them and to bring on board other high quality people to serve with them.

• Economic Development
• Education
• Energy Policies
• Health & Welfare
• Local Government Liaison
• National/State Liaison

Recently, I was challenged by a colleague who indicated to me that we might have really bitten off more than we can chew. He also opined that we may have stepped beyond the traditional functions of chambers of commerce. His conclusion was that certain of our task forces could not possibly address their respective mandates in a meaningful way and that we were probably just wasting resources. In other words: our GAC net was just too darn big. His was kind of a Moby Dick type warning with the image of us chasing out after a white whale.

An easy reply would have been to tell him that the Chamber is obligated to its membership to respond to the items that were identified in the 2008 survey. The GAC structure is just a means to that end. However, such a reply would have been disingenuous on its face.

The GAC Steering Committee has knowingly established an incredibly challenging 2009 agenda that does press up against the traditional limits of chamber of commerce type functions. We fully recognize that we may only be able to marginally effect some of the more aggressive objectives we have placed there for action. We may indeed fail to deliver very much on those. However, the alternative, doing nothing at all, was never considered by the Steering Committee to be a tenable position for the GAC. We concluded, admittedly with a minority dissent, that action will trump no action every time.

As an arm of the Chamber whose unique function is interaction with local, state and national policymakers, we feel strongly that our GAC mandate goes beyond the clearly short-term economic interests of our members. The Chamber has other missions as well, both economic and social.  Long-term positioning associated with the factors that are required for preserving our local economic health (e.g., energy policy) is equally important. Having a properly educated, healthy, secure and satisfied workforce (e.g., education, health & welfare, etc.) are also all critical factors which impact our economy. Additionally, providing assistance to those who are interested in bringing businesses to our city cannot be overstated (e.g., economic development). Lastly, quality of life in a community has a direct economic impact by significantly influencing the interest new industry has in locating, or staying, there. All the above considerations ultimately come full circle to economic health. One piece cannot be viewed separately from the whole.

Yes, so the GAC has cast a really big net. It has made public its goals. It has allowed the cynics free reign to expect the worse. It has done it all with some trepidation of failure but also with the expectations that we all could celebrate some real successes along the way. It has taken the position that either it would positively effect the community in some manner or its new concepts would crash and burn badly.

We want all our members to be aware that each has an open invitation to become a member of the GAC. No prior political experience is necessary. Nor is there a need for any GAC member to join a task force or be an activist on any issue. We encourage you to just come and be part of the dialogue that takes place at 7:45 AM on the first Wednesday of every month in the Chamber’s Community Room. Contact the Chamber (phone: 727-461-0011) with any questions you might have regarding participation.

Bob Murphy

2009 GAC Chair

During the first quarter of 2009, BBCG Inc. was sidetracked more than expected by me taking on the responsibilities of Chairman, Governmental Affairs Committee, Clearwater (Florida) Regional Chamber of Commerce.  We will reprint an article I wrote for publication in the Chamber’s Voice of Business bi-monthly newsletter which provides more detail. In a nutshell, with the support of a small steering committee over the course of the last three months, I have established six standing task forces which are now each headed by an extremely talented volunteer from the community. Between the six, we have attempted via broad mandates, to address all the issues our membership told us were of most concern to them in a fall 2008 survey. We have also tasked two of the task forces to address specific items that public sector officials have brought to us as quick-fused issues requiring immediate action.

It has been my intention as the President of BBCG Inc. to design and build the Chamber task force infrastructure, identify and install six high quality leaders, and then back off from the intense front-end effort and refocus on the requirements of BBCG’s employee benefits work.

With most of the pieces now in place, I will strive to be more proactive in making valuable posts to this blog.

Respectfully,

Bob Murphy, REBC, ChFC, CLU, RHU, MBA

[The below is excerpted from a column written by Tim Meyers for The Signal in Santa Clarita Valley, CA.  Click here for original. ].

Mr. Meyers insight into the workings of a Ponzi Scheme is timely relative to the substantial emerging losses of both wealthy individual and institutional inevestors during the last two weeks.

What constitutes a Ponzi scheme?

The scheme carries the name of Charles Ponzi, an Italian immigrant who originally perpetrated the fraud. The scheme simply involves promising extremely high rates of return and then paying those from the frenzied investments of subsequent investors.

The actual method of the Ponzi varies, but two things always occur in common: First, the Ponzi artist operates NO substantive business, certainly none that could generate the returns promised. Second, and most tragically, the Ponzi artist must rely for success on the extreme naivete of the investors.

Unfortunately, right now constitutes probably one of the most fertile times for Ponzi artists, especially when they prey on the elderly with nest eggs invested conservatively in retirement plans or large amounts of home equity.

Legitimate and wise advisers place these folks in conservative, nonleveraged fixed income investments that at best might yield five to six percent a year in investment return.

Now the Ponzi promoter might promise investment returns of 10 percent per month, or 24 times the return of a safe investment. This requires the threshold of credulity and lack of knowledge.

A savvy investor knows he or she can earn these types of returns only with high risk (the potential of losing the entire value of their investment) or taking on large amounts of debt or leverage (also risky).

When questioned about the exorbitant returns, the promoter might say that wealthy people hide these opportunities from the more modest, and he is in fact providing a Robin Hood-type service by letting them in on the action.

So our Ponzi promoter raises $100,000 from five investors, promising 10 percent per month in returns for a total of $500,000. At the end of 30 days, the promoter dutifully cuts checks for $50,000 for the first month’s return and is left with $450,000 (remember, no actual investment or business exists).

This could persist for nine more months as the promoter exhausts the investor funds, and the investors would realize they only received their money back, only losing out on the return.

But a Ponzi scheme does not remain static. The first five investors excitedly talk up to their friends the investment that returns twice as much in one month as their old staid investments.

Even at the rate of just five new investors per month, and paying out the 10 percent return per month, at the end of six months the promoter possesses just under $2 million in investor cash.

Now they make the next move. They convince the existing investors they need to roll over their monthly investment returns to further increase their returns.

Now, with five new investors a month and no cash payouts, in six months the promoter possesses dominion over slightly less than $5 million. Comfortable with the stability of the cash balance and with new investors still coming in, the promoter begins to divert large amounts of the cash to his or her personal use.

This actually helps with the recruitment of new investors because people flock to those showing material success.

What causes the Ponzi scheme to collapse? Two things, and if they occur concurrently, the faster the demise.

First, the pool of new investors drys up. Second, existing investors request their principle.

Unfortunately for the criminal, for the Ponzi schemes targeting seniors, the second happens more frequently. Seniors die and then heirs with professional executors want to liquidate the investment. With no cash available to pay returns, investors become suspicious and requests for payouts spread like wildfire, collapsing the scheme.

Now all Ponzi criminals of late share one thing in common: They possessed some harebrained investment scheme that would eventually come to fruition and pay off all the investors in full.

Before their sentencing they will protest that “with a bit more time” they could make all their promises good.

So in the end, the criminal acts with the same naivete of their investors.

Injured or Ill Members of the Armed Forces

The Labor Department will release regulations November 14, 2008 which will let family members of seriously injured or ill members of the armed services take up to 26 weeks off from work each year to care for them.

The military caregiver provision gives family members up to 26 weeks off, longer than the normal maximum of 12 weeks under the Family and Medical Leave Act. The provision also allows additional family members, including siblings and cousins – not just spouses, parents or children – to take time off.

Relatives of National Guard or Reservists Called to Duty

The regulations also will allow family members of those called to active duty in the National Guard or the Reserves to take up to 12 weeks off so they can manage needed and often rushed matters regarding a service member’s departure or return.

Labor Department officials said the law creating the leave for such situations did not cover regular active-duty military members.  DOL indicates that the provision is to assist families of deploying Guard or Reservists where significant family adjustments must be made as a result.

Other Changes

• Allowing employers to require “fitness-for-duty” evaluations for workers who took leave time and are returning to jobs that could endanger themselves or others.
• Forcing workers to tell employers in advance when they want leave time. Current regulations allow employees to tell employers up to two days after not showing up for work that they are using leave time. Employees will now have to follow their employer’s regular rules for informing them about missing work “absent unusual circumstances.”

[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.

[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.