Panel Discussion: The Many Faces of Self Insurance: Captives, PCCs, ICCs, Group Captives

An interesting panel discussion led by Dato’ Majid Mohamad, Technical Advisor at Labuan International Insurance Association (LIIA) discussing about the different types of self-insurance available in the market and their applications.

Anthony Egerton, Principal Officer, Huntington Underwriting Limited
Datuk Ir. Lim Tong Kang, Chairman, Malaysian Association of Risk and Insurance Manager (MARIM)
George McGhie, Managing Director, Captive Practice, Willis Towers Watson

Journal & Republican | Lewis County manager warns of tight budget year

LOWVILLE — Lewis County’s first-year manager last week warned lawmakers that they’re in for a tight budget year, making any new expenditures now or throughout next year more difficult to cover.

“We’re not going to be able to have the leeway or freedom to do those things,” County Manager Ryan M. Piché told members of the legislative Ways and Means Committee Oct. 24.

Mr. Piché, who will unveil his first tentative county budget during the Nov. 7 board meeting in Harrisville, said the spending plan will not include extra positions requested by department heads due to fiscal constraints.

If so inclined, legislators could choose to exceed the tax cap to cover the cost of new posts or expenditures, but “that’s not something I want to propose in my first year,” he said.

The county may only raise the tax levy by $486,000 to stay within constraints of the state tax cap, and the budget process started with a nearly $1.4 million deficit, Mr. Piché said.

“The elephant in the room in this budget is health insurance,” he said.

With legislators previously voting to hike health insurance premiums by 10 percent every six months, that not only impacts employees but also adds $700,000 in expenses to next year’s county budget, Mr. Piché said.

The county’s self-insurance fund has been down around the $1 million mark, while experts recommend it be at least $4 million. County leaders implemented the hikes — and recently offered employees a pair of alternative plans with lower premiums but higher deductibles and co-pays — in hopes of rebuilding that reserve.

While the county saw a surplus in that account in the two prior months, there was once again a $50,000 loss in September, county Treasurer Patricia L. O’Brien said. “Hopefully, it turns right around,” she said.

County officials are still hoping to see a “real positive trend” that may allow for the discontinuation of the premium increases or at least reduction to 5 percent or some other lesser figure, Mr. Piché said.

To help balance the budget, Mr. Piché said he and Mrs. O’Brien have requested from department heads a list of proposed one-time expenses that could be covered by surplus funds from 2017 rather than included in the 2018 budget.

Anticipated sales tax receipts will also be increased by $150,000 and the contingency fund — which may be used throughout the year for any unexpected costs — is to be reduced from $900,000 to $250,000, he said.

That will likely force legislators to have more fiscal restraint if department heads or organizations come to them during the year with new programs or services to fund outside the budget, Mr. Piché said.

“If the budget is put together right, there should be little coming out of contingency,” said Legislator Jerry H. King, R-West Leyden.

Mr. Piché said funding for libraries and other contractual agencies, as well as most other items, are being kept at 2017 levels.

The “fork” ratings are based primarily on food quality and preparation, with service and atmosphere factored into the final decision. Reviews are based on one unsolicited, unannounced visit to the restaurant.

What’s next for employer-provided healthcare?

The uncertainty around healthcare leaves businesses unsure about their options for employee benefits in 2018. Congress is focused on ideology, partisan advantage and the right way to pay for healthcare. They’re not making any progress because they’re missing the most important point.

Our elected leaders are arguing about how to pay for healthcare when they should be focusing on how much we are paying for it – and the fact we’re grossly overpaying. Evidence suggests nearly 30 percent of all healthcare spending in the United States is waste – including unnecessary services, excessive administrative and inflated prices – and it’s built right into traditional health insurance models. But, no one is paying attention. 

Whether it’s Trumpcare, Obamacare or something in between, all signs indicate insurance costs will continue to skyrocket. Next year marks the fifth-consecutive year that health insurance rates will increase by at least five percent – and it’s all because we’re trying to solve the wrong problem. Healthcare costs (and waste) will continue to increase our deficit and command a larger share of our nation’s gross domestic product.

What’s worse, the impact on businesses and employees will be disastrous.

Health insurance is among a company’s biggest expenses. An average employer-provided insurance plan costs about $6,500 a year in premiums with a $6,000 deductible. But, even if the business covers the lion’s share of the premium, the deductible simply isn’t affordable for the nearly half of our nation’s employees earning less than $15 an hour.

The result is that 48 percent of U.S. employees are not insured through their workplace. To make matters worse, Trump’s new executive order will make it more difficult to buy insurance on the exchange.

Despite the volatility, one aspect of the law remains stable: self-insurance. It’s an innovative solution that’s quickly gaining momentum among employers of all sizes.

Self-insurance allows employers to reduce their costs without cutting benefits. They can create their own benefits plan and pay claims directly or through a third-party administrator. Benefits can be customized and may include medical, dental, vision, prescription medications and workers’ compensation. For employees, the plan may look and operate in exactly the same way. In addition, self-insured companies often purchase stop-loss insurance to limit their risk.

Companies that self-insure benefit in numerous ways:

• They’re not on the hook for marketing costs or profit margins built into traditional insurance. The Self Insurance Educational Foundation has estimated these cost savings at 10-25 percent.

• Cash flow improves because employers don’t pre-pay for coverage – they pay when claims are incurred. They keep any extra money they’ve put into their claims bucket.

Self-funded plans are regulated under federal law (ERISA), so employers are not subject to state health insurance premium taxes.

• Companies that self-fund own their claims data, allowing businesses to benchmark their utilization against other companies’, and react to the data as needed.

Self-insurance gives employers a new option for providing quality health benefits without straining their bottom line.

Paul Johnson is co-founder and CEO of Redirect Health, a Scottsdale-based company that makes healthcare easy and affordable for individuals, employers and brokers. More at

Health Insurance Tax Targets Consumers and Small Businesses

Obamacare imposes a tax on health insurance premiums[REF] that will increase individual and small group health insurance premiums by an additional 2 percent to 3 percent in 2018.

After the 2017s moratorium ends,[REF] this tax will once again be imposed in 2018 and thereafter. The tax is projected to increase individual and small group health insurance premiums by an additional 2 percent to 3 percent in 2018. The tax will have an adverse impact on consumers and reduce employment but have little effect on large employers and their employees because large firms usually self-insure. The tax is hidden from consumers, and directly increases the cost of health insurance. Like the other Obamacare taxes, it should be repealed.[REF]

How the Health Insurance Tax Works

The Internal Revenue Service (IRS) calls the excise tax a “Health Insurance Provider Fee.”[REF] Opponents call it the health insurance tax (HIT).[REF]

The HIT is not imposed at a specified rate; rather, the effective rate is set annually by the Department of the Treasury to raise an amount of revenue specified by law.[REF] The amount of revenue that the Congressional Budget Office projects that the tax will raise is shown in Table 1.

Estimated Impact of the Health Insurance Tax on Premiums

The amount of tax revenue raised will increase substantially over time. In 2026, the HIT is projected to raise 54 percent more revenue than it did in 2018.

The HIT is imposed on net health insurance premiums for any U.S. health risk to the extent that the insurer’s premiums exceed $50 million annually.[REF] The tax is not tax deductible, which raises its effective tax rate by 54 percent.[REF]

Most Large Employers and Their Employees Are Exempt

Employers that self-insure are explicitly exempted from the HIT.[REF] Most large employers self-insure, while most small employers do not. Thus, the HIT will affect almost exclusively small businesses and individual consumers. In 2015, 80.4 percent of employers with 500 or more employees were in self-insured plans; 30.1 percent of employers with 100–499 employees self-insured; and 14.2 percent of employers with fewer than 100 employees self-insured.[REF]

In general, with self-insured plans, the employer establishes and contributes money to a trust. Employee health care costs are paid in accordance with the trust or plan document. The employer will often use a third party to administer the health care plan. The plan usually uses a preferred provider network or other network of health care providers to contain costs. Small or mid-size employers that self-insure usually purchase stop-loss insurance that limits either their aggregate or per person losses or both. In all of these cases, self-insurers are exempt from the HIT.

The table below summarizes the findings of four studies of the impact of the HIT on health insurance premiums. Each study is clear that the HIT imposes more costs on consumers. However, the results vary to some degree because they:

  1. Consider different time periods;
  2. Use different data sources and estimates about the amount of health insurance premium revenue that insurance companies will have; and
  3. Employ different estimates about how many firms will move toward self-insurance rather than buying health insurance over time.

It is generally agreed that the economic incidence of the HIT will fall primarily on consumers and small employers.[REF] The higher costs that small employers face will tend to reduce employment. A study by the National Federal of Independent Business Research Foundation found that the health insurance tax will reduce private-sector employment by as little as 152,000 jobs and as much as 286,000 jobs in 2023.[REF]

Because of the HIT, the health insurance underwriting restrictions in Obamacare (notably the age bands limiting the ratio of the premiums for the oldest workers to no more than three times those for the youngest workers) and the Essential Health Benefits requirements for health insurance, an increasing number of employers will find self-insurance to be an attractive option under Obamacare. This effect will be particularly pronounced for employers with relatively young and healthy employee populations.

In fact, since Obamacare was enacted, the percentage of private-sector enrollees in self-insured plans has increased from 57.5 percent in 2010 to 60 percent in 2015.[REF] The proportion of small and medium-sized firms that self-insure has increased as well.[REF] Similarly, enrollment in fully insured employer group plans dropped by 8.6 million individuals, from 60.6 million at the end of 2013 to 52 million at the end of 2016 and the number of individuals in self-insured plans increased from 100.6 million in 2013 to 105.6 million in 2016.[REF] These effects would probably be larger but because the repeal of Obamacare seemed likely, some firms deferred moving toward an unfamiliar means of providing health benefits.

To the extent this movement toward self-insurance occurs, it will reduce the amount of premiums underwritten (i.e., the size of the taxable base for the HIT) and increase the required health insurance effective tax rate to raise the set dollar amounts that must be raised. The higher effective tax rate will increase the percentage by which premiums must increase in subsequent years.

Health Insurance Tax Revenues

A Hidden Tax

Because the HIT is collected from insurance companies, it is effectively hidden from health insurance buyers, including both individual consumers and small employers. However, because the HIT is functionally an excise tax, it directly increases premiums. Current estimates are that when the tax goes back into effect in 2018 it will increase premiums by an average of 2 to 3 percent. Even worse, that tax rate will further increase as more employers shift to self-insuring their plans, thus shrinking the tax base for the health insurance tax (which is applied only to policies purchased from commercial health insurers). That is because the law requires the IRS to extract fixed amounts of revenue from that tax base.

Those effects make the health insurance tax one of Obamacare’s more damaging taxes. As with the other Obamacare taxes, it should be repealed.

David R. Burton is Senior Fellow in Economic Policy in the Thomas A. Roe Institute for Economic Policy Studies, of the Institute for Economic Freedom, at The Heritage Foundation.

Lafayette police, firefighter survivor benefits explained


Here’s a breakdown of the top stories right now at
Caitlin Jacob

The surviving spouses of Lafayette police officers killed in the line of duty stand to receive about $2 million a year from the city, depending on years with the city and other factors. 

City officials have been silent about benefits they offer surviving spouses of police officers since the Oct. 1 shooting death of Cpl. Michael Middlebrook.

Mayor-President Joel Robideaux outlined for the Lafayette City-Parish Council Monday the benefits Lafayette Consolidated Government provides survivors of those killed in the line of duty, including a funeral stipend and two times the officer’s annual pay, even if the spouse remarries.

RELATED:What do La. police survivors receive from the state, feds?

The spouse of a police officer killed in the line of duty will receive his or her retirement. But it’s better than that. The city, Robideaux said, will average the officer’s three highest annual salaries and give the spouse that in a lump sum.

LCG also provides two times the officer’s annual salary, up to $200,000, to the surviving spouse.

Worker’s compensation will provide the surviving spouse of an officer killed on the job between 32 1/2 percent and 65 percent of the deceased officer’s salary for life, he said. The amount depends on the number of children the officer had. The spouse would lose this benefit if they remarry.

The family of an officer killed in the line of duty, Robideaux said, will receive from worker’s compensation $8,500 for funeral expenses. And the surviving family will receive any annual vacation time and sick leave the officer accrued, he said.

Dependents of police officers killed in the line of duty are eligible for other benefits, too.

Federal benefits provided to the surviving spouse and children of a police officer killed in the line of duty include:

* $350,079 from the Public Safety Officers’ Benefits Act

* $1,041 per month for higher education

State benefits include:

* $250,000 for the surviving spouse and $25,000 for each dependent child from the state’s Self-Insurance Fund

Cpl. Michael Middlebrook, a 9-year veteran of the Lafayette Police Department, was shot and killed Oct. 1 at the Big Boy Discount Zone convenience store on Moss Street after he responded to a call.

Ian Howard of Lafayette was indicted for first-degree murder in connection with the case.


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Watertown Daily Times | Ogdensburg to end self-insurance, hire Excellus for municipal needs

OGDENSBURG — The city’s decision to end its practice of financing its own health insurance for employees may not show direct savings in 2018 but is likely to create efficiencies that could produce lower costs in the future, according to City Manager Sarah Purdy.

In releasing her preliminary budget for 2018 earlier this month, Ms. Purdy announced that the municipality will end its long-standing policy of utilizing a self-insured model of providing health insurance for employees.

One of the reasons for the switch, according to Ms. Purdy, is that under the city’s self-insured model, the municipality was not able to carry what is known as “stop-loss coverage” for employees.

Such insurance protection is considered crucial in order to absorb the cost of catastrophic claims, according to experts.

“Not having stop-loss coverage while also being self-insured means that if a covered individual has a catastrophic medical event, that winds up costing $1 million, the city would have to pay the entire cost,” Ms. Purdy said.

As examples, Ms. Purdy said incidents involving traumatic brain injury or the premature birth of a baby can often carry such hefty costs.

Ms. Purdy said the last time the city sought a quote for stop-loss coverage was one year ago, when the annual premium was quoted as $500,000.

“The city can’t afford that, but yet at the same time is running a huge risk that it also can’t afford,” Ms. Purdy said.

The city has allocated $3,262,334 for health insurance costs in the 2018 budget, according to Ms. Purdy.

But instead of using the money for self-insurance purposes, the municipality is making plans to acquire coverage through Excellus, a company Ms. Purdy said has been making inroads in the north country in recent years.

“We had looked at Excellus a year ago but at that time their proposal was too expensive,” she said. “A year later, they have gained more critical mass in the north country, and the proposal they provided this time is well worth it.”

Ms. Purdy said that if the city would have chosen to stay self-insured, the 2018 amount budgeted for medical coverage would have increased by 5 percent

“For that same amount of money, Excellus is willing to provide health insurance coverage for all our members up to age 65, plus pick up the run out costs (the cost of claims incurred in 2017 that are still in the process of being closed out), plus provide stop-loss coverage,” Ms. Purdy said. “So in 2018, the city does not expect to save money, but the significance of no longer having the catastrophic risk is huge. Going forward, we do expect Excellus will find cost efficiencies, which may have the effect of keeping premium increases smaller than industry standard or perhaps producing a savings — we won’t know until we get through one full year of Excellus coverage.”

In addition to reducing the city’s risk, Ms. Purdy said city staff will spend less time on employee or retiree questions about their bills because the municipality will no longer be self-insured.

“Those questions will go to Excellus,” she said.

Retirees who are Medicare-eligible will be switched over to UnitedHealthCare, a well-known provider of supplemental insurance for retirees, according to Ms. Purdy.

The “fork” ratings are based primarily on food quality and preparation, with service and atmosphere factored into the final decision. Reviews are based on one unsolicited, unannounced visit to the restaurant.

Business Perspectives: University System is good for NH business

BIA President

October 28. 2017 11:47PM

BIA president 

There is a serious labor shortage in New Hampshire. Many employers are reporting significant difficulty in filling open positions. This is especially pronounced in manufacturing, technology, health care and other key sectors of New Hampshire’s economy.

According to the Economic and Labor Market Information Bureau, 1,600 manufacturing positions were left unfilled between July and August. Demographic factors exacerbate this situation. The state’s existing workforce is older than most other states, and many workers are retiring or close to retirement.

The Business & Industry Association, New Hampshire’s statewide chamber of commerce and leading business advocate, is adding its voice to those articulating the University System of New Hampshire’s critical role in developing top-caliber talent for Granite State employers.

The university system has been an active partner with the business community working to understand and meet the needs of employers. It serves as a pipeline of young, work-ready individuals for employment. In fact, graduates of the USNH’s four campuses are the largest source of new labor for New Hampshire employers among all post-secondary institutions in the state.

New Hampshire students are more than three times as likely to stay in-state upon graduation as non-New Hampshire students. But for the university system to continue to fill its pipeline with new talent for New Hampshire employers, state financial support is critical.

Right now too many college-age students are choosing to complete their education outside New Hampshire. The state currently exports the highest percentage of college-bound students in the country. Once these individuals have left New Hampshire, few return to seek employment. We, in turn, miss out on a large pool of newly trained, highly motivated workers. There are many reasons that contribute to this, but the high cost of tuition at our state universities is an undeniable factor.

For the first time in decades, BIA made increased funding for the university system and community college system a priority budget request. In the last legislative session, lawmakers did what they could for the community college system, but the university system was essentially level funded. New Hampshire’s financial support for the university system is the lowest per capita in the country. This has a direct result on tuition costs, making UNH unaffordable for many New Hampshire students. It also is a factor in our graduates’ considerable student loan debt, ranked highest in the nation.

There is a false perception that the university system is inefficient, contributing to high tuition rates. The fact is, the system spends less on operations and administration and has the lowest administrative costs per student than any other public university system in New England. Furthermore, as a result of sound fiscal stewardship, USNH continues to see bond rating upgrades, producing additional savings to the state and its students. Innovations, such as self-insurance and high-deductible health plans, have helped contain costs as well.

New Hampshire has a serious worker shortage. Our demographics are working against us, and too many students choose to further their education out of state. The university system is a principal source of young talent for New Hampshire employers; it has an impressive record working directly with businesses to place students in internships that introduce them to career opportunities in the state; and it supports business growth through research and business incubation. But the university system needs sufficient support from the state. Investing in the University System of New Hampshire is a sound investment in the state’s economic future.

Jim Roche is the president of the Business & Industry Association, New Hampshire’s statewide chamber of commerce. The BIA produces this column monthly exclusively for the New Hampshire Sunday News.

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Health premiums for city employees to increase slightly | Local News

Medical insurance rates for Joplin city employees will increase slightly next fiscal year.

The cost to provide health insurance for individual employees will go up $5.50 from $466.82 to $472.32 per month. Taxpayers pay all of the cost of the premium for single coverage so employees do not pay any of that cost.

Employees who have family will see an increase. Premiums for family coverage will go up $11.52 from $980.36 to $991.88. Taxpayers pay 75 percent of those premiums. 

There will be no increase in the cost of the vision or life insurance premiums.

The City Council was told that by negotiating a five-year contract for health insurance services and administration, life and vision coverage using an insurance consultant, Segal Consulting, the city had helped hold down the costs. The administrator for the claims is Anthem Blue Cross Blue Shield.

The city went to self-insurance coverage in 2011, depositing a lump-sum to start a self-insurance fund and buying insurance to cover claims over $150,000 to keep from draining the self-insurance fund.

Anthem charges a fee for that stop-loss insurance. That will cost $531,000, an increase of $44,000 from last year. However, the insurer will not increase the fee for administering claims, which will remain at $252,000.

Ruth Donahue, of Segal, told the City Council that the low amount of the increases is the result of the insurance fund having a low amount of claims for the year.

She said that using self-insurance and negotiated insurance contracts for processing claims has kept Joplin under the amount of increases experienced nationwide. She said the city’s health benefits outlay has increased 6.3 percent over the eight years while the national trend has been more than 7 percent.

The city’s finance director, Leslie Haase, said city employees have established a group, the Joplin Health Nuts, that works with employees to encourage fitness and to teach ways they can be better consumers of health care.

Health insurance was provided to 505 employees this year, Donahue said. The self-insurance fund started the year with a balance of more than $1.78 million. There was about $5.95 million paid into the fund by the city, employees and retirees to cover the cost of premiums. After claims and expenses for the fund were paid, the fund had an ending balance of slightly more than $2.12 million.

Donahue recommended that the fund have a surplus of $2.248 million. The fund has a shortfall of about $118,000 that she recommended be recovered through premium increases to employees in the future to bring up the surplus balance.

Rates as of Nov. 1

Joplin City Council approved the costs at a meeting Oct. 16. The new rates will go into effect when the city’s new fiscal year begins Nov. 1.

Lafayette Police survivor benefits topic of Monday council briefing


Lafayette Police Chief Toby Aguillard spoke with The Daily Advertiser Oct. 3, 2017, about the loss of Cpl. Michael Middlebrook on Oct. 1. Middlebrook was shot and killed while responding to a shooting at a Moss Street convenience store.
Claire Taylor

In light of a dispute over medical benefits for the widow and daughter of a Lafayette Police officer killed Oct. 1 in the line of duty, the Lafayette City-Parish Council will get an update Monday on benefits to employees’ survivors.

An agenda distributed Friday afternoon states the purpose of the briefing at 5:30 p.m. Monday in the council auditorium is for the administration to brief the council “on matters related to benefits, resources, services and programs for surviving spouses and dependents of (LCG) employees when life is lost in the course and scope of employment.”

The Daily Advertiser submitted a public records request Tuesday to Lafayette Consolidated Government seeking information on the benefits it provides survivors of police officers killed on the job, but it did not receive a response as of Friday afternoon.

Federal and state government sources also provide benefits to the surviving dependents of police officers killed in the line of duty.

In the case of the widow and daughter of Cpl. Michael Middlebrook, that amounts to at least $600,000.

Through the federal Public Safety Officers’ Benefits Act, the eligible survivors of a police officer killed on duty as of Oct. 1 will receive $350,079, according to its website.

They also can take advantage of a PSOB educational stipend of $1,041 for one month of full-time higher education classes.

Middlebrook’s widow also may be eligible for a $250,000 payment from the state’s Self-Insurance Fund created by state legislation, and his daughter may receive $25,000.

Also, through the Municipal Police Employees’ Retirement System, the surviving spouse and children are eligible to receive at least 100 percent of a fallen officer’s final average compensation, according to Bex Huxen, MPERS executive director and general counsel.

Middlebrook earned about $51,000 a year, according to a database of LCG employees’ salaries obtained by The Daily Advertiser in 2016.

RELATED: Accused Middlebrook killer no longer in Lafayette jail

Survivor benefits became an issue days after Middlebrook was shot and killed at the Big Boy Discount Zone convenience store on Moss Street.

His accused killer, Ian Howard of Lafayette, was indicted for murder and faces the death penalty if convicted.

Middlebrook’s widow asked the city — which is self-insured — to allow her and her 3-year-old daughter to keep their health insurance at the same premium they paid while Middlebrook was alive.

The city agreed to keep the family on city insurance, but at a $4,000 a year increase.

LCG issued a statement Monday stating the attorney for Middlebrook’s survivors three times objected “to the release of, among other things, any personal and/or financial information” regarding the family, “threatening LCG with legal action if it fails to comply,” the news release states. 

“Accordingly, LCG is respecting the wishes of the Middlebrook family and is not issuing any public statement regarding the situation,” the release states.

RELATED:Middlebook attorney: Lafayette failed hero’s family

Allyson Prejean, who represents the family, said they don’t want LCG to release specifics about how much money the family might receive from fundraisers and donations, not about the health insurance issue in general.

Meanwhile, Youngsville’s mayor and council adopted a resolution Thursday outlining the benefits that city will provide to the dependent survivors of its fire and police officers killed while on the job. 

They include $15,000 for funeral expenses, Mayor Ken Ritter said, plus the city will pay the health insurance for survivors for five years.

Youngsville has 26 police officers and 33 firefighters, Ritter said. He wasn’t sure how many firefighters the city employs.

The city of Lafayette employs more than 200 police officers and another 265 firefighters.

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