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 Trust Matters, May 2014 

Renewal applications due; late fees may apply

Cyber Liability: Are you exposed? Are you prepared?

Prepare now for new wellness guidelines and requirements in 2015

Trends in medical plan designs

Officers complete Slower is Faster training

Did you know?

The Affordable Care Act and Excise Tax

Upcoming Events

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Renewal applications due; late fees may apply

Each year, the underwriting department prints, assembles and mails renewal applications to all Property/Liability Insurance Trust (IRFFNC) and Workers’ Compensation Trust (NCIRMA) members the last week in March. The due date indicated on the cover letter is typically around May 9. There are several reasons we need to have these returned in a timely manner:

  • In order to communicate final renewal premiums to members for their budget purposes.
  • To keep accurate records of insured items (autos, equipment, property) for first party claims.
  • To update member exposures for reinsurance reporting purposes and allow the broker to provide us with timely invoices. Our reinsurers request that we report exposures prior to 7/1.
  • All final renewal invoices must be submitted to the finance department before claims codes can be populated in claims system for the new program year.  We cannot process any new claims if the information is not populated in the claims system.
  • Financial auditors randomly review the applications for completeness each year.  It becomes a possible issue if the renewal application is not returned.
  • Increased administration cost as we repeatedly have to contact the member.

For the reasons listed above, the RMS Board of Trustees has voted to impose a late fee if the Workers' Compensation or Property/Liability Renewal Application is returned after June 1. These late fees are flat fees based on premium size and would apply separately for each application. To date we have received less than 60% of the Workers' Compensation applications and less than 50% of Property/Liability renewal applications.

30 Day Notice of Non-renewal

As a member of the RMS insurance trusts, you are required by contract, to provide a 30-day cancelation notice in writing. If your entity will terminate your Property and Liability coverage with IRRFNC, your Workers' Compensation coverage with NCIRMA, or your Health Benefits coverage with MIT, you are required to notify our office in writing by May 30, otherwise your entity will be subject to a 2% exiting fee based on expiring year premium. This will also greatly assist us in determining which members we should invoice for 2014-2015. Participation in the pool is a one-year commitment per the interlocal agreement. Cancelations shall be permitted only at the end of a fiscal year or Fund Year (June 30).

Cyber Liability: Are you exposed? Are you prepared?

Once a breach is determined, there are many actions to be taken -- a breach attorney needs to instruct you as to the legal requirements, you must determine if the breach falls under the breach notification laws of a given state because different laws may apply if the affected person lives in another state, a forensic expert will need to determine how the breach occurred, the affected persons will need to be notified in a timely manner, credit monitoring and call center services may need to be provided, and you may also need the services of a public relations firm.

You all are becoming more aware of cyber risk and have inquired about the availability of cyber coverage for your entities, so the League, Willis and Beazley have worked together to provide the members of our Property/Liability Insurance Trust (IRFFNC) with a cyber risk product that provides the needed coverages and a simplified application at an affordable price. Maintaining this affordable price depends on how many members purchase coverage. If your town tried to find this coverage on its own, the coverages, application and pricing would not be as attractive. Therefore, we hope that you will give this coverage serious consideration and return the application and quote sheet by due date of May 15.

You will purchase this product directly from our reinsurance broker, Willis. Due to the complexities of this coverage and the infrequency of claims, it made sense for the members to purchase this coverage directly from a carrier that specializes in this type of exposure. The pricing will be based off the member’s revenues. 

We sent an email to all our IRFFNC members that provides the information needed to apply for coverage. This application packet needs to be returned to Willis by May 15 to obtain the preferred program pricing for a July 1st program effective date. You will need to email the completed application and quote option page together as one document electronically to: NCLMCyberRisk@Willis.com. Please let Ryan Ezzell at rezzell@nclm.org know if your entity did not receive the cyber risk insurance email.

In addition, several other resources are available to our Property/Liability Insurance Trust members:

  1. This fall we engaged Agio (formerly known as Secure Enterprises) to complete cyber risk vulnerability assessments for eight of our members. From this we have a Best Practices Guide and a training program in PowerPoint. The guide is on our website behind the member login, available to those who participate in our property/liability insurance trust.
  2. We recognize not all of our members will purchase cyber insurance; for these members of the property/liability insurance trust we will subscribe to e-Risk Hub, a website providing a clearinghouse of cyber resources including breach lawyers, steps to take following a breach, consultation with a breach coach, etc. The site is provided by Net Diligence, a company that specializes in cyber risk management.
  3. We are also plannning cyber risk regional meetings between Labor Day and mid-October. Speakers will include RMS staff, a privacy law attorney, representative from Willis to explain the coverage and a representative from Agio to discuss the assessments completed last fall. These training sessions will be open to all League members.

Prepare now for new wellness guidelines and requirements in 2015

The MIT Health Benefits Trust is taking steps to lower claims and help our participants become healthier in plan year 2015-2016.  We will introduce new wellness guidelines that need to be met in calendar year 2014 for individuals to avoid a 10% surcharge of their medical premium in fiscal year 2015-2016. Because a large number of our members are not taking advantage of free preventative services, our claim costs are rising. Our large claims that are over $50,000 have more than doubled through the years going from just 75 in fiscal year 2007/2008 to 165 in fiscal year 2013/2014. Our claims data analysis reveals that more than 50% of our participants did not receive age appropriate cancer screenings and 70% were non-compliant for their annual physical in 2013/2014. 

We also have a Personal Care Management program in place for members with indications of major health issues in their claims. We have this program in place to help individuals manage their health and help all of us avoid large claims. A Personal Care Management nurse calls individuals covered under the medical plan who have claims indicating they are having trouble managing their health. It is not the normal disease management that is staffed by many nurses and has a call center feeding to it. Our program is staffed by four nurses who set mutually convenient appointments with individuals that qualify for the program. Our nurses build relationships with your employees since the same nurse calls each time. The nurses tried to reach 306 individuals this last year and only 29 participated.

Requirements that need to be met in calendar year 2014:

  • Individuals will need to receive their annual physical with a primary care physician or have their screening through our free onsite program, the Wellness Initiative. Other programs supported by the employer that provide onsite screenings are acceptable as well; but the employer will need to send the information to MedCost for individuals to receive credit. 
  • Participants will need to receive their age appropriate screenings per the American Cancer Society guidelines. This includes mammograms, colonoscopy and PAP.
  • Participation will be required in our Personal Care Management program. When outreach is made by the nurse, participation will be required until the nurse releases the individual. Only individuals that have claims indicating they may be at risk for developing serious health issues will be invited into this program.

Our intent is not to collect the surcharge but rather for individuals to take advantage of life-saving screenings. We will help our employers and employees meet these goals prior to December 31, 2014.  Beginning in July 2014 the monthly bill will indicate individuals who have not met one of the requirements, if the individual doesn’t know what requirement was not met they can call MedCost to find out.

Trends in medical plan designs

Since moving administrative services to MedCost Benefit Services, the Health Benefits Trust has enjoyed significant flexibility in designing plans that reduce members’ health plan costs. One concept that gained popularity is the Medical Expense Reimbursement Plan. The first city in the Health Benefits Trust to implement this sort of plan did so as a way of moving toward self-funding its benefit plan without being fully self-funded and taking on the possible financial volatility. This city also implemented a first-in-class employee wellness program that resulted in getting employees engaged in better management of their health.

The plan design works as follows:

  • The city assumes a large deductible, e.g. $7,500 per individual
  • The employee’s share of the deductible is capped at a much lower level, e.g. $500
  • Claims between the capped individual deductible ($500) and plan deductible ($7,500) are shared on an 80/20 rate between the employer and the employee.
  • The city pays less in premium since the deductible is much higher, however they must fund the liability between the employee deductible and the individual plan deductible (Medcost provides an estimate of the expected liability, administers MERP claims and charges an additional administrative fee).
  • Theoretically, the cost to the city should not be much different than the cost of a standard plan since the saved premium dollars are used to pay the MERP claims liability.

We have a handful of members that have adopted this type of plan. We believe this plan works well if the member combines the design with a strong employee wellness plan and a good handle on claim trends. Otherwise, these plans can be a cause for concern.

The first concern being the member does not fully grasp the added cost should claims experience an upward spike. However, perhaps most importantly, some members structure their plan such that the employee does not share in any additional cost due to the plan change and thus has no incentive to change utilization behaviors. For example, employees may still use the emergency room as their primary care physician since their copay is unchanged and the additional deductible expense is borne by the employer. 

With these thoughts in mind, your Health Benefits Trust staff is undertaking an initiative to analyze medical underwriting practices, to include evaluation of plan designs from basic structure, pricing, and to how we offer them to the membership. Ideally, we would steer members to plan designs that provide more incentive for employees to control costs, ensure rates are equitable for the membership, and are fully understood by our members. 

Officers complete Slower is Faster training

Roughly 20 police officers completed driver training using Slower is Faster techniques in Statesville May 1 and 2. Attendees learned techniques to help reduce the number of preventable accidents. Click here to view a video of the training and learn more about Slower is Faster here.

Did you know?

Did you know that members of the Workers’ Compensation and Property/Liability Insurance Trusts have access to more than 70 training courses online? As noted in our February issue of Trust Matters, these courses can be taken individually or in a classroom for group discussions. We are conducting webinars June 10, July 7 and 29 to walk you through registering and enrolling in courses; tools that administrators need for managing employee training; and reports to help track training progress within your organization and more.

Please register today for one of these webinars. These courses have helped our members increase their knowledge, maintain water and wastewater certifications, reduce risk and improve performance!

The Affordable Care Act and Excise Tax

A survey by Towers Watson indicates 61 percent of employers expect to trigger the Excise Tax in 2018 when this portion of the law becomes effective. What is the Excise Tax? This is also referred to as the Cadillac Tax and is assessed on high-cost, employer-sponsored health coverage. Coverage that costs more than $10,200 per individual and $27,500 for family (retirees: $11,850 for individual and $30,950 for family) will be subject to the tax. The tax applies to employees as well as retirees. It is important to note that the tax is not assessed based on plan design, but on annual cost. Adjustments may be available based on age and gender demographics of the plan and should there be higher than expected United States health care cost increases prior to 2018. Additionally, thresholds will be indexed to CPI + 1% beginning in 2019. The tax rate is 40% and applied to the excess amounts over the thresholds noted above. The following is included in calculating the annual cost: the medical plans; health FSA, HRA, employer and employee pre-tax HSA contributions; EAP with counseling; onsite primary care medical clinics; and self insured dental and vision plans. Example: assume in 2018 the cost of the plan is $27,000 for family coverage and the employee has a $2,000 FSA for a total of $29,000. This will exceed the $27,500 cap by $1,500. The tax of 40% applied to the excess cost results in a $600 excise tax. Options to avoid the tax in this example include reduction of medical plan value through design changes, reduce or eliminate FSA elections or pass along the cost of the tax to the employee through reducing the subsidy for employee medical coverage.

We have seen many employers adjust their plan designs to save on their medical cost. Given the threshold for the application of this tax and 2014 costs, many, if not most, plans will be subject to this tax. Coupled with this are the rules around plan designs to ensure minimum essential coverage is provided. Employers will have to do a balancing act to stay below the tax and continue to meet plan design requirements. Long term strategy should include improving the health of your population, adoption of plan designs that encourage employee accountability, effectively managing chronic conditions, etc.

Also, please note that 2015 is the year that most plans are required to implement the comprehensive out of pocket maximums. This change requires that all copays (office, Rx, emergency room) be subject to the out of pocket maximum, whereas previously only the coinsurance and possibly the deductible applied.

Upcoming Events:

  • Risk Management Services Board Meeting -- May 22
  • May 30 -- Deadline for renewal notice
  • June 1 -- Deadline to return Workers' Compensation and Property/Liability Renewal Applications