Monday, January 31, 2011
Today’s ruling by a federal appellate court judge in Florida that the law’s individual mandate provision is unconstitutional is certainly important, but even more significant is that the judge also ruled that entire law must be struck down on the basis on non-severability. In other words, if a single provision does not pass constitutional muster, then it all gets thrown out.
This is particularly interesting because shortly after the passage of PPACA, it came to light that the law did not include a severability provision, which is a pretty standard clause for most comprehensive legislation. To this day no one really knows for sure the reason for this important omission, although the most likely theory is that it was drafting error made in the rush to pass the legislation.
Then-Speaker Nancy Pelosi famously said that we needed to pass the bill to know what’s in it. Apparently we also needed to pass the bill to know what was not in it.
I have written and commented about this small but important legislative detail frequently over the past year. On more than one occasion someone has challenged me that it is not realistic to think that the entre law could be thrown out even if specific provision were voided by the courts. Conventional wisdom misses the mark once again.
So it’s off to the Supreme Court we go and we’ll see if at least five justices hear what the health care law did not say.
Thursday, January 27, 2011
Since a cracked or broken windshield is so common you would think it would be no big deal when and where you get it fixed. However, if you think about it, a windshield is the one major piece of the car that helps to keep you inside a vehicle incase of a head on collision. This could be a matter of life and death and when you put it in that light it becomes a little bit more important to make sure you have the windshield fixed and fixed by the appropriate shops. Auto Glass Replacement Safety Standards Council (AGRSS) works to certify and set stand for glass repair companies. Their website www.safewindshields.com, is a very helpful tool when it comes to getting your vehicle windshield replaced, especially if you are out of town traveling. The top right part of the screen has a “Registered Shop Locator” where you can type in a zip code and find the accredited glass repair shops near your current location. This way, even when you are out of town, you can find a qualified glass repair shop to fix your windshield and know that it will be installed correctly and securely.
So next time you get a rock in the windshield be sure to visit the AGRSS website or call your friendly Fey Insurance Services agent to make sure you get a high quality glass repair shop.
We are working to head off a DOL report that concludes smaller employers should not self-insure due to solvency concerns and a separate HHS report suggesting that self-insured health plans will negatively impact health insurance exchanges due to adverse selection concerns.
While the policy battle rages on these two fronts, self-insurance is now being targeted by a third team of regulators. The Treasury Department has recently developed a keen interest in stop-loss insurance of all things.
The hook for the IRS folks is that the new health care law limits the tax deduction companies that sell fully-insured health insurance products may take for the compensation they pay to their employees. In other words, if a company sells “health insurance,” the company is subject to this tax deduction limitation. And guess what, it looks like the IRS and Treasury officials are confusing stop-loss insurance with health insurance.
Consider the following excerpt from an IRS publication regarding this tax deduction limitation, requesting comments from the public on:
"the application of the deduction limitation for services performed for insurers who are captive or who provide reinsurance or stop loss insurance, and specifically with respect to stop loss insurance arrangements that effectively constitute a direct health insurance arrangement because the attachment point is so low." (See IRS Notice 2011-2).
So, not only are the Treasury officials asking insurance practitioners how they should treat, for example, stop-loss policies, Treasury is explicitly asking for comments on how they should treat these policies, especially policies with a low attachment point.
Interestingly, this was reported to be a hot subject of discussion at an American Bar Association meeting for tax practitioners last week in Florida. Can you picture a bunch of tax lawyers with no background in self-insurance trying to figure out stop-loss insurance? Yep, that’s a scary thought.
But back to the IRS. Should it conclude that stop-loss insurance can be defined as health insurance for even its limited tax treatment purposes, a troublesome precedent will be established. For more than two decades, SIIA has been largely successful in pushing back on state efforts to regulate stop-loss insurance like health insurance.
A contrary interpretation by the feds will likely embolden those who seek to impose new regulations on self-insured plans via their stop-loss insurers. That’s the last thing the industry needs.
So, with stop-loss insurance under a Treasury Department microscope, self-insurance now faces a true regulatory triple threat. Watch for additional updates on this important developing story.
Monday, January 24, 2011
In Tennessee, Governor Bill Haslam appointed Julie McPeak as the new commerce and insurance commissioner. This is big news for the self-insurance world because not only does McPeak understand alternative risk transfer, she has been an advocate for self-insureds and captives in her capacity as an attorney over the past few years.
Before that, she was the chief insurance regulator for the state of Kentucky and directly contributed to the captive insurance industry taking hold in that state.
Several months ago, then candidate Haslam approached Ms. McPeak to solicit her opinion on how the insurance industry could contribute to economic development in that state. She talked-up captives among other initiatives and apparently her input made a positive impression on the soon-to-be governor.
Tennessee can best be described today as a “dormant” captive domicile because it has a captive insurance statute, but no energy or resources have been committed by either the private or public sector to encourage captive formations in that state.
Ms. McPeak’s appointment has the real potential to change this. Work is already underway to update the state’s captive law to make it one of the most progressive and competitive in the country,
With a favorable law (assuming it can be passed through the Legislature) combined with a regulator who is willing to champion alternative risk transfer solutions, the key ingredients are in place to transform this domicile from dormancy to vibrancy.
Now let’s compare and contrast Tennessee with the nearby domicile South Carolina.
As most industry observers know, South Carolina has seen a reversal of fortune over the last several years as a captive insurance domicile. Its rapid growth and success in the early years has been stalled for some time, largely due to the state’s insurance department, which has increasingly been at odds with the captive insurance industry.
Industry leaders pleaded with newly-elected Governor Nikki Haley to appoint a new insurance commissioner who could restore the state’s status as one of the world’s premiere captive domiciles.
Interestingly, Ms. McPeak’s name had been floated last year as a possible candidate who could rescue captives in South Carolina, but it was obviously not to be.
Instead, Government Haley last week named David Black, CEO of Liberty Life Insurance Company to the post.
Now, Mr. Black does have solid business credentials but he is clearly not an altenative market guy, which means there will be a learning curve about captives at a minimum and no guarantee that he will be an advocate.
This latter point is important because it’s not good enough to be just luke warm about captives. The reason for this is that in order for any captive insurance domicile to grow the bureaucracy must be constantly tamed and that takes top-down leadership imposing a vision of true public-private partnership and demanding results.
The bureaucracy inside the South Carolina Department of Insurance is particularly challenging with regard to the captive application and review process, so the leadership demands are particularly acute.
We will soon see if Mr. Black is up to his challenge. Ms. McPeak is certainly up to hers.
This tale of these two domiciles will continue.
Thursday, January 20, 2011
But if you are legally in compliance, is that the same as adequate limits of liability protection? In our opinion, higher limits of protection are highly recommended to protect your assets, future earnings and driving privileges. For example, if you rear-end another party and cause serious bodily injury and/or property damage, your minimum limits Auto Policy might initially take care of the other person's medical bills, loss of income and pain and suffering and/or repair their car, but if it is not enough, the injured party could come after you for more. They could tie up your assets, you future earnings, your driver's license and car registration, etc. for long time. Even if you file bankruptcy they could still make it difficult for you to function while you are going through the process.
So what are adequate limits? Unfortunately there is no formula for determining this. With your home you can insure it for the replacement cost of the house using various estimation tools plus discussions with architects and contractors can help you determine the proper amount. There is no such simple formula to determine how much liability insurance to carry, but it is safe to say that
In Fey Insurance’s opinion, the minimum limits of protection imposed by states and the Canadian provinces are a start vs. no insurance at all, but they are not adequate to protect you in the event of a serious automobile accident.
Thursday, January 13, 2011
Equal Pay Act
Genetic Information Nondiscrimination Act
What is even scarier about this number for business owners is that Commercial General Liability (CGL) doesn’t cover these types of claims. Employment Related Practices claims are excluded under a business CGL. In order to have protection for these types of claims you must purchase Employment Related Practices Insurance. Be sure to talk with your insurance agent today about quoting this coverage for your business.
Thursday, January 6, 2011
Blogging and the Possiblity of Lawsuits- CIB Jan 2011 Newsletter
A growing number of lawsuits are targeting individuals who blog or post allegedly libelous material on the Internet according to the International Risk Management Institute (IRMI). One report indicates a 216 percent increase in libel lawsuits against bloggers and online posters in the last few years.
These postings and blogs can result in nasty lawsuits. For example, earlier this year, a
The liability insuring agreement under nearly all homeowners policies pays for damages arising only from bodily injury or property damage, not from any type of personal injury, such as libel. In most cases, the only way that these claims might be covered is if the insured's homeowners policy includes a personal injury endorsement.
So it is a good idea to remind your clients who are active bloggers and online posters of the wisdom of procuring personal injury coverage and a personal umbrella policy (which typically provides even broader personal injury coverage). Clients should also be advised that if the blogging is related, say, to a home-based business, there will likely be no coverage under either of these options due to various business exclusions and restrictions. A home-based business endorsement is essential in these situations.
In addition, you should know that the Internet is not a law-free zone where anything and everything goes. There are ramifications to consider for those avid and active posters and bloggers, ramifications that can turn out to be painful and very expensive