Secure Data with Dropbox

I recently posted an article about data loss and the risk of losing hard to restore information from your computer. In the article it was mentioned that we would share a few more specific examples of ways to protect your computer data from total loss. One example of securing your data and backing it up is a service called Dropbox. Dropbox is a cloud like program. This means that all your computer data is safely secured on different Dropbox servers throughout the country as well as on your personal computer. If your personal computer ever suffered a hard drive crash, was stolen or was damaged in a fire all you would need to do is replace your computer and download all your data from the Dropbox servers. You can do 2GB of storage for free or pay $9.99 a month for 50GB of storage. If 50GB is still not enough you can pay $19.99 a month for 100GB of storage.

When you install Dropbox on your computer it creates a folder that you can copy and past your files into. You can copy and past document, video, music files, etc. When you place these items into the Dropbox folder on your computer it then syncs the information with the Dropbox servers via an internet connection. If you have multiple devices like iPads, iPhones or if everyone in your family has a different laptop you can all share one account and load each device’s information into the same Dropbox account. It then syncs and backs up all devices. This also allows you to access each others information from any device via the Dropbox folder on your computer, mobile device or even a special website that is created for each account. Not only does it back up and secure your information it also makes it easier to access from anywhere.

Dropbox is probably better fit for personal use. Depending on the size of your business it may not be the best option as it does have a 100GB storage limit. I will be sure to post soon about how businesses can best secure their data as well as have some future posts on how to use insurance products to help restore your data.

A False Alarm at the IRS for TPAs

We normally report on actual legislative/regulatory developments, but this post discusses a false alarm coming from the IRS that appeared to subject health care TPAs to burdensome new reporting requirements in order to help head off any potential industry confusion.

At issue is Department of Treasury Final Rule 6050 W, which was published way back in August of last year. The rule is intended to define “third party transaction settlement organizations” in furtherance of the IRS’ goal of creating a mechanism to better track the flow of money within the economy.

A section in the preamble labeled “Healthcare Networks and Self-Insured Arrangements” got the belated attention of small circle of IRS observers who have a health care focus. The actual preamble language for this section (just three paragraphs) is as follows:

The proposed regulations included an example to demonstrate that health insurance networks are outside the scope of section 6050W because a health care network does not enable the transfer of funds from buyers to sellers. Instead, health carriers collect premiums from covered persons pursuant to a plan agreement between the health carrier and the covered person for the cost of participation in the health care network. Separately, health care carriers pay healthcare providers to compensate providers for services rendered to covered person pursuant to provider agreements. This example is retained in the final regulations.

A commenter requested that the final regulations clarify that a self-insurance arrangement is also outside the scope of Section 6050W. According to the commenter, a typical self-insured arrangement involves a health insurance entity, health care providers, and the company that is self-insuring. The company submits bills for services rendered by a health care provider to the health insurance entity. The health insurance entity pays the healthcare provider the contracted rate and then debits the self-insuring company’s bank account for the payments made to the healthcare providers.

This suggestion was not adopted because this arrangement could create a third party payment network of which the health insurance entity is the third party settlement organization to the extent that the health insurance entity effectively enables buyers (the self-insuring companies) to transfer funds to sellers of healthcare goods or services. If so, payments under a self-insurance arrangements are reportable provided the arrangement meets both the statutory definition of a third party payment network and de minimis threshold (that is, for a given payee, the aggregate payments for year exceed $20,000 and the aggregate number of transactions exceeds 200).

First, it was curious that the IRS received a single comment regarding self-insurance. Moreover, the commentator described self-insured arrangements in an odd way by using the term “health insurance entity” in an apparent reference to TPAs

Based on this interpretation, it would seem that the IRS did construe TPAs as third party payment networks. As a practical matter, this would mean that TPAs would have to expand their current 1099 Misc. reporting procedures to include payments to providers broken down on a monthly basis, which would be complicated and burdensome.

But upon a more detailed legal review of the full text of the regulations, it was concluded that TPAs did not meet the statutory definition of third party payment networks. One of the key considerations is that it is the employer and not the TPA which contracts with provider networks.

In this regard, it seems that the IRS may have indeed wanted to make TPAs subject to the rule, but the statutory language does appear not support this intent, possibly due to ignorance on the part of the Agency on how self-insured health plans operate and the role of the TPA.

Of course, it’s not uncommon for IRS rules to be tested in court so we will be watching to see if any enforcement actions and/or legal challenges arise on this issue.

A New "Life Line" for Group Workers' Comp. Funds in New York

In the wake of several high profile group workers’ compensation funds (SIGs) failures a few years ago, the future for other SIGs operating in that state has been looking bleak.

With the state on the hook for unpaid claims totaling between $300 million and $800 million (depending if you believe industry or government estimates) , policy-makers were formally recommending that most funds be shut down and impose such rigorous new regulations on the remaining funds that it would be almost impossible for them to continue to operate.

But just as the obituary for the state’s SIG industry was being written, the conversation has apparently turned from focusing on shutting everything down to finding a solution for letting the well run SIGs continue thanks to an effective lobbying campaign initiated by industry leaders and Group participants.

Specifically, a serious proposal has been floated to allow SIGs to post some form of security in amounts calculated based in their anticipated liabilities to satisfy regulatory concerns about solvency issues going forward.

This proposal may well serve as the framework for a solution, but there are key details which still need to be resolved in order secure “buy in” from both the state and the industry.

The first detail to determine how the security amount should be calculates so that it satisfies regulator concerns but still allows funds sufficient access to cash to pay claims. This is not such an important issue for well-established SIGs with large cash reserves, but is critical to those SIGs that have not had the opportunity to build up such large reserves.

Another open question is the specific "security vehicle" the state would require and the additional transactional expense to the Group. Industry experts have expressed concerns about surety bonds that are fully secured with irrevocable letters because the bond underwriter has the LOC in their hand, so SIGs could never use that cash until it is given back and then replaced with a lesser LOC (assuming it goes down), which can be a difficult process and can be further complicated if the state remains inflexible to changing requirements that could occur depending on cash needs.

As an alternative, it has been suggested the security vehicle be in the form of a restricted investment/ cash account that would require signoff by the state Workers’ Compensation Board but is not wrapped up in an instrument such as an LOC or surety bond.

Another alternative suggestion would be to utilize Reg 114 trusts in which the reinsurer post the cash, freeing up SIG assets to capitalize a captive.

We’ll see how all this plays out but at least there is a viable “lifeline” in the water for the state’s well run SIGs.

In the meantime, we are aware that the state has received proposals for loss portfolio transfer arrangements in order transfer future liabilities back to the private sector, but out sources tell us that disagreement regarding the amount of the liabilities has prevented any deals from being finalized so far

Finally, we continue to wait on an appeal from a State Supreme Court ruling that determined it was constitutional for the state to assess member companies of financially solvent SIGs for the claims liabilities incurred by now insolvent funds.
This should be an easy ruling assuming an objective review of the law, but this is New York after all, so stay tuned. We will report on the ruling when it is announced.

Stop-Loss Insurance, Reinsurance and "Partially Self-Insured" -- We Need to Talk

Forgive me for stating the obvious, but words mean things. I make this seemingly odd comment because I continue to observe a couple words being misused by self-insurance industry professionals on a regular basis and we all need to get on the same page.

Perhaps most aggravating is the term “partially self-insured,” which continues to get tossed around to describe self-insured health plans that utilize stop-loss insurance. Of course there is no such thing as being “partially” self-insured so the term is sloppy at best and can actually be harmful.

I say harmful because from a lobbying perspective, we are continually emphasizing the distinction between fully-insured and self-insured health plans. This “partial” description is often thrown back in our face in attempt to undermine our public policy and legal arguments, so this objection to the term is strictly academic. And those who use it against us have picked it up….from us!

The more subtle yet equally problematic imprecise word choice is when “reinsurance” is used interchangeably with “stop-loss” insurance. Reinsurance involves an insurance contract between two insurance entities, so by saying reinsurance when you really mean stop-loss insurance this implies that self-insured employers are insurance entities, which confuses policy-makers and has created legal uncertainty in some cases. Again, we have only ourselves to blame.

And that concludes our self-insurance vocabulary lesson (and sermon) for the day.

Named Peril vs. Open Peril Homeowner Policies

Many today feel all homeowner policies are the same, that they are a commodity of sorts. In our professional opinion this is not the case. One glaring difference between homeowner policies is whether they are “Named Peril” or “Open Peril” homeowner policies.

Named Peril insurance policies specifically list the risks they will cover your home for. The policy contract will cover such happenings as wind, lightning, fire, smoke, theft, etc. If something happens to your home that doesn’t fall into the insurance policies definitions of the name peril terms than there is no coverage.

Open Peril insurance policies state that all risks are covered except for a list of exclusions that are outlined in the policy contract. This type of contract gives broader coverage than a Named Peril because the incident that happened to your home or personal contents doesn’t have to fit into a certain definition of coverage. As long as the incident isn’t excluded it is covered.

A homeowner policy that is using a “Named Peril” contract will always be cheaper than an “Open Peril” contract. It is important to know this so that you don’t fall victim to purchasing solely on price. You may be excited to see a savings from one policy to the next but that savings could be at a much higher cost and exposure to you. Unfortunately you may not know this until you actually have a claim and are staring at a bill that would have been covered under an Open Peril policy but is not covered now under your Named Peril policy.

This is just one example of what may be different between homeowner policies. Other things like deductibles, specialty items coverage, fallen tree coverage, water backing up sewers and drains, and earthquake coverage are a few others to consider.

Big Win for Captives in the Big Sky State -- And Related News

The Montana State Legislature only meets for two months every two years so getting a bill passed requires a certain amount of precision. So it is particularly impressive that legislation to significantly improve the state’s captive insurance statute cleared the House and Senate by near unanimous votes and is expected to be signed into law by the governor.

Among other things, the legislation allows for the formation of incorporated cell and special purpose captives, which will make Montana one of the most progressive captive domiciles in the United States.

The interesting backstory is the amount of meaningful consultation that took place between industry proponents and key regulators within the state auditor’s office in developing the legislative language. There was genuine push and pull over the course of several meetings spanning several months. The final product met industry’s objective in creating new opportunities for captive formations, while incorporating sufficient safeguards to provide the regulators with a level of comfort.

We will now be watching to see if companies take advantage of the new law.

In related news, an incorporated cell captive bill is now pending in the Vermont state Legislature. Perhaps they were inspired by Montana.

The long slog continues in South Carolina to push through captive legislation dealing with incorporated cell captives and other updates to the statute there. The outcome still remains uncertain but headwinds seem to prevail.

Rounding out our domicile legislative round-up, a captive bill has been introduced in the Tennessee Legislature that was put together by taking the best provisions from captive laws in multiple domiciles. It’s too early to say whether the legislation will pass this year, but if it does Tennessee is sure to attract national attention.

A new era of captive regulatory structures seems to be emerging across the country. Will our industry’s “big thinkers” be up to the challenge on delivering the next generation of innovative ART programs to prove the potential is real?

Earthquake Insurance in Ohio!? (Re Post from July 2, 2010)

The recent tragedy that has struck Japan is heart breaking. Our thoughts and prayers go out to all those people who suffered loss from this disaster. Recently we did a repost of a flood insurance article since it had been in the news in Ohio and we are sad that once again we are doing a repost due to another natural disaster. Below is our July 2^nd post from 2010 about earthquakes.

Also, with this post I would like to also encourage all of you to please be sure to research and see what you might be able to do to lend support to those in Japan.

Re Post from July 2^nd, 2010:

The big question going around on June 23rd was, “Did you feel the earthquake”. Many thought people were joking, but when they checked their Facebook page and saw that many of their friends in the Ohio area had felt the earth move, they knew the question was legit. The reason Ohioans felt the earth move was just north of us, Canada had a 5.0 magnitude earthquake. Though we are not California or anywhere near California, Ohio still has their fair share of earthquakes. On average Ohio has 5 to 6 earthquakes a year. Year to date in 2010 we have already had 6, so the question that has to be asked of this insurance blog is should people in Ohio carry earthquake insurance? We at Fey Insurance Services feel that it is a good idea to have this coverage. It is something we always quote to our customers. For an average valued house the premium can range from $50 to $80 a year. Though we only have little earthquakes the potential for a large scale quake is there and if that happened the affects would be devastating to a home.Feel free to get in touch with us to inquire about earthquake insurance

Data Loss

If a fire where to occur at your business it is relatively easy to replace desks, chairs, decorations and even computers and network systems. The part that is very difficult to replace is data. Every business has data. Whether it is your computerized bookkeeping, client management data and software, important electronic documents or your Outlook calendar, they all serve as a vital part of your business and would leave you at a loss without them. With items like office furniture and computers you can go out and purchase replacements with very little difficulty. Data, however, is something that is specifically created over time and when lost is very difficult to recreate or replace.

There are two suggestions that I would like to share in this blog article. The first is securing your data either through backup tapes, off site backup or cloud computing. The second is insurance protection to help pay for the cost of recreating your data or extracting your data from damaged computer hardware.

The first suggestion of securing your data is probably the most reliable and sure fire way to prevent the nightmare of lost data. There are so many offerings out there of companies like Mozy that help to back up your business servers and data off site. If a fire destroys the server in your office all you would need to do is buy a new server, download your data from the offsite backup system and you are up and running again. Cloud computing is another offsite way to secure data. Instead of your data being stored on computers in your office they are stored on specialty servers throughout the country. All you are doing each time you access the data is pulling up the information via online so if a fire renders your computer useless you just purchase another computer, login to your online cloud and access your data. Backup tapes are probably the least effective because they require you to remember to take them offsite and require you to remember to update the tapes on a regular basis.

Insurance is the second suggestion on how to prevent data loss. One caveat about this topic is that technology is constantly changing and insurance companies are always trying to catch up with how to best insure this moving target. There are currently specialty coverages out there that help an insured pay for the costs of salvaging lost data. Coverage can be added to business policies that help pay for the forensic work that would need to be done on a fire damaged hard drive that possible still stores your company’s data. Some insurance products help you to repurchase lost software programs that can be very costly to replace. There are times when you need to hire extra staff for a short period to help reestablish your bookkeeping after a fire. Insurance can help pay for this extra cost.

In future blog post we will be sure to focus on what the actual insurance products are that can help protect the loss of your data and we will also write more on data backup services as well. In the mean time, work with your IT departments or consultants to figure out the best cost effective way to secure your data as well as talk with your insurance agent to figure out how to best insure your data.

Flood Insurance Facts (Re post from 11/23/09)

Floods have struck the Ohio area once again. We thought this might be a good time to re post an old flood insurance blog article that gives a few facts about flood insurance.

Posted November 23, 2009 on www.feyinsuranceblog.com:

Flood insurance had its fifteen minutes of fame after the Hurricane Katrina disaster in 2005. During this time period the media was making everyone well aware that flood insurance is not part of your typical homeowner policy. Today that is still the case and with this post I would like to point out a few more facts about flood insurance.

Flood insurance is run through a government program called FEMA (Federal Emergency Management Agency). You can purchase it through insurance agency such as Fey Insurance Services but the backing is from FEMA. Typically it takes 30 days for a new flood insurance policy to go into effect. The one exception would be for a mortgage closing where flood insurance is required. So you need to plan ahead. Hearing about a big rain on the nightly news and calling your agent the next day will not work. Many people think of flood insurance when they think about what is stored in their basement. Flood insurance will only cover things such as furnaces, water heaters, washers, dryers, air conditioners, freezers, pumps and utility connections. Everything else you store down there (old cloths, furniture, carpet, TV, etc) is not covered unless those items are on the first floor of your house and the flood reaches that level.

In some cases flood insurance is required in order to get a loan. If your home or a home you are about to purchase is in a 100 year flood plain (meaning at least once every 100 years your location is under several feet of water) you will be required to purchase a flood insurance policy to close on your loan.

Feel free to get in touch with a Fey Insurance Services representative to learn more facts about flood insurance or to get a quote today.

Digesting Health Care Reform

So we hurry up and wait.

That is perhaps the most apt description of how self-insured employers and their business partners have adapted to the new health care law and the ongoing reform process it has triggered.

For obvious reasons, we saw a flurry of activity immediately after the passage of PPACA to first determine what was actually in the legislation and then to move forward with compliance planning. This stage seems to have largely passed and now we are in an extended waiting period until 2014, which is when the health insurance exchanges are scheduled to come on-line and the next wave of regulatory requirements, such as the employer mandate, are upon us.

With that timeline framed, let’s take a look at where things stand today and possible legislative/regulatory developments over the next three years.

Clearly there is curiosity with regard to self-insured employer reaction to PPACA as we approach the first anniversary of the law’s enactment. A recent outreach effort to employers of various sizes generated feedback that concluded the law has not created any significant hurdles for them to continue to self-insure, at least in the short run.

The biggest issue seems to be whether or not employers want to retain grandfather status of their health plans. Although unscientific, the feedback suggests it is almost an even split regarding grandfather status decision.

We also received feedback on other issues such administrative burdens, plan design changes, wellness programs and stop-loss cost. When this information was aggregated, the observation is that while there is general discomfort with adapting to the new law, employers are sticking with self-insured health plans, at least for time being.

More on the longer term employer view later, but first we need to stay focused on health care reform developments that will play out in the coming weeks and months, which could influence events before 2014.

Separate HHS and DOL reports dealing with self-insured health plans will likely be released this month and despite efforts to ensure that the regulators are fully educated about self-insurance, there is probably a better than average chance that these reports will contain negative commentary.

Key members of Congress and their staff have already been briefed in advanced about possible biased findings, and we have been generally encouraged by the supportive responses. That said, we could very well see self-insured health plans being one of the focal points in future legislative developments if official government reports conclude that such plans impede overall health reform implementation efforts.

The most likely threat would be legislation to restrict smaller employers from self-insuring, similar to a provision actually included in an early version of the PPACA legislation that SIIA was able to have stripped.

As previously reported, the IRS is also looking to define stop-loss insurance, which was an unanticipated consequence of the health care law. We expect a face-to-face meeting any day to get a better understanding of the agency’s thinking and I will be sure to publish a recap of this meeting, so be sure to check back regularly.

It was interesting to hear President Obama’s comments at the National Governors Association meeting this week that he is agreeable for moving up the timeline for states to be available to apply for waivers to the health care law if they develop their own reform plans that achieve the same access and affordability outcomes as the administration anticipates through PPACA implementation.

This offer was made in response to complaints from numerous governors that the new health care law will greatly increase costs to the states due to expanded Medicaid obligations. And of course, it was classic Obama rhetoric – a politically appealing sound bite that doesn’t square with reality.

Of course, the hitch with this offer is that a state-based plan must meet an artificially high bar for outcomes in order to be approved, so the reality is that it is unlikely that any waivers will actually be granted. As such, it is probably premature to be concerned about ERISA preemption issues, but we will certainly keep an eye on things.

In a bit of positive news, some of our reliable sources in Congress have signaled a renewed interest in association health plan (AHP) legislation, which would include a self-insurance option. They tell us, however, that the one hurdle to overcome is the perception that AHPs would contribute to adverse selection and therefore compromise larger health care reform objectives.

We are working to address these concerns now, so stay tuned for a possible return of AHPs as a serious topic for discussion on Capitol Hill.

Then there are the legal challenges to PPACA. Just today, Florida Federal Judge Robert Vinson put the Obama on notice that they have seven days to file an motion for expedited appellate review of the individual mandate constitutionality question or 26 state will be allowed to hold off on any PPACA implementation actions pending a final ruling by the Supreme Court. This has made things even more interesting.

There will be more short term health care reform legislative/regulatory developments for sure, but I thought it would be useful to highlight those on the radar screen today.

Now let’s return to the longer view of PPACA from the self-insured employer perspective. The real uncertainly arrives in 2014 when companies are required to provide health coverage or pay a penalty (play or pay).

From talking with several employer representatives, we have learned that most companies have been running numbers to test both scenarios, but are generally keeping tight-lipped about any conclusions at this early date. So essentially, the self-insurance marketplace has moved quickly to adapt to the new health care regulatory environment and now the waiting begins for potentially bigger shoes to drop going forward and the resulting reaction from self-insured employer and there business partners.

Settle in…it’s going to be a long ride.