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Risk Management

Self-Funding and Sarbanes-Oxley Act

The Sarbanes-Oxley Act of 2002 applies where self-funders act as secret health insurance companies without proper financial disclosure. If the employer is faulty in the management of its health care plan and has failed to make proper disclosure, the employer has violated the act.

Instances of such management faults covered includes any of the following:

  • Under-reserving

  • Stop-loss with limits higher than appropriate

  • Poor selection of vendors

  • Emphasizing speed over accuracy.

Having an SAS No. 70 in place is becoming increasingly important.

Are Social Security Numbers Passé?

Not yet but they will be soon. Fraud, theft and privacy make a standard number too dangerous. We can expect plans to go to nine-decimal random (or computer-generated) numbers in the near future.

Captive Insurer – Changing Rules

Some larger employers want their corporate employee benefit risks to be managed and fronted by a major insurer but with such risks being 100% reinsured by the employer’s captive insurer. Their wish was initially thwarted by the position of the DOL which had required such captive to have no more than 50% of its total risk assumption to be for such employer benefit risk. This 50% DOL requirement was eased by the DOL Opinion involving Columbia Energy which enunciated a new DOL position; namely, if the arrangement met high standards (as DOL-determined) the 50% requirement could be waived.

We might see future arrangements where big employers use big insurer/fronters to manage and insure their benefit programs and where the employers’ off-shore captives reinsure the risks.

New COBRA Notifications Rules

The DOL-released final regulations apply to notice obligations arising under COBRA. The COBRA provisions generally require group health plans to provide participants and beneficiaries who would lose coverage under certain circumstances (qualified beneficiaries) the opportunity to elect to continue coverage under the plan at group rates for a limited period of time. The final rules set minimum standards for the timing and

© 2004 International Foundation of Employee Benefit Plans, Inc. All rights reserved.

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