Risk Managers

Currently, the City of XXXXXXXXXX has a Cafeteria Plan through Seciton 125 of the Internal Revenue Code. It is my understanding that the Plan Administrator performs certain services at no charge to the City in lieu of selling insurance policies to the employees. Therefore, the role of the administrator and vendor of insurance products are combined.

Senate Bill 273 addresses concerns regarding the role of the administrator and vendor of products. While this bill refers to Texas public school districts, I believe it may well apply to any employer group in Texas that offers a Cafeteria Plan. Section 9, subsections 4,5.6 address the issues in question.

In my discussions with the Texas Department of Insurance, it is apparent that the acts of “enroller” versus “marketer” must be separate and distinct. An enroller who is working for the administrator who has contracted with the employer, has the advantage of promoting his products at the time of enrollment since he has the enrollee in a captive environment. Additionally, the “enroller” by virture of the function he is contracted to perform, has privileged information about the enrollee, (such as amounts and types of policies or contributions the enrollee has made, W2 information, salary and hourly information), that gives the enroller an unfair advantage.

The functions of the administrator are separate from the acts of an agent. These lines begin to fade during this process to the unsuspecting consumer. In my opinion, administrators must separate the functions of the “enroller” from those of the “marketer.”

It is my understanding that when a court does interpret a statute, Seciton 321.005, Government Code, it requires it to ascertain the legislature’s intent. Further, it is my understanding that when construing a statutory term, Section 312.002, Government Code, requires words to be “given ordinary meaning.” The ordinary meaning of the work “benefit” includes “advantage” and “useful aid.” The free or reduced cost of Cafeteria Plan administration, I believe, provides a financial advantage and useful assistance to the City of XXXXXXXXXX, and therefore a “benefit.”

It is my opinion that to accept a free or reduced fee cost plan for Cafeteria Plan administration give the appearance or endorsement for the insurance products that are required to be offered (sold) to participants of the plan, thus giving one company preferential treatment over another. The offer of a free administration in return for the soliciatation of insurance policies may be a form of rebating as defined by the Texas Insurance Code.

Since the City of XXXXXXXXX is currently requesting bids for their health insurance, I believe that it would be constructive to review and bid our the Cafeteria Plan Administration contract to incorporate some of the issues and concerns expressed herein. I believe that it would be beneficiall to the City of XXXXXXXXXXXX to align the employee health insurance program concurrent with the Cafeteria Plan Fiscal Year. There are distinct advantages to doing so and could be accomplished by bidding out administration now.

In conjunction with bidding out the Cafeteria Plan Administration, I recommend that the City of XXXXXXXXXXX also bid out the insurance products to be offered through the Plan. This would mark a clear delineation between the enroller and the marketer. This would also give the City of XXXXXXXXXXX the advantage of competitively bidding out the insurance products, rather than be limited to the products offered and sold by the Plan Administrator. The end result may be better coverage at lower costs to the employee and eligible dependents.

I hope this opinion and recommendation answers your questions. If I can be of any further assistance, or provide additional information as needed, please do not hesitate to call me.

Editor’s Note: This letter was completely ignored by our client. They continued their “free” Cafeteria Plan Administration with a local insurance agent. This group of approximately 800 employees generates approximately $125,000 in annual insurance commissions on products sold through the city’s Cafeteria Plan.

This generic pharmaceutical drug manufacturer has been around for 25 years  and not only leads this foreign nation’s domestic market – it is a major player throughout the world, including the United States.  This pharmaceutical manufacturer has developed a new drug for diabetes and is awaiting FDA approval. Approval is expected. Estimated market share in the United States will be 26%, earning enormous profits for this foreign based manufacturer.

http://www.sovereignsociety.com/Portals/0/landing/FullPromo_EDSIKB12.html

HealthSmart Holdings, Inc. announced that it has successfully completed a recapitalization with Silver Point Capital, L.P. and the Company’s other lenders.

Silver Point Capital, L.P. is a private investment firm based in Greenwich, Connecticut. The firm manages hedge funds for its clients. It invests in the public equity, fixed income, and hedging markets of the United States. The firm primarily invests in securities of distressed, large-cap, and Mid-cap companies; bank debts; bonds; and trade claims. It specializes in credit analysis and diversified credit-related investments.

We have all been hearing about the health care debate in Congress from the media these days. But do any of us really understand the vast implications in store for us should the House and/or Senate version become reality?

Go here for a side-by-side comparison of the House and Senate Bills.’ http://www.kff.org/healthreform/upload/housesenatebill_final.pdf

November 2009

Dear Producer:

Re: Health Care Service Corporation’s Code of Business Ethics and Conduct

Health Care Service Corporation (HCSC) and its subsidiaries are committed to the highest standards of business ethics and integrity as well as compliance with all applicable laws and regulations governing its business operations. HCSC requires that all employees adhere to these standards. Doing so will enhance and reinforce the Company’s status as a responsible corporate citizen and will maintain the confidence of the Company’s employees, customers, providers and the public in its honesty and integrity.

HCSC adopted a Code of Business Ethics and Conduct (the “Code”) to further its commitment to a culture that promotes legal and ethical behavior. The Code defines HCSC’s values and behavioral expectations for every employee of the Company. We place the utmost importance on the observance of these principles. Compliance with the Code is a condition of employment for every HCSC employee.

HCSC’s excellent reputation depends not only on the conduct of its employees but also on the honesty, integrity and good judgement of the people and organizations with whom we do business. We value the relationships we have with our producers. We realize that these relationships are built on trust and cooperation and many have developed over years of working together. We must always maintain the highest standards of integrity and objectivity in these working relationships and we will not conduct business with anyone who does not operate with integrity or who compromises our Company’s values and ethical standards or encourages our employees to do so.

HCSC’s Code of Business Ethics and Conduct is available on our web sites at www.bcbsil.com, www.bcbsnm.com, www.bcbsok.com and www.bcbstx.com. Please share this information with your employees and agents who do business with HCSC. Of particular importance are the integrity standards related to conflict of interest, fair competition, confidential information, accuracy of records and gifts and gratuities and I ask that you review these standards carefully. Your understanding and support of our Code will allow us to work effectively together and with the highest level of integrity.

As a producer selling our products, you must bring forth any concerns of suspected health care fraud or other questionable practices. The toll-free Integrity Hotline number is 1-877-272-9741. Persons reporting such information need not identify themselves. The Hotline is available twenty-four (24) hours a day, seven (7) days a week.

If you have any questions regarding HCSC’s Code of Business Ethics and Conduct, please call the Hotline. We appreciate your cooperation. Thank you.

Sincerely,

Thomas C. Lubben
Chief Compliance Officer

Editor’s Note:      “We  (Blue Cross) will not conduct business with anyone who does not operate with integrity” – What a novel concept!

Half guilty, half pregnant Arnulfo Olivarez, self-admitted felon, has had his upcoming November 24 sentencing postponed to March 4, 2010. It seems that the Wheels of Justice turn ever so slowly.

He has petitioned the court to allow him to contact school districts again as a means to continue his insurance livelyhood. Despite pleading guilty (August 2008) to bribing public school officials in return for lucrative insurance contracts, the Texas Department of Insurance continues to approve his insurance license renewals - he remains an active insurance agent.

According to Texas Department of Insurance, Olivarez currently represents Aetna, American Heritage, American Zurich, Anthem, Assurance Company of America, Aviva Life Insurance, BCS Life Insurance Company, Blue Cross & Blue Shield of Texas, Conseco, Cypress Texas LLoyds, Delta Dental, Empass Indemnity, Foremost County Mutual, Hartford, HM Insurance, Golden Rule Insurance, Humana, John Alden Life Insurance Company, Kanawha, Lincoln Benefit Life Insurance Company, Maryland Casualty Company, National Union Fire, New Era Life Insurance Company, New York Life Insurance Company, Northern Insurance Company of New York, Pacificare, Pan American, Principle, Prudential, Southern County Mutual, Standard Insurance, Sun Life, Transamerica Occidental, Unicare, United Healthcare, and Unum Life Insurance Company of America.

http://www.brownsvilleherald.com/news/case-89555-guilty-district.html?orderby=TimeStampDescending&oncommentsPage=1&showRecommendedOnly=1 

  Insurance Agent Arnulfo C. Olivarez

http://www.modernhealthcare.com/article/20091117/FREE/311179968#

As a friend wrote this morning, the Federal Government can not run a health care system much less manage a two car funeral procession. 

The Left’s health care “reform” plan will dramatically expand eligibility for Medicaid, a poorly-functioning program created in the 1960s to help low-income families.

Heritage Foundation expert Conn Carroll explains:

The Health care “reform” bills advancing in the House and Senate would expand Medicaid by making this government-run health plan available to all adults with incomes at or below 150% of the poverty line. The change would dramatically multiply eligible recipients, with 46 states seeing increases of at least 20%, including 16 posting jumps of 50% or more. Almost 21% of the entire U.S. population would be eligible for Medicaid and seven states and the District of Columbia would have eligibility rates of at least 25%.

Meanwhile, Heritage Vice President Stuart Butler debunks liberal myths about the proposed “trigger,” which would create a government-run health care “public option” if other reforms fail to work. This mechanism, he explains, provides few incentives to experiment with new approaches and its criteria would be hard to measure.

The Senate version of the health care bill, which has been written in secret, will probably be revealed this week, Heritage’s Brian Darling explains. The House narrowly passed its bloated big-government bill earlier this month.

AP poll released today says 57% of Americans favor taxing the rich to pay for proposed health care bill. Since almost 50% of all working Americans pay no federal income taxes, this will be welcomed news for the entitlement crowd.

Thousands of “rich” Americans are voting with their feet these days. According to Sovereign Natiion, hundreds of thousands are leaving – finding financial refuge offshore. Panama is attracting many, with favorable tax treatment for Americans tired of pulling the train.

The Dart brothers voted with their feet years ago. The billionaires denounced their American citizenship – http://en.wikipedia.org/wiki/Dart_Container

The only problem with socialism is that you eventually run out of others people’s money – Margaret Thatcher