by Billy West

All entities within a portfolio are not necessarily covered under the same corporate management liability policy. This can be a detrimental assumption made by insureds who own multiple companies. Accurate information and education on this distinction can save hundreds of thousands for owners.

The Differences to be Identified

Industries such as healthcare, hospitality, and real estate will often create single-purpose entities to help manage the liabilities associated with singular ventures. Owners may mistakenly confuse covered subsidiaries with non-covered affiliates. While newly formed corporations or limited liability companies may be owned by the same listed owner(s) of the Named Insured identified on the insurance policy, this may not be true for the named insured. It is critical that this distinction is made.

Staying Ahead

For carriers, it is the responsibility of the company and the insured to update changes in the organizational structure or newly formed affiliates to be covered under existing policies with the underwriter. With automated renewal quotes being sent to insureds, incorrect assumptions are made and risks are increased. The can be costly mistakes due to gaps in coverage.  That is why it is so important for agents to explain the difference and potential consequences. Before a claim is made that is not covered by an existing policy, resulting in large, costly losses, agents should work with clients to be sure each company the insured wants to be covered and its ownership structure properly defined. This can and should be done at each renewal. An uncovered affiliate may be added to the policy free of charge if the rating exposures are included on the application.

A Proactive Approach

Waiting for a claim to be denied is not the best approach. Working with clients to understand their businesses will help to identify gaps in coverage and what needs to be addressed in their corporate D&O or EPL policy. Helping clients in their understanding of the differences between subsidiaries and affiliates, having them identify which and what they want to be covered at the time of renewal, and an overall proactive approach helps prevent expensive claim denials.

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by Justin Treece

Employers across the country are considering the option of self-funding with greater frequency than in the past. As companies weigh their options, employers both large and small are finding the self-funded or partially self-funded model much more accessible. Once only considered viable for larger employers (over 1,000 employees), the self-funded option’s perceived financial risk is no longer a barrier to entry.

Before deciding on this topic, employers should consider the following questions.

What are the benefits of self-funding?

For some employers, the choice of working with a fully funded carrier is an easy one to make and often times the path of least resistance. For other employers, the financial benefits that come with self-funding are well worth the calculated risk. Fully funded plans allow for a fixed monthly expense and no volatility in cash flow on a month- to- month basis.  However, a fully insured group experiencing better than expected claims has little financial incentive. Alternatively, in a self-funded environment, an employer pays for the actual claims incurred through the plan year as well as fixed costs for administration of the plan and the reinsurance purchased to set caps on both an individual and an aggregate protection levels. In addition, self-funding allows for greater flexibility.  Employers can design benefit plans that best meet the needs of their employees and include what is required to remain competitive as well as requirements of the federal government.  Also, taxes and fees paid on the insurance premiums are mitigated in a self-funded plan vs. fully insured, resulting in additional plan savings.               

How much am I risking if I have an aged employee population or we face a devastating medical claim?

Due to an aging population and workers remaining in the workforce longer, an increase of claims can occur. As we age, additional medical care and/or treatment is oftentimes needed. Unfortunately, there is no way to predict a major accident or when a critical illness may affect someone’s health. Larger employers are better equipped for these concerns for they often have reserve funds to cover claims. On the opposite end, smaller employers could take a devastating loss in the event of one of these claims. However, there are options designed to protect employers. Stop-loss insurance helps protect employers if a claim exceeds a particular individual or aggregate dollar amount. Before choosing to self-fund, employers should talk to their consultant about stop-loss coverage and weigh which options are best for their business.  An experienced consultant can estimate how such a plan might look. You can contact us here for a consultative look at your coverage.

How will I equip myself with everything I need to best run my health plan?

A strong consultant in combination with a good administrator will provide the basic tools necessary to run a company’s health plan. However, there are many solutions and options that may help in the reduction of healthcare costs. Cost-saving tools and strategies such as PPO and narrow networks, reference-based pricing, Benefits Captives, true pharmacy controls, health and performance, disease management and medical tourism all may be options to help control the healthcare spend of an employer.

Employers should have a conversation with their benefits consultant about the option of self-funding. The options made available may help in the improvement of a company’s employee benefits program and in cost-savings.

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