By William D. Dyer

Q: What is EPLI Insurance?
A: EPLI Insurance or Employment Practices Liability Insurance covers the employer for exposures relating to employment (i.e. discrimination, wrongful termination et al).

Q: What’s the difference between term life insurance and whole life insurance?
A: Term insurance is for people who do not want life insurance to be paid when they die of old age. It is normally purchased to cover a ten or twenty year period, like when someone with young children wants coverage in case they die prematurely. The premiums are cheap, but they skyrocket at the end of the term, so most people cancel the coverage. It seldom results in a claim, since most people who buy term buy it when they are young and healthy. If there is a term life death claim, it is usually the result of an accident or a premature death due to an unexpected disease.
Whole Life insurance is as the name implies, it covers your entire life. This insurance is for someone who wants coverage for their entire lifetime. Since this has a greater coverage period, it is more expensive. But on a net basis, whole life is cheaper than term life. When you pay your premiums, a small portion goes to the cost of the life insurance and most goes toward an investment. As you pay your premiums after twenty or thirty years, you likely will have double what you paid in premiums in the investment portion of the policy, called cash value. You can use the cash by borrowing it, or you can leave the cash alone, and it will likely (depending on the design) pay for your premiums for the rest of your life.

Q: What is the average cost of malpractice insurance?
A: We get this question all the time, and it depends on which state, specialty, the year of the retro date and the doctor’s claims. If you want a ballpark, in CA, a non invasive specialty, fully mature, with no claims is $10K a year, and an invasive specialty is $45K. If it is NY, multiply those numbers by three or four.

Q: How much is the most basic professional liability insurance for a small business?
A: It’s tough to say because it depends on what they do for a living, but a ballpark small business is $5K to $10K a year.

Q: What is Personal Injury Medical Malpractice?
A: This is a new insurance that allows the patient to buy life, and a product similar to AD&D for claims arising from complications related to a recent surgery. For example, if you die from complications of a surgery, then your family will get a death benefit. If you lose your limb(s) or other functions, then you get a benefit. This new insurance may lower the chances of claims against the surgeon. First, if a family or patient suffers a loss and they get paid under this policy they may be less likely to sue the doctor since they received compensation. Also, this may help negate a patient or family’s lawsuit claim alleging that the doctor did not provide adequate information regarding the surgical risk, and therefore never obtained informed consent. How would a patient claim that he/she did not know the risks if he/she buys insurance to protect himself/herself from the surgical risk?

Q: FMLA versus workers comp?
A: FMLA is the Family Medical Leave Act. This provides job protected leave for non job related illness or leave to care for an immediate family member. Workers Comp provides benefits for job related injury disability or death.

Q: Are most ASO also stop loss?
A: ASO is administrative service only. These are the services that the employer needs to self-insure its health insurance; the business that performs this is called TPA, or third party administrator. ASO includes claims processing, utilization review, case management, PBM-pharmacy benefit manager, and PPO.
Stop Loss is the insurance that the employer buys to cover himself/herself for catastrophic claims that exceed a defined dollar amount (i.e. $50K or $100K). He/she would also purchase Aggregate Stop Loss Insurance. This covers the employer if his/her total annual claims exceed a defined amount of money. So do all ASO plans have stop loss? Not always. There are large employers who have thousands of covered employees that may feel they do not want to purchase stop loss, since their risk is very predictable. When it is not predictable, they have the necessary funds to cover bad years.

Q: Why do you have to issue a broker of record to a broker?
A: This is done when you want to hire a new broker to handle your insurance. Perhaps you currently have the best deal on your insurance, but you find another broker who provides more services than your current broker, and you want to change. You simply sign a letter addressed to all your insurers with your policy number which states, “I am appointing broker X as my new broker and please pay him/her the normal commissions that are being paid in relation to my insurance.” You should think about why you are changing brokers. Some clients sign this without knowing what it means or they think it is no big deal. It means the person who is handling your insurance now is going to be fired. It is similar to firing an employee. You would not do this for any particular reason. Also, do not do this midway into the policy if it is for group benefits. Inform your current broker, and make the change thirty days prior to renewal. Since the current broker did the work of shopping for all your coverage for free, and he/she is paid a monthly commission throughout the year, if you fire him/her midway into his/her policy then that money goes to the new broker for doing nothing. For all other insurance coverage you can make the change anytime after the renewal, since the broker gets paid the entire commission at the time of binding your renewal.

Q: What are reinsurance triggers in healthcare?
A: Not sure, but reinsurance can trigger on a specific basis, meaning a defined deductible amount or it can be a quota share where the reinsurer takes a percentage of risk over a certain dollar amount.

Q: What does D and O insurance mean?
A: Directors and Officers Insurance protects the current and former officers, directors, managers, and employees for claims arising from the operations of the company (not professional liability).
Example: an anti-trust claim or misuse of corporate assets or business interference.

Q: What does a statutory limit mean on a worker’s comp policy?
A: Workers Compensation covers all employees for work related injuries at 100% of the medical bills. It has a disability benefit and life insurance. In return for these free benefits, the worker cannot sue the employer for more than what the statute says. In California, this is $1 million. The only way to get more than this limit is if the worker can prove gross negligence.
Example: an employer knew he had a faulty machine and let an employee use it and he/she is severely injured or killed. This is why all employers, especially those who can have a big worker’s comp claim should buy umbrella liability insurance, since this is the coverage that may respond if you have a claim that exceeds the workers compensation statutory limit. General Liability will not respond.

HCP National Insurance is a provider of Errors and Omissions, Professional Liability, and General Liability Insurance for small businesses. We are experts in small business insurance, health care insurance, D and O and E and O insurance, medical malpractice insurance, and all other insurance coverage. Our home office is located in Aliso Viejo, CA.

NOTE THE ABOVE IS A GENERAL DISCUSSION ABOUT HOW COVERAGES MAY WORK. YOUR INSURANCE POLICY AND ALL ADDENDA ARE THE ONLY AUTHORITY OF HOW YOUR COVERAGE WORKS. DO NOT RELY ON THIS ARTICLE AS AN EXPLANATION OF YOUR COVERAGE. HAVE YOUR ATTORNEY REVIEW YOUR ENTIRE POLICY WITH YOU TO DETERMINE WHAT IS AND ISN’T COVERED.

It’s April, so it’s time for another round of health insurance Q&A.

Q: Can my employer stop my health care when on comp?
A: Yes, unless you are on FMLA, CFRA or (CA Only; FEHL/PDL). The health insurer contract will often state that to be eligible for health insurance you must work full time and be actively at work. This may change with the healthcare reform, so stay tuned.

Q: Do FMLA and CFRA run concurrently in cases for pregnancy?
A: Yes they do, and if you are disabled from pregnancy and you are in CA you also have FEHA, which if combined with FMLA and CFRA can get you greater time off.

Q: Does the company need to retro FMLA when a manager did not tell an employee he/she may be eligible for FMLA?
A: This is a legal question, so we cannot respond. Contact a labor attorney because you may have a case.

Q: What does capitation mean in provider excess loss?
A: Capitation is where an HMO pays a group of providers a defined amount of money to provide healthcare. If the money they collect is not enough due to a catastrophic patient, then the group will hopefully have in place a provider excess loss insurance policy (AKA Provider Stop Loss, Managed Care Excess and Capitated Stop loss, or Stop Loss Reinsurance). The policy allows the group to submit any claims they have usually after $15K or $20K is paid by the group for reimbursement.

Q: What happens when my employer denies my FMLA in California?
A: He/she may be in big trouble if he/she were wrong to deny it. Call a labor law attorney. The employer and any manager or supervisor, who is involved, is liable if they were wrong to deny your leave.

Q: What is the difference between Standard versus Nonstandard Malpractice Insurance?
A: Standard insurance companies provide insurance for a certain risk profile: minimal claims, no medical board issues, and typical practice patterns. These insurers charge the least for coverage. The standard insurers have their rates filed with the department of insurance and they cannot charge more or less than those rates without COI approval. If a doctor does not fit the standard insurers underwriting requirements, then they are rejected in the standard market since the insurers cannot charge more than their filed rates.

Example: Dr. A is a general surgeon and a doctor who meets the standard underwriting. He would be charged $45K a year for his premium. However, Dr. B, another general surgeon, has lots of claims thus the standard insurer calculates that it should charge him $80K a year. But the standard insurer cannot charge $80K since the most it can charge is $45K, because these are the rates it has filed with the department of insurance. Thus it cannot accept Dr. B since he is a non standard risk. Now the non standard malpractice insurer does not want to be limited to filed rates so it does not file and does not have the oversight of the insurance department. It charges Dr. B $80K to insure him. The non standard market is the place for doctors, who cannot be accepted by the standard market. At HCP National we work to get all our clients into the standard medical malpractice insurers. While a doctor is stuck in the non standard market, we shop them every year to find them the best deal possible.

Q: How does stop loss insurance work and best practices?
A: One needs to analyze your past shock loss claims. If you have a group that has a 1000 or more employees, your experience should be somewhat predictable. Also, you should have past claims experience to set your specific level. In addition, see if you can reduce the stop loss premium by sharing some of the defined risk with the insurer (aggregating specific or retro).

Same for your aggregate, take your ECC (expected cash claims) plus trend, add 120%, 125% or 130% and compare it to what the insurer wants to charge. Also, hire a broker who has done millions of stop loss deals. Your broker’s job is to find the best deal on stop loss insurance for you and advise you on which stop loss levels to purchase.

HCP National Insurance is a provider of Stop Loss Reinsurance and Professional Liability Insurance. We are experts in small business insurance, health care insurance, D and O and E and O insurance, medical malpractice insurance, and all other insurance coverage. Our home office is located in Aliso Viejo, CA.

NOTE THE ABOVE IS A GENERAL DISCUSSION ABOUT HOW COVERAGES MAY WORK. YOUR INSURANCE POLICY AND ALL ADDENDA ARE THE ONLY AUTHORITY OF HOW YOUR COVERAGE WORKS. DO NOT RELY ON THIS ARTICLE AS AN EXPLANATION OF YOUR COVERAGE. HAVE YOUR ATTORNEY REVIEW YOUR ENTIRE POLICY WITH YOU TO DETERMINE WHAT IS AND IS NOT COVERED.

We’ve seen questions go through our que quite a bit, so we decided to do a monthly Q&A to get these questions answered. Feel free to ask follow up questions or even new questions, in the comments.

Q: When filing a worker’s comp claim in California, when will the employer stop health coverage for an employee?
A:If the employee will not be actively at work or working full time, 30 hours a week in general, (please check your health insurance plan document), then the employer should put the employee on COBRA . Be aware that some workers comp insurers will advise you to keep the employee on health insurance for an indeterminate length of time. They advise this as a way to not anger the employee. This is very bad advice. If your health insurance states, which many plan descriptions do, that to be eligible for health insurance you have to be working a certain number of hours a week on a full time basis, it means it. Just because you choose to keep them on the plan and pay their premium does not mean they are covered.

Example: We heard of an employer who kept an employee on the plan while an employee was out for 6 months due to a work related back injury. The employee had a heart attack, while on his WC leave, and needed open heart surgery. In the physician’s notes, the patient told him he had been on WC leave. The health insurer denied the claim, since the employee was not eligible for health insurance. The employee sued the employer for the $150,000 hospital bill.

Q: What is HMO reinsurance?
A: It is insurance that an HMO would purchase from an insurance company who agrees to share in a defined part of risk for a defined premium. One of the most common types of HMO reinsurance is stop loss reinsurance. An HMO might feel that it can pay all claims for the first $200,000 of medical expenses for any one member, but it does not want to absorb expenses beyond this level. The HMO agrees to pay an outside reinsurer who will reinsure the HMO, and reimburse it for claims above $200,000. The HMO will pay that reinsurer a per-member, per-month premium (pmpm). The pm pm pricing is the basis for the premium. The other typical reinsurance option is quota share reinsurance.

Q: What coverage do I need for my medical malpractice?
A: In California the norm for medical malpractice insurance is $1 million per occurrence and $3 million per policy aggregate. Other states have higher or lower limits depending on the rules and regulations within the state. If a doctor has privileges, his/her hospital will dictate the limits, and the hospital will know of any laws relating to these limits. If you do not have hospital privileges, ask your medical malpractice broker what is typical. There are 2 kinds of medical malpractice claims made: medical malpractice insurance and occurrence medical malpractice. Most doctors purchase claims made since it is more affordable.

Q: Employee benefits rescinding broker of record, who gets commission?
A: Commissions are paid monthly by the insurance company as you pay your premiums. If you fire agent A on 2/28 and hire agent B, and 2 days later, on 3/2, you rescind the broker of record on Agent B and rehire Agent A, odds are Agent A will not lose any money and Agent B gets paid nothing. The norm is that the insurer will give the current broker, in our example, Agent A, 10 days to receive rescindment of the broker of record. After 10 days the commission for March will be paid to Agent B. After 10 days if you fire Agent B and rehire Agent A, then Agent B will have 10 days to rescind the broker of record.

Q: How can public entities save money?
A: Competition is the key to saving money on insurance. You want a few insurance brokers working on your insurance. It is a lot of work, but the best way is to get multiple bids from 2 or 3 brokers including the incumbent. However, you need to be available to give the non-incumbent brokers the information they need to quote. We find many public entity purchasing departments favor the incumbent broker since he/she has all the loss run information and applications necessary to shop the insurance. The outside broker has little chance of competing unless you have a very diligent purchasing department at the public entity, which gets you the necessary information and answers questions in a timely fashion. We have seen very good purchasing departments, and many who are unresponsive, so the insurance stays with the same broker forever because you cannot get the necessary information to give a competitive quote and the public entity is then left paying more. Other ideas include hiring an insurance consultant to review your RFP to make sure that every item necessary to shop the insurance is included. This includes typical Q & A’s, and have the brokers provide their #1 through #3 favorite insurers for your risk, along with the premium that they have with those insurers. If more than one broker picks the same #1 insurance company, allow the broker with the most premium to have the #1 choice. The more premiums that a broker has with the insurance company, the better their relationship will be.

Q: What is excess workers comp?
A: This is for large to medium sized employers who want to self insure their workers compensation. They can purchase excess or stop loss reinsurance. This protects the employer from large claims.
Example: The employer has very predictable experience, but he/she wants to buy excess workers compensation insurance with a $100K deductible. So for claims below $100K, the employer pays. For any claims that exceed $100,000, he/she submits for reimbursement to the excess workers comp carrier with whom he/she purchased the excess reinsurance policy.

NOTE THE ABOVE IS A GENERAL DISCUSSION ABOUT HOW COVERAGES MAY WORK. YOUR INSURANCE POLICY AND ALL ADDENDA ARE THE ONLY AUTHORITY OF HOW YOUR COVERAGE WORKS. DO NOT RELY ON THIS ARTICLE AS AN EXPLANATION OF YOUR COVERAGE. HAVE YOUR ATTORNEY REVIEW YOUR ENTIRE POLICY WITH YOU TO DETERMINE WHAT IS AND ISN’T COVERED.