Pharmacy Benefit Managers (PBMs) serve as intermediaries between insurance companies, pharmacies, and drug manufacturers. Large PBMs are often accredited with securing lower drug costs through volume discounts and aggressive negotiations with manufacturers, which has the potential to make prescription medication more affordable. Unfortunately, many large PBMs lack the transparency that would be required to validate their impact on the cost of prescriptions. 

As employers work to find optimal partners, it is important to understand the primary PBM models available in the market and how they align with each employer’s corporate culture. Each model has its own set of pros and cons, so there is not one optimal solution. The key when evaluating is to understand the strengths and weaknesses of the model you are leveraging so you continue to move toward the best approach for your organization and employees. At a high level there are three types of PBM pricing models:

  1. Traditional Pricing
  2. Pass Through Pricing
  3. Hybrid

Traditional Pricing

In Traditional Pricing, also known as spread pricing, PBMs are reimbursed at a higher rate by health plans and self-insured employers than what they are paying manufacturers and pharmacies for the drug. The PBM keeps the difference to offset their administrative costs as well as profit margins. This model is sometimes referred to as spread pricing, which is leveraged by most of the largest PBMs in the market. The model has been highly scrutinized as very little financial data is available and contractual gag clauses often leave insurers and employers with little knowledge of the actual price of the drug. In addition, some prescriptions also have a rebate payment made but only aggregate information is shared, making it impossible for health plans and employers to understand the true cost. With that said, given the buying power of these large PBMs, even with increased spread, employers may still save money within a traditional pricing model.

Pass-Through Transparent Pricing

The Pass-Through Transparent model operates based on the actual costs of the drugs. Clients are billed the amount the PBM is paying the manufacturer and/or pharmacy. All Rx rebates and discounts are passed onto the client. The PBM is compensated not through traditional/spread pricing but through an administrative charge, typically at the prescription level. Although this model seems more economical, PBMs leveraging a pass-through model may not always have the buying power of the traditional pricing PBMs and therefore savings may or may not be realized by health plans or self-insured employers. It is often hard to quantify savings in advance since pharmacy utilization under traditional pricing PBMs are steering utilization to those prescriptions that have the most margin for the PBM in the form of discounts and rebates. 

Hybrid

The Hybrid model is a mix between the Traditional Pricing and Pass-Through Transparent models. In this model, rebates and discounts are typically passed to client(s), but it may or may not be in full. Some hybrid models indicate all received rebates are passed back to clients but may have an intermediary that receives some spread that is not disclosed and not considered a rebate. In short, hybrid PBMs have diverse disclosure practices. At a quick glance it may seem more transparent, but it’s difficult to validate.

Solving for the Transparency Issue

Pharmacy Transparency

With the lack of transparency, some policies at the state and federal level aim to decrease the complexity. For example, most states with transparency laws require reporting from manufacturers when wholesale cost is increased above a certain threshold. The first drug transparency law was passed in 2016 in Vermont, but now over 20 states (including CA, CT, ME, MN, NV, NH, ND, OR, TX, UT, VA, WA, WV) have implemented their own requirements. Maine has one of the more robust approaches, collecting and analyzing the data with the goal of identifying each supply chain’s average net, allowing the public and policymakers to follow the money through the supply chain[1].

The Consolidated Appropriations Act also has requirements for pharmacy reporting that will require PBMs to report on some data that is rarely shared, including but not limited to rebates by drug for the top 25 prescriptions. In some instances, PBMs will share that data with health plans and self-insured employers; in other instances, they will file directly with Centers for Medicare & Medicaid Services (CMS) without employers understanding those plan details. 

More recently, on May 24, 2022, the Pharmacy Benefit Manager Transparency Act of 2022 was introduced. Sponsored by Senator Chuck Grassley (IA) and Senator Maria Cantwell (WA), this bill will empower the Federal Trade Commission (FTC) to increase drug pricing transparency and hold PBMs accountable for unfair practices that increase cost. It also will require PBMs to report to the FTC the amount of money they make through spread pricing and pharmacy fees[2].

While we wait to see if the Pharmacy Benefit Manager Transparency Act is passed, other solutions are available. There are companies that are striving to help clients save money when it comes to prescription drug costs. They often run analyses on current employer prescription drug costs to determine how much they could save if they moved away from traditional PBM models.

At edHEALTH, we work hard with our member-owner schools to bend the trend in healthcare costs. Pharmacy continues to be an expensive cost-driver, at a national level, and something we’re addressing head-on. We continuously look for opportunities to bend the trend in healthcare costs, including exploring all options to reduce prescription drug costs.

Tracy Hassett, President and CEO of edHEALTH

When our client, edHEALTH, carved-out prescription drug benefits, the goal was to provide additional savings and transparency to its members. edHEALTH continues to work with their vendors and evaluate various options so that they can offer additional transparency and cost savings. To learn more about potential solutions, talk to your current advisor or reach out to Spring Consulting Group.

[1] https://www.nashp.org/drug-price-transparency-laws-position-states-to-impact-drug-prices/

[2] https://www.natlawreview.com/article/pbms-continue-to-draw-federal-scrutiny-pbm-transparency-act-2022#:~:text=The%20Pharmacy%20Benefit%20Manager%20(PBM,and%20state%20attorneys%20general%20in

The World Health Organization defines burnout as: a syndrome conceptualized as resulting from chronic workplace stress that has not been successfully managed and recognizes three identifying characteristics of the phenomenon:

  1. Feelings of energy depletion or exhaustion
  2. Increased mental distance from one’s job, or feelings of negativism or cynicism related to one’s job
  3. Reduced professional efficacy

Burnout has gained its status as a bona fide buzzword for good reason. A recent survey by Indeed found that 52% of workers were feeling burned out, up 9% from pre-COVID times; while a 2021 American Psychological Association study showed that 3 out of 5 employees reported negative impacts of work-related stress, such as lack of interest, motivation, and energy. The impacts of burnout go beyond an unhappy workforce. In fact, employees struggling with burnout are:

All of these factors contribute to lost productivity, a drain on both financial and non-financial resources (e.g., other team members needing to take on more from a burned-out colleague, or resources spent on replacing employees that have resigned due to burnout), and overall a workplace environment that is far from ideal. Although every industry is struggling with burnout, healthcare and higher education are industries with unique challenges. Both require a higher onsite presence than other industries and have experienced a lot of change related to the pandemic.

At this point, you have likely heard the term burnout and understand its prevalence, but perhaps don’t have a clear path forward to prevent or mitigate the issue.

What to Do About Burnout

If you notice a team member seems less engaged or enthusiastic, tangibly overwhelmed, is declining in performance, or just less present – these are all flags for burnout. Often burnout can be nipped in the bud before getting to a more extreme state if you know the signs and have tactics in place toward resolution.  Often supervisors will notice these signs early in the process, which means training related to burnout and compassion are imperative.

From a quantitative perspective, we’ve seen organizations successfully respond to employee burnout by implementing or boosting the following:

On the more tangible side, wellness tools like Headspace, Calm, and Noisli have been developed to tackle stress, focus, and productivity. There is also a range of virtual counseling and mental health platforms available for employers to provide additional support to employees. At Spring Consulting Group, we have access to a platform called Spring Health, which offers counseling services, Employee Assistance Programs (EAPs) and more.

Burnout solutions must align with your organizational goals and demographics. I mentioned that industries like higher education and healthcare have different forces at play, which need to be accounted for in a burnout strategy. It can be a challenge to know where to begin but expanding on current offerings can be an easy first step as well as surveying employees to understand what services would be considered value-add to most participants. The key is to know burnout is negatively impacting your population and if unaddressed it will compound an already burdened attraction and retention strategy. The time is now to make it a priority and find solutions.

1https://thrivemyway.com/burnout-stats/
2https://www.gallup.com/workplace/237059/employee-burnout-part-main-causes.aspx

Executive Summary

Musculoskeletal (MSK) conditions are a driving force behind healthcare spending, representing an estimated 17% of all spending in the US healthcare market. In addition, MSK conditions are the leading contributor to disability worldwide.1 Some examples of MSK conditions include osteoarthritis, rheumatoid arthritis, osteoporosis, sarcopenia, back and neck pain, and fibromyalgia.2  MSK pain may be acute or chronic, localized or affecting the entire body.3 Additionally, conditions may or may not be related to work, creating an added layer of difficulty in understanding the condition and addressing individual patient needs.

Many models currently exist that attempt to control costs related to MSK conditions. While the vendors providing these programs are confident in their success, it can be difficult for employers to select a program that addresses the needs of all employees with relevant conditions. Therefore, a thorough and ongoing review of organizational health data is necessary. For example, what a hospital needs in an MSK program may vary greatly for an employer operating solely out of an office setting. When reviewing workers’ compensation claims, how many are MSK related? If there is a concern, employers may want to start by implementing ergonomic reviews where the employee works to ensure there is nothing at work that is negatively impacting the employee. Other attempts to address MSK costs focus on care and treatment after the injury or disorder exists such as overall wellness programs, one-on-one coaching, and digital physical therapy offered as an employee benefit.

What is the impact on healthcare spend?

– Musculoskeletal (MSK) conditions are the top cost driver of healthcare spending, followed by heart disease, cancer, and diabetes.
– The average health cost per member with MSK condition increased by 40% between 2010 and 2019.
– COVID-19 aggravated this trend as more workers shifted to remote work; 70% of employees with MSK conditions experienced new or increased pain.4
-The Department of Labor’s Bureau of Labor Statistics estimates that about 30% of workers’ compensation injuries fall under MSD.5

As costs have increased, traditional approaches to treating MSK conditions have not shown a corresponding improvement in patient outcomes. This may include surgery, advanced imaging, injections, and pain management.6  It may be time to consider alternative treatment options to appropriately address these rising costs and employee pain levels.

What alternative models exist?

As employers, employees and providers begin to understand that traditional treatment options may not be the best approach for specific cases, alternative approaches have grown in popularity. Workers’ compensation claimants receiving opioids dropped from 55% to 24% between 2012 and 2018, while there was a 131% increase in the use of massage to address chronic pain, a 26% increase in the use of orthotics, and a 15% increase in the use of physical therapy, according to the National Council on Compensation Insurance (NCCI).7

Employers who have identified a significant impact of MSK conditions on their claim costs should seek programs that can be added to their benefit offering. There is a large market for these alternative treatment options, some components of which are listed below:

Specialty MSK vendors track data that implies overall success including a 50% to 70% reduction in pain, 40% to 75% reduction in anxiety and depression, increased adherence and participation in programs, surgery avoidance, and return on investment for employers.

What should I do as an employer interested in an MSK program?

Employers must begin by understanding the cost associated with musculoskeletal conditions within their population, as well as the range of conditions employees may be experiencing. If costs (medical and pharmacy) are significant or increasing, employers should consider alternative programs that would benefit employees and the plan. Identifying a pattern may demonstrate the need for a specific approach like preventive programs or ergonomic assessments.

From there, market research will be necessary to understand pricing and select a vendor with the best program for your population. Spring’s consultants are here to help with market research, claims and data analysis, and/or a Request for Proposal (RFP) process so that you find a solution that best meets your organizational needs.

1https://www.businessinsurance.com/article/00010101/NEWS08/912336312/Musculoskeletal-disorders-in-comp-highlight-prescribing-changes,  https://www.who.int/news-room/fact-sheets/detail/musculoskeletal-conditions
2https://www.who.int/news-room/fact-sheets/detail/musculoskeletal-conditions
3https://my.clevelandclinic.org/health/diseases/14526-musculoskeletal-pain
4https://healthactioncouncil.org/getmedia/a738c3c5-7c23-4739-bb8d-069dd5f7406b/Hinge-Health-State-of-MSK-Report-2021.pdf
5https://www.businessinsurance.com/article/00010101/NEWS08/912336312/Musculoskeletal-disorders-in-comp-highlight-prescribing-changes
6State of MSK Report 2021, Hinge Health
7https://www.businessinsurance.com/article/00010101/NEWS08/912336312/Musculoskeletal-disorders-in-comp-highlight-prescribing-changes

Coming out of our COVID haze, it can be difficult to remember a time when employers could be truly strategic and proactive without priorities evaporating due to lockdowns, staffing shortages, travel bans or taking a U-turn due to pressures in other areas of the business. The time is now to pivot back to your strategic plans related to employee benefits. We recommend the road to an optimal benefits program be lined with solutions to specific pain points and cultural considerations at your organization. However, I advise at least considering the following within your strategic roadmap to see if they are a fit and can close gaps within your current program. 

1) Employee Surveys

Priorities within your workforce have likely changed considerably in the past two to three years.  If you haven’t asked employees about their priorities related to employee benefits, it is time!  Some of your more traditional benefits or office-affiliated perks that may have been linked to attraction and retention in the past are no longer a value add to employees.  It is not enough to talk about perks and flexibility; needs must be better understood to ensure you are providing something that actually attracts and retains talent, instead of the

2) Lifestyle Accounts

Financial accounts within employee benefits are not new (e.g., a Flexible Spending Account), but recently employers have started using these account-based perks in different ways to fill a gap that exists in their offering while providing ultimate flexibility.  These accounts are taxable but can be used within the parameters set by the employer.  Organizations may use them to support just about anything, but common categories today include:

– Medical procedures that may not be covered within the medical plan (i.e., infertility services, elective procedures, etc.)
– Travel expenses for medical services
– Family-focused benefits (i.e., doula, etc.)
– Legacy wellness support (i.e., fitness equipment, fitness classes)

The beauty of these services is that they can be selected based on employee needs as well as organizational culture and budget.

3) Absence Policies and Processes

Diversity, equity, and inclusion (DEI) are at the top of the list of internal initiatives, and goals are uniquely defined based on how much progress has already been made.  It goes without saying that DEI is critical to the success of all companies, but I think a key area of DEI that requires some additional attention is your corporate absence strategy.  Over the past few years, organizations have developed additional absence policies around COVID-19 and Monkey Pox, but there has also been a large push toward more family-focused leave of absences surrounding bereavement, parental leave, and the like.  It’s important that DEI initiatives within employee benefits focus not only on the services but also on the time off that may be required, and viewing this through the many lenses of your diverse workforce. 

4) Oncology Support

As benefits professionals, we have worked diligently to identify point solutions for high-cost and highly disruptive conditions.  While point solutions continue to be part of a strong strategy, most employers have or will see an increase in oncology prevalence and spend due, in part, to expensive treatments but primarily driven by disrupted or delayed care and screenings. 

Initial concerns with COVID-19 not only decreased primary care visits but snowballed, as providers later had limited appointments available due to overwhelming demand, which has translated into undiagnosed cancers.  Now as participants are getting back to their primary care physicians, many cancers have progressed further or upstaged, creating the need for more intense and complex treatment. 

In addition to the direct cost of cancer care, employee productivity is significantly less after a cancer diagnosis, even if that diagnosis is within their extended family. 

Spring encourages employers to seek a proactive and holistic approach to oncology support, including some or all the following:

– Monitor screening engagement
– Encourage prevention including reminders and other communications; consider incentives
– Educate and support initial and ongoing care decisions
– Concierge support
– Clinical support

Of paramount importance is to educate and engage employees before a diagnosis, so they know where to go for initial support.  Those first few weeks after a diagnosis are critical to setting the stage for appropriate treatment and clinical review and/or second opinions.  There are some free and buy-up options in the market provided by top-tier cancer care providers/facilities.  Those have brand recognition and are designed to provide unbiased support but, in many cases, they also funnel patients to their service centers.  Another consideration available is point solutions that are agnostic to cancer care providers/facilities and provide concierge support but do have an add-on charge, typically as a per employee per month (PEPM) or per referral model.

5) Healthcare Disparities

One of the most complex items that should be on your roadmap is to examine what healthcare disparities exist in your population. For starters, ensure multilingual communications are available to close healthcare gaps for those with language barriers.  From there, it is important to begin to stratify your population – if your size warrants – and begin to examine if health outcomes are impacted by race, location, earnings, and/or other social determinants of health.  This strategic initiative must be performed in collaboration with your insurers and third-party administrators and will take dedicated time to set a methodology and refine your findings over time.  The key is to at least get started by looking at the data and talking about how you can improve your understanding of the current state to work toward better data in the future.

Setting the strategic plan for your employee benefit package should be customized to your organization’s priorities and complexities that are identified through claims experience and survey information.  Given each organization has its own culture, demographics, and business priorities, it is impossible to set a perfectly standard list of considerations when it comes to your employee benefit strategy. But as you drive toward the best vision for your company – off in the horizon – be sure to stop along the way to check out these five hotspots of benefits planning.

Spring frequently helps employers assess different solutions, plans, and programs and build them into their roadmap. One client, edHEALTH, is currently organizing three solution committees to refine areas of opportunity and prioritize solutions based on demand and change readiness. 

Whether or not we have seen the worst of The Great Resignation, savvy employers are not new to adjusting their benefits and “perks” programs to better align with workforce desires. At the Disability Management Employer Coalition (DMEC) Annual Conference last week in Denver, I spoke specifically on whether Flexible Time Off (FTO) has taken over as the frontrunner, versus the more traditional Paid Time Off (PTO) approach. I thought you might be curious to know the answer, at least in my opinion, so I’m jotting down the key points from my presentation here.

Background

As with so many things in business and in life, in order to clearly understand the current state of PTO, it’s critical to look back at the history of the concept. In 1910, President Taft proposed 2-3 months of required vacation, “in order to continue his work next year with the energy and effectiveness which it ought to have.” Countries like Germany, Sweden, and others were no strangers to this idea, and set forth on setting global standards regarding minimum levels of vacation. Today, the U.S. is one of only six countries in the world – and the only industrialized nation – without a national paid leave policy. So, what gives?

At least on paper, Americans seem to prefer work over vacation. You may be laughing or rolling your eyes, but it is a fact that significant time off goes unused at the end of the year (people choose to lose it rather than use it). In some cases, this may be the result of a corporate culture that, while they may document PTO programs, do not actually encourage the use of that time. If you’re expected to work while on vacation, you may not feel it worthwhile to take said vacation.

PTO

Over the years additional policies popped up to fill some of these gaps, such as leave related to COVID-19, sick leave, disability, parental leave, and family leave. Many organizations arrived at a PTO program in which an allocated number of days account for different types of leave which vary by employer, but might include vacation, bereavement, sick and personal leave. While this creates efficiency and reduces unscheduled absences, this design (perhaps inadvertently) encourages working while sick, as employees do not want to use days within their bucket when they have a cold, since those same days could be used on a tropical vacation or, on a less happy note, in the case of a personal or family emergency. This flaw went from acceptable to unacceptable in light of the pandemic, and turned some organizations off of PTO and on to FTO.

FTO

Flexible Time Off (FTO) allows for ultimate flexibility in the volume of “vacation” time taken. With the expectation that employees do their jobs, meet deadlines and achieve their individual and corporate goals, time for rest is scheduled at the discretion of managers. FTO however is not to be confused with unlimited vacation days. While a nice idea, some challenges exist around FTO, including:

Given these factors, however, FTO plans can be a powerful organizational tool. If you’re considering FTO, I recommend first answering the following questions:

The Big Reveal

FTO can bring a lot to the table for an organization: it is unlikely to result in more time off (than before), it is financially savvy, a good recruiting tool, and relatively easy to implement. On the flip side, however, I noted some real challenges. In the end, and if you read this article for the clickbait title, my investigative answer is no: FTO is not the new PTO. It should however be considered as one tool within the absence management toolbox, and assessed according to your individual employer needs and priorities.

After a short hiatus, The Disability Management Employer Coalition (DMEC) was able to host their 2022 Annual Conference in-person for the first time since the pandemic started. DMEC is one of the leading organizations in the paid leave industry and their annual conference brings together employers, vendors, government officials, lawyers and more to network and discuss leading trends in the business. This year also marked the 30th anniversary of the creation of DMEC, furthermore solidifying itself as a staple in the world of disability management. It was great seeing so many familiar faces from the industry and learning more about what’s keeping industry professionals up at night. This year’s conference took place in Denver, CO and Spring had the pleasure of both exhibiting and presenting.

Although this year’s conference covered a wide range of topics, I noticed the following three key themes.

1) FMLA & ADA Challenges

Although compliance is often a hot button topic at DMEC, this year there was a specific emphasis on maneuvering around FMLA & ADA challenges. Presenters tackled FMLA & ADA challenges from a range of angles including changes in guidance, a Q&A with federal agency leaders, and a mock trial where the attendees acted as the jury. Some of the of the FMLA & ADA related presentations this year included:

2) Support for Caregivers and Healthcare Workers

Although COVID has settled a bit in severity, caregivers and healthcare workers are still facing high rates of burnout and overworking, without receiving much federal support. Also, in the past 50 years we have seen the highest rates of children and elderly parents in the home, often requiring some type of care, most often unpaid care by a family member. During this year’s conference, presenters tackled the issue of mental health for employees assuming the role of a caregiver and how employers can offer needed support. Below are some of the groundbreaking presentations tackling this issue.

3) The Future of Leave

As we tentatively look beyond the COVID-19 era, there was a huge emphasis this year on what we can expect from the disability and leave management industry moving forward. During the pandemic many employers adjusted to remote/hybrid leave policies, introduced new mental health resources and navigated changing COVID regulations. But as we slowly move into a post-COVID world, many speakers, such as those noted below, looked at new-age alternative leave policies and what we can expect for the future of leave.

a) Utilizing Tech & Data

When looking at the future of leave management, we are seeing a giant increase in leave related tech and software, which allows employers to better understand leave trends and preferences within their workforce. Although tech and data collection software are not new in the industry, we are seeing constant updates and an influx of new software that help measure different facets of absence management policies. Below are a few tech & data related sessions we wanted to spotlight.

b) Moving Past COVID-19

As many organizations slowly move back into the office, employers have been developing and reassessing return-to-work programs and reevaluating leave policies to keep their workforce happy. On a national level, we are seeing changes in COVID-related compliance and a big push to retain talented employees through enhanced benefits packages. Here are some noteworthy sessions related to adjusting to a post-COVID world.

All in all, being back at the DMEC Annual Conference in-person was a powerful experience! This year I saw so many young and enthusiastic faces which is a good sign for the future of the industry. DMEC never fails to provide innovative insights into the absence and disability management landscape while providing a fun and interactive experience, and I am already looking forward to their next event.

A critical starting point in setting up a captive is the captive feasibility study. Captive feasibility studies come in many forms, and there are no industry standard report formats. As a result, many captive owners do not know what to expect as a final deliverable, and we see many feasibility reports that are severely lacking.

The feasibility study forms the cornerstone for the establishment of a captive and is usually one of the first documents that would be requested for in the event of an audit by the IRS.

Every captive actuarial study should include both qualitative and quantitative aspects. Not only should it clearly map out expected financial results, but it should also highlight important insurance considerations that ensure an appropriate and compliant captive structure.

To help provide a framework, here are five key questions that captive owners should be able to answer based on their captive feasibility study.

1. Do you have appropriate data?

As part of the captive feasibility study process, captive owners should work closely with their current insurance carriers to gather as much high-quality data as possible. The study should reflect at least the following for all proposed lines of coverage:

This data will be used to develop future loss estimates once the coverage is placed in the captive. All of it should be readily available, and organizations should be reviewing this data regularly, regardless of whether it is undertaking a captive feasibility study. 

2. Has an actuary reviewed your loss experience?

Once you’ve gathered the necessary experience data, it is important that an experienced actuary review it. All experience reports are different in layout and content, and an actuary will know best how to interpret the data, develop the best estimate of future losses, and ask the right questions of the carrier.  A captive feasibility study should always include a robust actuarial analysis.

A good actuary will ensure that plan changes, rate changes, and overall population changes have been properly reflected in the experience report.  If they aren’t, the actuary can make the necessary adjustments.

The actuary should also review the claim reserves that the carrier is reporting.  In our experience, carriers typically overstate reserves due to conservative assumptions, inflating the loss ratio. A good actuary will independently calculate reserves to compute a more accurate estimate of historical loss ratios and future losses.

3. Do you have a clear sense for the expected administrative expenses – at the start of the program and ongoing?

Administrative expenses related to operating an employee benefits captive include actuarial, captive management, legal, audit, letter of credit (if used for collateral), carrier fronting fees, premium taxes, captive domicile fees, taxes, and state procurement taxes (if domiciled outside of home state).

These fees play a large role in determining whether the captive will be profitable at fully-insured market rates.  If your captive charges rates higher than market rates to turn a profit, then the fees are too high. Carrier fronting fees are typically the largest expense and the most important to get right. Captive owners need to understand how these fees were determined in the captive feasibility study and if they are market competitive and realistic.

We always recommend that a company placing employee benefits in their captive conduct an RFP process to select vendors, and that includes competitive fee arrangements.

4. Is the party that conducted your feasibility study independent, or could there be a conflict of interest?

We have seen many captive feasibility studies completed by non-qualified entities or by organizations that have a vested interest. For instance, many insurance brokers will conduct a high-level analysis to conclude a captive program is not feasible. It is essential to understand the interests of all stakeholders and to work with organizations that have the appropriate credentials to help you make an informed decision.

Find an independent party who can provide an objective, transparent, and unbiased recommendation.

5. Will the coverage qualify as insurance?

Every captive feasibility study must comment in detail on the qualitative aspects of captive insurance including what it means to qualify as insurance. This is an important consideration from a captive owner’s perspective and must be fully understood. There are many case laws that have commented on the lack of understanding of insurance company operations.

For instance, an important aspect of any insurance transaction is that it must achieve risk transfer and risk distribution. There are a few industry-accepted risk transfer tests that will demonstrate that the coverage adequately transfers risk from the insured to the captive.  The “10-10 Test” is the most common, determining whether there is a 10% chance of a 10% loss.  Alternatively, there is the Expected Reinsurance Deficit (ERD) Test where the threshold is an ERD ratio of at least 1%.

Risk distribution requires that the captive distribute its risk among several insureds.  Typical risk distribution tests are meant to ensure that no more than 30%-50% of the risk is from the same insured, and if the captive is a brother-sister insurance company, there must be at least 12 participating entities, each having no more than 15% of the risk.

We also recommend the Coefficient of Variation test to better understand the impact of the law of large numbers.  As the number of independent exposures increases the less volatile actual loss experience will become and therefore more predictable.

Employee benefits or not, all captive feasibility studies should address whether there will be adequate risk transfer and risk distribution.

To summarize, a captive feasibility study is one of the most salient parts of placing employee benefits in a captive.  Captive owners should aim for feasibility or refeasibility studies that are transparent, objective, highly robust, and consider all aspects of the captive transactions.

I had the pleasure of speaking at The New England HR Association (NEHRA)’s Annual Legal Summit a couple weeks ago. The summit brought together attorneys, CEOs, insurance experts and HR professionals to discuss changes in regulations and laws that directly impact the workplace experience of employees. Some of the major topics discussed included how to adapt to a hybrid workforce, how to know who to hire during and cultural and legal considerations when facing substance use and mental health issues in the workplace. All in all, the conference was a great success and allowed for fantastic networking opportunities and provided guidance around a range of compliance considerations that apply to countless employers nationwide.

During NEHRA’s Legal Summit, I presented on, Piecing Together the Puzzle of the Paid Leave Landscape, in which I dove into history of Paid Family & Medical Leaves (PFML) in the US and explained the current landscape of which states provide PFML (and to what degrees). I moved on to show breakdowns on a global level for paid leave for new fathers, new mothers and for an employee with a health problem. As you’ve probably heard, data shows that the US is far behind when it comes to enacting federal legislation that provides paid family leave in comparison to the rest of the world. Without federal paid leave policies, it has fallen on individual states to create, enact and enforce paid leave policies. Of the fifty states in the US, 23 have rejected PFML proposals and have no safety net for employees who face medical or family issues that would require time off work, unless a program is provided by their employer.


After addressing some of the global and national trends, I explained some of the barriers of access to paid family leave within the US. For instance, women are 20% more likely to leave their jobs when they don’t have access to paid leave and 25% of new mothers return to work less than two weeks after giving birth1. Additionally, when breaking down access to paid leave based on race, research conducted by the National Partnership for Women & Families found that 28% of black respondents reported having requests for leave denied, compared to 9% of white workers. It is clear even within states or organizations that provide some form of paid leave, many Americans are facing very different realities when trying to utilize or understand their paid leave options.

As this was a legal summit, I tackled some of the major questions employers ask about leave surrounding compliance, costs, and leave options if they reside in a state that does not provide PFML. I reviewed some best practices employers can take when developing and evaluating leave policies such as leveraging benchmarks, looking into funding options (e.g. self-insurance, captive insurance, etc.), and utilizing technology and appropriate metrics to evaluate financial impacts. I also noted that different perspectives must be considered when developing leave policies. For instance, employees have different priorities; they are often worried about job security, getting paid and workload upon return when assessing taking paid leave. On the flip side, navigating leave from an employer perspective can be a daunting task when having to traverse FMLA, state laws, ADA/ADAAA, HIPAA, discrimination laws and more; so, it is essential to utilize resources to make sure your company is abiding by all regulatory standpoints.


All in all, I was in great company at the NEHRA legal summit! As per usual, NEHRA hosted some of the leading experts in the field and tackled major topics employers and HR professionals are facing currently. I hope to see many of you again during NEHRA’s 2022 Annual Conference in October.

A Recap of NEEBC’s Beyond the Basics (Level 2) Event

Last week I had the honor of presenting at the New England Employee Benefits Council (NEEBC)’s Health & Welfare: Beyond the Basics (Level 2) event. The event provided great insights into how employers can adapt their corporate culture and provide strong benefits to attract and retain top-tier talent. Sessions focused on the following four critical areas of health and welfare: healthcare, data analytics, lifestyle accounts, and employee absence.

health and welfare benefits

David Chamberlain from Brown & Brown clarified the difference between health and wellness and steps employers can adopt to promote preventative care. He later dove into the differences and advantages of discount analysis verses repricing and how this all ties into pharmaceutical needs. Finally, he outlined the landscape of Pharmacy Benefit Managers (PBMs) and how new disrupters such as Amazon Pharmacy are able to provide pharmaceutical capabilities for people with and without insurance.

Mary Delaney from Vital Incite explored the need for data when developing benefits strategies. She explained how data such as age, gender, medication patterns, likeliness of hospitalization and other indicators are essential when developing a health/medical insurance plan. Lastly, she explains how this data can be collected through employee needs surveys and analyses of national health data trends.

Firstly, Jennifer Aylwin from Vertex Pharmaceuticals gave a short background on lifestyle accounts (LSAs) and how they can appeal to a range of employee needs. Due to the COVID-19 pandemic, many employees are now working in a hybrid or remote setting, and LSAs are a good practice to keep those employees content and engaged. She ended her presentation with an exercise where the audience was able to develop a business case for leadership consideration of LSAs.

As for absence management, I had the pleasure of presenting on this topic. I started by exploring some of the benefits of adopting integrated absence management policies, such as reducing administrative costs and fostering a positive corporate culture where employees feel valued. I ended by showing how strong absence policies paired with effective communication of those policies have proven to provide a better experience for employees and greater workplace efficiency.

All in all, it has been great finally being able to see so many familiar faces in person again. As we adjust to a post-pandemic life, it is essential that we implement health and welfare strategies that match the need of employees currently. Keep an eye out for Spring at upcoming NEEBC events here.