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HAWAIIAN FIRMS WIN EXEMPTION FROM RECIPROCAL BENEFICIARY LAW

HONOLULU-Some of Hawaii's largest employers have reached an agreement with the state that will exempt them from a law that calls for health insurance benefits to be extended to anyone an employee names as a beneficiary.

The employers filed suit July 11 in federal court to enjoin the state from enforcing the portion of the new law that applies to health benefits (BI, July 21). Employers argued that the law, designed to extend benefits to domestic partners, could force them to cover beneficiaries with no relationship to an employee. The employers' suit argued that Hawaii's law runs afoul of the federal Employee Retirement Income Security Act of 1974 that pre-empts state laws that relate to employee benefit plans.

A stipulated judgment reached last week with Attorney General Margery Bronster does not address the ERISA merits of the issue. Instead, the attorney general agreed to limit the state's interpretation of the law so that it applies only to employees covered by traditional indemnity plans, said John J. D'Amato of the Honolulu firm D'Amato & Maloney.

Of 320,000 people covered by employer-provided health care plans in Hawaii, only 1,800 are covered by traditional indemnity plans from insurance companies, Mr. D'Amato said. The vast majority are covered by health maintenance organizations and a mutual benefit society.

The agreement received court approval Friday.

"We wanted a timely resolution on this issue," Mr. D'Amato said. "The law is ambiguous. It is not very well drafted, and we felt this could drag on for a very long time."

Groups urge care standards

WASHINGTON-Managed care plans should have to meet legally enforceable national standards to assure that consumers receive health care and that trust is restored to the health care system, according to a coalition of three health maintenance organizations and two patient advocacy groups.

In a "preliminary statement of principles for consumer protection," the group laid out 18 consumer protection principles at a Washington news conference last week. The principles include, among other things, that: health care services are accessible 24 hours a day, seven days a week; individuals enjoy a choice of health plans; strong protections be in place against improper exposure of individual medical information; plans cover emergency care; loss ratios be disclosed; discrimination be prohibited; and health plans and provider groups should develop written standards similar to those used by the National Committee for Quality Assurance for hiring and contracting with physicians, other providers and health care facilities.

"The principles are called 'preliminary' because the health plans and consumer organizations are continuing discussions about a number of issues that are not included in this enumeration, including appropriate mechanisms for member grievances and appeals and the appropriate locus for oversight of health plan standards," the group said in a statement accompanying the principles.

The principles were put forth by the American Assn. of Retired Persons; Families USA; Group Health Plan Cooperative of Puget Sound; HIP Health Plan of New York; and Kaiser Permanente.

The Blue Cross & Blue Shield Assn. responded to the call for legally imposed national standards by urging "decision-makers to exercise caution in considering federal health care standards that would give the federal government new and wide-ranging power over private sector health care plans."

Flex plan guidance offered

HARRISBURG, Pa.-The state of Pennsylvania last week officially confirmed that a broad measure signed into law in May exempts employees from being taxed on contributions made to flexible benefit plans to cover their health care premiums and expenses.

"This sends a solid message to employers to get your systems changed," said Chip Kerby, a principal with William M. Mercer Inc. in Washington.

The guidance, provided on the state's site on the World Wide Web-http://www.revenue.state.pa.us/start.htm-makes clear that the law exempts from the state's 2.8% income tax all major types of flexible benefit plans, including premium conversion plans, flexible spending accounts and plans that give employees a choice of applying credits that can be cashed out or used to "purchase" health care benefits that employers give certain values. The credits themselves would not be taxed if used to purchase health care coverage, but they would be taxed if taken as cash.

While the legislation making these changes was enacted in May, some employers awaited official guidance before making any changes to their tax withholding systems. The law is retroactive to Jan. 1.

The change in law, though, does not apply to contributions for dependent care, which are typically funded through employees' contributions to FSAs. Those contributions still will be considered aftertax under Pennsylvania law.

The state is encouraging employers that have not already adjusted their withholding rates to make the necessary reductions in withholding for the remaining months of 1997 for employees to offset the over-collection of taxes that have resulted from the law's retroactive effective date.

AMR settles more crash cases

CHICAGO-Liabilities totaling as much as $210 million to compensate the families of people who died in a 1994 crash of an American Eagle turboprop airplane have been divided between American Eagle's owner AMR Corp. and the plane's French manufacturer, Aerospatiale.

Last week, four AMR companies and three companies belonging to Avions de Transport Regional, which is owned by Aerospatiale, agreed to pay between $100 million and $110 million to settle 26 lawsuits covering the deaths of 27 passengers and crew members aboard American Eagle flight 4184, which crashed in Indiana on Oct. 31, 1994.

Because about 35 cases already had been settled, this means 62 of 68 cases from the crash have now concluded.

Each company's relative share of the total liability was unclear as of last week. Although one London underwriter involved in the claim said AMR was allocated two-thirds of the liability loss and Aerospatiale the remainder, other sources close to the case say the percentages are the other way around. The London underwriter indicated that after last week's settlement, $210 million had been paid in liabilities.

AMR's broker, Aon Group Ltd. in London, would not comment, and AMR's lead aviation hull and liability underwriter, Richard Maylam of Lloyd's, did not return calls. Aerospatiale's broker, Cecar & Jutheau, and its lead insurer, La Reunion Aerienne, did not return calls.

The remaining damage cases may be settled this week, said plaintiffs' attorney James P. Kreindler of Kreindler & Kreindler in New York.

The National Transportation Safety Board concluded in July 1996 that the American Eagle disaster was probably caused by "the failure of ATR, the plane manufacturer, to completely disclose adequate information about previously known effects of freezing precipitation on the plane's stability and control characteristics.*.*.*." The plane nosedived into a soybean field near Roselawn, Ind., after a ridge of ice formed on the wings.

The NTSB also blamed France's Directorate General for Civil Aviation for "inadequate oversight" of the ATR-72 aircraft.

Labor to look at poultry plants

WASHINGTON-The U.S. Department of Labor is launching a survey to gauge the safety and compensation practices of the nation's poultry industry.

"This is not an enforcement effort right now," said a spokesman for the Occupational Safety and Health Administration, which along with the Wage and Hour Administration is conducting the initiative. He said that instead the effort was intended to "take a snapshot" of industry practices.

"We want to do a baseline compliance survey just to discover the level of compliance with wage and hour and safety and health laws," said the spokesman. The nationwide survey will begin Oct. 6 and probably run through mid-November, he said. The Labor Department will review the findings before deciding what to do next, he said.

The spokesman said the Labor Department would be talking to about 30% of the industry's 174 poultry processing plants. He added that the poultry industry has a rate of injury and illness more than twice that of industry in general.

The poultry industry is reacting coolly to the probe.

"You would think that they would have a snapshot already-approximately 150 inspections have already been conducted in the poultry industry so far this year. So we see no real reason for this survey. The poultry companies are committed to maintaining a safe workplace," said a spokesman for the Washington-based National Broiler Council.

Consumer groups fight reform

WASHINGTON-Consumer groups are calling on President Clinton to stop negotiating with congressional leaders regarding compromise product liability reform legislation.

The move came as White House officials met with congressional representatives to work out differences on product liability legislation. Although the president vetoed reform legislation last year, he said he would be willing to sign "reasonable" legislation (BI, May 6, 1996). Although no draft of any compromise has been made public, consumer groups wrote to the president last week urging him to veto any reform legislation. Of particular concern to the letter's signers, which included Public Citizen, Americans for Democratic Action and the National Organization for Women, was a rumored agreement to cap punitive damages for small businesses and the creation of a uniform 18-year statute of repose for durable goods.

"Standing alone, this proposed deal deserves your veto, not your support. In addition, your support of this type of federal products liability legislation would create a framework, easily amended by future congresses, that would result in even worse damage to consumers and the public. We urge you stop proceeding down this misguided path," reads the Sept. 24 letter.

Briefly noted

Sens. Mike Enzi, R-Wyo., Judd Gregg, R-N.H. and Rep. Jim Talent, R-Mo., are scheduled to unveil companion measures aimed at reforming the Occupational Safety and Health Administration on Sept. 30. . . .

Larry Hollen, former president and chief operating officer of Orion Capital Corp., has been named president of American Home Assurance Co. in New York. Mr. Hollen, who joined the American International Group Inc. subsidiary last February, succeeds B. Michael Schlenke, who was named vice chairman of American Home. . . .Mac W. Henderson, a retired reinsurance executive and the founder of Reinsurance Facilities Corp., a Los Angeles-based reinsurance intermediary, died Sept. 19. . . .Insured claims from last Friday's earthquake in central Italy are unlikely to be significant, says Benito Pagnanelli, deputy general manager of Trieste-based Assicurazioni Generali S.p.A. Most Italian property policies exclude earthquake damage, he said. Also, the most famous of the buildings damaged, the Basilica of St. Francis of Assisi, would have been self-insured by the Roman Catholic church, and its famous art works by the Italian government, added Mr. Pagnanelli.