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SAN FRANCISCO-Bermuda-based EXEL Ltd. has reached an agreement in principle to acquire 25% of the common stock of San Francisco-based wholesaler Tri-City Brokerage Inc. for $8 million in cash.

The deal is intended to help Lloyd's managing agency The Brockbank Group P.L.C. develop a U.S. midmarket distribution strategy, according to EXEL. Brockbank is a unit of Bermuda-based Mid Ocean Reinsurance Co. Ltd., which is expected to merge with EXEL next month (BI, March 23). The Tri-City deal is conditional on completion of the merger.

John G. Hahn, president of Tri-City, the largest independent national wholesaler, said the company will use the proceeds of the deal to pursue new business opportunities.

Insurers seek review

of ruling on comp law

WASHINGTON-A group of 11 insurer and employer organizations is supporting U.S. Supreme Court review of an appellate decision they say undermines a 1993 Pennsylvania workers compensation law that curbed unnecessary medical treatment and saved millions of dollars.

In an amicus brief filed earlier this month, the group seeks relief from the 3rd U.S. Circuit Court of Appeals' ruling in Sullivan vs. Barnett, which invalidated insurers' and self-insurers' authority to refuse some reimbursements for injured workers' medical treatment (BI, March 30). The request supports a petition to the Supreme Court to review the case.

Prior to the 1993 reforms, Pennsylvania was the only state to require that insurers pay medical bills for disputed treatment.

"The 1993 reforms created a fairer method of resolving disputes and aligned Pennsylvania's law with that of other states," said Bruce Wood, assistant general counsel with the American Insurance Assn. in Washington, one of the insurer groups that filed the brief. The new law essentially required payment if a review found that the treatment was reasonable and necessary, plus 10% interest and attorney's fees.

Following those reforms, a group of injured workers sued, saying they were denied due process because the insurer's or self-insurer's action was not subject to advance notice and hearing. A federal district court upheld the law, but 3rd Circuit judges ruled that provision of the law was unconstitutional.

Ohio takes over

Health Power HMO

COLUMBUS, Ohio-Ohio Insurance Department regulators are overseeing operations of Health Power HMO Inc., which was placed under supervision earlier this month, according to the HMO's parent company.

The HMO, a unit of Wilmington, Del.-based Health Power Inc., provides comprehensive health care services to nearly 32,000 enrollees, about 92% of whom participate in Ohio's Medicaid program and live in and around Cincinnati, Columbus and Dayton, Ohio.

Ironically, Securities and Exchange Commission rules required the publicly traded parent company to announce the regulatory action, though Ohio law prevents the state Insurance Department from confirming or denying a company has been placed in supervision, said Kip May, deputy superintendent of the Insurance Department.

That step, which is the lowest-level of regulatory action, is done without a court order to help a company regain its footing, while the more serious enforcement steps of rehabilitation and liquidation require court orders and thereby become public record, Mr. May explained.

The HMO was placed under supervision "because of the subsidiary's failure to meet Ohio's minimum statutory net worth requirements for health insuring corporations," the HMO's parent said in a statement.

Ohio's law requires an HMO that offers basic as well as supplemental services to have minimum capital and surplus of $1.7 million, according to Mr. May.

Ohio Insurance Superintendent Harold Duryee recently told members of the Ohio House Insurance Committee that regulators are not worried about Health Power's ability to pay short-term costs, but they are concerned about its potential long-term obligations, according to a statement made available by the department.

The parent company's board of directors, meanwhile, has authorized management to heighten efforts to divest itself of the HMO subsidiary, according to Dr. Bernard Master, chief executive officer and president. "Our board believes that stockholder value will be best served if the company focuses its efforts on the company's profitable subsidiaries, CompManagement Inc. and CompManagement Health Systems Inc.," he said.

Those two subsidiaries offer claims management, medical cost containment and managed care services for employers' workers compensation, among other things.

Missouri mandates

more second opinions

JEFFERSON CITY, Mo.-Missouri residents covered by some health insurance plans will have greater access to second medical opinions when a new law takes effect Aug. 28.

Under S.B. 754, health maintenance organizations and health insurers must provide an enrollee facing major surgery or a debilitating disease with a second medical opinion or consultation from a willing second physician. In addition, the cost to the enrollee cannot exceed what he or she would otherwise pay for an initial medical opinion or consultation from that second physician.

The law also requires that if a managed care organization does not employ or contract with a second physician who has the necessary expertise, it must arrange for a referral to an appropriate physician. In addition, managed care organizations must ensure enrollees obtain the second medical opinion at no greater cost than if the benefit were obtained from a physician in its network.

Sen. J.B. Banks, D-St. Louis, proposed the legislation as a result of his personal experience with a leg ailment. His first physician wanted to amputate his leg, while a second physician recommended treatment that allowed him to keep the leg, according to the senator's administrative assistant, Michelle Coleman.

While he was able to obtain a second opinion, his experience made him aware that many people may not have the resources to do so, she said.

Gov. Mel Carnahan signed the bill last month. Self-insured benefit plans are not subject to the law.

Effort on to protect

patients from Y2K bug

WASHINGTON-A coalition of public and private health care organizations is launching a broad-based campaign to reduce potential Year 2000 risks to patients from date-sensitive medical devices and software programs.

The devices may include some heart monitors but not individual pacemakers.

At a news conference last week, the National Patient Safety Partnership called for a national education campaign. Information is critically needed by health care providers and patients because many manufacturers have not responded to repeated letters from the U.S. Department of Veterans Affairs seeking compliance information, a coalition leader said.

The coalition also wants to establish a national clearinghouse of information about the compliance status of medical devices and information about how to contact manufacturers by Jan. 31, 1999.

"The vast majority of manufacturers are well aware of the problem and are working to solve it," said Stephen J. Northrup, executive director of the Medical Device Manufacturers Assn. in Washington. With the news conference last week, "I think they unreasonably scared the public about the scope of the problem," he said.

The U.S. Food and Drug Administration, which regulates medical devices, continues to monitor manufacturer compliance, a spokes-woman said.

"We feel like we have a clear handle on the nature of the problem. . .and we don't think it will be a major problem," she said.

Charter members of the coalition represent hospitals, doctors, nurses, veterans and related health care organizations.

Information in brief

Watson Wyatt Worldwide is buying the Northeast benefit consulting business of KPMG Peat Marwick L.L.P. The book of business, to be acquired effective Aug. 1, generates about $15 million in revenues. Terms were not disclosed. . . .BWD Group Ltd. agreed last month to pay $1.2 million to settle a sexual harassment lawsuit brought by the U.S. Equal Employment Opportunity Commission on behalf of nine current and former employees of the Lake Success, N.Y.-based insurance broker. The suit alleged that corporate officers engaged in sexually offensive conduct such as propositioning female employees, touching female employees' breasts and buttocks, and questioning employees about the size and shape of clients' breasts.