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2011 Newsmakers


When the San Francisco Office of Labor Standards issued a report in June showing that only 20% of the contributions employers allocated to health reimbursement arrangements were used to reimburse employees for health care expenses, top city officials were outraged. The HRA approach to satisfy the city's 2006 health care spending law that requires all but very small employers to spend a certain amount of money on employees' health care was called a “loophole” by San Francisco Mayor Edwin Lee. Some members of the San Francisco Board of Supervisors had very definite ideas on how to close that loophole. Supervisor David Campos introduced a proposal that would have required unused HRA contributions to be indefinitely rolled over rather than revert back to employers, as the spending law allowed. The business community rallied against that proposal, warning lawmakers that loss of unused HRA contributions could cost jobs. Mayor Lee accepted that argument, noting in his veto message that the proposal was “overly broad.” Supervisor Malia Cohen then crafted a new proposal that the business community and Mayor Lee accepted: Funds employers contribute to HRAs to satisfy the health care spending law would be required to be available for 24 months after the contribution, or for 90 days after terminating employees leave. The Board of Supervisors gave the bill final approval on Nov. 22, and that same day Mayor Lee signed the measure, which goes into effect Jan. 1.

For more than two decades, the Pension Benefit Guaranty Corp.'s premium structure has not changed. Employers with defined benefit plans pay the agency an annual flat rate premium—$35 per plan participant—and employers with underfunded plans pay an additional $9 per $1,000 of plan underfunding. This revenue helps to fund agency insurance programs that guarantee benefits in failed plans the PBGC takes over. But with those insurance programs a record $26 billion in the red, more revenue will be needed. Rather than a simple across-the-board premium increase, however, PBGC Director Joshua Gotbaum pushed for a different approach: linking premiums to the risk a plan poses to the PBGC, measured, for example, by the plan sponsor's credit rating. The business community has yet to buy into the concept. More than 80 major employers, consultants and trade associations opposed any premium increase, which they said would drive more employers out of the defined benefit plan system. They were more supportive of regulatory relief announced by Mr. Gotbaum that ends assessment of penalties for late premium payments, as long as the as the premiums are paid within seven days of the due date. In the year ahead, though, the PBGC chief could face his biggest challenge since joining the agency last year: dealing with the possible termination of American Airlines' massively underfunded pension plans, the likelihood of which increased with the Chapter 11 bankruptcy filing of parent company AMR Corp.

The word omnipresent would be an apt one to describe Kathleen Sebelius in 2011. Nearly every week, the Department of Health and Human Services secretary held a news briefing or was out on the speech-making trail. Her topic, nearly without exception, was related to the 2010 health care reform law. Many of the briefings were to discuss the successes of the law. For example, Ms. Sebelius extolled the virtues of a provision in the law that requires employers to extend coverage to employees' adult children up to age 26. Thanks to the Patient Protection and Affordable Care Act, “hundreds of thousands more young people have the health care coverage they need,” Ms. Sebelius said after the release of a report in September finding that about 1 million young adults gained coverage in the first quarter of 2011 due to the age 26 provision. On other occasions, though, Ms. Sebelius took a lower profile. She quietly pulled the plug when the administration decided to ax a voluntary long-term care program authorized by the health care reform law. With no fanfare, Ms. Sebelius issued a statement saying HHS had not found a way to make the program work. With a spate of new regulations expected in the coming year, Ms. Sebelius is expected to be no less active on the health care reform law front in 2012 than she was in 2011.

When Peter Shumlin was inaugurated as Vermont's governor in January, he pledged to win enactment of legislation to establish a single-payer health care system. “I call upon Vermonters to join together with the common purpose of our state once again leading where others dare not go: universal, affordable, quality health care that follows the individual and is not tied to employment,” Gov. Shumlin said in his inaugural speech. Just five months later, he achieved that goal when Vermont lawmakers approved a single-payer bill. In signing the measure into law, Gov. Shumlin conceded that many questions had been asked about the measure, and he pledged to answer them. “I realize that people have legitimate questions about how a single-payer (system) will be financed and operated, and we will answer those questions before the Legislature takes the next step,” he said. In fact, the Vermont law created a five-member board on vital issues such as premium subsidies, benefits to be covered, the role of employers and private insurers, and, above all, financing. Many decisions made by that board will have to be ratified by the state's lawmakers. No matter how Vermont decides to achieve universal coverage, it ultimately will need permission from the federal government to implement it. The federal health care reform law has a mechanism in which states can seek waivers to institute reform measures that differ from the federal statute. Such waivers, though, are not available until 2017.

It is fitting that Laurie Solomon, director of risk management at The Coca-Cola Co., has developed innovative programs for a company that is legendary for its marketing brilliance. Her latest innovation came this year, when the world's largest nonalcoholic beverage company tapped its Dublin captive, Coca-Cola Reinsurance Services Ltd., to reinsure group annuity products written by a top-rated European-based insurer and purchased by its pension plans in the United Kingdom, Ireland and Germany. “This is a fantastic opportunity to bring value to Coca-Cola by expanding the use of a great tool we already had in place,” Ms. Solomon said after she announced the new program at Business Insurance's Risk Management Summit in March. Yet another innovation, approved by Labor Department regulators last year, is Coca-Cola's plan to fund retiree health care benefits through its South Carolina captive, Red Re Inc., and a special trust. Ms. Solomon said she expects the Internal Revenue Service to issue a ruling on the arrangement in 2012. Ms. Solomon's accomplishments extend beyond the captive benefits funding arena, however. She also has won corporate approval to take on higher levels of risk through captives—which, along with improving loss-control programs, helped shave Coca-Cola's risk costs by 25%, or $20 million, over the past five years.