EXPRO Employee Benefit Submission Model for Captives

The Health Care Services Group (HCSG) and its wholly owned captive insurer, HCSG Insurance Corporation, submitted a Prohibited Transaction Exemption 96-62 (EXPRO) to the US Department of Labor (DOL) providing a model for those considering funding of employee benefits in a captive. That submission has met the requirements for authorization of the DOL. The next step for the captive, HCSG Insurance Corp., is to seek the approval to write the employee benefit coverages from the Captive Insurance Division in New Jersey where it is domiciled.

The structure of the plan has Companion Life (A.M. Best A+ rated) fronting and reinsuring 100 percent of the risks of the captive. Milliman will serve as the independent fiduciary for the plan. Quoting the submission to the DOL, the coverage enhancements to be provided include:

• Accidental Death & Dismemberment Insurance: All enrolled Plan participants will be provided with Accidental Death & Dismemberment insurance coverage with a benefit amount of $2,500 at no cost to the enrolled Plan participant or his or her beneficiaries or dependents. 100% of participants enrolled in any of the benefits under the Plan will be able to take advantage of this enhancement.

• Group Voluntary Limited Medical Insurance: Four enhancements will be made available with respect to voluntary limited medical insurance coverage. First, eligible employees will be able to purchase such coverage at group rates that will be reduced by 2.5% from current rates. 100% of participants enrolled in this benefit will be able to take advantage of this enhancement. Second, eligible employees will be able to purchase such coverage on a pre-tax basis through a “cafeteria plan” arrangement intended to comply with Section 125 of the Internal Revenue Code of 1986, as amended. 100% of participants enrolled in the limited medical insurance program will be able to take advantage of this enhancement. Third, the following additional term life insurance death benefits will be provided for each eligible employee with such coverage: $1,000 increase in life and AD&D insurance coverage for the employee, $500 increase in life insurance coverage for the spouse or a child between the ages of six months and 25 years, and $250 increase in life insurance coverage for a child between the ages of 15 days and six months. 100% of participants enrolled in this benefit will be able to take advantage of this enhancement. Fourth, participants enrolled in the Limited Medical Plan will be provided with access to Health Advocate, Inc., at no cost to those participants or their beneficiaries or dependents. Health Advocate, Inc. is a service that allows participants to navigate health care issues with the guidance of a trained professional, typically a registered nurse (a “Personal Health Advocate”), supported by medical directors and benefits and claims specialists. The Personal Health Advocate can be accessed 24 hours a day, seven days a week, and will assist with clinical issues, claims, benefits, grievances, paperwork, coordination of care between physicians and medical institutions, and other important needs.

• Group Term Life Insurance: Eligible employees will be able to purchase group term life insurance at group rates that will be reduced by approximately 2.5% from current rates. 100% of participants enrolled in this benefit will be able to take advantage of this enhancement. In addition, the life insurance coverage is currently available on a guaranteed issue basis regardless of health (so that employees are eligible to purchase coverage without a physical examination) in amounts up to $25,000 for the employee and $10,000 for the spouse. Under the proposed transactions, the amount of guaranteed issue coverage available for purchase will be increased to a maximum of $30,000 for the employee and $15,000 for the spouse.
• Short-Term Disability (STD): HCSG employees currently do not participate in a group STD program (exception - employees located in New York, Rhode Island, New Jersey, California and Puerto Rico are covered under mandatory state STD programs). Under the proposed transactions, eligible HCSG employees will be able to purchase voluntary STD coverage at group rates that will be approximately 2.5% less than the rates available through other comparable group STD plans on the marketplace. 100% of participants enrolled in this benefit will be able to take advantage of this enhancement. In addition, the STD benefits will be offered to eligible employees without requiring evidence of insurability, provided that the eligible employee is an employee of HCSG on the effective date and enrolls when the STD benefits are first offered to that eligible employee, or within a limited time period when the employee is first employed by HCSG. 100% of employees who enroll in the STD benefit when it is first offered, along with 100% of employees who are hired after the effective date and who enroll in the STD program within 30 days of employment will be able to take advantage of this evidence of insurability enhancement.

The EXPRO process requires the DOL to act within 45 days of an employee benefits submission that would normally be barred by the Employee Retirement Income Security Act. Captive.com viewers are encouraged to read the entire DOL submission of HCSG and its wholly owned captive insurer, HCSG Insurance Corporation.