Archive for April, 2014

Considerations for transitioning out of a PEO

Professional Employer Organizations (PEOs) were developed in order to provide a service that would allow small companies to focus on the more important task of running and growing their business. PEOs contract with small to mid-size companies to assume and manage the responsibility of the employer. The PEO will provide an array of services to a small company, such as risk management, personnel management, human resources and payroll functions, claim management for workers compensation and unemployment insurance, and tax compliance. One of the PEO’s most important functions is to provide comprehensive employee benefit packages, including group health, life, disability, and 401(k) plans. Many smaller organizations find it beneficial to join a PEO as a way to lower the cost of plan administration fees, since they are able to pool resources with other companies. A PEO also handles payroll and other benefit administration services, which can help save time and staff for companies with very limited resources. Read more…

Section 11 claims are on the rise

April 22, 2014 Leave a comment

court22013 was a big year for IPO’s, and 2014 looks to be even busier.  From an initial boost for smaller companies from the JOBS Act to the more recent boom in tech, e-commerce and telecom company filings, IPO activity in the U.S. has reached its highest since 2013. But as more companies go public, the courts are not far behind. Along with the increase in IPO’s has come a similar rise in securities class action suits alleging misrepresentation in IPO companies’ offering documents. More notably, cases filed under Section 11 allegations have become an attractive option for plaintiffs looking to obtain class certification without being dependent on the “fraud on the market” theory.

Section 11 holds Issuers of securities liable for registration statements containing false statements of a material fact or those that omit a material fact. According to the rule, a purchaser of a security may bring suit against a company under Section 11 even if they bought shares on the secondary market, Read more…

Medical device recalls jump over last decade

April 17, 2014 Leave a comment

medicaldeviceRecent reports from the FDA’s Center for Devices and Radiological Health (CDRH) indicate that medical device recalls have nearly doubled (about 97%) since 2003. The Medical Device Recall Report, released last month, analyzed data from the last decade showing the number of recalls, as well as why the products had been pulled from the market. The report looked specifically at devices like ventilators, infusion pumps and external defibrillators, all of which have been historically linked to device failures, such as batter problems or improper device maintenance.

CDRH officials say that while the report’s data may appear alarming, the jump in recalls may be a good thing. The increase reflects industry efforts to improve the quality and safety of medical devices, which has resulted in a greater number of recalls reported. Manufacturers who were cited for violations in the past have an improved understanding of their products, Read more…

Halliburton and IPO Claims

ipoIt happens more than 200 times per year: a publicly traded company discloses an adverse development, its stock price drops, and it — and its directors and officers — are hit with a class action lawsuit by shareholders who allege that they bought the company’s stock based on material misrepresentations and are entitled to financial compensation for the decreased value of their shares once the truth came out. These lawsuits can drag on for years, are expensive to defend even in victory, and can lead to expensive settlements.

In the closely watched Halliburton case, the Supreme Court is reconsidering an earlier holding that made many shareholder class action lawsuits feasible. The Halliburton case involves class action claims brought pursuant to SEC Rule 10b-5, promulgated pursuant to Section 10(b) of the Securities Exchange Act of 1934, as amended. A core element of a 10b-5 claim is that each plaintiff had to rely on the supposed misrepresentation. Plaintiffs’ lawyers have to demonstrate this reliance in the early stages of the lawsuit, as one of the conditions for certification of a plaintiff class. If plaintiffs’ lawyers had to show that each and every plaintiff actually relied on the alleged misrepresentations, broad class actions under Rule 10b-5 would be nearly impossible to pursue. Read more…

Obamacare amended – quietly

opEd-obamacareFor more than four years, the cries from Republicans have been a monotone of “Repeal” when it comes to Obamacare.  That changed recently, and very quietly.  Will this portend more compromise in order to make Obamacare work better or is it an aberration?

The case, outlined here in the Boston Globe on April 7, 2014, is a story of hushed-up legislation passed recently. The change, driven by business groups, eliminated the caps on deductibles for small group policies sold by health insurance exchanges from a $2000 per individual/$4000 family limit, thus allowing higher options that are often popular with smaller employers. Republicans supported the change because it gives more choice to employers. President Obama signed it into law without comment, either.

Read more…

Protecting customer and employee data requires C-Suite involvement

April 7, 2014 Leave a comment

databreach“A game changer changes the way that something is done, thought about, made or addressed.” The game changer as it relates to the risk management and risk transfer of Cyber/Data Liability comes in the aftermath of the Target breach that occurred earlier this year.

Data protection is fast becoming the responsibility of an organization’s CEO and Board of Directors; or both private or public companies. Board and Audit Committee oversight should involve:

  • Education and knowledge of data breach exposures and how they should be monitored, managed and addressed in order to protect a company’s assets and reputation.
  • Data security should be part of an organization’s Board member orientation and an on-going agenda item.
  • Understanding of an organization’s risk profile (credit card systems, employee personnel data, customer Personal Identifiable Information (PII), etc.) at the Board level is paramount.
  • Implementation of a complete data security plan.
  • Board level reporting system and disclosure framework.
  • Continual review of risk management and risk transfer mechanisms.

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Going back to the future with high deductible plans

highdeductibles1Although high deductible health plans (CDHP) have been around for a number of years, these plans are still in the minority of offerings provided by employers. With the roll out of National Health Reform (PPACA), these plans are expected to gain more interest from employers in the next three to five years. This will be either in the form of a total replacement or as a health benefit option.

Having worked in the employee benefits industry for a number of years, I have seen many changes to the design of health insurance plans. Over time, we have gone full circle with our plan designs. In the early 1980’s,  the prevalent plan design for health insurance were major medical plans that included an annual deductible of $100 with members required to pay 20% coinsurance on charges until they had spent $500 out of pocket. From the 1990’s and for nearly two decades after, the most prevalent plan designs were HMO/PPO arrangements. These plans began with $5 office visit co-pays, and over the years have increased to $20 or $25 as the most common office visit co-pays. The copay increases were designed to lower renewal increases.  Basically, they were ‘tweaks’ to the plan design in office visit, emergency room, in /out patient hospital and prescription drug copays, all in order to reduce renewals.

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