A fire sprinkler, as this recent viral video shows, is an effective fire safety tool—but it can be unintentionally discharged when it is accidentally set off by friendly fire or a fire sprinkler head is struck or sheared off by a person or equipment. ...

 

PSA Insurance and Financial Services - 5 new articles


Fire sprinkler + flaming cheese = water damage: Lessons from a restaurant’s mishap

A fire sprinkler, as this recent viral video shows, is an effective fire safety tool—but it can be unintentionally discharged when it is accidentally set off by friendly fire or a fire sprinkler head is struck or sheared off by a person or equipment.

Accidentally activating your fire sprinkler system can be very disruptive to your business and cost a lot of time and money as a deluge of water floods your building. You can call 911, but from there you’ll wait: and a typical fire sprinkler head for a commercial system (not including high-risk or special hazard systems which are much higher) will discharge between 20-40 gallons of water each minute that you wait for emergency responders, which could easily be 10-15 minutes. Even if help arrives in five minutes, at least 100-200 gallons of water fills your building, resulting in significant water damage and expense.

Most business owners never think about the fire sprinkler system, or its accidental consequences, until they are left to pay for damages.

So how can you prevent these accidents and save your business from significant costs, claims and damages?

3 practical steps to prevent and prepare for a fire sprinkler system discharge

Educate

Teach your employees the fire sprinkler basics. Typically, if one sprinkler head goes off, they don’t all go off (not including high-risk or special hazard fire sprinkler systems). Depending on the type of your hazardous work environment, each sprinkler comes with a heat-sensitive element with a different preset temperature that determines when it responds to heat from fire. Only those sprinkler heads in the immediate vicinity of the fire activate and discharge water.

Fire sprinkler heads, if tampered with, struck by tools or equipment, or damaged, can also go off without warning. Make sure your employees know never to hang seasonal decorations from sprinkler heads, which is very common cause of accidental discharges.

Protect

Only use approved cages or guards, made of tough metal that surrounds fire sprinkler heads, to protect them from being damaged if lightly struck. Also, mark areas around sprinklers that could be exposed to accidental impact.

Consider investing in a few prevention tools (quick-stop talon, fire sprinkler stop valve or sprinkler wedge). These can help reduce your property damage by temporarily stopping the water flow until the fire department arrives and repairs your fire sprinkler system.

Prepare

Plan for unintentional sprinkler discharge. Even if you educate employees and protect your fire sprinkler heads, your system can still go off—as shown in the video. To mitigate damage in your building, you’ll need to shut down your system quickly, which requires knowing where your control valves are and marking them accordingly. If you are located in a multi-tenant building, you may not have access to each control valve, which would delay you in shutting down fire sprinkler system—causing unnecessary additional damage. Discuss possible action plans with your landlord to mitigate this problem.

Stay tuned for our next blog in this series, which will discuss how to develop and conduct a sprinkler impairment plan when you shut down your fire sprinklers for regular maintenance or for repair, and how to notify your insurance company to avoid potential coverage issues.

In the meantime, if you have more questions about fire sprinkler systems and how to manage your related risks, please feel free to contact me at spomponi@psafinancial.com. For more safety tips, also check out our Risk & Safety Management Resources.

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New looks. New features. Redesigned PSA website.

We’ve made improvements with you in mind.

After a long few months of hard work, our redesigned website is finally here. It offers a refreshed, clean layout; a clear, site-wide navigation; and streamlined content to feature services, job openings and free resources of most value to you. Plus, it’s designed to be super-fast and easy to use on your favorite mobile device.

A log in portal to different services has also been introduced to provide our clients with many time-saving features. Some of these capabilities include quick access to your business and personal policies, the ability to retrieve auto ID cards, a secure environment to communicate and share confidential information with your customer service representative, as well as a number of resources specific to your account with PSA.

We will continue to add more content, including downloadable guides, whitepapers, on-demand videos, blog posts, and other relevant resources on a variety of topics to help you make informed decisions in managing your personal or business risks.

The PSA Perspective blog has also been updated with the capability to sort articles by topic depending on your interest, and it allows you to sign up for our weekly posts.

We hope you’ll enjoy visiting the PSA website and find our content useful.

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Department of Labor Continues to Focus on Mental Health Parity (Benefit Minute)

The Mental Health Parity and Addiction Equity Act (MHPAEA) requires that financial requirements and quantitative treatment limitations imposed on mental health and substance use disorder benefits cannot be more restrictive than the requirements that apply to medical/surgical benefits in the same classification.

MHPAEA also states that a group health plan may not impose non-quantitative treatment limitations (NQTL) with respect to mental health/substance use disorder benefits that are more restrictive than comparable limitations applied to medical/surgical benefits and imposes certain disclosure requirements. The 21st Century Cures Act passed in 2016 mandated that DOL solicit feedback and issue guidance regarding the disclosure and NQTL requirements. As a result, the DOL (with HHS and Treasury) recently issued guidance that includes proposed FAQS, a revised disclosure template, a self-compliance tool and an enforcement fact sheet. The guidance will take effect when final FAQs are published.

Proposed FAQs

The proposed FAQs primarily address NQTLs.  These FAQs focus on how the NQTLs are applied in operation (even when the language of plan seems to be compliant) and address relevant issues such as ABA therapy, opioid addiction and eating disorders.  The FAQs address the following:

Experimental/investigative treatments: To the extent that a plan follows current medical evidence and professionally recognized treatment guidelines for determining whether a medical/surgical treatment is covered, the same standard must apply to mental health/substance use disorder treatments.  For example, if a plan defines Autism Spectrum Disorder as a mental health condition, the plan must cover ABA therapy if supported by the same treatment guidelines that are used to determine that an experimental medical/surgical treatment will be covered. The experimental treatment exclusion cannot be applied unconditionally to mental health/substance use disorder treatments when it is applied conditionally to medical/surgical treatments.

Medical management standards: A plan may impose prescription drug dosage limits as a medical management technique.  However, to the extent that a plan follows professionally recognized treatment guidelines to set dosage limits for prescription drugs related to medical/surgical conditions, the same standard must apply to mental health/substance use disorder treatments.  For example, a plan cannot set a lower dosage limit for buprenorphine to treat opioid use disorder when the dosage limits for medical/surgical benefits follow the treatment guidelines.

General exclusions: A plan may exclude all benefits for a particular condition or disorder without violating MHPAEA.  However, once the condition is covered, the NQTLs requirements apply.  Certain fully insured plans may not have the flexibility to exclude particular mental health/substance use disorder conditions due to state insurance law and ACA essential health benefit requirements.

Step therapy: If a plan requires step therapy, the processes, strategies, evidentiary standards and other factors must be comparable and cannot be applied more stringently for mental health/substance use disorder treatments.  For example, a plan cannot require 2 unsuccessful outpatient attempts to be eligible for inpatient mental health/substance use disorder treatment if only one unsuccessful attempt is required for inpatient medical/surgical treatment.

Facility type: If the plan excludes or limits benefits for mental health/substance use disorder treatment based on the type of facility, the plan must use comparable factors applied no less stringently for medical/surgical treatment.  For example, if inpatient out-of-network medical/surgical treatment outside of a hospital is covered with prior authorization, then the plan may not unequivocally exclude all inpatient out-of-network mental health/substance use disorder treatments outside of a hospital (e.g. residential treatment center for eating disorders).

Provider reimbursement rates and network adequacy: While a plan is not required to pay identical provider reimbursements for medical/surgical and mental health/substance use disorder, the plan’s standards for admitting a provider to participate in the network and the reimbursement methodology must be comparable.  In addition, to the extent that factors such as distance standards and appointment waiting times are used to measure network adequacy, these factors must be applied comparably.  For example, a plan may not reduce the reimbursement rate for non-physicians providing mental health/substance use disorder services if both physician and non-physician practitioners are paid the same reimbursement rate for medical/surgical services.  Similarly, a plan may not attempt to ensure that participants can schedule an appointment within 15 days for medical/surgical services if the same factor is not used in developing the network for mental health/substance use disorder services.

The FAQs also address network provider directory requirements and clarify that ERISA-covered health plans are required to furnish an up-to-date directory of mental health/substance use disorder providers, either as part of the SPD or as a separate document that accompanies the SPD.  The directory may be provided electronically in accordance with the DOL’s electronic distribution rules. The summary of benefits and coverage (SBC) must also include information for obtaining a list of network providers.

Requesting Documentation for Treatment Limitations  

The DOL has also provided a disclosure template which can be used by plan participants to request general information about the plan’s NQTLs or specific information about treatment limitations that may have resulted in a denial of plan benefits.  A plan or insurer must be prepared to respond to the request for information within 30 days of receipt.  The form requests that the plan:

  • Provide specific plan language regarding the limitation and how it applies to both medical/surgical benefits and mental health/substance use disorder benefits;
  • Identify factors used in the development of the limitation;
  • Identify evidentiary standards used to evaluate the factors;
  • Identify methods and analysis used in the development of the limitation; and
  • Provide any evidence and documentation to establish that the limitation is applied no more stringently, as written and in operation, to mental health/substance use disorder benefits than to medical/surgical benefits.

Penalties for MHPAEA Violations

Under current law, the penalty for MHPAEA violations is equitable relief – a plan must provide the benefits that the participant was entitled to receive in compliance with MHPAEA.  Additionally, the DOL does not have authority to enforce MHPAEA directly against insurance carriers.  The DOL has suggested that Congress should strengthen the law by creating a new civil monetary penalty regime.

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PSA does Cinco de Mayo

We wish a relaxing holiday to everyone.

 

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Legislative and Regulatory Updates (Benefit Minute)

This issue of the Benefit Minute provides a recap of some recent state and federal legislative and regulatory activity.

Federal – Family HSA Limit Back to $6,900

EB Affordable Care Act

In March 2018, the IRS announced that the annual HSA contribution limit for family coverage under a Qualified High Deductible Health Plan (QHDHP) was being reduced from $6,900 to $6,850 due to a tax reform-related change in the index that is used for certain benefit-related amounts that are subject to inflation adjustments.

On April 26, 2018, the IRS reversed course.  In response to concerns raised by stakeholders, it was announced in Rev. Proc 2018-27 that the IRS will allow taxpayers to treat the originally announced $6,900 as the 2018 HSA contribution limit for family coverage under a QHDHP.

The IRS cited the following reasons:

  • costs of modifying systems for the reduced maximum;
  • costs associated with distributing $50 excess contributions and related earnings; and
  • compliance with Code section 223(g)(1) which requires that the annual HSA contribution limits be published by June 1 of the preceding year.

The IRS has provided several alternatives to address tax treatment if the $50 excess contribution was already withdrawn.  However, in no case may the tax exclusion for 2018 exceed $6,900 (plus any catch-up contributions).

Maryland – Male Sterilization and Health Savings Accounts (HSA)

In 2016, the Maryland legislature passed a law requiring all health insurers to cover male sterilization procedures as preventive care without any cost sharing for policy years beginning on or after January 1, 2018.  This raised concerns as to whether fully insured QHDHPs issued in Maryland would be HSA-compatible since the IRS had never stated whether male

sterilization procedures qualified as preventive care benefits (thereby permitting the services to be covered for free before the minimum deductible for a QHDHP is met).

Two recent developments have settled this issue.  First, in March 2018, the IRS issued Notice 2018-12 which states that a health plan that provides benefits for male sterilization without these services being subject to the deductible is not a QHDHP.  However, the IRS has provided transition relief until January 1, 2020 if coverage has been or will be provided for male sterilization services without being subject to the deductible.  During the period of transition relief, individuals covered by a health plan that fails to be a QHDHP because of the male sterilization coverage will still be treated as eligible individuals for purposes of HSA contributions.

Second, in April 2018, the Maryland legislature amended the previous law, thereby allowing coverage for male sterilization in a QHDHP to be subject to the plan’s deductible. QHDHPs are still not allowed to impose coinsurance or copayment requirements on male sterilization procedures once the deductible has been met.  As a result of these developments, individuals covered by fully insured QHDHPs issued in Maryland continue to be eligible to contribute to an HSA.

Maryland – New Premium Tax on Health Insurers

The Maryland legislature has passed a bill that implements a 2.75% premium tax for 2019 on health insurers in Maryland, which will be passed on to consumers in the form of higher premium costs.  This state premium tax “replaces” the ACA’s health insurance tax that was suspended for 2019 in the January 2018 short-term funding resolution passed by Congress.  The funds generated from the premium tax will be used to create a state reinsurance program for insurers who offer Marketplace plans in the state.

Federal – Qualified Transportation Fringes

Federal tax reform eliminated the employer tax deduction for employer-paid transit and parking benefits and required that tax-exempt employers pay unrelated business income tax (UBIT) on employer-paid transit and parking benefits. Recent IRS guidance has clarified that the employer tax deduction is lost when employees pay for parking and transit benefits with salary reduction contributions since these salary reduction amounts are considered employer contributions.  It is expected that many employers who provide these benefits will continue to do so regardless of the corporate tax implications due to mandated transit benefits in some municipalities and lower corporate tax rates beginning in 2018.

Federal – Tax Credit for Paid Family Leave

Federal tax reform allows employers that offer at least two weeks of annual paid family and medical leave with at least 50% wage replacement to receive a general business tax credit for those wages paid to certain employees in 2018 and 2019. The IRS recently issued general guidance in the form of questions and answers.  Topics addressed include:

Eligible employer: an employer with a written policy that provides for at least 2 weeks of paid family and medical leave annually to all qualifying employees who work full time (pro-rated leave for part time employees) and pays at least 50% of wages normally paid to the employee.

Qualifying employee: an employee who has been employed for at least one year and who, in the preceding year, had compensation equal to or less than 60% of the compensation threshold for highly compensated employees. To obtain the credit in 2018, the employee’s 2017 wages must have been not more than $72,000.

Eligible leave: leave for any of the reasons stipulated in the federal Family and Medical Leave Act (FMLA), including birth or adoption of a child, to care for a spouse, child or parent with a serious health  condition,  employee’s own serious health condition, qualifying exigency related to active duty and care for a service member.

Calculation of the tax credit: the credit is available on up to 12 weeks of paid leave.  The minimum percentage is 12.5% of wages paid, which increases by .25% for each percentage point by which the amount paid to a qualifying employee exceeds 50% of wages (up to a maximum of 25% if 100% of wages are paid during the leave).  The employer’s tax deduction for wages paid is reduced by the amount of the tax credit.  In addition, wages taken into account for any other general business credit may not be used in determining the paid leave tax credit.

The IRS expects that additional information will be provided to address other topics related to the tax credit for paid family and medical leave, including:

  • when the written policy must be in place;
  • how paid family and medical leave relates to an employer’s other paid leave;
  • how to determine whether an employee has been employed for one year or more;
  • the impact of state and local leave requirements; and
  • whether members of a controlled group are treated as a single taxpayer in determining the credit.

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