Medicare Secondary Payer Compliance for US Property & Casualty Insurance 2 November 2010

Objectives Why Gould & Lamb? Definition of: Social Security Medicare Medicare Secondary Payer Act Medicare Recovery Rights Past Payments Future Payments MSP Compliant S/J/A Penalties for Non-Compliance Medicare Medicaid SCHIP Extension Act 2

Why Gould & Lamb? Gould & Lamb is a single source to satisfy Medicare Secondary Payer (MSP) compliance as well as Mandatory Insurer Reporting (MIR) obligations for the Lloyd’s Market OneSource© System is the technology solution for automated MSP notification and MIR Gould & Lamb is the United States’ largest and leading MSP and MIR Compliance provider 3

Social Security The Social Security Act (42 U.S.C.A. § 301 et seq.), designed to assist in the maintenance of the financial well-being of eligible persons, was enacted in 1935 Social Security pays benefits to people who cannot work because they have a medical condition that is expected to last at least one year or result in death US Federal law requires this very strict definition of disability 4

Social Security (cont.) US workers are required to make payroll contributions to Social Security In general, to qualify for disability benefits, one must meet two different earnings tests: A “recent work” test based on age at the time of disability A “duration of work” test to show sufficient work quarters under Social Security After 24 months of receiving Social Security Disability Insurance benefits, Medicare eligibility is automatically established 5

Medicare A US Federal health insurance program for individuals: Age 65 or older Under age 65 with certain disabilities After 24 months of receiving Social Security Disability Insurance (SSDI) Suffering from End-Stage Renal Disease (ESRD) or Amyotrophic Lateral Sclerosis (ALS) 6

Medicare Statistics (Kaiser Family Foundation) 47M Americans currently have Medicare coverage 8M are permanently disabled under 65 16% of the Medicare population is under 65 and permanently disabled Medicare is 12% of the Federal budget and 20% of the total national healthcare expenditures Medicare spending is predicted to double from $528B (approx. £330B) in 2010 to $1,038B (approx. £649B) in 2020 Next 20 year predictions: People on Medicare is projected to rise from 47M to 79M Ratio of workers per beneficiary will decline from 3.7 to 2.4 By 2017, Part A Medicare trust fund is projected to be depleted Part A spending has exceeded income since 2008 7

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Medicare – Part A Part A Hospital Insurance Beneficiary is automatically enrolled if eligible for Medicare benefits Benefit coverage under Part A includes inpatient care in hospitals and short term skilled nursing facilities (but not custodial or long-term care) Hospice (palliative) care Home Health care services as defined by Medicare coverage guidelines (Beneficiaries must meet certain conditions to receive these benefits) 9

Medicare – Part B Part B Medical (Outpatient) Insurance Beneficiary is required to elect and enroll for Part B benefits upon eligibility Benefit coverage under Part B includes: Outpatient physician office visits Outpatient rehabilitation (physical and occupational therapy) Home Health Care (as defined by Medicare coverage guidelines) Outpatient surgical and ambulatory care procedures 10

Medicare – Part D Part D Prescription Drug Coverage Formulary 1 January 2006, Medicare prescription drug coverage became available to Medicare beneficiaries The Medicare Beneficiary may choose to elect and enroll for Part D benefits upon eligibility Private companies provide prescription drug coverage. Beneficiaries choose the drug plan they wish to enroll in, and most pay a monthly premium. Formulary Prescription Drug coverage Exclusions 11

Medicare Secondary Payer Act 42 U.S.C. 1395y(b) [section 1862(b) of the Social Security Act], and 42 C.F.R. Part 411 Medicare has been secondary to workers’ compensation benefits from the inception of the Medicare program in 1965. The liability insurance (including self-insurance) and no-fault insurance MSP provisions were effective December 5, 1980. 12

Medicare Secondary Payer Act Medicare is precluded from paying for a beneficiary’s medical expenses when payment “has been made or reasonably can be expected to be made under a workers’ compensation plan, an automobile or liability policy or plan (including a self-insurance plan), or under no-fault insurance.” Primary Payers (CFR 411.20): Workers’ Compensation, Liability, Auto No Fault, USL&H, and Jones Act 13

Medicare Recovery Rights Two aspects of protecting Medicare: Compromise: Right of recovery for past Medicare payments (conditional payments, a.k.a. Medicare liens) Commutation: Consideration for Medicare recovery of future injury-related, Medicare covered medical expenditures (future allocation) 14

Medicare Recovery Rights: Past Payments Compromise: Medical payments made by Medicare where a primary payer has not paid promptly Medicare makes a “Conditional Payment” reserving their rights to proceed against the primary payer for reimbursement Conditional Payment Research (CPR) Conditional Payment Negotiation (CPN) 15

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Penalties for Non-Compliance: Conditional Payments 42 USC 1395 (y)(b)(2)(B) allows the US Federal Government to bring an action against “any” responsible party Double damages plus interest may be collected from the primary payer Medicare may refuse to recognize any settlement contrary to the MSP Medicare may refuse future benefits to claimant for treatment related to alleged injury 17

Medicare Recovery Rights: Future Payments Commutation: Consideration for Medicare recovery of future injury-related, Medicare covered medical expenditures Claim Settlement Allocation (CSA) Liability Settlement Allocation (LSA) Liability Medicare Set-aside Allocation (LMSA) 18

Medicare Recovery Rights: Future Payments Liability CSA, LSA, LMSA CSA LSA LMSA General orthopedic injuries and/or zero allocation without cost projections Any of the following conditions CRPS, chronic pain with SCS or ITP, major psych condition, immunodeficiency, vision/hearing loss with prosthesis and/or zero allocation with Total settlement amount greater than $250,000, not workers’ compensation and/or underlying workers’ compensation injury and/or non-workers’ compensation catastrophic claim 19

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MSP Compliant Settlement/Judgment/Award Resolution of conditional payments Settlements must “adequately consider” Medicare’s interests Applicable if future medicals are limited or closed by settlement 21

MSP Compliant Settlement/Judgment/Award No cost shifting to Medicare by “primary payer” Medicare can make conditional payments and seek reimbursement from the “primary payer” Absent “adequate consideration” of Medicare’s interests, Medicare may fail to recognize the settlement 22

Potential Penalties for Non-Compliance: Future Medical Medicare may refuse to recognize any settlement contrary to the MSP Act Medicare may refuse future benefits to claimant for treatment related to alleged injury 23

Medicare Medicaid SCHIP Extension Act Former President George W. Bush signed the bill into law on December 29, 2007. The law is designed to provide a funding vehicle for the State Children’s Health Insurance Program by establishing a series of reporting requirements and a civil money penalty for non-compliance. Section 111 requirements are applicable to Group Health Plans and Workers’ Compensation, Liability and No-Fault Auto plans (collectively referred to as non-GHP). 24

Responsible Reporting Entity (RRE) What is an RRE? The self insured entity or carrier that has assumed, been assigned or adjudicated as the primary payer responsible for ongoing medical care or has entered into a settlement/judgment/award to or for the benefit of the injured party An insured entity that engages in a business, trade, or profession and acts without recourse to its insurance “Self-Insured Retention” refers to the risk the insured retains that is not included in the coverage provided by the insurer 25

Responsible Reporting Entity An RRE is not: A third party claims administrator An entity that is responsible for payment within a deductible “Deductible” refers to the risk the insured retains with respect to the coverage provided by the insurer The entity that reimburses the assumed, assigned or adjudicated primary payer 26

RRE Registration Must be completed and deemed “production ready” within 180 days of commencement Gould & Lamb participated in the Pilot Test and is “production ready” for all associated RREs, therefore individual testing is not required Gould & Lamb will assist with the registration process 27

Triggering Events for Reporting For claims involving Medicare eligible injured parties: Acceptance of Ongoing Responsibility for Medical (ORM) Responsibility for making a payment to or for the benefit of the injured party/beneficiary Post 1 January 2010 Termination of ORM Settlement/Judgment/Award Total Payment Obligation to the Claimant (TPOC) Post 1 October 2010 28

Penalties for Non-Compliance Section 111 of SCHIP serves 4 purposes: $1,000 per day, per claim fine (approximately £640) Estimated $1.1B in fines to fund SCHIP (approximately £702,068,400) Discover billions in unresolved Medicare liens (conditional payments) and seek immediate recovery Cease making ongoing conditional payments in the future Ensure that all settlements “adequately consider” (allocate) Medicare’s interests as required by law 29

OneSource© System Technologically diverse, internally developed and maintained technology solution for MIR Accepts proprietary Gould & Lamb, standard CMS and Universal File Specifications Manual data entry via website Provides an automated Medicare-approved reporting solution Significantly reduces exposure to Medicare penalties for non-compliance to the Lloyd’s Market 30

Key Data Elements Received from the Lloyd’s Market On All Claims to Perform Medicare Query Function (MQF) First Name Last Name Gender Date of Birth Social Security Number AKA “The Big 5” 31

Key Data Elements Received from the Lloyd’s Market For Claims Involving Medicare Eligible Injured Parties/Beneficiaries (partial population over time) CMS Date of Incident Post 12 December 1980 First date of exposure, implantation, ingestion or traumatic injury ORM Indicator Yes/No TPOC Date & Amount ICD9 Alleged Cause of Injury and Diagnosis Codes State of Venue Policy Number Plan Insurance Type Tax Identification Number (pseudo-TIN) 32

Data Elements Provided to the Lloyd’s Market by Gould & Lamb Weekly Claim Status File provided as a snapshot of claims sent to Gould & Lamb, which includes: Medicare Secondary Payer Alerts Record ‘Last Update’ Date and ID Mandatory Insurer Reporting (MIR) Flag and ‘Last Report’ Date Injured Party Medicare Eligibility Status Data Validation Status and Validation Description Quarterly Claim Response File from Medicare includes: Disposition Status of each Claim Record Disposition Error Codes Compliance Flags1 33

Security and Data Transfer Mechanisms File exchanges via: Secure File Transfer Protocol (SFTP) Secure Socket Layer encrypted website (HTTPS) PGP encryption, if desired iService (HTTPS website) Detailed Disaster Recovery Plan, including failover to “warm site” “Need to know” data segregation via Siebel 8.0 34

Mandatory Insurer Reporting (MIR) Workflow 35

iService Web Portal 36

iService Login Screen 37

iService Claims Tab 38

iService New Claim Entry 39

iService Claim Edit 40

iService Data Validation 41

iService Successful Data Validation 42

iService Medicare Responses Tab 43

iService Additional Features User account management Audit tracking Ad hoc reporting and data extraction Customizable views Performance monitoring Integrated technical support Video tutorials 44

Implementation Key Dates For Reporting Training Tentative CMS Production Date: 15 April 2011 Monthly Query: 8th of every month Big 5 Data to Gould & Lamb by 6 February 2011 Claim Data to Gould & Lamb by 13 April 2011 Training Once a complete TPA list received, a welcome letter e-mail is distributed providing a high level overview of objectives, expectations and plans for upcoming training Project management software Numara – TrackIt! 45

Implementation Dedicated team approach Dedicated Client Liaison Specialists to each Managing Agent /TPA Assume ownership of implementation, Assisted by Report Services Coordinator with participation and oversight by Reporting Services Manager Overall tracking, oversight and performance evaluation by VP of IT and Strategic Services 46

Implementation Track record Depends on complexity and IT solution engaged with client Began conducting Medicare Queries in July 2009 Completed Pilot Test in February 2010 (one of only three companies at the time) Sent first production Quarterly Claim File for an RRE in July 2010 and have reported for 712 RREs to date 47

Implementation Escalation process Questions / issues presented to the Client Liaison Implementation Specialist (via e-mail) not responded to within two business days, escalated to John Miano, Manager of Reporting Services If Manager of Reporting Services does not respond within one business day, escalated to VP of Information Services, Scott Huber If VP of Information Services not respond within one business day, escalated to Deb Pfeifle, CEO 48

Implementation Linking group to London office Weekly teleconference Live meetings as needed prior to CMS designated mandate and for RRE reporting group Viability of Achieving the 180 days Various solutions to meet production goals iService Only – direct data entry 49

Conclusion Gould & Lamb is Your Partner in Compliance, providing the single source to satisfy all Medicare Secondary Payer (MSP) compliance issues as well as Mandatory Insurer Reporting (MIR) requirements for the Lloyd’s Market OneSource© System is the most flexible and advanced technology solution in the industry This is just the beginning 50

Thank You Contact information Telephone Number: 941.798.2098 Toll Free Telephone Number: 866.672.3453 Deborah Pfeifle, Ext. 1404 President & COO Deborah.pfeifle@gouldandlamb.com Russell Whittle, Ext. 1554 VP of MSP Compliance Russell.whittle@gouldandlamb.com Kip Daniels, Ext. 1077 Executive Vice President Strategic Services Kip.daniels@gouldandlamb.com Scott Huber, Ext. 1456 Vice President of Information Services Scott.huber@gouldandlamb.com John Miano, Ext. 1518 Manager of Reporting Services John.miano@gouldandlamb.com Website: www.gouldandlamb.com 51

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