December 8, 2006

Susan Warkentin, Vice President

Planning & Development

Tucoemas Federal Credit Union

P.O. Box 5011

Visalia, CA 93278-5011

Re: Disease Specific Health Insurance

Dear Ms. Warkentin:

You have asked if a federal credit union (FCU) may reimburse volunteer
officials for premiums associated with disease management health
insurance. Reimbursement of disease management insurance premiums is
permissible if the coverage is reasonable and limited as required by
NCUA's regulations.

The Federal Credit Union Act generally prohibits directors and committee
members from receiving any compensation but allows FCUs to provide
"reasonable health, accident, \[and\] similar insurance protection." 12
U.S.C. §1761(c). NCUA's regulation implementing this provision states
the prohibition on compensation does not prohibit "reasonable health,
accident and related types of personal insurance protection, supplied
for officials at the expense of the credit union," but coverage "must
cease immediately upon the insured person's leaving office, without
providing residual benefits other than from pending claims." 12 C.F.R.
§701.33(b)(1), (2)

An FCU may choose to provide an insurance plan with comprehensive
coverage, including disease management insurance, if the insurance is
reasonable in coverage and amount, is within the bounds of safety and
soundness, and ceases upon the insured leaving office, except for any
pending residual claims. For further guidance, you may find previous
legal opinions from the Office of General Counsel helpful and they are
available on the agency website. *See* OGC Op. 94-0435 (May 10, 1994);
99-0621 (Nov. 8, 1999); 02-1203 (Jan. 22, 2003); and 03-0382 (July 10,
2003).

Employer-sponsored health plans offering disease management programs are
becoming more commonplace. Conceptually, disease management programs
reduce healthcare costs by improving the health of those with chronic
conditions, for example, diabetes, renal failure, or cancer. The goal is
to reduce potential complications by caring for the patient's ailment
and alleviate expensive costs attributed to treating an acute illness.
Studies done by Mercer Consulting indicated employer-based plans
offering these types of programs have grown significantly in recent
years. This rising trend indicates providing disease management programs
may be viewed as reasonable.

Instead of providing insurance directly, FCUs may reimburse officials
for costs related to health insurance. This is permissible so long as
the reimbursements do not amount to compensation. To comply with the
compensation prohibition, an FCU must have a written policy addressing
the extent of coverage for which the FCU will provide reimbursement,
documentation requirements, and how the FCU will monitor direct
application of its funds to insurance premiums.

Providing disease management health care programs to FCU volunteers may
be permissible, following these guidelines. If you would like further
assistance in determining if the particular plan you intend to offer is
permissible, we suggest you contact your NCUA examiner or the
appropriate NCUA regional office.

Sincerely,

/S/

Sheila A. Albin

Associate General Counsel

OGC/AMT:bhs

06-0932

cc: Region V