On June 24, 2019, President Trump issued his “Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First.” This Order requires hospitals to publicly post their prices, and is designed to give healthcare consumers more choice and better decision-making capabilities.

Join The Phia Group’s legal team as they discuss the executive order point by point; they’ll touch on what they like and don’t like about it, and – more importantly – what this all means for you.

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By: Andrew Silverio, Esq.

Recently, the Trump administration released a finalized rule establishing the conditions under which employers can utilize HRAs to subsidize their employees’ purchase of individual coverage, including coverage on the Exchange.

Under the rule, employers are able to provide enrollees with a fixed dollar amount, tax exempt, which can be used to buy individual coverage.  While the rule doesn’t relieve the employer’s obligations to provide group coverage, if applicable, participation in the individual coverage HRA is conditional upon having individual coverage, which includes Medicare.  This requirement is applicable for the employee and any dependents.  Additionally, the individual coverage must satisfy certain requirements to qualify under the rule, allowing an individual to utilize the ICHRA, and individuals must attest that they have suitable individual coverage.

Notably, the model notice and attestation (available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Downloads/HRA-Model-Notice-PDF.pdf and https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Downloads/HRA-Model-Attestations-PDF.pdf) provided by the administration contain no disclosure or explanation that certain coverage, such as certain limited-benefit plans or health sharing ministries, would not satisfy the rule’s requirements relating to the suitability of other coverage.

Critics of the rule have pointed to a few plausible factors in arguing that it will raise the price of individual coverage in the exchanges, both by incentivizing sicker employees within a workforce and employers with sicker employee populations overall to feed high risk lives into the individual markets.  Additionally, it has been noted that older participants may not benefit sufficiently from the ICHRAs, because the limitations on how much the contribution amounts can differ based on age will be insufficient to compensate for the naturally disproportionate premiums those participants will encounter in the individual market.

Finally, the content of the rule aside, the quick turnaround time of a 01/01/2020 effective date is leaving state marketplaces scrambling, with many saying it will be simply impossible to implement sufficient changes in just a few months to be equipped to manage enrollment accurately under the new rule.

This is a significant development, with implications in the ACA, tax code, employment law, and other fields.  Court challenges are likely, but as of now the rule stands to go “live” in just a few months.  Reach out to The Phia Group at PGCReferral@phiagroup.com with any questions or for more detailed information on any of the rule’s contents.

In this episode of Empowering Plans – Tales from the Plan, The Phia Group’s VP of Legal Recovery Services discusses his experiences before and after becoming a happy participant in Direct Primary Care.  If you are one of the many people who’ve heard about “DPC” but still wonder how it will be received by the plan participants, tune in.

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By: Erin M. Hussey, Esq.

On May 21, 2019, Health and Human Services (“HHS”) published the Final Conscience Rule with an effective date of July 22, 2019, which allows the denial of certain health care services for religious reasons. This rule protects providers, individuals, and other health care entities from having to provide, pay, or refer services such as abortion, sterilization, or assisted suicide. The rule also protects those providers, individuals, and other health care entities from discrimination on the basis of their exercise of conscience in HHS-funded programs. The intent of this rule is to protect religious and moral objections from having to conduct or pay for these services.

This rule also details compliance obligations such as non-retaliation requirements. The Director of HHS’s Office of Civil Rights (“OCR”), Roger Severino, stated the following on that matter:

“This rule ensures that healthcare entities and professionals won’t be bullied out of the health care field because they decline to participate in actions that violate their conscience, including the taking of human life. Protecting conscience and religious freedom not only fosters greater diversity in healthcare, it’s the law.”

Following the publication of the Final Conscience Rule, many lawsuits were filed, including one brought by 23 Democratic states and one brought by the city of San Francisco, and both of those lawsuits essentially argue that the Final Conscience Rule is unconstitutional. As a result of those lawsuits, HHS has now delayed the effective date of the rule until November 22, 2019. With regards to the delayed effective date, the city attorney of San Francisco, Dennis J. Herrera, stated the following:

“We have won this battle – and it was an important one – but the fight is not over. The Trump administration is trying to systematically limit access to critical medical care for women, the LGBTQ community, and other vulnerable patients. We're not going to let that happen. We will continue to stand up for what's right. Hospitals are no place to put personal beliefs above patient care. Refusing treatment to vulnerable patients should not leave anyone with a clear conscience.”

We will be watching to see if the Final Conscience Rule goes into effect on November 22, 2019. This final rule coupled with the proposed rule on Section 1557, which was discussed in our previous blog, will have a major impact on different classes of vulnerable patients.

For more information on the Final Conscience Rule, please see HHS’s fact sheet found here: https://www.hhs.gov/sites/default/files/final-conscience-rule-factsheet.pdf.

In this meaningful episode, Ron Peck tells us about his family’s battle against cancer, and lessons we can all learn from their experience.  Health benefits play a role in our health and survival. You can’t afford to miss this one.

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The Lien, Mean, Subrogation Machine

By: Maribel Echeverry McLaughlin, Esq

When you think of personal injury attorneys, you may imagine men in trench coats with cheesy tag lines with inflated promises, and commercials with ambulances blaring in the background.  Fortunately, I do not like trench coats, my tag lines are only sometimes cheesy, and ambulances terrify me.  

While attending law school, I worked for an attorney who became a state legislator, which meant I was forced to learn the ins and outs of running a practice in a very short period of time.  That experience ultimately left a bad taste in my mouth for opening my own firm.  Eventually, after graduating law school, I started my career as a junior associate in the personal injury firm down the street and became the partner’s main resource for research… and coffee.  

Working there opened my eyes to new experiences, such as the opportunity to practice law with a team of partners and senior associates.  We met once a week and strategized on how to win the most amount of money for our clients and, obviously, for the firm.  Sometimes those two goals conflicted with each other and we would work to find a resolution that would make sense for all parties involved.  

Interestingly enough, that typically meant negotiating with healthcare providers and health insurance plans.  In my tenure with this firm, I may have come across at least five (5) liens from private self-funded benefit plans.  After much negotiation and push back from the plans, each of them were resolved.  But it was not until I left that world that I realized how little personal injury attorneys actually know about the Employment Retirement Income Security Act (ERISA), self-funded health plans, and how they function in our world.  

Overview of the Law:
In 1990, the United State Supreme Court ruled in FMC Corp. v. Holliday,¹ that state law will not prevent a private self-funded plan governed under ERISA from obtaining reimbursement. Additionally, the Court ruled that any state law that is contrary to ERISA would be preempted if the Plan’s language so provides or there is a clear contradiction to the federal law.

For years, this law went unchallenged until 2006, when Mr. and Mrs. Sereboff were involved in a motor vehicle accident, and the Mid Atlantic Medical Services Employee Health Plan paid related claims in the amount of $74,869.37.  

The Sereboff’s eventually settled their personal injury claim for $750,000.00 and did not reimburse the self-funded Plan.  The Plan eventually filed suit in the U.S. District Court for the District of Maryland, claiming a right to collect from the Sereboffs under § 502(a)(3) of ERISA.  

The Court ruled in Sereboff v. Mid Atlantic Medical Services² that the federal courts have subject matter jurisdiction over actions where an ERISA-covered Plan seeks equitable relief.  The Court further ruled that if an ERISA-covered Plan has paid medical benefits arising from an act or omission of a third-party for which a plan participant obtains a settled or jury award, the Plan has a right to right to enforce the terms of the Plan Document pursuant to ERISA 502(a)(3), for equitable relief.

Shortly after, the Supreme Court held again in US Airways, Inc. v. McCutchen³, that the terms of an ERISA-covered Plan would be enforced as written, despite any contrary state law or equitable principle.  

This was a landmark decision as it clarified that the “common fund” and “made-whole” doctrines could be disclaimed by an ERISA Plan in their Plan Document language.  Whether adopted by state statute or relying on common law, neither of these doctrines can be used to defeat the Plan’s right of full reimbursement as long as there is clear language in the Plan Document disclaiming the application of these principles.

Most recently, the Court decided in Montanile v. Board of Trustees of Nat. Elevator Industry Health Benefit Plan⁴, when a participant in an ERISA plan dissipates a third-party settlement on non-traceable items, the plan fiduciary may not bring suit to attach the participant's separate assets⁵.  In other words, the Plan is only entitled to “their” money, but if it cannot be traced in an asset that was paid for with that money, then the Plan cannot sue for the member’s general assets.  

Decisions to Settle and Negotiate Liens by Personal Injury Attorneys:
While working for the trench coats, I realized that large insurance carriers, such as Blue Cross, United, etc., were willing to settle without much work and negotiation.  At that time, it was easier to settle those liens than trying to work out a balance with a provider and proved to be more financially sound for the member.  

After negotiating with many private self-funded Plans, I realized they were, and still are, the most difficult to negotiate.  Attorneys will advocate zealously for their clients, whether they are victims of a horrific car accident case, or for the Plans themselves.

I received a letter not too long ago, from a lien resolution company in California, that was fifteen pages long, filled with arguments for the Plan to reduce their lien. Interestingly enough, after doing a quick internet search, it happens to be a string of arguments that many plaintiff attorneys are making to work through the private self-funded Plans governed by ERISA.  

Some of these arguments are easy to argue away, such as the common fund and made-whole arguments, especially if they are disclaimed in the Plan’s language.  

The attorney from the lien resolution company was representing a member and their attorney, for reimbursement and subrogation claims.  He sent me exactly what the member’s attorney had requested for a reimbursement, and interestingly enough, the Plan had previously refused to reduce their interest.  He made many arguments throughout those 15 pages and frankly only two stuck out to me.

He titled one “Deficiencies in the Plan Documentation”⁶; in which he alleged that the Plan administrator must properly disclose any reimbursement provision to Plan beneficiaries in the Plan document.

He opined that the Ninth Circuit, 29 C.F.R. 2520.102-2(b) requires that “(1) the description of summary of [a] restrictive provision must be placed in close conjunction with the description or summary of benefits, or (2) the pages on which the restrictive provision is described must be noted adjacent to the benefit description.”⁷ 

The Court ruled that a reasonable Plan participant should not have to read every provision of a Plan’s documentation in order to ensure they have read every restrictive provision.⁸  The Court invalidated an inconspicuously-placed provision where the limitations for third party liability and out-of-pocket maximums were separated from the Plan’s description of benefits by multiple unrelated plan provisions, without cross-references or indexing.  

Our client’s Plan had the reimbursement provision entirely isolated from other provisions of the Plan’s documentation, and as such, would be invalidated by the Ninth Circuit.

The second argument cited was titled “Out of Pocket Maximum.”⁹ Here, he alleged that the Plan Document provided that individual beneficiaries would not pay more than a specific amount toward medical expenses.  He explained that the “Out of Pocket Maximum” should be a defined term, but in this document, it was not.  He also pointed out that the Plan Document does not define the terms “reimbursement”, “subrogation”, “lien” or other terms relevant to the third-party provision.¹⁰

As a former plaintiff’s attorney, I can understand and appreciate the zealous advocacy that this attorney was providing to his client.  It is difficult to balance all the interests especially when the common understanding is that the insurance companies have an abundance of money and that this lien interest would not break the bank.  

In reality, after explaining the concept of self-funding and paying claims out of the pool of money for all members that pay their premiums, attorneys tend to appreciate the advocacy we provide on behalf of these Plans.  These are not big bad insurance companies, as many people perceive; these are usually smaller companies, with the hope of keeping the risk low, and claims paid.  The opportunity for reimbursement for third party claims keeps the premiums low for the members, a concept that eventually attorneys or members understand completely.  

After reviewing these arguments with other attorneys in our office, we agreed that we should amend our major medical template to include these definitions and add references to certain places in our Flagship Plan document, in order to avoid these sorts of arguments from other attorneys in the future.

Specialists in plan document drafting and subrogation attorneys will be able to review your plan document to ensure we address all of the arguments to meet the needs of self-funded groups and their members.
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  ¹FMC Corp. v. Holliday, 498 U.S. 52 (1990)
  ²Sereboff v. Mid Atlantic Medical Services, 547 U.S. 356 (2006)
  ³US Airways, Inc. v. McCutchen, et al., 133 S.Ct. 1537 (2013)
  ⁴Montanile v. Board of Trustees of Nat. Elevator Industry Health Benefit Plan, 135 S.Ct. 651 (2016),
  ⁵Id. at 655
  ⁶John J. Rice, Esq, LTR #3 to Phia - Clariza (2018)
  ⁷Spinedex Physical Therapy USA Inc. v. United Healthcare of Arizona, Inc. (9th Cir. 2014) 770 F.3d 1282, 1295
  ⁸Id. at 1296.
  ⁹John J. Rice, Esq, LTR #3 to Phia - Clariza (2018)
  ¹⁰Id.

Transparency – A Clear and Almost-Present Danger?

By: Ron E. Peck, Esq

Transparency in healthcare, and pricing of care, has been a hot topic – especially for those in our industry – for quite some time.  That flame has been fed recently by an increase in regulatory and legislative attention.  About one year ago, a bipartisan group of Senators unveiled their intention to launch a healthcare price and quality information transparency initiative, and the feedback has been all over the map.

I recently published a blog post regarding failed attempts at transparency in retail.  The two examples I shared therein I’ve also described below.  The response I received was passionate – from support, to opposition; it seems as if everyone feels “something” when it comes to “transparency.”  Before you read any further, let me state clearly and unequivocally that I am a staunch supporter of transparency – as a concept, as well as a tool to be used in our never-ending quest to minimize costs while maximizing benefits in health coverage and care.  Like so many other useful tools, however, transparency in overabundance or without other key ingredients will not only fail to move the needle (as it relates to the cost of health care) but may result in an increase in spending.

To get you up to speed, the examples of transparency (gone wrong) that I love to share are as follows –

Exhibit A: JC Penny’s.  Recall in 2011, when JC Penny’s made what most experts have deemed a catastrophic, strategic mistake, regarding its pricing strategy.  What horrific miscalculation did the retail giant make?  It replaced “sales” (a/k/a “discount”) and “coupons” with everyday low prices.  JC Penny’s told consumers: “Hey!  We aren’t going to bamboozle you by inflating prices, and then throwing arbitrary discounts at you.  Instead, we’ll offer you fair prices without any games.”  This was one example where transparency failed miserably.

Exhibit B: Payless.  If you want to buy some sneakers from Payless, you’d better do it soon.  Payless ShoeSource, Inc. is closing for good.  I’ve never shopped at Payless myself, but they hold a special place in my heart by virtue of something they did in November of 2018.  Yes indeed; it was only a few months ago that they supported my theory that transparency without quality awareness is not only useless, but potentially dangerous.  Payless opened a fake luxury store, dubbed “Palessi.”  At this “boutique,” they displayed shoes (for which they normally charge $20 at their Payless stores), with price tags that ranged up to $600+ (a 1,800% markup).  Shoppers saw the higher prices and assumed that – if it costs more, it must be better.

Another example of transparency that not only fails to reduce spending, but increases it, is also tethered to healthcare.  Unlike many other expenses about which we industry members are dealing, (expenses for which the lion’s share of the cost is borne by the benefit plan and as such, the patient has no “skin in the game”), one example of healthcare costs for which plan participants are fully responsible to pay is over the counter pain medication.  Enter any retail pharmacy and you’ll see brand name medication, and identical store brand drugs, sharing shelf space.  The store brand is clearly marked with a lower price than the brand name drug – who’s price is also clearly labeled.  Additionally, both medications list the ingredients on the package; identical ingredients and percentages.  This is the ultimate cross-roads between healthcare, patient skin in the game, and transparency.  So, of course people buy the store brand drug – it’s the same drug, costs less, and the patient is financially responsible to pay the price.  Transparency works, right?  Wrong!  People overwhelmingly purchase the branded drug.

I’ve said it before, and I’ll say it again – people want the most expensive option.  People don’t want to pay for the most expensive option, but they want to have the most expensive option.

Look no further than the credit crisis bankrupting so many Americans.  Credit cards made it so easy for people to buy more than they could afford, because they made it “feel” like it was someone else’s money.

Sound familiar?

People inherently want the most expensive option, because they are convinced price is an indicator of quality.  Additionally, luxury purchases are a status symbol.

So we (human beings) want the best.  We assume the most expensive option must be the best option – ever hear someone say, “you get what you pay for?”  Additionally, we want other people to think we have the best (a/k/a the most expensive) stuff as well.  The only roadblock is that we don’t always have enough money with which to buy the best (most expensive) stuff.  Drat.

But, when someone gives me a magical “card” and that “card” grants me access to deeper pockets than my own, I can now use that “card” to buy the best (a/k/a most expensive) stuff.  The fact that I will tomorrow be asked to pay for that “stuff” later (either in the form of credit card payments … or … [assuming my metaphor didn’t go over your head] insurance premiums) won’t stop me from running up an unaffordable bill today.

Transparency did nothing to stop people from getting themselves into credit card debt.  Transparency will do nothing to curb people’s health care spending, and I actually foresee it making things worse.  Consider the proposals to have drug prices on TV advertisements.  I’m watching the Patriots beat another opponent, when a commercial for Viagra pops up; (pun intended).  The commercial ends by telling me the cost of the drug is $400.  Next, a commercial for Cialis appears, and tells me that drug costs $600.  Well – don’t I and my spouse deserve the best?  Cialis it is!

I’d like to say that I am the first to spot these phenomena, but I’m not.  In 2016, the Journal of the American Medical Association published a study¹ that supports my assertion that transparency on its own doesn’t lead to savings.  In this study, two employers offered web-based tools to their employee plan participants, providing them with “transparent” healthcare prices.  It empowered these participants to compare prices and “shop around” for their care.  The result?  The tools were rarely accessed, despite the introduction of high deductibles.  In fact, as a side note, the high deductibles caused more participants to seek more costly care, in an effort to burn through the out of pocket maximum as quickly as possible.  Additionally, for the reasons already discussed earlier, researchers discovered that the participants with access to pricing ended up picking the more expensive options, more often than participants without access to pricing.

This report supports my theory above that patients always apply the type of rational behavior upon which traditional economic theory is based, especially when they are shopping for health care.  Rational behavior and economics would anticipate that a consumer will buy a less costly option unless the more expensive option includes additional features worth the added expense to the consumer.  That attitude, however, fails to take into account people’s need to “be seen” as affluent (and flaunt non-existent wealth), as well as their unfounded belief that if something costs more it must be better, and is worth the added expense.  Consider, for instance, the blind taste tests where a person is given two glasses of wine, and they are told one is a $100 glass of wine, and the other is a $10 glass of wine.  Without fail, the drinker claims the more expensive wine is better tasting – even though (you guessed it) the wine in the glasses is the same wine!

Looking at the impact of transparency on a broader scale, Professor David De Cremer of Cambridge University’s Judge Business School, published a fascinating article about transparency, and when it backfires.²  In it, he lists four negative side effects of transparency.  He discusses how it: creates a culture of blame (people become hyper-focused on what they are seeing and reacting to it, rather than identify bigger picture issues, causes for those issues, and solutions); increases distrust (those whose work is constantly under the microscope feel micro-managed and unable to take risks); increases cheating (those who are constantly being watched begin to look for, and take advantage of, any opportunity to game the system when the albeit rare opportunity arises); and sparks resistance (people refuse to do any work that will be hyper-examined, protesting the lack of faith).

Finally, let’s not lose sight of the fact that not everyone agrees on what transparency in healthcare even is.  Consider the Federation of American Hospitals which wrote to Congress that: “ …the healthcare price transparency initiative should focus on sharing out-of-pocket costs. Patients undergoing the same procedure could end up paying different amounts based on their health plan. Therefore, out-of-pocket cost information is more valuable to consumers … effective price transparency should involve the release of information that is clear, accessible, and actionable so that consumers easily can determine the cost of their premiums, deductibles, copayments, and non-covered services (out-of-pocket costs), prior to purchasing health insurance coverage as well as receiving medical services.”  Yikes.

Dr. Niran S. Al-Agba, MD posted on the MedPage Today Professional “KevinMD Blog”³ – “Comprehensive transparency is only relevant if packaged in a reliable comparative context.  Information regarding cost, value, and effectiveness should be readily accessible to patients enabling them to make meaningful comparisons across providers and specialists. However, choices must be incentivized properly, so they are not only empowered but also motivated to use the information to make informed choices.”  I totally agree.  Unless and until reliable quality measurements are included in the transparency discussion, and that information is delivered in such a way that the consumer will understand and appreciate that price has no relationship with quality, I fear “price transparency” on its own is not only a step too short, but potentially a step backwards, in Palessi boots.
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By: Jon Jablon, Esq.

Our consulting team recent came across a network agreement that had the interesting nuance of indicating that the provider would bill amounts that were in line with market standards.

Language like that is a killer. There’s no way around it. It’s so ambiguous as to be all but useless when trying to decide which amounts are properly billed. What exactly are the appropriate market standards? Who is empowered to decide that? When the payor and medical provider inevitably have wildly different opinions on that, how can they possibly resolve the matter when the contract language is so infuriatingly unhelpful?

In this example, the provider had unbundled certain charges, and argued that the market did in fact bear that billing methodology, since most private payors such as this one accepted it – and therefore it was proper pursuant to the contract. The plan, however, contended that a large portion of the provider’s business (and a large part of the total local market) was made up of Medicare claims, and CMS guidelines do not bear that type of unbundling – and therefore it was not proper pursuant to the contract.

Due to this tragically-unclear contractual provision, the payor and provider have been forced to either compromise (which neither wants to do), or take it to court (which neither wants to do, either). It’s going to come down to which option the parties hate less.

Another tragic aspect of this story is its moral. The moral of the story should be to make sure you read your contracts and have them reviewed by an expert prior to signing – but as many of us have found out the hard way, it’s not always possible to view a copy of the provider-facing network agreement. If the payor agreement that you sign talks about billing standards, make sure they’re clear and unambiguous; if it doesn’t, try asking to see the provider agreement. The worst anyone can say is no.

Food for thought: if you’re being asked to sign your name to terms that are clearly ambiguous, or terms the other party won’t even show you, maybe that vendor is not the right fit for your business…

With this episode, the guys define surprise balance billing, discuss movements to curb them (at the State and Federal levels), and harass Pat “The Man” Santos as well.  Stop reading this description and start listening! 

Click here to check out the podcast!  (Make sure you subscribe to our YouTube and iTunes Channels!)

By: Chris Aguiar, Esq.

As the saying goes, many of the basic skills we need to be effective in life are taught to us early. “Use your words” – a common instruction given to young children who are struggling to express themselves or communicate effectively, is an instruction I still use daily – albeit with a slight adjustment.  Especially with matters relating to plan administration, words alone aren’t enough! it’s important to use the correct words to avoid any confusion and ensure that everyone reading the plan understands exactly what you mean! 

A common example we often encounter is the exclusion of benefits incurred while someone is driving under the influence (“DUI”). Some plans use provisions excluding benefits arising from “serious illegal activity” or “felonious activity” and expect those exclusions to operate in a DUI situation.  You might be thinking, “yeah, Chris, a DUI is seriously illegal activity”. While virtually everyone will agree that a DUI is seriously illegal, in the law it may not always be considered a “serious illegal activity”.  Imagine someone is considered to be a very small amount over the limit (e.g. 0.0804) and they crash into a tree only to have an officer determine that they were in fact engaged in a DUI. They were not drastically over the limit, did not injure anyone but themselves, and this was their first offense. Is it conceivable someone might look at these facts and determine that this particular incident did not rise to the level of “serious illegal activity”?  Certainly, the participant seeking to have their benefits paid might believe the activity not to be sufficiently serious, and you can bet their lawyer will fee the same way. Furthermore, based on the facts above, the act would be considered a misdemeanor rather than a felony. It is quite possible neither of the provisions could be upheld!

The point is this – while this issue is not simple enough that a preschooler could handle it, plans can protect themselves by being careful how their provisions are drafted by using words that clearly state their intent. If you intend to exclude benefits when injuries arise while a participant is driving under the influence, ensure the terms of the exclusion clearly state that intent! Understanding the correct words to use is almost always the difference between a valid and invalid denial!