By: Nick Bonds, Esq.

Pharmaceutical companies and rapidly rising drug prices have been eating up a lot of the oxygen in the conversation around healthcare costs. From pharmaceutical executives and PBMs testifying before Congress to President Trump’s May 9 remarks from the Roosevelt Room calling for Democrats and Republicans to unite in a legislative effort to end surprise medical bills.

But Congress and the White House are not alone in their endeavors to tamp down prescription drug costs, HHS Secretary Alex Azar and the CMS recently promulgated a new rule requiring pharmaceutical manufacturers to include the list prices of their drugs in their television ads. This push for transparency is the latest tactic in a multi-pronged strategy deployed by the Trump Administration to lower drug prices in the United States, including moves to change the system of rebates paid to PBMs and to restructure Medicare Part B.  Outraged drug manufacturers cried foul, arguing that patients almost never pay their list prices and disclosing them in their commercials would lead to customer confusion.

Perhaps one of the most interesting components of this CMS rule is its enforcement mechanism. Instead of the CMS itself going after drug manufacturers who fail to comply, the rule allows other manufacturers to pursue damages and injunctions against them for claims of false or misleading advertising under Section 43(a) of the Lanham Act. Also known as the Trademark Act of 1946, this federal law relies on a “likelihood of confusion” standard for adjudicating trademark disputes. The Lanham Act and its remedies have been refined over the last 70 years to combat the very customer confusion pharmaceutical companies insist this new CMS rule will cause.

Whether you agree with drug manufacturers or the CMS, it’s worth noting that this is not the only situation where the government has turned to intellectual property law as a versatile tool to lower drug costs. A bi-partisan group of Senators, including Republicans Chuck Grassley and John Cornyn along with Democratic Presidential Candidate Amy Klobuchar, are working together on a package of legislation targeting drug pricing issues which they hope to have ready by summer. Cornyn’s bill takes a machete to the “patent thickets” crafted by drug manufacturers to artificially extend the monopolies on high-value “blockbuster” drugs granted them by their patents. These patent thickets make it all but impossible for cheaper generic drugs to reach the market, keeping the price of name brand drugs higher for longer. Legislators are coming to see these patent thickets as an abuse of our patent system, a system intended to spur and reward innovation.

It may be too early to say how effective intellectual property law will be in lawmakers’ fight against high drug prices, but it certainly looks like a trend to keep our eyes on. At the very least, it shows that Democrats and Republicans are willing to get creative, using every weapon in their arsenal in their fights with Big Pharma. And they’re willing to reach across the aisle to do it.

By: Philip Qualo, J.D.

The Centers for Medicaid and Medicare Services (CMS) has finalized yet another rule demonstrating the agency’s commitment for greater transparency in the healthcare industry. On May 8, 2019, CMS finalized the “Regulation to Require Drug Pricing Transparency”, which will require prescription drug manufacturers to provide the Wholesale Acquisition Cost for their products in direct-to-consumer television advertisements. Under the final rule, drug makers will have to post the list price of a typical course of treatment for acute medications like antibiotics or for a 30-day supply of medications for chronic conditions. These consumer ads will be required to have a readable, text statement at the end to comply with the mandate.

The rule also requires the Health and Human Services (HHS) secretary to maintain a public list of drugs that violate the rule. Drugs with list prices under $35 per month will be exempt from the requirement.

CMS estimates that approximately 25 pharmaceutical companies will be affected by this rule, as they run an estimated 300 distinct pharmaceutical ads on television each quarter. Complying with the rule is expected to cost drug makers $5.2 million in its first year and $2.4 million in subsequent years.

The regulation, which was initially proposed in October 2018, has faced major opposition from drug manufacturers. On December 17, 2018, the Pharmaceutical Research and Manufacturers of America (PhRMA) submitted comments in response to the then-proposed CMS rule arguing that disclosure of drug prices in television advertisements. PhRMA argued that the list price alone does not convey to patients meaningful information about how much they will actually pay for a medicine. Without providing additional context, such as a patient’s average, estimated, or typical out-of-pocket costs, disclosure of the list price in a direct-to-consumer advertisement could give patients the false impression that they are required to pay the full list price, rather than the copay or coinsurance that the patient is actually responsible for. They also argued that the new rule is unconstitutional on First Amendment grounds. Specifically, they believe that a government mandate on drug makers to disclose only the full list prices directly in their television ads would violate the First Amendment as "compelled speech."

One of the primary goals of this new regulation is to boost competition among drug manufacturers and provide them with incentives to lower their list prices. Greater drug price transparency will also provide new cost containment opportunities for employers who sponsor self-funded health plans and their respective Pharmacy Benefit Managers. The final rule will go into effect 60 days after it is published in the Federal Register.

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By: Brady Bizarro, Esq.

On February 26th, and again in early April, top executives from major pharmaceutical companies and PBMs testified before the Senate Finance Committee. The companies represented included Pfizer, Merck, John and Johnson, CVS, Express Scrips, OptumRx, and others. Led by Chairman Grassley (R-IA) and Ranking Member Wyden (D-OR), the Committee sought to address the problems of continued price increases, free loading, and price transparency. They also portrayed PBMs portrayed as the shadowy middlemen who may be making these problems worse through their increased use of rebates.

The hearings proceeded mostly as Q&A sessions. When asked whether the CEOs consider negative public opinion when setting list prices, all said yes, meaning price isn’t just a function of administrative or research and development costs. Their answer Implies that if no one got upset, prices would go up more. One senator pointed out that if Humira (a drug used to treat arthritis and Crohn’s disease) were its own company, the drug would be among the Fortune 500 companies all by itself, larger than General Mills, Halliburton or Xerox.

The drug manufacturers claimed to support the Trump administration’s proposed rebate reform rule. That rule as proposed applies to Medicare Part D rebates only (which are still very large). Senators are also developing bills aimed at reforming the rebate system. Two CEOs told the Committee that they would lower their list prices if the rebate ban was extended to the private market.

Between these two hearings (for the manufacturers and then for the PBMs), the drugmakers and PBMs essentially blamed each other for high prescription drug prices. Popular ideas discussed were potentially tying U.S. drug prices to international prices. There was also serious support for value-based purchasing arrangements (sometimes called risk-sharing agreements) that tie drug payments to patient outcomes. That would mean that if a particular drug fails to produced a particular clinical or financial outcome, a price reduction would be triggered or a refund. Senators noted that these arrangements are complicated because of anti-kickback laws and proposed rebate reform rules, though. In the end, all parties agreed that the status quo isn’t working for patients, payers, or society.

By: Erin M. Hussey, Esq.

In our previous blog post, The Final AHP Rules Take a Hard Hit, we discussed the court decision that vacated (1) the bona fide provisions (including the provisions about a substantial business purpose, control, and the expanded commonality of interest requirements), and (2) the working owner provisions from the Final Rule on Association Health Plans (“AHPs”). The court remanded their decision to the Department of Labor (“DOL”) to determine how this ruling would affect the rest of the Final Rule given the severability clause. The DOL has provided an initial response via Question and Answers (“Q&As”). Those DOL Q&As detail the following:

“The  Department disagrees with the District Court’s ruling and is considering all available options in consultation  with  the  Department  of  Justice  including  the  possibility  of  appealing  the  District  Court’s decision and the possibility of requesting that the District Court stay its decision pending an appeal.  At this time, we have not reached a decision on how to proceed.”

As such, without any action from the DOL, it appears the above-noted bona-fide and working owner provisions remain inoperative. However, the House and Senate have taken matters into their own hands. On April 11^th, Sen. Mike Enzi (R-WY) and Lamar Alexander (R-TN) introduced a bill in order to protect the AHP Final Rule (S. 1170). The text of the bill is not available yet but will be made available here: https://www.govtrack.us/congress/bills/116/s1170. Sen. Enzi noted the following in his statement on the legislation:

“I rise to introduce the Association Health Plans Act of 2019 . . . My bill will simply codify the Labor Department's final rule to provide certainty for current enrollees and to ensure the pathway remains available for new association health plans to form.”

The following day, on April 12^th, U.S. Representative Tim Walberg (MI-07), joined by Rep. Michael C. Burgess, M.D. (TX-26) and Rep. Virginia Foxx (NC-05), introduced the Association Health Plans Act of 2019 (H.R. 2294). The text of that bill is not available yet but will be made available here:  https://www.congress.gov/bill/116th-congress/house-bill/2294.

While it is unlikely these bills will get bipartisan support, this legislation will be something to keep in mind while we await the ultimate outcome of the AHP Final Rule.

By: Jon Jablon, Esq.

We’ve seen it a thousand times: a health plan document provides that the plan will pay the lesser of certain factors, including billed charges, the applicable network rate, and the plan’s U&C rate (however it may be calculated). The old way of thinking in the industry is that this language gave the Plan Administrator a lot of leeway in determining appropriate payments – but it’s “the old way of thinking” for a reason.

Consider this scenario, with the language mentioned above: an out-of-network provider bills $20,000 for services, and the plan’s U&C rate is $13,000. The plan can simply pay the “lesser of” billed charges or U&C – netting payment of $13,000. There’s no contract, and no requirement to pay more than U&C. Easy stuff; very straightforward.

Now, consider this scenario: an in-network provider bills $20,000 for services; the plan’s U&C rate is $13,000; the network rate is $18,000. The plan’s language obligates the Plan Administrator to pay the “lesser of” those figures which is the U&C rate – but the network rate contractually obligates the payor to pay $18,000! Payment of the “lesser of” – that is, strict compliance with the plan document – results in violating the network contract, which can result in a contentious situation at best – but at worst, a lawsuit by the provider and possibly loss of network access (sometimes even on the TPA level, depending on the situation).

That’s what some might call a “double-edged sword,” where the Plan Administrator must make the choice either to violate the network contract and abide by the strict terms of the Plan Document (thus fulfilling its fiduciary duty), or to violate the Plan Document and abide by the terms of the network contract (thus fulfilling its contractual payment obligations). It’s a tough choice – but one that a Plan Administrator can avoid having to make in the first place, with the right plan language!

When the plan document obligates the Plan Administrator to pay less than the amount required by a separate contract, the Plan Administrator’s contractual and fiduciary obligations are at odds with one another. But it’s avoidable!

My advice? Make sure the Plan Document provides that the amount the Plan Administrator will pay is the contracted rate, if there is one. (And, hey – if that network rate doesn’t seem like it’s adding enough value, ditch the network. There are viable alternatives!)

As with so many stories in the self-funding universe, the moral of this one is to make sure your plan language lines up with your contracts. If you want to make the plan language tighter, or you think it can be better, or even if you just want to test its tensile strength to see what’s what, contact The Phia Group’s consulting division, at PGCReferral@phiagroup.com.

The healthcare space is rapidly evolving – and self-funding is no exception. Legislators, regulators, and courts are constantly providing new guidance – some good, some not. For this month’s webinar, we’re going to present some current events; we’ll discuss how they can help or hurt self-funded players, and what you can do to take advantage of them (or avoid the pitfalls created).

Join The Phia Group’s legal team for an hour as they tackle some of the most relevant topics currently affecting our industry, and explain what they mean to you and your business.

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A Texas Federal Judge Declares The Affordable Care Act Unconstitutional: What Next?

By: Brady Bizarro, Esq.

On February 26, 2018, eighteen state attorneys general and two Republican governors filed suit in a Texas district court against the federal government over the constitutionality of the Affordable Care Act (“ACA”). While Texas v. United States is not the first serious legal challenge brought against the Obama administration’s signature healthcare law (see, e.g., King v. Burwell, 135 S. Ct. 2480 (2015); see also National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012)), it is the first in which the executive branch broke with tradition and declared that it would not defend the ACA in court. The case has certainly represented the most serious threat to the ACA since the GOP’s legislative efforts to repeal the healthcare law failed last summer. As it turns out, this threat should have been taken more seriously by industry analysts. On December 14, 2018, Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas found that the ACA was unconstitutional.

His decision has rattled the markets, Democratic political leaders, advocacy groups, and the broader healthcare industry. One prominent Democratic senator remarked, “This is a five alarm fire – Republicans just blew up our healthcare system.” Senate Minority Leader Chuck Schumer (D-NY) called it an “awful ruling . . . [which, if not reversed] will be a disaster for tens of millions of American families, especially for people with pre-existing conditions.” After taking a closer look at this ruling, however, many legal experts have concluded that it is not nearly as earth shattering as the headlines have made it appear.

First, Judge O’Connor’s ruling did not block enforcement of the ACA despite the fact that the plaintiffs had asked the court to issue a nationwide injunction on the federal government from implementing, regulating, or enforcing the ACA. Since the judge declined, all of the existing provisions of the ACA with which employers, fully insured plans, and self-funded plans must comply are still in effect. This decision has no effect whatsoever on plan design, on cost containment, on employee incentives, or on regulatory compliance. A quick check of Healthcare.gov post-ruling revealed that federal officials have even added this reassuring message: “Court’s decision does not affect 2019 enrollment coverage.”

Second, a spokeswoman for the California attorney general has already confirmed that the sixteen states (and D.C.) that stepped in to defend the ACA will appeal this district court ruling to the United States Court of Appeals for the Fifth Circuit in New Orleans, Louisiana. That means there is a chance that this decision could be overturned before the case reaches the Supreme Court. That possibility brings me to my third point; that legal scholars across the ideological spectrum have found the legal arguments made by the plaintiffs in this case to be remarkably unpersuasive. To understand why, let us break down the court’s opinion (which sided with those arguments).

Judge O’Connor’s opinion has two major elements. First, he contends that since Congress reduced the ACA’s individual mandate penalty to $0, the mandate to purchase insurance must be invalidated. Then, he argues that since the individual mandate is essential to and inseverable from the remainder of the ACA, the entire 2,000 page healthcare law must be struck down. This issue of “severability,” or whether one provision of a law can be severed without invalidating the entire law, is key. Prior to addressing severability, however, Judge O’Connor explains his constitutional analysis for finding that the individual mandate is no longer fairly readable as an exercise of Congress’s tax power.

Regarding his first contention, that the individual mandate could not be saved from the ACA, Judge O’Connor has made a rather compelling case. When the ACA was passed in 2010, the bill contained a requirement that all Americans purchase health insurance or pay a penalty. In 2012, the Supreme Court ruled that this requirement, known as the individual mandate, was a legitimate exercise of Congress’s constitutional authority to tax. See NFIB v. Sebelius (2012). In late 2017, in the Tax Cuts and Jobs Act (“TCJA”), Congress zeroed out the penalty associated with the tax, meaning the individual mandate can no longer reasonably be considered a tax. As such, the constitutional foundation identified by the majority of the Supreme Court, on which the individual mandate was based, was invalidated (recall that the majority in NFIB v. Sebelius also declined to sustain the individual mandate’s constitutionality under the Commerce Clause).

With respect to Judge O’Connor’s second contention, that the entire ACA must fall, many legal experts strongly disagree. Nothing in the original 2010 bill spoke to the severability of the individual mandate. Typically, when lawmakers neglect to include a severability clause in a bill, courts look to discern the intent of Congress when considering whether finding a particular provision of a law unconstitutional would require the elimination of the entire law. In NFIB v. Sebelius, the majority never addressed severability with respect to the individual mandate since the Court upheld the requirement. Four dissenting justices concluded that the individual mandate was unconstitutional and that Congress intended the entire ACA to be invalidated without the individual mandate.

Judge O’Connor assumes that the intent of the 2010 Congress controls the severability analysis in the case before his court; an intent only discerned by a minority of the Supreme Court. Indeed, he spends most of his 55-page opinion attempting to discern the intent of the 2010 Congress on his own. In doing so, however, he ignores the intent of a later Congress that did speak to the issue of severability in the form a later legislative act. The 2017 Congress, in passing the TCJA, eliminated the individual mandate and preserved the rest of the ACA. This act presents strong evidence that Congress intended the ACA to function without the individual mandate. Judge O’Connor’s explanation for this fact is that the 2017 Congress was unable to repeal the individual mandate because of budget rules and it therefore had no intent with respect to the individual mandate’s severability.

By assuming Congress had no intent because it was shackled by complicated legislative rules, Judge O’Connor has drawn the ire of most of the legal community. If he had been so sure of his position, why would he neglect to issue a nationwide injunction on the ACA, as he could have done? True, throwing a wrench into the middle of the healthcare system, where $600 billion in federal funding and health insurance coverage for millions of Americans is on the line, would have been a drastic action; however, if Judge O’Connor truly believed Congress intended this, he could have blocked enforcement of the ACA across the country.

I could go on at length about the consequences if this ruling were to stand; the impact on employer-sponsored plans, the effect on those with pre-existing conditions, the potential loss of health insurance coverage for millions of individuals, and the end of the Medicaid expansion. Yet, based on the response from the legal community of which I am a part, my position is that this decision rests on very shaky ground. This decision also goes much further than even the Trump administration had wanted (it wanted to preserve protections in the law for people with pre-existing medical conditions). I fully expect this case to be reversed by the United States Court of Appeals for the Fifth Circuit and to eventually be declined by the Supreme Court.

In short, we should all hold our collective horses and conduct business as usual for the time being.

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The Profit Motive – A Necessary Evil?

By: Andrew Silverio, Esq.

Working in the self-funded healthcare industry, it can be easy for us to develop tunnel vision and focus on cost containment and affordability at all costs, losing sight of other valid interests within and relating to the healthcare market.  Quality of care is an obvious one – if not done properly, reductions in cost can come at the expense of quality (of course, this isn’t always the case in healthcare, a product which so often has a great deal of inefficiency built in).  But there are other, less directly related interests which we should keep in mind when we zoom out and look at the broader system, for example in forming policy decisions.  The healthcare market is an ecosystem, and like in any ecosystem, one organism becoming too powerful can ultimately be a bad thing for everyone.  A super-predator in an isolated system can quickly hunt its own prey out of existence and starve.

CNBC published an article recently about a disease called nonalcoholic steatohepatitis, or “NASH.”  It develops from nonalcoholic fatty liver disease, which has been estimated by the Center for Disease Analysis to impact 89 million Americans, and can lead to cirrhosis, cardiac and lung complications, liver cancer, and death.  As a result of the obesity epidemic, particularly around the western world, the disease is becoming increasingly common, and the National Institute of Health now states that as many as 30 million Americans, or 12 percent of adults, have NASH.   It’s estimated that by 2020 NASH will surpass hepatitis C as the leading cause of liver transplants in the United States, as increasingly younger Americans, now often in their 20s and 30s, are developing the disease.

As alarming as these numbers are, there is still no FDA approved treatment for NASH.  Yet.

With a global market for a cure estimated at $35 billion (with a b) dollars, pharmaceutical companies are quite literally racing to get new drugs approved and onto the market.  There are currently 55 NASH drugs in various stages of clinical trials according to BioMedtracker, so new treatments are clearly on the horizon.

That $35 billion pot of gold is the sole reason so many companies are sinking so much money into just having a shot at being first to market.  The market may be months away from a cure, it may be a few years away – we’re not doctors or medical researchers – but what we can say with confidence is that whatever the timeline is, it would be much longer without that mammoth payoff as motivation.  Manufacturers of new specialty drugs are allowed to charge, and regularly receive payment of, absolutely absurd prices.  But in some cases, as appears to be the case with NASH, it is precisely because of this that we will soon have treatment for a disease which would otherwise continue taking lives unchecked.

This ability of manufacturers  to charge and receive such high rates for new drugs has also given rise to an entire new sub-industry based around medical tourism and drug importation. In attempting to get patients access to new specialty drugs at a reduced cost to employers, numerous programs aimed at securing generic versions not yet available in the United States are enjoying success under several different models.  These programs run the whole spectrum, from acting to facilitate shipment by a foreign pharmacy in Canada or Mexico to the American patient, or sending that patient to a border to cross over and pick up a drug themselves, all the way to a concierge service where a patient flies first class to the Caribbean, is put up in a hotel, and receives their treatment in a tropical paradise.  The fact that this third option can actually still be significantly less expensive than the patient simply picking up the American version of a drug at the pharmacy down the street from his or her home is quite telling.

Other types of cost-containment efforts take aim at getting the amounts a plan has to actually pay for these drugs under control.  Again, these programs vary greatly and can take the form of exclusions for certain specialty drugs, exclusions for all specialty drugs, or unique cost-sharing structures where copayment amounts change based on whether payment might be available from another source or based on the particular drug.  Seemingly recognizing the impossibility of an individual without insurance paying for these drugs out of pocket, manufacturers implement assistance programs to help cover patient copayments, or offer discounts or rebates for those who pay completely out of pocket.  Other programs aim to identify when these programs might be available and steer that monetary benefit back toward the health plan.

The fact that all these different approaches are necessary illustrates an important principle which is often overlooked – the profit incentive to develop new drugs and therapies.  America is a global leader in developing new therapies, and is by far the biggest healthcare spender per capita and arguably guilty of the greatest waste.  Can the former continue to be true without the latter?  If not, to what extent are we willing to sacrifice innovation and the development of new therapies for those few with no remedies available for their illnesses, in order to ensure that the masses can receive vital routine care in an affordable way?

Food for thought.

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The Self-Funded Case – Back To Basics

By: Tim Callender, Esq.

Self-Funding – So Many Toys in the Sandbox

Not to criticize our industry, in the least, but if we are being honest, we should all agree that it takes thousands of “parts” to make this “car” run, so to speak.  This fact has its positives.  An industry chock full of numerous stakeholders does lead to incredible innovation, teamwork, healthy competition, creative solutions, and the general strength that comes with an industry steeped in camaraderie.  Likewise, this reality of many stakeholders can also create confusion and distraction unless we are paying close attention and working to block out the noise.  The typical self-funded case will likely have a list of stakeholders that include (in no particular order & I am sure to leave something / someone out):

• The broker / consultant
• The employer, plan sponsor
• A benefits committee and/or benefits decisionmakers within the plan sponsor
• A third-party administrator or a carrier ASO platform
• A plan document solution provider
• A pharmacy benefits manager
• A specialty Rx cost containment solution provider
• A case management / utilization management solution provider
• A concierge and/or centers of excellence solution
• A stop-loss carrier / managing general underwriter
• Internal legal counsel
• External legal counsel
• Legal counsel for all the solution providers
• A dialysis cost-containment solution provider
• A claim re-pricing solution provider
• A network
• A wrap network or wrap network alternative
• A claim negotiation solution and/or patient advocacy solution provider
• A data analytics platform
• A claims auditing solution provider
• A number of independent review organizations
• A subrogation and recovery solution provider
• And many, many, more…. (I felt the bullet points were becoming excessive – time to stop)

In short – there are many, many toys in this sandbox of self-funding.

So…. How About, Back to Basics?

As discussed, there are an incredible number of stakeholders in the self-funding sandbox. To reiterate, this is not necessarily a bad thing, but it can steer us away from the fundamental basics and core needs of our industry, which can lead us astray from the root goal.  What is that goal?  In short, most self-funded plan sponsors are going to tell you that they entered into the self-funded space for two reasons: (1) to bring the costs associated with their health plan down; and (2) to have the creative control needed to deliver top-notch health benefits to their employees and their families. 

Not to take away from the importance of the newest healthcare-related iPhone app, or the newest, innovative methodology behind case management, but sometimes it is important to step back and focus on the basics of this complex, self-funded system.  Whether from the outside looking in, or deeply involved in the self-funded industry, all viewers should agree that this industry – this system – is definitely a complex one, as noted by the copious bullet points listed above.  To wade through the complex and try to identify the key roots of a successful self-funded case is not only a noble pursuit but should be a point of pride for all in this space.  With the roots in place, all of the other, more complex solutions can fall into place and will do so with a much higher likelihood of success.

While like minds might rightly differ on the key elements that lead us toward the goals discussed above, I would list out the five most important roots that push the goals of driving down costs while delivering great benefits as follows:

1. A well-written and understandable plan document.
2. A vested “benefits committee” or other decision-making body housed within the employer Plan Sponsor.
3. An educated and empowered consultant.
4. A partner-focused third-party administrator.
5. A well-oiled subrogation and recovery platform.

The All Powerful and Governing Document

Without a plan document, what is a self-funded plan, truly?  It is a nebulous financial instrument, or bizarre oral contract slightly memorialized by HR emails and broker notes that exists without clear guidance or application.  Yet this plan is still subject to incredible responsibility and liability.  Needless to say, not only is having a plan document a good idea (if not required, depending on how you read the law) but it is an even better idea to have a well-written and understandable plan document.  As discussed above, many plan sponsors become enamored with new and innovative solutions, ranging from specialty Rx cost control to a medical tourism program filled with plan member incentives.  These are wonderful solutions that may yield outstanding results – but what if the plan document does not properly support and outline the specialty Rx program?  What if the plan document fails to provide clear instruction to the plan member on how he/she can take advantage of the beneficial medical tourism program?  Not only does the plan sponsor run the risk of implementing benefit structures that may cause legal problems, since they are not outlined in the plan document, but the plan sponsor will most surely lose out on gaining the benefit of these innovative solutions.  Not to mention paying claims outside the terms of the plan’s stop-loss policy.  Without a well-written and understandable plan document, the it is pointless to pursue more complex solutions and the goals of cost containment and rich benefits will surely never be met.   

The Heart & The Brain

Every employer plan sponsor should have a benefits committee in place, whether the committee is made up of 3 people or 15 people.  Too many employers rely solely on the expertise of their consultant and “pass the buck,” so to speak, when it comes to truly understanding the ins and outs of their self-funded plan.  Not to say that relying on a consultant is a bad thing – that’s why they exist!  However, as any expert will tell you, the expert’s job is always easier when he/she is advising an educated consumer.  An educated plan sponsor, backed by a benefits committee full of diverse knowledge and expertise, and advised by an industry expert consultant, is already leaps and bounds ahead of the rest when it comes to the ability to choose and implement solutions that will lead to cost savings and rich benefits.  Not to mention, the committee can share the labor burdens associated with running a self-funded health plan.  Like, working together to finalize that plan document! 

Additionally, a benefits committee increases the chances of a plan successfully implementing a complex solution.  Let’s use an out-of-network, reference-based pricing solution as a singular example.  Such an innovative and disruptive program does not stand a chance if there is not employee / member buy in and understanding.  There will likely be balance billing and “scary” situations which will lead plan members to bring the noise, so to speak, directly to HR.  This noise can quickly cause enough pain that the plan sponsor will choose to abandon an otherwise legitimate and beneficial program.  But.  What if a savvy, vested, and educated benefits committee existed, at the employer, plan sponsor level?  Imagine the education and communication opportunities that could exist – imagine the opportunities to work with the plan members, ask critical questions of the vendor, and course correct when needed. 

A benefits committee, whether small or large, will move a plan closer to its goals of containing costs and delivering rich benefits, every time. 

Likewise, it takes the industry expert consultant to advise this bought in committee and bring them the solutions and ideas that they may not be aware of, that they can then interpret and execute, on their own terms.

To repeat: the vested benefits committee plus the expert consultant = reduced plan costs and the implementation of solutions to drive rich benefit delivery. 

The Partner

A sophisticated plan sponsor, governed by a benefits committee and advised by an expert consultant, should next seek a true partner in its third-party administrator.  Plan sponsors can sometimes fall victim to regionalism or sticker attraction (seeking out the lowest administrative fee), which may not always lead to the best payor partner for that particular plan.  Instead, plan sponsors and their consultants should begin by clearly understanding and defining their own needs and their own goals.  They must do this first before trying to find the right payor partner.

Is the plan focused on a strong network?  An in-house dialysis solution?  Is a domestic call center presence important?  What about reporting capabilities?  What does the account management model look like and how involved will they be with enrollment meetings and finalizing the plan document?  Will the payor listen to the plan’s recommendations and needs regarding stop-loss?  The list goes on. 

Needless to say, combining a thoughtful benefits committee, with an expert consultant, and a true partner-oriented payor, will allow for a plan to truly innovate and successfully put solutions in place that will meet the plan’s goals.

The Money at The End of The Chain

In thinking on the goals of driving costs down while delivering great benefits, there is one area that provides a clear “win.”  Subrogation and recovery efforts. 

Why is this the case?  In efforts to contain costs, many plans go straight to the overly advertised, upfront, disruptive solutions that may drive costs down before costs are incurred.  Many of these solutions have merit and bear fruit! But plan sponsors should not lose sight of the big recovery win that is available through a robust subrogation and recovery platform.  Especially now, where copious opportunities exist to seek the recovery of plan dollars on so many fronts.  Traditionally, most plans would focus their recovery efforts on the routine motor vehicle accident – the benchmark example of third-party liability.  Anymore though, alongside these benchmark MVAs, plans should be considering other sources of third-party liability, such as torts, product recalls, and class actions.  The list, and opportunities, go on.    

Additionally, whether governed by ERISA or state law, or a combination of both, all self-funded plans are bound by some level of fiduciary duty.  Instead of quoting federal or state law, the gist is this: plan fiduciaries must behave prudently with plan assets, which includes how the fiduciaries spend plan assets, don’t spend plan assets, or get plan assets back!

To this end, it is easy for a plan sponsor to focus on asset expenditure and upfront plan savings, while forgetting about recovering dollars from a third party.  This is understandable!  Upfront expenses and upfront plan savings are exactly that, “upfront!”  But, the concept of chasing around a third party, sometimes for years, in an effort to return plan funds back to the plan – well, it is easy to see how this concept can fall by the wayside and become easily forgotten.  Yet, maximizing recovery efforts should be just as important to a plan fiduciary as the more routine, upfront savings and expenses that usually take priority.  Seeking to assure that subrogation and recovery efforts are maximized is an important obligation of every plan fiduciary.  Not to mention, returning plan assets into the plan’s coffers means costs can be kept down and the plan can reinvest those dollars in other areas that might lead to that richer, more robust health plan. 

Goals met.