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Empowering Plans Segment 12 - The Cost of Care

On July 10, 2017
This week, The Phia Group's CEO, Adam Russo and Sr. VP, Ron Peck, interviewed Attorney Jon Jablon - Director of Provider Relations, regarding the seemingly increasing number of excessive charges being billed by providers to health plans, strategies to cut costs, and importantly - ways to work with providers rather than against them, in an effort to implement an arrangement that works for all involved.

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The Stacks - 3rd Quarter 2017

On July 7, 2017
A Year Later . . . Montanile Remembered, Lessons Learned
By:  Christopher M. Aguiar, Esq.

Things were going so well.  In the game of subrogation cases being heard by the Supreme Court of the United States, self-funded benefit plans under the purview of ERISA were on a roll.  First, it was Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356 (2006), then U.S. Airways v. McCutchen, 133 S. Ct. 1537 (2013). Some even considered Great West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002) to have been unfairly viewed as a loss for the subrogation industry because despite a decision against Great West Life, it provided the blue print followed by Mid Atlantic Medical Services, Inc. to elicit the favorable decision that led to the recovery in Sereboff.  As is the case in most games, momentum can be lost in the blink an eye.

Often times, when the momentum is heavily in one’s favor, the successors eventually let their guard down.  Enter Montanile v. Board of Trustees of Nat. Elevator Industry Health Benefit Plan, 136 S. Ct. 651 (2016). Montanile was the victim of an accident with a third party who was driving under the influence of alcohol.  Montanile’s benefit plan paid approximately $120,000 in medical claims arising from the accident.  Following the accident, he sued the driver of the vehicle and obtained a settlement in the amount of $500,000.  Settlement negotiations between Montanile and the Plan broke down and his attorney warned the Plan that he intended to disburse the funds to Montanile.  The Plan did not respond until almost seven months later when it filed a lawsuit in which the Plan argued that even though Mr. Montanile had spent some or all of the settlement funds, the Plan still had a right to the funds.  The Supreme Court disagreed, stating that the Plan would have had an equitable right if it had “immediately sued to enforce the lien against the settlement fund then in Montanile’s possession” and that suing Montanile to attempt to attach his general assets was a legal remedy not available to the Plan under ERISA 502(a)(3).  Id. at 658.

Immediately following the period when the Court announced that it would be granting certiorari and hearing arguments in Montanile, subrogation experts rationalized what they had hoped would be the outcome; mainly, that the highest court in the land would not put forth a decision that effectively allowed plan participants to take the money and run – but we all knew better, and the Court affirmed our fears; that the Plan’s equitable remedy may be extinguished when funds are disbursed.

In the almost fourteen months since Montanile, there has not been much movement.  The case has been cited in several briefs and other cases, but there is nothing of a significant nature to report. That said, in the interest of keeping the issue fresh in everyone’s mind and not allowing the importance of a benefit plan’s third party recovery rights take a back seat, let us take the opportunity to recall the keys to a successful recovery program and some best practices – many of which have received favorable treatment in the few cases that have addressed the problem created by Montanile.

Plan Language

Perhaps the most important thing to remember is that Montanile did not actually change the law.  Plan language continues to be the most important consideration in determining whether a plan has a right to 100% reimbursement.  Regardless of whether the funds have been disbursed to the participant and/or whether they have been spent on non-traceable assets, if a plan’s language is inadequate, the plan will not be able to enforce its right to a full reimbursement.  Montanile did not change the decision in McCutchen, which clearly stated, “In a §502(a)(3) action based on an equitable lien by agreement—like this one—the ERISA plan’s terms govern. Neither general un-just enrichment principles nor specific doctrines reflecting those principles—such as the double-recovery or common-fund rules invoked by McCutchen—can override the applicable contract.” 133 S. Ct. at 1540.  Ensuring your plan’s language is as strong as possible remains imperative to maximizing recoveries.

Investigation is the Key

The Supreme Court in Montanile disagreed with the Plan’s assertion that its equitable remedy should be enforceable regardless of the whereabouts of the settlement fund and did not appear to have any pity for the burden on the Plan to protect its right.  The Court stated:
… The Board protests that tracking and participating in legal proceedings is hard and costly, and that settlements are often shrouded in secrecy.  The facts of this case undercut that argument.  The Board had sufficient notice of Montanile’s settlement to have taken various steps to preserve those funds.  Most notably, when negotiations broke down and Montanile’s lawyer expressed his intent to disburse the remaining settlement funds …unless the Plan objected …. The Board could have – but did not - object.  Moreover, the Board could have filed suit immediately, rather than waiting half a year.

Montanile at 662.

The Court’s statements here seem to indicate a pretty clear burden on plans to engage in their own investigations and take any and all steps necessary to protect their interests though it does seem to leave the door open for some flexibility in its decision in a situation where perhaps the facts are different.  For example, would the Court have ruled differently if the Plan did not “have sufficient notice” of Montanile’s settlement?  This appears to have been the case in AirTran Airways, Inc. v. Elem, 767 F. 3d 1192 (2014).   In Elem, the attorney ultimately obtained a settlement of over $500,000 against the responsible driver but told Air Tran that the settlement had been for the insurance policy limit of $25,000.  He then inadvertently sent a copy of the $475,000 check of which he had neglected to advise Air Tran. In this case, there appears to have been overt acts to deceive the Plan with regard to the settlement.  Would the Court have ruled the same way if faced with these facts?  

Regardless, to avoid situations like this, the Plan MUST HAVE an effective investigation unit.  All too often investigations are halted based on an insufficient self-report.  Everyone can agree that a participant that falls down the stairs at home does not present a recovery opportunity; but what if that person’s “home” is a rental apartment and the “fall down the stairs” resulted from a broken stair and faulty railing in the main hallway?  If the investigation unit is ill-equipped to ask the right questions or identify when someone is masterfully crafting answers to avoid the question without lying, a plan will miss recovery opportunities.

And the Key to Investigation is Data

A high quality investigation unit is a pivotal part of any recovery process, but access to a plan’s data is where it all begins.  The Court’s decision in Montanile effectively put a ticking clock on a plan’s recovery rights.  The earlier a plan is involved, the better chance it will have to be aware of potential recovery opportunities and on top of the availability and whereabouts of the potential recovery funds.  The most effective way to do that is to both be able to access claims data and also be able to expertly analyze and identify opportunities in the data.  When paired with the most cutting edge technology and resources, data can be utilized to find out about recovery opportunities quickly and put a plan in the best position to succeed.

Funds Disbursed? … All May Not Be Lost …

Certainly, Montanile threw subrogation professionals a bit of a curveball, but most of us knew this curveball was in the arsenal.  Ensuring that you can trace the funds is always the best option; but since Montanile, some courts have reminded us that even if the funds are disbursed, a plan may still have some options.  First, the Supreme Court in Montanile held that a plaintiff can “enforce an equitable lien only against specifically identified funds that remain in the defendant’s possession or against traceable items that the defendant purchased with the funds.... A defendant’s expenditure of the entire identifiable fund on non-traceable items ... destroys an equitable lien.” Montanile, at 658.  For the Plan to lose its right of recovery, the participant must spend the money on items that cannot be traced.  So, if the participant purchases a car, property, or asset of some sort, the plan may still be able to enforce its right.

Further, even if the funds are disbursed, the Plan may have a claim for accounting or disgorgement of profits.  In Homampour v. Blue Shield of California Life and Health Insurance Company, the Northern District of California stated the following:

Montanile does not entirely foreclose plaintiffs' claim. Plaintiffs have not alleged how or from what funds plaintiffs seek to recover disgorgement of profits. It is possible that plaintiffs will present evidence demonstrating that the profits they seek to disgorge are specifically identifiable and within defendants' possession.

Slip Copy, 2016 WL 4539480 at 8

Finally, even in a circumstance where a plan’s equitable remedy is completely lost, the plan may still have a legal remedy under a breach of contract theory.  In Unitedhealth Grp. Inc. v. MacElree Harvey, Ltd.., the U.S. District Court for the Eastern District of Pennsylvania noted that “assuming Ms. Neff had at that point already dissipated the settlement recoveries, then, pursuant to Montanile, the Plan could seek legal redress against Ms. Neff for breach of contract.” Slip Copy, 2016 WL 4440358 at 7,

Conclusion

Subrogation, like many cost containment options, is complicated.  Understanding the legal framework, the differences between the remedies that may be available, the advantages and drawbacks to the different options and utilization of different remedies, and having all the resources to recover effectively can be incredibly burdensome.  It requires experience, technical aptitude with data, and access to legal resources necessary to protect the plan’s rights.   Montanile served as a painful reminder, but all is not lost.  A plan can take steps to protect itself, maximize its recovery dollars, and ensure compliance with its fiduciary duty to enforce the terms of the plan and ensure its viability.

Don’t Let Your LOAs Leave You DOA
By: Kelly E. Dempsey, Esq.

Imagine a scenario where an employer has a long-time reliable employee that suddenly has a stroke of bad luck and is diagnosed with stage four cancer after being relatively asymptomatic and having never been diagnosed with cancer previously. The employee works with a team of medical professionals to come up with a game plan for beating this terrible disease. The employee quickly begins what will hopefully be life-saving treatment as soon as a game plan is mapped out. The claims start rolling in and the treatment starts taking its toll. The employee starts missing an hour here and there for appointments – and then a few hours for appointments and sickness –and then full days of work during treatment. When the employee is at work, the employee struggles to perform normal job functions and the employee is now unable to work because the rigorous chemotherapy regiment.

The employee decides it’s time to take a leave of absence to focus on treatment. To the dismay of the employee, though, the employee doesn’t have any additional leave available under The Family and Medical Leave Act (FMLA), since the full allotment of FMLA leave was recently exhausted while the employee and the employee’s spouse were finally bringing home their new adopted baby that they had waited so long for. Is this pulling at your heart strings yet?

The employer recalls that sometime in 2016, the U.S. Equal Employment Opportunity Commission issued guidance on a leave associated with The Americans with Disabilities Act (ADA)1 . Ah ha! The employer tells the employee they have just the solution – take a leave under ADA and the employment and leave situation can be re-evaluated in a few months. The employer tells the employee not to worry about anything except becoming cancer-free; the health plan coverage will continue as long as the employee needs it, even though the last of the employee’s paid time off is exhausted and no additional FMLA is available. In other words, the employer, via its health plan, is taking care of its employee, as so many employers try so hard to do. The employee is then signed up for the short-term disability policy which will help replace some income during the leave, and the employee is all set – there is continuing health plan coverage and some income replacement to boot. All is well.

Fast forward in time. Three months have passed, and the employee is making miraculous recovery. The employee is not ready to come back to work yet, but things are looking up and the employee is respected to return to work at some point in the near future. With the end of the health plan year approaching, the employer is attempting to get its ducks in a row for renewal season, which includes a stop-loss policy renewal. The cancer treatment claims are continuing to roll in and, as expected, the dollars keep adding up – but unfortunately, as anticipated, stop-loss is going to become a factor before renewal (ugh).

Claims are filed with the stop-loss carrier and all the typical supporting documents are provided. During the stop-loss carrier’s review, the carrier starts scratching its head. This individual has been on a non-FMLA leave of absence for over three months. The health plan document discusses FMLA and COBRA, but no other types of leave. Why was this employee still on the plan? Why was COBRA not offered when plan coverage seems to have terminated? The stop-loss carrier questions the employer and requests additional documentation to support eligibility; the carrier even generously says the employee handbook is acceptable. As everyone knows, the stop-loss policy is underwritten based on the plan document alone; anything contained within the employee handbook is entirely separate from the plan document and the stop-loss underwriting generally won’t take into account anything within the employee handbook. The employer thinks “boy, am I lucky!” *queue the suspenseful music*

The employer pulls out the employee handbook and skips to page 42 – Employer Leave Policies. The employer starts reading, “In addition to FMLA, employees that have exhausted paid time off and FMLA may be eligible for an additional extended leave of absence; referred to as non-FMLA leave. This non-FMLA leave is created to comply with the ADA’s requirement to provide a leave of absence as a reasonable accommodation and will be offered in addition to FMLA. Thus the non-FMLA leave will not run concurrently with FMLA. Additional information regarding how to request this leave and the additional requirements associated with this leave is further detailed herein:”

The employer’s wheels start turning: okay, this ADA leave doesn’t run concurrently with FMLA – great, that helps, but where’s the part about continuing health plan coverage? That must be in this handbook somewhere. The employer starts frantically turning pages looking for those magical words “employees are entitled the health plan benefits during a non-FM LA leave of absence.” But alas, no such wording is contained within the 163-page employee handbook.  The employer’s internal dialogue starts racing. “How can this be? We never meant for our employees to be out sick and not have health coverage. Doesn’t the ADA say we have to provide coverage to employees while they’re out on leave?” So you ask, “What now?” The bottom line is that there is no stop-loss reimbursement for the cancer claims, and quotes for renewal just added a few extra zeros.       

No need to review the gory details in depth – but one can imagine what happened during the plan and stop-loss renewal. The employer’s bank account is looking bleak, as are the proposed stop-loss renewal rates. The employer starts shopping other options despite having been with the same stop-loss carrier for years.  All the while, the employer just thinks “How did I end up here? All I wanted was to take care of my employees and give them the best benefits possible. Where did I go wrong?”  

It’s intuitive to think that a leave of absence from employment is coupled with a continuation of health plan coverage, especially if the leave is illness related; to the dismay of many, however, a continuation of coverage (other than COBRA) isn’t always coupled with a leave of absence. As shown in the scenario above, many employers struggle to align their health plan documents with their employee handbooks (and other internal policies) which subsequently increases the potential for a gap to arise between all the relevant documents. While most federal and state laws do not require a continuation of coverage, employers can choose to provide the benefit of continued coverage – but if the employer wants to ensure stop-loss reimbursement, the terms of continuation of coverage need to be clearly spelled out not only in the employee handbook, but also in the health plan document. The health plan document is key to showing proof of continued coverage, especially in a situation where stop-loss is relevant.

Many employers don’t even realize they have gaps between their policies and the health plan documents until it’s too late. All it takes is one large medical event - a cancer claim, an ESRD diagnosis, premature twins, a transplant – to discover that the documents the employers has aren’t airtight, and may not even align with the employer’s intent.

In summary, most employers need to do some homework. Go back to the office and take a look at the health plan document and the employee handbook. Do the two documents reference the same types of leave? Do the documents clearly indicate when coverage under the health plan is maintained during a leave? Do the terms of these documents meet the intent of the employer? What does the stop-loss policy say about eligibility determinations? Can the handbook be used to document eligibility in the health plan? What (if any) changes need to be made to minimize or eliminate gaps, to the extent possible?

Don’t let large unexpected claims leave you dead on arrival. Do the leg work now, and figure out what needs to be done to avoid being caught by surprise.

Kelly E. Dempsey is an attorney with The Phia Group. She is one of The Phia Group’s consulting attorneys, specializing in plan document drafting and review, as well as a myriad of compliance matters, notably including those related to the Affordable Care Act. Kelly is admitted to the Bar of the State of Ohio and the United States District Court, Northern District of Ohio.

[1] https://www.eeoc.gov/eeoc/publications/ada-leave.cfm

Air Ambulance: Heads in the Clouds
By: Jon A. Jablon, Esq.

Health plans, third-party administrators, brokers, consultants, and stop-loss carriers are a bit baffled by air ambulance fees. Many are outraged or appalled or disgusted as well – but it seems that the overwhelmingly common feeling is sheer confusion over how this type of billing is permissible.

In all other markets – construction, textiles, grocery, you name it – the ordinary legal doctrine is that if there is no agreed-upon price for the goods or services, the seller may only charge the reasonable, fair market value of the delivered service or item. Admittedly, in most markets, prices are agreed upon beforehand – but in the long history of business, there have been enough instances of services rendered without agreed-upon pricing that courts have seen fit to devise controls for just those occasions.

And yet…air ambulance charges are frequently between 600 and 800 percent of Medicare rates for the same flight – and sometimes far, far more. In fact, one recently crossed my desk billed at over 2,600% of Medicare rates. That’s right – a whopping twenty-six times what Medicare would have paid for the same flight.

The disclaimer is that Medicare rates are not directly relevant to these flights, but instead used as a benchmark to inform what might be the fair market value, since unfortunately there isn’t much else to go on. Unlike many other medical providers, though, there seems to be a trend in the air ambulance billing industry where balance-billing is the norm, and many air ambulance providers have the devil-may-care willingness to bill patients which triggers the outrage and disgust that so often has health plans paying upwards of 90% of egregious balances to protect their patients.

Add to the egregious billing the notion that many flights are not medically necessary or otherwise appropriate to begin with, and it becomes clear that we have a problem on our hands.

At Northshore International Insurance Services, Inc.’s 26th Annual Medical Excess Claims Conference regarding Air Ambulance Claim Cost Containment Strategies, Jeff Frazier – a partner at Sentinel Air Medical Alliance, a firm specializing in curbing air ambulance costs – answered quite a few questions, including the following2 :

Question: Why is air ambulance ordered for someone who does not really need the service?

Answer: About 20% of the patients using air ambulance services really need the service. In a lot of cases, patients are not transported to the nearest hospital due to overflight or relationships between the facility and the air ambulance provider.

Question: How do you determine medical necessity?

Answer: Review of transport notes or ambulance run reports primarily to determine medical necessity. Sometimes notes from the hospital are also reviewed.

Question: Why do payors cave?

Answer: Fear of the provider balance due billing the patient.

Balance-billing is a major concern of all benefit plans that pay benefits at an amount not tethered to billed charges, which is an increasing trend. If not for balance-billing, it seems likely that all plans would pay objectively reasonable rates rather than percentages of billed charges.

“Taking Patients for a Ride” Article

A recent (April 6, 2017) Consumer Reports article penned by Donna Rosato – entitled “Air Ambulances: Taking Patients for a Ride3 ” – highlights some real-life scenarios in which air ambulance billing practices have proven to be, in a word, abusive. Aside from citing two separate sources quoting the average air ambulance flight at about $7,000 and about $10,000, the article notes that:

Rick Sherlock, president and CEO of the Association of Air Medical Services, a trade group, says that many air-ambulance patients are on Medicare or Medicaid, and that those programs pay $200 to $6,000 per transport. So, Sherlock says, air-ambulance operators must collect more from people with private insurance to make up the difference.

It should be questioned how equitable or ethical it is to jack up prices for one consumer because the provider has chosen to accept less money for another consumer. An air ambulance provider can always refuse to contract with CMS and choose to not accept Medicare or Medicaid – so to complain about not being paid enough seems a bit petulant.

Airline Deregulation Act

Further challenges are presented by the Airline Deregulation Act of 1978. Through this federal law, states are prohibited from regulating non-hospital affiliated air ambulance providers. That is, this law does not apply to the University of Whatever Health System’s own proprietary air ambulance services, since those are considered to be an “extension” of emergency services as opposed to a separate air ambulance provider – but the law does apply to FlyingAirTaxiMedicalAmbulance Co., Inc., since it is independent of an emergency room and is its own “carrier.”

Through the years there have been proposed changes to the federal Act to account for the disastrous effects it has on air ambulance consumers and health plans, but we’re not quite there yet.

Interestingly, many air ambulance carriers have resorted to quoting the Act when attempting to justify their billing – or at least when attempting to refute reasonable settlement requests. It seems that the most prevalent argument is against any notion of fair market value; the fact that state law is preempted with respect to air ambulance billing practices is cited as the reason that fair market value is not relevant to the carrier’s billing. But, although rooted in state contract law, is it reasonable to suggest that an implied contract for services is “state law,” sufficient to be preempted or overridden by the federal Airline Deregulation Act?

In other words, while the federal Act may supersede state laws aimed at regulating air ambulance providers (and others), the concept of fair market value is implicit in the non-contracted nature of air ambulance services. The issue is not one of some state law attempting to regulate air ambulances; fair market value has to do with the open market and general principles of contract rather than some particular state law.

The Airline Deregulation Act does not set a price or indicate what might be appropriate value. Instead, it dictates that individual states cannot pass laws to regulate the price of these flights. Fair market value is a general principal of contracting rather than some statutory price control, though; air ambulances are free to provide quotes up-front, but in most cases that is either not feasible or just not done. It seems that the general and basic principal of fair market value would still apply when no price is quoted or agreed-upon. The Airline Deregulation Act, after all, was passed to promote a free market economy rather than restrict it. It hardly serves to promote a free market when medical providers can gouge payors without warning.

One could even contend, somewhat ironically, that demanding surprise payment at an amount far in excess of the fair market value frustrates the very purpose of the same Airline Deregulation Act that these providers rely on to defend their charges.

Contract? What Contract?

Here’s where things get even more interesting. Independent air ambulance providers tend to be universally out-of-network. There are a couple of exceptions, but in general, it is near impossible to find an air ambulance provider (unrelated to a hospital) that has contracted with a PPO network to accept discounted fees – primarily due to the belief that the Act guarantees them their full billed charges no matter what, and that there’s no reason to join a network and accept discounted charges.

Regardless of that belief, another question worthy of consideration is whether the out-of-network flights can truly be considered non-contracted. Contracts are a funny thing and they come in many forms; while there is no contract to pay a certain specified rate or percentage of billed charges – indeed, a claim that would generally be considered a “contracted claim” – consider that the patient (if conscious and competent) almost always signs the provider’s “assignment of benefits” form. On that form, the patient says “if my insurance doesn’t pay you, in full, 100% of your bill, then I, the patient, agree to be responsible for the remainder.”

For some bizarre reason, courts in this country have indicated that the patient’s agreement to pay some unspecified amount supersedes any ordinary market properties. If the patient weren’t a patient but a homeowner, and a painter said “you will pay me what I bill you for this job” and the homeowner agreed, courts have always opined that while the consumer is of course responsible to compensate the painter for its service, the painter is responsible for billing only that which is reasonable – measured as the fair market value of the services. In the medical industry, though, there are very few (and largely ineffectual) statutory or common law pricing controls. Even the simplistic concept of fair market value, which is perhaps the most basic of all pricing principles, does not apply in ordinary cases. It goes without saying that this needs to be fixed.

What Can You Do?

Whoever you are – whether a health plan sponsor, third-party administrator, broker, MGU, reinsurer, or anyone else working in the self-funded industry – air ambulance charges are worrisome. If they don’t concern you…they should.

Negotiating claims can be an option, as is the case with other out-of-network medical claims, and there are also other, more novel solutions out there in the marketplace.

Just as programs have developed to assist payors in reducing dialysis billed charges, so are there companies and services that are specifically geared toward controlling air ambulance charges. Specialists in this field can provide assistance from a regulatory and financial standpoint – and ensuring proper utilization is also crucial to ensuring that payors are not gouged.

We urge payors to discuss options with a broker or consultant and ask about some of the solutions out there that have helped save health plans countless dollars of unreasonable and unnecessary air ambulance exposure.

About the Author

Attorney Jon Jablon joined The Phia Group’s legal team in 2013. Since then, he has distinguished himself as an expert in various topics, including stop-loss and PPO networks, focusing on dispute resolution and best practices. In 2016, Jon assumed the role of Director of The Phia Group’s Provider Relations department, which focuses on all things having to do with medical providers – including balance-billing, claims negotiation, PPO and provider disputes, general consulting, and more.


[2] http://www.niis.com/2015Conference/Air%20Ambulance%20Claim%20Cost%20Containment%20Strategies.pdf

[3] http://www.consumerreports.org/medical-transportation/air-ambulances-taking-patients-for-a-ride

Spinning the Web of the Plan Document

On July 7, 2017
By: Kelly Dempsey, Esq.

(No, this isn’t about spiders.)

The date was somewhere around August 25, 1999. The location was my 10th grade biology class. I remember taking in the scenery of a new classroom and looking at all the pictures and quotes my teacher had up on the walls. One in particular caught my eye:

“I know you think you understand what you thought I said, but I’m not sure you realize that what you heard is not what I meant.”

Once your head stops spinning, we can continue…

I’ve since learned this quote is attributed to the former head of the Federal Reserve Board, Alan Greenspan.  The context of this quote is still foreign to me, but I believe it can be applied to just about anything – so let’s apply it to plan documents.  

In general there are several entities involved in the process of administering an ERISA self-funded medical plan document, but ultimately the plan sponsor is responsible for ensuring the terms of the plan document meet the needs of the plan and its members. The plan administrator then has the fiduciary duty to administer the plan in accordance with the terms of the plan document. So when is the last time that you, the plan sponsor, have read the plan document cover to cover?  

Plan documents have to be reviewed and revised for any number of reasons, including regulatory changes – but sometimes plan documents are changed when the plan moves to a different claims administrator (i.e., hires a new TPA to administer claims, or moves from an ASO to a TPA or vice versa). The “rules” each claims administrator sets related to the plan document’s format may vary. Some TPAs will administer the document as-is. Some TPAs prefer to use their own plan document template, which the plan sponsor can either adopt from scratch or conform its existing benefits to.

I’ve written about “gap traps” before, and while this isn’t a really one of those as we typically use the term (which is most often relevant to gaps between a plan document and a stop loss policy), a type of gap arises if a restated document doesn’t mirror the prior plan document. For example, the prior plan document had an illegal acts exclusion that applies for any act that carries with it a potential prison sentence of one year. The restated plan document, however, doesn’t include this specific prison sentence limitation, which means the plan essentially will have to exclude more claims in order to comply with the terms of the plan document (such as, for instance, a DWI, which does not carry with it a sentence of up to one year, but is an illegal act!). While this would comport with the terms of the plan document, it is something for which plan members – and even the plan administrator – may not be prepared.

Another example is a situation where the prior plan contained a medical tourism program that includes many non-U.S. locations, so the plan did not include a foreign travel exclusion. When the two plan documents were “merged” such that the existing document and new format are combined, the new plan document accidentally contained both an international medical tourism program as well as a new exclusion for non-U.S. claims (because foreign travel exclusions are still fairly common). Needless to say, that type of contradiction can cause a slew of problems (including a potential gap with the stop loss policy).

The addition of a new exclusion, or even apparently minor verbiage changes within an existing exclusion (or definition, or benefit, or just about anything else, for that matter), can seem very insignificant, but has the potential for dire consequences if the intent of the plan is not reflected as clearly as possible.   

So, a few questions for employers, TPAs, consultants, brokers, and anyone else involved in plan document drafting:

•    Does the plan document actually say what the plan sponsor wants it to say?
•    Does it clearly outline what is covered?
•    Do the exclusions align with what the plan wants to be excluded?
•    If a plan document has been recently restated, have you confirmed that the terms of the new plan document are the same as the prior plan document?

It’s always best to triple-check these types of things.  Happy reading!

Altogether Now… But Not a Single Payer

On July 5, 2017
By: Ron Peck, Esq.

I have in the past remarked both that a single payer system would be harmful to patients and providers, and that it therefore behooves providers and benefit plan administrators to collaborate on an approach that ensures long term sustainability and viability of private benefit plans.

In response, I have been asked why a single payer system is bad for providers and patients, as well as why the current benefit model is not sustainable or viable long term.  While fully responding to both of these inquiries requires way more real estate than I have here, I hope in this blog entry to briefly explain.

WHY THE STATUS QUO CANNOT CONTINUE

I was recently asked to speak about our healthcare system.  I’d planned to talk about how PPACA (aka the ACA or Obamacare) only targets one-third of the healthcare system – that being payers (insurance), while mostly ignoring the other two-thirds: payees (providers) and patients.  

When I performed a web search to find pictures of the three for my slide deck, (insurance, providers, and patients), almost all of the available stock photo images associated with each were as follows: Provider; a wise, grey haired, caring doctor gently comforting a sick child – someone we could trust.  Patient; a desperate looking otherwise average person, clearly in pain and needing help – someone we could relate to.  Insurance; a sleazy looking businessman in a fancy suit, with a slick grin and pockets full of cash – someone we could hate.

Call it a scapegoat, or something else, but of the three players in healthcare, insurance is the villain.  Small wonder, when you consider that they are the ones that employers blame when rates go up; they are the ones siphoning salary from your paycheck; and they don’t provide anything useful.  I mean – providers save lives.  Insurance ruins them, right?  Insurance profits off of others’ suffering, right?  Insurance can charge whatever they want because the alternative is death, right?  Wrong.

Health insurance is routinely ranked beneath the pharmaceutical industry, medical products and equipment, and even some hospital systems, when it comes to profitability; (https://www.forbes.com/sites/liyanchen/2015/12/21/the-most-profitable-industries-in-2016/#12b660035716).  Now – I understand that “profit” means your revenue to cost ratio is great… and that it’s absolutely possible that insurers are taking in way too much revenue, and simply fail to address costs (resulting in poorer profits), but regardless of the reason – the national belief that insurance is printing money, is misplaced.

As I’ve said many times before, insurance isn’t healthcare – it’s a means to pay for healthcare.  This idea that insurance can strong-arm people into paying whatever they want, because people can’t say no – because not having insurance means certain death – assumes that without insurance there is no healthcare.  Yet, the truth is that healthcare would exist with or without insurance; we’d just need to find a different way to pay for it.  People “need” insurance – not for its own sake – but to pay for healthcare, because healthcare itself is too expensive.  

Imagine the following scenario:  Oil changes for your car jump to $1,000 per oil change.  Rather than be outraged with the price, we turn around and demand that auto insurance start paying for it.  We then get outraged when auto insurance rates increase.

Insurance isn’t without blame.  Indeed, I believe strongly that some forms of benefit plan are the only types that should be allowed to exist; that others are too profit driven, and/or force insureds to pay the cost when they make mistakes or act inefficiently.  Yet, with that said, blaming those actors (even the bad ones) for all the problems facing healthcare is a huge mistake.

Health insurance is not a behemoth, stomping around, forcing its will on insureds and providers.  In fact, the opposite is true.  Problems with the status quo arise not from the strength of the insurance market, but rather, their weakness.  This weakness, which we’ll next dissect, would be abolished by a single payer system – at the expense of medical service providers.

Presently, insurers (try to) negotiate with hospitals and drug companies on their own.  To do this, many rely upon preferred provider organization (PPO) networks or other such programs, whereby someone (the insurer itself or a network acting on a plan’s behalf) negotiate deals with providers, which then allows the provider to be deemed “in network.”  

In exchange for agreeing to the network terms, providers are promised prompt payment, and reductions in (or elimination of) audits and other activities payers otherwise engage in when dealing with medical bills submitted by out of network providers.  Indeed, benefit plans unilaterally calculate what the covered amount is when paying an out of network provider (usually resulting in the “balance” being “billed” to the patient).  When paying an in-network provider, however, benefit plans are required to pay the network rate (the billed charge minus an agreed upon discount), regardless of what pricing parameters they’d usually apply to out of network bills.  This is agreeable to the payer, meanwhile, because it means they get a discount (albeit off of inflated rates), and – more importantly – the payment is payment in full… meaning patients aren’t balance billed.

Due to the payer’s size (or lack of size) and number of payers present, competition between payers and networks, and other elements present in our market, payers cannot “strong arm” providers.   Compare this to markets where there is a single payer; when providers must agree to terms controlled by the payer, since it’s their way or no way.  

In other words, in a pure single-payer system, there is only one payer available – and you play by their rules, or you don’t play at all. Currently, in the United States, Medicare and Medicaid are the two “biggest” payers, and thus, it should come as no surprise that they routinely secure the best rates.

So – when you ask why the current system can’t survive, look at the prices.  Yes – instead of focusing on getting everyone enrolled in an insurance plan, and hoping that will somehow make things less expensive, instead look at what we’re actually paying.  As with the $1,000 oil change, sometimes the simplest answer is the right answer.  Healthcare is too expensive because healthcare is too expensive.

A 2011 study (http://content.healthaffairs.org/content/30/9/1647) found that reimbursements to some US providers from public payers, such as Medicare and Medicaid, were 27% higher than in countries with universal coverage, and their reimbursements from private payers were 70% higher.  This tells you two things – private plans pay way more than Medicare, and Medicare pays way more than “single payer systems.”

What does this mean?  If providers fail to offer private payers better rates soon, they will bankrupt the system.  If that happens, Medicare will go from being the “biggest” payer to the “only” payer… and the rates they pay will drop accordingly.  This then, brings us to the next chapter…

THE ISSUES WITH A SINGLE PAYER

Businesses need to stay profitable to stay afloat, and medical providers are no different.  In a single payer system, usage increases (because – from the “consumer” perspective [aka patients] it’s free), and reimbursement to providers decreases (for reasons discussed above).  That means providers are expected to do more with less.  Naturally, this results in decreases in quality, and longer waiting times (assuming access is available at all).  

To counter this natural shift, many nations with single payer systems also implement strict central planning.  This moves many healthcare choices from individual patients and providers, and instead allows the government to set the rules.

Months to have a lump examined?  Hours upon hours sitting in a waiting room?  Death panels?  The “horror” stories we hear from other nations with single payer systems are not shocking – they are expected.  Yet, those who support a single payer system do so because the current system is too expensive.  Thus, to avoid a single payer system, we need to make healthcare less expensive.  How do we do that?  Reduce the cost of healthcare, and reduce the cost of health insurance accordingly.

IDEAS FOR THE FUTURE

First, many have argued (and I tend to agree) that health insurance pays for too many medical services.  Routine, foreseeable services should not be “insured” events.  Insurance is meant to shift risk, associated with unforeseen catastrophic events.  A flu shot doesn’t fall into that category.  If people paid for such costs out of their own pocket, hopefully the cost of insurance would decrease (adding cash to the individual’s assets with which they can pay for said expenses).  Likewise, hopefully providers would recognize that people are paying for these services out of their own pockets, and reduce their fees accordingly.  If an insurance carrier wanted to reimburse insureds for these expenses (promoting a healthy lifestyle and avoiding some catastrophic costs insurance would otherwise pay) or employers want to cover these costs as a separate and independent benefit of employment (distinct from health insurance) so be it; (cough*self-funding*cough).

Next, we need to refocus on primary care as the gatekeeper.  I’ve seen a movement towards “physician only” networks, direct primary care, and other innovative methods by which benefit plans and employers promote the use of primary care physicians, and I applaud the effort.  They provide low cost services, identify potential high cost issues before they multiply, and steer patients to the highest quality yet lowest cost facilities and specialists when needed.

Lastly, I’ve seen benefit plans attempt to remove themselves from traditional “binding” network arrangements and instead contract directly with one or two facilities in a given geographic area.  By engaging with the facility directly, they can find common ground, and identify valuable consideration not previously considered.  Between increased steerage, true exclusivity, electronic payment, prompt payment, dedicated concierge, and other services payers can offer hospitals – above and beyond dollars and cents – some facilities are able to reduce their asking price to a rate that will allow the plan to survive… and thrive.

From ACOs to value based pricing… from direct primary care to carving out the highest cost (yet rarest) types of care – to be negotiated case by case – many innovative payers are trying to cut costs and ensure their survival.  The next step is getting providers to agree that such survival is good for the provider as well.  Compared to the alternative, I hope they will not cut off their noses to spite their faces.

It’s Time for a Wake-Up Call!

On June 26, 2017
By: Jen McCormick, Esq.

Healthcare has received so much attention over the past 10 years. Everyone has something to say about its current form, how comprehensive it should be, or who should be have a role in providing the coverage.   The most contentious piece of the conversation, however, is cost.  Healthcare can be expensive – particularly if you don’t pay attention.  Guess what – it’s time to pay attention… This mean you employers!

As an employer, do you take steps to encourage employees to make smart choices when it comes to healthcare? Are they encouraged to select generics? Are they told to read and understand the benefits available to them? Are they aware of the incentives the employer may offer for making an informed choice? These incentives don’t have to be limited to the plan document either!  Consider having a staff meeting to review all the great benefits the plan offers, maybe poll the staff and see if the employees want to offer a certain benefit (i.e. acupuncture), or even have a quiz which asks questions about the benefits and rewards the highest scoring employee.  

Whatever the method – it’s time to do something different and get employees engaged at the outset (prior to receiving healthcare benefits)!

Empowering Plans Segment 11 - The Senate Unveils its Repeal & Replace Bill

On June 22, 2017
In this special edition of the Empowering Plans podcast, Sr. Vice President and General Counsel Ron Peck and Attorney Brady Bizarro give their initial thoughts on the Better Care Reconciliation Act. What is in this new bill? What does it mean for the self-funded industry? What is next for healthcare reform?

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A Network by any Other Name

On June 22, 2017
PPOs, EPOs, HMOs… The days of simple network categories is past.  Today, innovative providers are offering up-front transparent pricing, subscription-based direct primary care (DPC), value based pricing, ACOs, medical tourism, international prescription plans, on-site clinics, telemedicine and direct contracting with “centers of excellence.”

Thank you for joining The Phia Group’s legal team on Thursday, June 22, as they discussed what a health plan needs to do to ensure the plan document supports the chosen methodology, which contracts and arrangements an employer needs to analyze to avoid conflict, and more.

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Full Billed Charges: A Question of Geography

On June 21, 2017
By: Jon Jablon, Esq.

It is increasingly common within the self-funded industry for medical providers to demand full billed charges for non-contracted claims. As we know, no one is actually required to pay full billed charges – but when push comes to shove, that tends to be the prevailing demand.

What about when the plan document limits payment at a percentage of Medicare? Say, 150%? The fiduciary has a duty to strictly abide by the terms of the plan document when making payments – and the definition of a non-contracted claim is that there is no contract to provide services at an agreed-upon price. Interestingly, though, and perhaps rendering it a misnomer, a non-contracted claim is still subject to two distinct contracts – an assignment of benefits, and the all-important plan document.

The plan document, of course, defines the Plan’s payment mechanisms and explains beneficiaries’ rights. When the plan document says that the Plan will pay $X, and the Plan does pay $X, the Plan has followed the terms of the plan document to a T. Or to an X, anyway. Let’s boil that down as simply as possible: X = X. What could be simpler than that?

Next, the assignment of benefits is an agreement between the patient and the provider. The patient says “I will transfer you all health plan benefits due to me ($X), and I promise that if $X does not compensate you fully, I will pay whatever balance you think makes sense.” In return, the medical provider promises to provide valuable medical services. We at The Phia Group have discussed the concept of assignments of benefits ad nauseum, and for good reason; this is the mechanism by which medical providers become beneficiaries of Plan benefits, and are due $X from the Plan.

Question: does an assignment of benefits give providers the right to receive full billed charges from the Plan, even though the Plan limits its benefits to an amount less than billed charges? There are a lot of moving parts in the self-funded industry, and this is yet another; the answer you may not have expected is maybe: it depends on the Plan’s geography.

Is the Plan domiciled in Fantasyland, home of laughable arguments, unexplainable oddities, and absurd logic? Then yes – billed charges will be due on every non-contracted claim, regardless of plan document language.

Or, is the Plan domiciled in Realityville, where general legal and market principles do exist, words have actual meaning, and hospitals and attorneys can be expected to be at least reasonably informed? If that’s where the Plan is, then no – of course an assignment of benefits doesn’t guarantee payment of full billed charges.

What are you, nuts?

Empowering Plans Segment 10 - Plan Tales: The Good, Bad, and Really Bad

On June 19, 2017
In this episode, Adam Russo and Ron Peck interview two key members of The Phia Group’s consulting division – Vice President of Consulting, Attorney Jennifer McCormick, and Product Developer, Kristin Spath. These two have tales to tell, regarding their experiences helping clients with unusual questions, and transforming outlandish ideas into real benefit plan innovations.

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Behind Closed Doors

On June 19, 2017
By: Brady C. Bizarro, Esq.

Anyone paying attention to national politics in the past six months knows that Washington has a problem with leaks; leaks from the White House, leaks from the intelligence community, and unsurprisingly, leaks from Capitol Hill. While many of these leaks come from “anonymous” sources and some are later debunked, they can be extremely damaging to both administration officials and lawmakers. Leaks, however, are not typically an issue in the legislative process. This is because, although legislation is not usually made public until it reaches a congressional committee, Congress routinely holds public hearings, meetings, and roundtable discussions after introducing legislation that could have a significant impact on domestic policy. This time around, however, Republican leaders have chosen to write their health care bill behind closed doors, and that decision should worry employers, insurers, and providers alike.

Back in March, the Washington Post reported that the House bill to repeal and replace Obamacare was being kept secret in an undisclosed room in the U.S. Capitol. This led Republican Senator Rand Paul (R-Ky) on a rather public quest to find the bill and to demand that his House colleagues show him the secret draft. Eventually, a draft leaked to the press, causing Republicans significant grief and making the task of passing the legislation that much more difficult. The Senate has also chosen secrecy, opting not to hold any public meetings on their version of a repeal and replace bill. The strategy seems to be to wait until the Senate has enough votes to pass the bill before unveiling it. Unsurprisingly, an outline of that bill emerged last week and is now causing Senate Majority Leader Mitch McConnell (R-Ky) many headaches.

According to the leaked outline, the Senate bill requires insurance companies to offer coverage to people with preexisting conditions and, unlike the House bill, it prohibits them from charging sick people higher premiums. The outline still permits states to seek waivers that would permit insurers to decide not to cover essential health benefits. This effectively means that insurers can reinstate lifetime and annual limits on coverage since the ban on limits applies only to essential health benefits. Finally, the outline reveals that heavy cuts to Medicaid are still planned, but are pushed out a few more years. In short, these changes represent a compromise between hardline conservatives who want a full repeal of Obamacare and moderate Republicans who are concerned about the impact on low-income Americans and those with pre-existing conditions.

Since we do not know for sure what the final bill will look like, it is futile to try to assess its impact on the health care industry as a whole and on the self-insurance industry in particular. Still, one conclusion we can draw is that the legislative strategy at play is creating substantial uncertainty for our industry. When the Affordable Care Act was being passed, Democrats held public hearings involving industry experts, advocacy groups, and other key stakeholders. While the bill was far from perfect, at least interest groups got the chance to give their input and to discuss their concerns in an open forum. By writing their health care reform bill behind closed doors, Republicans are making themselves susceptible to leaks and to charges that they shut key stakeholders out of the process. It remains to be seen if this strategy is more or less likely to produce a bill that works for the health insurance industry and the American people.