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Phia Group Media

The Phia Group's 2nd Quarter 2017 Newsletter
Phia Group Newsletter 2nd Quarter

Phone: 781-535-5600 |

The Book of Russo:
From the Desk of the CEO

Happy spring to all of you. This is my favorite time of the year as baseball begins, the kids can run outside here in Boston, and I get some sanity by enjoying the weather. At The Phia Group, it's no different. This is the time of year when it's truly heating up from a cost containment and consulting level. Brokers, employers, stop loss carriers and administrators are starting to see outrageous claim charges from the first quarter and reaching out to us for assistance. The bottom line is that we are here to empower you and your plans. I urge you to check out the case study from our unwrapped service, as well as the amazing initiative we have put together from a social media aspect. We decided this year to not only offer industry leading webinars, but also to expand our voice though shorter podcasts and intuitive blog posts.

We are here to make this industry better for everyone, by doing what we can to lower the overall cost of care. I love this fight, and we here at The Phia Group are passionate about this goal and our overall mission. Thank you for believing in us and reaching out. Happy reading.

Phia Group Case Study: Handbook, Schmandbook
Service Highlight of the Quarter: Phia Unwrapped
Fiduciary Burden of the Quarter: Strictly Abiding by the Terms of the Plan Document
New Services Announcement: The Phia Group: Catering to More of Your Needs
From the Blogosphere
The Phia Group’s 2017 Charity
The Stacks
Phia’s Speaking Events
Employee of the Quarter
Phia News

Phia Group Case Study: Handbook, Schmandbook

A client of The Phia Group faced a situation in which the group’s Plan Document referenced an extension of coverage for up to 24 months for participants unable to actively work due to disability. To contrast, the employer’s Employee Handbook referenced an extension of coverage for up to 36 months, or longer if deemed appropriate by the employer. The group’s stop-loss policy provided coverage only for the length of time dictated by the plan document (24 months).

The health plan’s broker referred the Plan Document and stop-loss policy to The Phia Group’s consulting team to perform a Gap-Free Analysis. As part of this analysis, it was discovered that the Plan Document’s leave provisions did not align with those in the stop-loss policy. The Phia Group’s team also included a note to ensure that if the Plan Document was changed, the Employee Handbook may need to be changed to align as well. Upon receiving the Gap-Free Analysis, the group’s broker asked The Phia Group to review the Employee Handbook and make whatever changes were necessary for the documents to align; upon review, the additional discrepancy was discovered and remedied.

Three months later, after the Plan Document and Employee Handbook were amended to alleviate the gaps in coverage, a member requested 18 months of leave from the employer. The employer was free to grant the leave based on other terms in the Employee Handbook, but the employee was informed that after twelve months, coverage under the Plan would terminate. As luck would have it, during the fifteenth month of the employee’s leave, she incurred significant medical claims that, if paid by the Plan pursuant to its former language, would have been denied by stop-loss. By addressing gaps in coverage, the Plan successfully avoided a large stop-loss denial.

Service Highlight of the Quarter: Phia Unwrapped

In the past, wrap networks provided a great amount of value to health plans. They effectively enlarged the plan’s primary network, somewhat like being able to utilize T-Mobile’s cell phone towers when out of AT&T range. The old theory, however, no longer holds true. Just as primary networks add less and less value as the magnitude of medical bills increase dramatically and arbitrarily, so to have wrap networks become more cumbersome than they are valuable.

Phia Unwrapped is designed as a replacement for non-contracted claims – whether they would normally be subject to a wrap network or treated as out-of-network. Phia Unwrapped is a way of keeping the plan’s primary network as always, but ensuring that all other claims are repriced accurately and responsibly, that patients have an advocate to help them through any potential balance-billing, and that the plan has experienced legal and negotiation support on the back end to secure the best possible outcomes.

In the Plan year 2014-2015, an 1,100 life Employer Group had 32% combined “savings” from their out-of-area wrap PPO program and out-of-network claim “solutions.”  Dissatisfied with these so called solutions and hearing about the strategic merits of reference based pricing (RBP) the employer switched to Phia Unwrapped. This switch allowed the group to pay a reasonable amount on claims while also providing support for members to make sure they were not caught in the crossfire with a provider attempting to collect abusive charges.

The results? In the Plan year 2015-2016, the employer had 74% savings paying 140% of Medicare, totaling an additional $2.8 Million in savings compared to traditional solutions.  Though the employer was initially concerned about “noise” from the members (who to this point only had out of pocket differentials for going out of network), Phia's industry leading balance billing support managed by Attorneys ensured that there was minimal member disruption (2%). 

What does “disruption” look like?

The group had an out-of-network emergency trauma claim, which was billed at $241,000.  Upon receipt of the out-of-network claim, the pre-setup EDI feed sent the claim to Payer Compass for re-pricing, pursuant to the Phia Unwrapped program. The third-party administrator subsequently received pricing back from Payer Compass; the Plan’s language – which specified payment at 140% of Medicare – allowed a little over $81,000. In accordance with the Phia Unwrapped service, the claims administrator paid the claim at the allowed amount.

Three months later the hospital balance billed the patient, at which point the patient spoke to Payer Compass and The Phia Group, clearly concerned about the balance billing. After a few rounds of back-and-forth with the hospital, the bill was escalated to The Phia Group’s Provider Relations department, which had been authorized to negotiate on the Plan's behalf. After a series of lengthy negotiations, which included email and phone correspondence with the hospital CFO, The Phia Group and the hospital reached an agreement to settle the claims for a total payment of 175% of Medicare, yielding significant savings from billed charges. These savings proved to be much higher than the 20% discount that the Plan would have realized if it still used the wrap network.

In the next billing cycle, The Phia Group reimbursed the difference between what it had originally billed as its fee and what it now billed for the final savings:

Plan Exposure:                                             
Final Payment:                                             
Phia Intervention Saved:   

Whatever your out-of-network volume, Phia Unwrapped is the solution you have been waiting for.

Fiduciary Burden of the Quarter: Strictly Abiding by the Terms of the Plan Document

ERISA is very clear that the Plan Administrator is required to administer benefits strictly in accordance with the terms of the applicable plan document. Plan Administrators, though, are often faced with difficult situations – situations where paying a claim that might otherwise be excluded under the plan document would avoid considerable headache, appease a member of the C-suite, or more accurately reflect what the drafter of the plan document intended, even if the language does not provide for that outcome.

We at The Phia Group have been presented with many situations in which the plan document says one thing, but the Plan Administrator wants to do another. Our advice is always the same – be careful and mind your fiduciary duties – but at the end of the day, the Plan Administrator is the decision-maker and should do what it feels is appropriate, being mindful that stop-loss will likely not be quite so sympathetic to the Plan Administrator’s deviation from the terms of the plan document.

One such example came in the form of a particular plan working to administer an exclusion for illegal acts. A twelve-year-old plan participant committed an illegal act, according to the plan document, when the child inadvertently drove an ATV on a public road in a jurisdiction that considers it a crime to ride an ATV on that road. In the next county over, this would not have been a crime – and the child reportedly was not aware that he had entered a jurisdiction where his actions were a crime. There was an ATV crash, and claims were incurred. Upon being presented with claims related to the accident, the plan’s TPA read the language of the plan document, analyzed the facts of the case, and came to the conclusion that the claims should be denied. Since these were not claims that were doubtful or disputed, the TPA rendered the determination without the need for any discretion.

Upon discovering the denial, the group was not happy. According to the group, it never intended for its “illegal acts” exclusion to apply to a twelve-year-old on an ATV; this, according to the Plan Administrator, was a simple mistake on the part of the child, who was not aware what he was doing was illegal. The Plan Administrator was eager to overturn the denial to effect what it considered its real intent – which was to punish acts committed by adults, with knowledge of the illegality of their actions.

Is it appropriate to read such an exception into the terms of the plan document? If the plan document says “illegal acts” but the Plan Administrator wants to apply the exclusion to some illegal acts but not others depending on the circumstances, it creates a potential problem in that the Plan Administrator has failed to strictly abide by the terms of the plan document. This means the plan document has been administered inconsistently.

Practically speaking, do people usually complain about claims being paid? Of course not. But legally speaking, is the Plan Administrator permitted to create exceptions to unambiguous language on a case-by-case basis? Not according to ERISA. Violating fiduciary duties is a problem – especially in light of the Department of Labor getting stricter about audits whenever there is even a hint of impropriety. It is not likely that anyone would report this fiduciary violation – but that does not mean it is a good idea to violate the fiduciary duty to begin with. The Phia Group’s attorneys will attest to the notion that a low likelihood of punishment for a fiduciary violation is neither an excuse nor a good reason to commit the violation.

As mentioned above, the stop-loss carrier would likely not be pleased about the Plan Administrator’s determination either. If the Plan Administrator wants the language changed, the Plan Sponsor should effect an amendment – but as far as stop-loss is concerned, the plan document has been underwritten as-is and a claim, such as this one, should be denied by the Plan. As we have all seen first-hand, when a stop-loss carrier receives a claim for reimbursement that should not have been paid by the
Plan in the first place…well…let’s just say it’s not an ideal situation.

New Services Announcement: The Phia Group: Catering to More of Your Needs

Leave of Absence ReviewWith The Phia Group’s Leave of Absence Review, employee handbooks, health benefit plan documents, and stop-loss policies align, all while remaining compliant with applicable law. Click here to learn more!

Flagship Plan DocumentWith The Phia Group’s Flagship Plan Document, clients can enjoy speedy & efficient production of best-in-class plan documents, with minimal time or monetary investment. Click here to learn more!

If you would like to speak with one of our specialists regarding the new services we offer, please feel free to contact us at so we can schedule a call.

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From the Blogosphere

ACA to AHCA… A Look Back on the Past 7 Years. Seven years in the making.

Health Insurance is NOT Health Care. Sit back, relax and enjoy Ron Peck’s metaphors.

U.S. Airways v. McCutchen – Where Are They Now? It seems like it was just yesterday.

The Guilty Shall Remain Nameless - Yet I Shall Shame Them… Again. Quote: “Yes… Is there someone else here I can talk to?”

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The Double-Edged Sword of Discretion: How Even Great Plan Document Language Can Cause Gaps in Coverage

On April 27, 2017, The Phia Group will present “The Double-Edged Sword of Discretion: How Even Great Plan Document Language Can Cause Gaps in Coverage.”

Click HERE to Register!

On March 23, 2017, The Phia Group presented “Medical Bill Blues: Pre-Payment Contracting and Negotiation, Pricing Alternatives, and Post-Payment Recovery of Overpayments,” where we analyzed the various ups and downs we associate with "provider relations.”

On February 15, 2017, The Phia Group presented “Top Miscues Employers Make When It Comes To Their Health Plans ... And What We All Can Do To Become Health Plan Heroes.”

On January 19, 2017, The Phia Group presented “Back to The Self-Funding Future – Which Echoes of 2016 Will Continue to Impact Self-Funding in 2017,” where our legal team talks about how the past decade has ushered in both outrage and opportunity for self-funded plans.

On January 4, 2017, The Phia Group presented a brief webinar to describe some changes recently made to our reporting portal.

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On April 4, 2017, The Phia Group presented “The AHCA Failed: Where To Next,” where our legal team discusses the recent, stunning failure of the GOP’s American Health Care Act.

On March 13, 2017, The Phia Group presented “Attack of the Killer Savings,” where we identify facilities that provide the best outcomes for the least cost.

On February 28, 2017, The Phia Group presented “The Journey Continues,” where Adam Russo & Ron Peck discuss what makes our health benefit plan unique.

On February 13, 2017, The Phia Group presented “The Next Episode,” where we talked about what makes our health plan a source of savings.

On January 30, 2017, The Phia Group presented our very first podcast, “The Maiden Voyage.”

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The Phia Group’s 2017 Charity

The Phia Group's 2017 charity is the Boys & Girls Club of Brockton. 

The mission of The Boys & Girls Club is to nurture strong minds, healthy bodies, and community spirit through youth-driven quality programming in a safe and fun environment.

The Boys & Girls Club of Brockton (BGCB) was founded in 1990 to create a positive place for the youth of Brockton, Massachusetts. It immediately met a need in the community; in the first year alone, 500 youths, ages 8-18, signed up as club members. In the 25 years since, the club has expanded its scope exponentially by offering a mix of Boys & Girls Clubs of America (BGCA) nationally developed programs and activities unique to this club.

Since their founding, more than 20,000 Brockton youth have been welcomed through their doors. Currently, they serve more than 1,000 boys and girls ages 5-18 annually through academic year and summertime programming.

Monthly Donations From Phia

For more information or to get involved, visit

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The Stacks

Self-Funded Health Plans May Have a New Ally in the Fight Against Specialty Drug Prices
By: Brady Bizarro, Esq.

Throughout the bitter and seemingly endless presidential election cycle, Donald Trump and Hillary Clinton vehemently disagreed on almost every issue, especially those involving health policy. Yet, there was at least one health policy issue on which both candidates agreed: prescription drugs are too expensive. For self-funded health plans, this is old news. The industry continues to face increasing costs overall, and prescription drugs make up a significant portion of those costs. Specialty drugs are particularly culpable. Specialty drugs accounted for 32 percent of all drug expenditures in 2014 despite making up less than one percent of all written prescriptions, according to research conducted by Express Scripts.

Click here to read the rest of this article.

Appealing to Reason
By: Jon A. Jablon, Esq.

The language is exceedingly common within benefit plans. We’ve all seen it; in order to appeal a denial, a medical provider must be specifically appointed by the patient as the patient’s “authorized representative.” Only members may appeal their own claims, unless they appoint someone to do so. Some third-party administrators and plan administrators even have a form that a member must fill out. These are long-held maxims by many – but are they truly compliant?

Click here to read the rest of this article.

Held Captive by Appeals
By: Tim Callender, Esq.

Prior to the passage of the Affordable Care Act, self-funding was already healthy and growing. Since the passage of the Affordable Care Act (and predominantly due to the ironic increase in healthcare insurance costs through the fully-insured, carrier model) we have seen self-funding grow even more. Although this growth has been significant, there are some employer groups – primarily small and mid-sized groups – that have struggled to find a sustainable path into self-funding nonetheless.

Click here to read the rest of this article.

As Employer-Sponsored Plans Multiply, Self-Funding Remains an Attractive Option
By: Brady Bizarro

As the new year begins, we can reflect on annual reports and surveys recently released by federal agencies and non-profit organizations which measure public and private healthcare spending and reveal trends in national health policy. One of the most prominent reports is the National Health Expenditure Accounts report, which was released in December by the Centers for Medicare and Medicaid Services. Some of CMS's findings forecast tough times ahead for employer-sponsored health insurance. Now, more than ever, employers will need to develop innovative approaches to continue offering affordable coverage to their employees.

Click here to read the rest of this article.


To stay up to date on other industry news, please visit our blog.

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Phia’s Speaking Events

Adam Russo’s 2017 Speaking Engagements:
• 2/22/17 – TABA Spring Conference – Austin, TX
“The Good, The Bad, and the Naughty – Ethics: Simple Mistakes vs. Breach”
• 3/16/17 - IMA National Independent Agency Consortium – Bonita Springs, FL
“Not Your Grandmother’s Self-Funding: Best Practices for a Changing Industry”
• 3/21/17 – Advantage Benefits RBP Seminar – Grand Rapids, MI
“The Best Gets Better - Getting the Most Out of Your Self-Funded Plan”

Adam Russo’s Upcoming Speaking Engagements in 2017:
• 4/24/17 - Berkley Captive Symposium – Grand Cayman Islands
“The Best Gets Better - Getting the Most Out of Your Self-Funded Plan”
• 5/4/17 – Benefest – Westborough, MA
"Multiple Personalities - The Biggest Issues Impacting Plans & Employers, and Instances Where They are Their Own Worst Enemy"

Ron Peck’s 2017 Speaking Engagements:
• 4/3/2017 – Eastern Claims Conference (ECC) – Boston, MA
“The Good, The Bad, and The Ugly: Understanding Reference Based Pricing in the Special Risk Market”

Tim Callender’s 2017 Speaking Engagements:
• 2/2/17 – Alaska Association of Health Underwriters – Anchorage, AK
“Innovation and Cost-Containment In the Self-Funded Space”
• 2/27/17 – LBG Advisors: Benefits Symposium – Anaheim, CA
“Innovation and Cost-Containment In the Self-Funded Space”

Tim Callender’s Upcoming Speaking Engagements in 2017
• 5/22/17 - Group Underwriters Association of America Annual Conference - Denver, CO
“The Future of Health Plans”
• 7/17/17 - Health Care Administrator’s Association TPA Summit - St. Louis, MO
“Conference Emcee”

Jen McCormick’s 2017 Speaking Engagements:
• 3/29/17 – SIIA Executive Forum – Tucson, AZ
“Department of Labor Audits”

Brady Bizarro’s 2017 Speaking Engagements:
• 1/22/17 – Texas Association of Benefit Administrators (TABA) – Austin, TX
“Healthcare Policy under the Trump Administration”

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Get to Know Our Employee of the Quarter:
Erik Graber

Congratulations to Erik Graber, the Phia Group’s Q1 2017 Employee of the Quarter!

“Erik embodies everything Phia is about from our mission statement to our vision to our culture.  Throughout Q1, Erik has been tenacious in his pursuit of teaching and training new team members; giving them the tools essential to succeed in their roles.  The life of an IT Director is not a glamorous one and Erik works assiduously, oftentimes nights and weekends – sacrificing precious family time – to meeting and exceeding his goals and deadlines to ensure our company runs seamlessly.  If there is an issue you can rest assured Erik will promptly handle the matter – possibly with a bit of sass and sarcasm!  Erik is truly an asset to The Phia Group, and we’re fortunate to have him!”

Congratulations Erik and thank you for your many current and future contributions.

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Phia News

Promotions at Phia:
• Keith McMahon was promoted from CI to CRS III
• Lauren Vermette was promoted from legal assistant role to CI
• Cara Carll was promoted to Team Leader of the MedPay & Work Comp. Tier
• Kerri Sherman was promoted to Team Leader of BI Tier & Case Investigation
• James Newell was promoted to Team Leader of Claim & Case Support
• Angela Grande was promoted to CRS III
• Katie Delaney was promoted to Team Leader of the Quality Analysts.
• Jude McNeil was promoted to Team Leader of the Call Center in Customer Service
• Lisamarie DeCristoforo was promoted to Team Leader of Case Evaluation in Customer Service

New Hires This Quarter:
The Phia Group has added 5 new employees to its staff this quarter. They include:
• Matthew Painten was hired into our Marketing department
• Jeff Hanna was hired into our Accounting department
• Randal Moody was hired into our IT department
• Krista Maschinot was hired into our Phia Group Consulting department
• Victoria Pace was hired into our Phia Group Consulting department

Open Positions at Phia
• Case investigator
• Attorney I
• ETL Specialist
• Data Architect
• IT Technologist
• Product Analyst

Click here for more information or to apply today!

Additions to the Phamily:
• Tara Trojano gave birth to a baby girl, Emily Rose, on 02/09/17
• Liz Welcome gave birth to a baby boy, Quinton Jay Robert Pereira, on 02/01/17

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The Stacks – 2nd Quarter 2017
Self-Funded Health Plans May Have a New Ally in the Fight Against Specialty Drug Prices
By Brady Bizarro, Esq.

Throughout the bitter and seemingly endless presidential election cycle, Donald Trump and Hillary Clinton vehemently disagreed on almost every issue, especially those involving health policy. Yet, there was at least one health policy issue on which both candidates agreed: prescription drugs are too expensive. For self-funded health plans, this is old news. The industry continues to face increasing costs overall, and prescription drugs make up a significant portion of those costs. Specialty drugs are particularly culpable. Specialty drugs accounted for 32 percent of all drug expenditures in 2014 despite making up less than one percent of all written prescriptions, according to research conducted by Express Scripts.

Self-funded health plans employ a variety of cost-containment strategies in an effort to ameliorate the fiscal burden of prescription drugs. These include increased cost-sharing (through copayments, coinsurance, and deductibles) and utilizing manufacturer copay cards and tiered benefit programs. Now, the self-funded industry may be given new tools by the President-elect to fight the pharmaceutical companies.

Chief among President-elect Trump’s health policy priorities is his campaign promise to “repeal and replace” the Affordable Care Act. In addition, he has announced at least two priorities which depart from conventional conservative thinking and have important implications for the future of self-funding: requiring price transparency from all healthcare providers and permitting consumers to import drugs from overseas.

As part of Trump’s plan for “Healthcare Reform to Make America Great Again,” the President-elect proposed that Congress must:

Remove barriers to entry into free markets for drug providers that offer safe, reliable and cheaper products. Congress will need the courage to step away from the special interests and do what is right for America. Though the pharmaceutical industry is in the private sector, drug companies provide a public service. Allowing consumers access to imported, safe and dependable drugs from overseas will bring more options to consumers.

It is hard to overestimate the savings a self-funded health plan can realize if permitted to import drugs from overseas. One of the main reasons why prices for brand-name drugs are typically lower in most developed countries than in the U.S. is because of increased negotiating power. In the U.S., the government has forfeited its negotiating power. Medicare, the largest single purchaser of prescription drugs in the U.S., is prohibited by law from negotiating prices with pharmaceutical companies. By contrast, in the United Kingdom, brand-name drug prices are generally much lower because the government and the industry negotiate agreements which contain set spending caps and require drug companies to reimburse the government any amount which exceeds the cap. While some of these agreements do contain opt-out provisions for the reimbursement requirement, most pharmaceutical companies agree to these contracts as-is in order to gain access to a much larger market.

Also consider the case of Canada, which is often touted as a prime example of a source of low-cost prescription drugs. The Canadian government negotiates with pharmaceutical companies on behalf of the public. As a result, brand-name and even generic drugs are less expensive in Canada than they are in the United States. In 2004, the median prescription drug prices in Canada were nearly 79 percent lower than those in the U.S., according to the Patent Medicine Prices Review Board Annual Report. The 2013 report revealed that Canadian consumers still paid less than half of what U.S. consumers paid for patented-drug products. If the President-elect succeeds in pushing through legislation which ends the ban on foreign drug imports, U.S. consumers could realize similar savings.

This would not be the first time that a politician has attempted to lift the ban on importing foreign drugs. The Safe and Affordable Drugs from Canada Act of 2015 was sponsored by Senator John McCain (R-AZ) and had bi-partisan support, including from Senator Bernie Sanders (D-VT). The bill remains stalled in the Senate Committee on Health, Education, Labor, and Pensions. There was also an attempt to permit importation in 2009 while the Affordable Care Act was being pushed by Democrats, but that effort also failed. Despite past failed attempts, there are many reasons to think that the importation of prescription drugs from overseas may actually become legal (at least in some form) under a Trump Administration.

First, public support for change and increased price transparency is at an all-time high, especially in light of recent, high-profile price-gouging controversies. In August 2015, Turing Pharmaceuticals acquired the exclusive rights to distribute Daraprim, a drug used to treat AIDS-related symptoms. A month later, the company raised the price of Daraprim from $13.50 per pill to $750 per pill overnight, an increase of over 5,500 percent (before 2010, the drug cost $1 per pill). A joint study by the Infectious Disease Society of America and the HIV Medicine Association found that the increase in price would result in an average bill of $634,500 per year for most patients. In response to the public outcry, the CEO of Turing Pharmaceuticals defended his company’s actions, citing the need to modernize the drug and create new alternatives with fewer side effects. A year later, the price of the drug is $375 in the U.S., and between $1 and $2 per pill internationally.

Turing Pharmaceuticals is not the only company to drastically increase the price of its brand-name drugs and face near-universal criticism. Mylan, a global generic and specialty pharmaceuticals company, faced an even bigger political firestorm in the summer of 2016 when it raised the price of a two-pack supply of its popular EpiPen to $608 (the same two-pack EpiPen is available in the United Kingdom for $69). The EpiPen, which sold for $100 as recently as 2009, is an epinephrine auto injector device used to control allergic reactions to food and environmental allergens. What made this case more contentious was a media report revealing that over the past eight years, while the price of EpiPens increased 461 percent, the salary of Mylan’s CEO rose 671 percent, up to $18.9 million a year.

Although many experts agree that these examples are egregious, it is important to note that there are enormous costs associated with pharmaceutical research and development. Furthermore, there is a very real need to encourage drug development as a matter of good public health and public policy. This is why the U.S. government provides regulatory protections to assist pharmaceutical firms in the development of life-saving drugs. Nonetheless, recent polling confirms that Americans are fed up with the price of brand-name drugs. Nearly eight in ten Americans agree that drugs are too expensive, and almost 86 percent agree that pharmaceutical companies should be required to reveal how drug prices are set, according to a survey released by the Kaiser Family Foundation in September 2016.

In addition to the public outcry over specific pricing controversies, the Food and Drug Administration (FDA) has sent mixed signals regarding the agency’s willingness to enforce the ban on foreign drug imports. The FDA’s website explains that the agency has a policy “that it typically does not object to personal imports of drugs that FDA has not approved under certain circumstances . . .” Those circumstances include when less than a three-month supply is imported, and when the consumer importing the drug verifies in writing that it is for her own use and provides contact information for the doctor providing her treatment.

Perhaps most importantly, President-elect Trump will enjoy the benefits of a Republican-controlled House and Senate. While in recent weeks he has shown signs of scaling back some of his campaign promises, this particular health policy initiative enjoys bi-partisan support. As such, there may be no better opportunity to push through legislation lifting the ban on safe, dependable imported drugs.

Appealing to Reason
By Jon A. Jablon, Esq.

The language is exceedingly common within benefit plans. We’ve all seen it; in order to appeal a denial, a medical provider must be specifically appointed by the patient as the patient’s “authorized representative.” Only members may appeal their own claims, unless they appoint someone to do so. Some third-party administrators and plan administrators even have a form that a member must fill out. These are long-held maxims by many – but are they truly compliant?

In what it has deemed a frequently asked question, the Department of Labor, in its Benefit Claims Procedure Regulation FAQs , has asked itself “Does an assignment of benefits by a claimant to a health care provider constitute the designation of an authorized representative?” The Department of Labor simply, and helpfully, led its answer with the word “no.” To elaborate on this “no,” the DOL wrote that “Typically, assignments are not a grant of authority to act on a claimant's behalf in pursuing and appealing a benefit determination under a plan.”

But how much does that truly clarify? Without some context, it is fairly unhelpful – and in context, it is revealed that this guidance from the DOL is somewhat inaccurate.

An authorized representative is one who is authorized to act as the representative of another – a description that could scarcely be any clearer. In our sense, an authorized representative is generally used in the context of the right to appeal. To illustrate the utility of this concept, consider three scenarios; in all three, a plan member has received services from a non-contracted medical provider, and in all three the Plan’s available benefits are not quite enough to cover the provider’s full billed charges. Appeals will occur – but the difference in the scenarios hinges on exactly who is appealing, and on whose behalf.

In scenario number one, the health plan systemically prohibits all assignments of benefits, and pays benefits directly to the member. The member endorses the Plan’s payment to the provider to compensate the provider for its services – but the provider is dissatisfied with the payment amount. In this scenario number one, the provider may not appeal to the health plan unless the provider appeals on the patient’s behalf, since the provider itself was due benefits from the patient, rather than from the health plan, since there was no assignment of benefits – and in such case the provider would need to be appointed by the member as the member’s authorized representative, since the provider has no independent right to benefits from the health plan in this scenario. In other words, the provider would need to appeal on the member’s behalf, and would therefore need to be the member’s authorized representative to do so.

In scenario number two, there is again no assignment of benefits, but the provider decides to balance-bill the member instead of getting involved in the appeals process. The member, rather than the provider, appeals directly to the Plan. Members, of course, are always claimants and are always entitled to appeal to the health plan if the member feels that a greater amount of benefits should be paid. In this scenario two, there is no need for the member to appoint the provider as the member’s authorized representative, since the member needs no representative if she appeals on her own behalf.

Now, consider scenario number three, where there is a valid assignment of benefits from the member to the provider (as is almost universally the case in self-funded health care). Through the assignment of benefits, the provider is invited to submit its claims directly to the health plan, and receives only partial payment of its billed charges in return. In this scenario three, the provider desires to appeal the denial. The provider submits an appeal to the health plan – in accordance with all of the plan’s written and established procedures – and the third-party administrator answers the provider with a letter stating that only members may appeal, unless the member fills out a specific form to authorize the provider to appeal on the member’s behalf. How compliant is that, though? Might the health plan be at risk of noncompliance if it denies providers the right to appeal their own claims?

An authorized representative, as described above, is one who is authorized to be the representative of another. In a case such as this, a medical provider might be authorized to act as the representative of the member, therefore becoming the member’s personal representative. Consider, however, federal regulations that afford all claimants the right to appeal; claimant is a term of art that explicitly includes participants and beneficiaries . A beneficiary is defined as “a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.”

Forget the legalese; the important thing is to note that medical providers, if benefits are assigned to them, are beneficiaries, as that term is defined by the regulations – and beneficiaries become claimants when they submit claims to the health plan. If you remember, all claimants are empowered to submit claims to the health plan, appeal a denial of those claims, and even ultimately sue for redress under ERISA. (As one court put it, “there is now a broad consensus that when a patient assigns payment of insurance benefits to a healthcare provider, that provider gains standing to sue for that payment under ERISA § 502(a). ”)

The same regulation that defines “claimant” also provides that:

Every employee benefit plan shall establish and maintain a procedure by which a claimant shall have a reasonable opportunity to appeal an adverse benefit determination to an appropriate named fiduciary of the plan, and under which there will be a full and fair review of the claim and the adverse benefit determination.

According to these regulations, not only are claimants afforded the right to file claims, but they are also guaranteed the right to appeal, by imposing this responsibility upon the health plan to afford claimants the right to appeal. The relevant regulations unambiguously explain that a claimant may appeal an adverse benefit determination. Moreover, the text of ERISA itself provides that “A civil action may be brought…by a participant or beneficiary…to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan. ” To simplify, again, claimants can sue for benefits. Since medical providers are claimants if they are assigned plan benefits, then providers can appeal and ultimately sue if necessary.

As another court wrote, somewhat more bluntly, “the assignment is only as good as payment if the provider can enforce it. ” This is a matter of public policy, and seems fairly intuitive; if a provider has the right to submit a claim, and the health plan has the right to tender a denial of that claim, practically speaking, why should the provider not also have the right to appeal the denial of its claim? According to courts and the regulations, the provider does in fact have this right.

We now know that medical providers who have been assigned benefits can submit claims, appeal denials of those claims, and sue for redress pursuant to ERIA. It should be noted, however, that although the law on the topic may be established, not everyone is on the same page, as is so often the case in our industry.

The DOL’s answer to its own question (“Does an assignment of benefits by a claimant to a health care provider constitute the designation of an authorized representative?”) continues by specifying that “An assignment of benefits by a claimant is generally limited to assignment of the claimant's right to receive a benefit payment under the terms of the plan.”

But how can that be the case? Claimants have the right to appeal, and claimants include anyone “designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.” The regulations say one thing, but the DOL’s FAQ seems to say the opposite.

The DOL’s answer to its own question yields an absurd conclusion: that a provider that has accepted an assignment of benefits and submitted claims to a health plan is not a claimant. According to applicable law, however, either the provider accepts assignment of benefits and submits claims, and therefore earns the right to appeal and sue – or the provider does none of those things. These rights are not discrete; they are a package deal, inseparable from one another. Each right – the right to submit claims, the right to appeal a denial, and the right to sue under ERISA – has “not for individual sale” marked on its label.

The confusion doesn’t stop there, though. Coming back to the Department of Labor’s answer to its own frequently asked question, the Department has stated that “[t]ypically, assignments are not a grant of authority to act on a claimant's behalf in pursuing and appealing a benefit determination under a plan.” This is a correct statement, although very misleading in context. It is true that an assignment of benefits does not grant a provider authority to act on a claimant’s behalf – because a provider who has received an assignment of benefits is a claimant unto itself, and is not acting on anyone else’s behalf. The provider therefore needs no authority to act on anyone’s behalf.

Where do we go from here? There is conflicting guidance; FAQs are suggestive rather than binding, but most take them as gospel nonetheless, since they are explicitly designed to be written in plain English rather than the legalese of the regulations.

The rules surrounding who has what rights and under what circumstances are undoubtedly confusing at times; guidance provided by our regulators is sometimes confusing, vague, and – at times – even contradictory. This is one of those times, and affording all relevant rights to medical providers is an important topic now more than ever in the face of incoming bouts of regulatory scrutiny of the self-funded industry and the fiduciaries who act within this space.

As health plans struggle to contain costs, health plan administrators, third-party administrators, and brokers should be careful not to handicap themselves by employing the same thinking as prior decades simply because that’s what has always been done. Performing an in-depth review of claims and appeal processes – and the rest of the health plan to boot – is the best way of staying ahead of the curve and ensuring compliance and viability.

Held Captive by Appeals
By: Tim Callender, Esq.

Prior to the passage of the Affordable Care Act, self-funding was already healthy and growing.  Since the passage of the Affordable Care Act (and predominantly due to the ironic increase in healthcare insurance costs through the fully-insured, carrier model) we have seen self-funding grow even more.

Although this growth has been significant, there are some employer groups – primarily small and mid-sized groups – that have struggled to find a sustainable path into self-funding nonetheless.  For purposes of this article I will refer to these employers as “Small-Mids.”  Obviously, opinions differ as to what a “small” or “mid-sized” employer group is, but for today’s discussion, we are looking at employer groups ranging from 50 employees up to approximately 200 employees.  

One of the primary barriers to entry for Small-Mids is the financial risk inherent to the self-funded model.  Even with a stop-loss policy in place (assuming the employer is domiciled in a state that has not regulated stop-loss to the point of making it prohibitive to gain a policy for a small to mid-sized employer), many Small-Mids do not have the cash reserves necessary to make it through a high health spend year before stop-loss reimbursement might kick in. There are programs in the market such as “level-funding” whereby an employer’s risk is effectively capped at a certain figure in exchange for a set monthly expense, but such programs are still in their infancy and not very widely-used.

 In the traditional market, however, figure in a handful of dialysis claims, one or two air ambulance claims, and one plan member on a growth hormone prescription, and the Small-Mid is running for the hills.  Lest we forget that Small-Mids are often terrified of financial ruin on many fronts to begin with, let alone bearing the risk of high claims exposure.  For them, it is unquestionably easier to sign up for that prototypical fully-insured option and trade financial risk for predictable premiums. The problem, though, is that predictable premiums are generally high premiums.

Another barrier to entry for the Small-Mids is the appeals experience.  “What do you mean, ‘appeals experience,’ Tim?” you might ask.  In short, as those of us working in the self-funded health plan space know, a health claim’s denial triggers appeals rights.  These appeals may be pursued by the plan member, a plan beneficiary, or even the medical provider through an assignment of benefits or appeals authorization.  The typical claims and appeals cycle tends to look something like this:

(1)    A claim for health benefits is submitted to the plan-sponsor’s third-party administrator by the Claimant (the Claimant might be the plan member, a plan beneficiary, or a medical provider);
(2)    The claim is adjudicated, by the TPA, pursuant to the terms of the governing plan document, as created and adopted by the plan-sponsor;
(3)    The claim is denied pursuant to the terms of the plan document;
(4)    The Claimant files a first-level appeal.
(5)    The first-level appeal is handled by the TPA.  Sometimes input from the plan-sponsor is solicited, sometimes not.  Every TPA / plan-sponsor relationship is different.
(6)    The denial of benefits is upheld by the TPA / plan-sponsor at the conclusion of the first-level appeal process.
(7)    The Claimant files a second-level appeal.  
(8)    The TPA will handle the second-level appeal in one of two ways: (i) it will review the second-level appeal, provide a recommendation to the plan-sponsor regarding the determination, and ask the plan-sponsor to make a final determination based on the TPA’s recommendation; or (ii) the TPA will submit the second-level appeal to the plan-sponsor, in its entirety, for the plan-sponsor to review and determine, on its own, whether the denial should be upheld or overturned.
It is step (8) where the wheels typically come off for an existing self-funded plan and it is step (8) that is a significant barrier for Small-Mids to get past when they analyze and consider self-funding.  Imagine a Small-Mid that is privately held and made up of hard-working, blue-collar employees and blue-collar leaders who have risen to positions such as Vice President of H.R., or Chief Operations Officer.  Suddenly, it is these leaders who are faced with a second-level appeal based on the medical necessity of cortisone injections for the treatment of migraines; suddenly it is these leaders who are faced with a second-level appeal based on the interpretation of a complex plan exclusion, such as the “hazardous activities exclusion” or the “illegal acts exclusion.”  We have all heard these stories and we are all familiar with the fallout that might occur when a Small-Mid is faced with this daunting task.  

Additionally, how many stories exist of the closely held Small-Mid’s leadership team suddenly faced with a second-level appeal that directly concerns their highest performing sales person?  Or, more generally, consider the heartache involved for any Small-Mid’s leadership team when they must decide an appeal on a health claim for a well-known and well-loved employee, regardless of his or her title! Many Small-Mids have close-knit employee populations, many of whom have been coworkers and friends for years.
 How many times have we heard, “we make motorcycle clutches and just wanted to provide our employees with good health benefits!  We never signed up to make these types of decisions!”  Another group leaves self-funding and then the horror stories trickle downstream, preventing other Small-Mids from moving toward self-funding.  Or, if the Small-Mid stays in the self-funded space, there is a very real chance that they unknowingly breach their fiduciary duty as a plan-sponsor, time and again, when they throw their hands in the air and pay claims that should not be paid pursuant to the governing plan document, simply because of the emotion, heartache, and the difficulty of handling complex appeals.

Solutions to the problems discussed above do exist, and these solutions are exploding across the industry and across the country.  The captive model is one such solution, primarily focused as a remedy to the Small-Mid’s concern over self-funding and financial devastation.  Captive risk-sharing is not a new idea – yet it is not as common in the self-funded health space as we all might think.  Time and again, my colleagues and I are surprised as we travel and speak on self-funding topics, all around the country, to learn that many employers, not to mention their brokers, have either never heard of captive risk sharing or have simply never invested the time to learn much beyond the basics.  

The proof is in the pudding. The numbers show that properly-run captive programs, filled with Small-Mids, are breaking down doors and bringing Small-Mids into self-funding through the assurance of responsible, managed risk-sharing.  Whether heterogeneous (made up of groups spanning multiple industries) or homogeneous (groups within the same industry) in makeup, a captive provides a common goal amongst its members to keep costs down and prop one another up through the safety net of a pool of funds that many might view as a “rainy day fund.”  

Regarding the second barrier to entry for Small-Mids, directly handling health claim appeals, there are solutions covering that problem as well.  Third-party, second-level appeals outsourcing is becoming more prominent in the self-funded industry.  Historically, the only option that might exist for a plan sponsor was to hope it landed with a TPA that might be willing to handle second-level appeals, usually for a fee.  But, most TPAs steer away from this administrative add-on for two reasons.  (1) it drastically blurs the line between who is acting as a fiduciary for the plan and (2) it can create a potential conflict of interest and call objectivity into question when the same entity has adjudicated the initial claim, handled the first appeal, and then went on to handle the second appeal.  

Figure in a solution that can handle the appeals concerns discussed above and we are looking at the pinnacle method to eliminate the two most prominent barriers to self-funding faced by Small-Mids: financial concerns over claims exposure, and managing appeals.  

As Employer-Sponsored Plans Multiply, Self-Funding Remains an Attractive Option
By Brady Bizarro, Esq.

As the new year begins, we can reflect on annual reports and surveys recently released by federal agencies and non-profit organizations which measure public and private healthcare spending and reveal trends in national health policy. One of the most prominent reports is the National Health Expenditure Accounts report, which was released in December by the Centers for Medicare and Medicaid Services. Some of CMS's findings forecast tough times ahead for employer-sponsored health insurance. Now, more than ever, employers will need to develop innovative approaches to continue offering affordable coverage to their employees.

Healthcare expenditures grew more than two percent faster than the overall economy in 2015. Spending was up overall by nearly six percent in 2015, up to $3.2 trillion, or $9,990 a person. Private health insurance spending increased by seven percent, with annual premiums for employer-sponsored family plans already topping $18,000 this year (up three percent from last year). Prescription drug spending, high-cost patients, and an increased use of services were cited as the primary cost drivers.

To the surprise of many health policy experts, many of whom had warned of a mass exodus from employer-sponsored plans to the exchanges, the CMS data also shows that enrollment in employer-sponsored plans rose slightly in 2015. As a result, an increasing number of small and mid-sized employers in particular will face the burden of soaring healthcare costs in 2017.

Self-funding an employee health plan remains one of the most effective cost-containment strategies for employers with a relatively healthy workforce and a willingness to customize a plan. From 2013 to 2015, the number of mid-sized firms that "self-insure" jumped nearly 20 percent, according to the Employee Benefit Research Institute. Among small companies, that share is now up seven percent. As the cost of maintaining fully-funded plans continues to rise, in large part spurred by the Affordable Care Act's coverage mandates, we can expect these numbers to rise.

Self-funding provides employers with flexibility and the opportunity for employee engagement when designing their health plans. Employers can avoid many state-based coverage mandates and administrative costs because of federal preemption of state health insurance regulations. They can work with third-party vendors to analyze claims data and implement unique risk controls such as wellness programs, smoking cessation initiatives, and tiered prescription drug benefits.

A more recent development in the self-funded industry has been the increased use of employer incentive programs. These programs reward employees with cash and other incentives if they create savings for the health plan by voluntarily obtaining care from lower-cost healthcare providers. Many resources exist that enable employees to determine what various providers of different medical services commonly charge for certain services, and what to expect in terms of the quality of their outcomes. For example, third-party organizations routinely provide objective analyses of medical billing by claim type and by facility, while others measure how many mistakes are made by providers. These resources provide quality metrics, a comparison of prices, and even letter grades based on factors such as quality outcomes and lack of provider error. In its Review of State Reports (2008-2015), Freedman Healthcare confirms that "high prices do not directly correlate with high quality of care -- in other words, the highest paid providers do not necessarily provide the highest quality of care." For some procedures, the price discrepancy can be substantial. For example, one employer reported a price difference of $18,000 for a gastric sleeve procedure between two facilities in Louisiana.

While these programs can help alleviate the financial burden, cost will not be the only concern for employer-sponsored care this year. Under a new administration, employers will also face legislative and regulatory uncertainty. President-elect Trump has vowed not only to repeal and replace the Affordable Care Act, but to reduce regulations overall at the federal level. This would be a welcome development for employers, but it remains to be seen which provisions of the Affordable Care Act will be left in place. For example, if the Trump Administration moves to repeal the employer mandate, employers would no longer be required to offer health insurance to their full-time employees. Also, employers would no longer need to report coverage to the IRS or determine the value and affordability of their plans.

Despite the uncertainty, Trump has promised to keep in place two of the most popular ACA provisions; the ban on denying coverage to individuals with pre-existing conditions and the extension of dependent coverage up until age 26. Health policy experts have warned that these two components of the ACA are only viable if accompanied by coverage mandates, which would diversify insurance risk pools. Whether or not the employer mandate is preserved, employers seeking affordable coverage options for their employees will continue to benefit from the flexibility of self-insuring.

The Phia Group's 1st Quarter 2017 Newsletter

Alternatively, you can download the file here.

The Stacks - 4th quarter 2016
Section 1557: Removing the Gender Divide in Employer Medical Plans
By Jennifer M. McCormick, Esq.

The fourth quarter is exciting. Not only do we have the holidays to look forward to, but we have so many opportunities and ideas to contemplate for the upcoming plan year. Generally, over the course of the year we see regulations take effect and guidance clarified, and even learn some new cost containment techniques. Unfortunately, this does not always mean that we know exactly what must be revised in our health plan documents for the upcoming plan year in order to ensure we fully implement these compliance updates and cost savings. To complicate matters, we’re on the edge of our seats to see whether (and how) the recent presidential election could further disrupt the Affordable Care Act (ACA).

This is particularly true for some employer groups who are questioning what (if anything) they must modify in their health plan to comply with the ACA non-discrimination rule. In order to alleviate any heartburn this specific aspect of ACA may cause for the upcoming renewal season, let’s try and break down what Section 1557 really means for plan sponsors.

What Is Section 1557?

Section 1557 prohibits discrimination in certain health programs and activities on the basis of race, color, national origin, sex, age, or disability. It’s not news that discrimination against an individual on the basis of race, color, national origin or disability is prohibited – but – Section 1557’s expansion of these protected classes to now include discrimination on the basis of sex, is. As with other new regulations, the issued guidance leaves us with a lack of clarity and many unanswered questions; however, despite confusion and uncertainty, employers are still required to review and potentially revise internal processes and documents.

This article focuses on the new classification of “sex” and the new corresponding considerations for plan sponsors. For instance, if Section 1557 is applicable to an employer’s health plan, that plan cannot discriminate based on gender identity, meaning it cannot deny coverage based on an individual’s sex or gender identity (i.e. an individual’s internal sense of gender, which may be male, female, neither or a combination).

Prior to making any Section 1557 related updates, however, it is important to understand what is required, and of whom. For example: (1) who must comply with Section 1557; (2) what does Section 1557 exactly require; (3) are there exceptions; and (4) what must change?

Who Must Comply?

When more closely examined, the scope of Section 1557 is not particularly vast as it is only applicable to particular covered entities. For the purpose of this rule, a covered entity is an entity that operates a health program or activity, any part of which receives Federal financial assistance. Specifically, covered entities include all health programs and activities, any part of which receive federal assistance from HHS, health programs and activities administered by HHS (including the Federal Marketplace), and health programs and activities administered by entities under Title I of the ACA (including State Marketplaces).
This generally means that an entity that receives a grant, loan, or subsidy or has another arrangement whether the federal government provides funds, services of federal personnel or property (real or personal) is subject to the Section 1557.

Entities likely subject to Section 1557 include those involved in the administration of health care. For example, health insurance issuers, hospitals, health clinics, physicians’ practices, pharmacies, nursing homes, dialysis facilities, community health centers, providers that accept Medicare, and issuers on the Marketplace are generally subject to Section 1557.

Once applicability of Section 1557 is confirmed, the entity must next make compliance related changes. Ensuring compliance is difficult, particularly since the text of Section 1557 describes what must not be done, instead of what must be done.

What’s Required?

According to the rule, an entity subject to Section 1557 must not: (1) deny, cancel, limit or refuse to issue health coverage based on sex; (2) deny or limit a claim; (3) impose additional cost sharing; or (4) employ discriminatory marketing or benefit design. Specifically, this means a health plan must not deny or limit treatment for any health care that is ordinarily or exclusively available to individuals of one gender based on the fact that the person seeking services identifies as belonging to another or different gender.

While effective as of July 18, 2016, if Section 1557 requires changes to a health plan, the rule does not become effective for the health plan until the first day of the first plan year beginning on or after January 1, 2017.

Changes to a health plan will be necessary if the plan design denies coverage based on gender identity, denies treatment or access to facilities for sex-specific ailments, categorically excludes services related to gender transition or excludes transition related treatment as experimental or cosmetic. As a result, health plan documents must be carefully reviewed and any relevant exclusionary language timely removed.

Additionally, entities subject to Section 1557 must comply with certain notice and tagline requirements. Unlike the health plan changes, these notice requirements took effect 90 days after the July 18, 2016 effective date.

One of the requirements is that notice be placed in significant publications and significant communications targeted to beneficiaries, enrollees, applicants, and members of the public. While the term ‘significant publications and significant communications’ has not been explicitly defined, the agencies suggested they will interpret this term broadly and it will not be limited to those publications or communications intended for a broad audience, but could also include those directed at individuals. As a result, it will be important for employers to review their communications to ensure compliance with the notice requirements.

Section 1557 outlines what must not be done with respect to benefits and requires that notices be included in certain materials, and hints at potential exceptions to these requirements.

Are There Any Exceptions?

This rule does not include an exception, unlike other ACA requirements which allow for certain exemptions and accommodations (i.e. the contraceptive piece of the preventive care requirement).

The rule, however, does state that certain protections already exist and Section 1557 would not displace regulations issued under the ACA related to preventive health services. Further, HHS did note that application of any requirement under Section 1557 which would violate applicable federal statutory protections for religious freedom and conscience is not required. Cases in multiple jurisdictions are currently underway and we expect to see additional guidance on this issue as a result of the litigation.

Additionally, a third party administrator (TPA) subject to Section 1557 does not render a plan for which it administers benefits automatically subject to Section 1557 (and vice versa). A TPA will only be liable for Section 1557 non-compliance if their own actions are discriminatory.

As it relates to the notice requirement, the preamble to Section 1557 did note that entities subject to the rule may exhaust their current supplies of significant publications and communications prior to incorporating the required notice.

What Must Change?

Guidance implies that Section 1557 will be interpreted broadly so entities must first decide if they are subject to the rule.

If subject to the rule, the health plan should be reviewed for compliance. Note that the rule does not explicitly require coverage of any particular service (either surgical or non-surgical) to treat gender dysphoria, gender identity disorder, or any individual that is transitioning genders, exclusions or coverage limitations related to sex, gender dsyphoria or sexual orientation must be removed. However, if a plan has an exclusion for sex change surgery for individuals diagnosed with gender dysphoria, it should be removed or modified.

Further, the rule does not require a plan to cover health care that is based on gender when the care is not deemed to be medically necessary (e.g. prostate exam for a woman that identifies as a transgender male). Additionally, a plan may use reasonable medical management to apply neutral, non-discriminatory standards (as long as it resulted from “a neutral rule or principle” when adopted and the reason for its coverage decision was not a pretext for discrimination).

If not subject to Section 1557, the health plan is not required to make benefit changes. The entity, however, should evaluate their risk tolerance as there is still the potential for the U.S. Equal Employment Opportunity Commission (EEOC) to investigate complaints of discrimination by the employer. Cases regarding plan exclusions of sex reassignment surgery are currently pending in the courts. Further, this should be a significant consideration after a federal court ruled on November 7, 2016 to deny a motion to dismiss a sex discrimination case that the EEOC had filed. Specifically, the EEOC’s motion explained that sexual orientation discrimination was a form of prohibited sex discrimination.

Even if an entity has a high tolerance for risk (or is not concerned about potential employment discrimination), consider other reasons for complying with Section 1557, including the impact on potential claims. According to a June 2016 study from the Williams Institute, there are an estimated 1.4 million adults who identify as transgender in the United States, or 0.6 % of the population. Many entities are opting to cover these benefits and coverage could be seen as a competitive advantage or good public relations.


Since the final rules were issued, insurers and other industry entities are taking a position on how to address Section 1557. Insurers are directly subject to 1557 and fully insured plans taking a conservative approach are being modified to include surgical and non-surgical treatment for gender dysphoria.

Employers subject to Section 1557, and those not subject but who wish to avoid EEOC scrutiny, should remove any exclusions from health plans which could be viewed as categorical exclusions of transgender services. The decision to cover or exclude transgender benefits, however, ultimately depends on the risk adversity of the employer. As a result, every employer and plan sponsor must review their situation on a case by case basis for Section 1557 applicability and modify relevant materials accordingly.

Of course all of this could become irrelevant if the ACA is repealed or replaced, so I guess we’ll have to wait and see…

How to Avoid Common Pitfalls When Managing a Self-Funded Health Plan
By Brady C. Bizarro, Esq.

Since the passage of the Affordable Care Act in 2010, employers have become increasingly aware of the potential financial benefits that come with adopting a self-funded health plan. A primary benefit of self-funding is that under the Employee Retirement Income Security Act, self-funded plans are shielded from the reach of state insurance regulations. States are unable to regulate these self-funded ERISA plans as they would fully-insured health plans.

As a result, employers are empowered to use innovative plan language to craft an affordable, flexible plan. Additionally, employers benefit from uniform coverage and cost continuity because a single plan can cover many employees in multiple states.

Despite the real advantages of self-funding, many employers still seek out tools they can use to transfer actual or perceived risk away from their plans. That's where incentives and disincentives come into play -- but there are potential pitfalls to be aware of.

Federal law expressly prohibits discrimination against plan participants based on sex, disability, health factors, and other criteria. For example, offering incentives to enroll in Medicare is not permitted according to the Medicare Secondary Payer Act. This is part of the basic structure of the act and, as might be expected, the regulatory bodies charged with enforcement take a very broad view of what actions might constitute such an incentive. While it may be intuitive for a plan to suggest that its participants can, for a monetary incentive, terminate coverage under the plan and instead become covered under Medicare, this runs afoul of the act.

According to the Department of Labor, an employer can't give a cash reimbursement for the purchase of an individual market policy. If it does so, the payment arrangement is part of a “plan, fund, or other arrangement established or maintained for the purpose of providing medical care to employees, without regard to whether the employer treats the money as pre-tax or post-tax to the employee.” Therefore, the arrangement is a group health plan under ERISA. Under the ACA, such arrangements can't be integrated with individual market policies. To be compliant with the ACA, a premium reimbursement plan (or HRA) must be integrated with a compliant group health plan.

Offering a choice between cash and health benefits is generally allowable, but the compensation can't be designated specifically for the payment of individual premiums. Any attempt to condition these payments on proof the employee enrolled in exchange coverage would therefore be noncompliant with the ACA.

An offer of cash in lieu of benefits would also be deemed discriminatory if made only to high risk or ill employees. Such an offer must be extended to all employees. It's also worth noting that if the employer offers affordable coverage which meets the minimum value requirements, employees would not be eligible for subsidies on the exchange -- and exchange coverage would therefore likely be less affordable or attractive to an employee than the employer’s group plan.

Modifying copays and deductibles is another way an employer can incentivize employee behavior. The Department of Labor indicates that a plan may waive or lower a copayment for the cost of certain services in order to encourage participants to seek a certain type of care -- such as well-baby visits or regular physicals. This can benefit the group by ensuring employees and their families are healthy. Similar to copayments, plans may waive or lower deductibles for certain services at the employer's discretion. It should be noted that a HSA-qualified high-deductible health plan is can't retain its HSA qualification if the plan pays first-dollar for services other than preventive care -- so HDHPs can't utilize deductible waivers as an incentive in most cases.

Just as providing incentives to employees may lower the cost of self-funding, so can disincentives.

The simplest type of disincentive is raising deductibles and even lowering the percentage of covered services. By doing this, the plan sends the message to participants that remaining enrolled in the plan may not be the best financial choice. At the very least, a raise in price may cause participants to explore other options.

However, employers should note that raising deductibles could adversely impact the plan in the form of driving even healthy lives to the exchanges. In other words, recklessly including high deductibles in a plan could drive away the very lives the plan needs to thrive, as well as those it wanted to disincentivize in the first place.

An alternative option to consider would be for the plan to have no deductible up to a certain point, at which point the deductible becomes applicable -- and the deductible is the highest permitted by applicable law. By doing so, the plan can ensure that the healthy lives it wants to keep on the plan are satisfied with the care offered because they won't have a deductible for their care.

A “skinny plan” is a type of plan that has been developed in the wake of the ACA. As the ACA imposes many requirements on self-funded plans, the skinny plan attempts to comply perfectly with the requirements of the ACA, and cover the bare minimum allowed by law. A skinny plan is a sort of bare-bones model -- it's generally considered not suitable to employees who have underlying conditions, who may need specialty care. The ACA doesn't require that the plan cover specialty care, so skinny plans don't cover a lot of services that many employees need on a regular basis.

The ACA requires that all large employers offer healthcare to their employees -- but there's no requirement that the employees enroll on the employer’s plan. If the employer offers a skinny plan, and many employees elect to not enroll due to its lack of coverage of services they may need, then the employer has still complied with the ACA.

One potential pitfall of offering a skinny plan may be relevant to employers with smaller employee bases; if not enough employees enroll, maintaining a self-funded plan may prove unfeasible. For this reason, offering a skinny plan is likely only a good option for larger employers.

Pursuing healthcare cost containment strategies is increasingly important for employers who wish to offer affordable health insurance to employees, especially after the passage of the ACA. Self-funded plans can benefit from creative plan design -- and managing risk with incentives and disincentives can provide even greater savings. Provided that employers can stay compliant with anti-discrimination regulations, self-funded health plans will continue to be uniquely flexible and offer real savings to both employers and employees alike.

Confessions of a Self-Insured Employer
By Adam V. Russo, Esq.

As an employer and founder of a business, I will never forget my first experience purchasing health insurance for my employees at The Phia Group. It was 2002 and I was so excited that the company I co-founded in my mother’s basement with my best friend from college was successful enough to actually need health care coverage because we finally had employees. Excitement turned to frustration, and that experience with the health insurance market opened my eyes and sparked within me a new level of passion for revolutionary change; to change how health insurance should look and feel.

How could purchasing health coverage be so different than every other thing that we purchased for the office? I'm not talking about pens, desks, or paper; I’m talking about other employee benefit options such as life insurance, 401k plans, and our firm’s errors and omissions coverage. In every other purchase we made, there was transparency, there was true competition, and there was actual and meaningful discussion. When it came to buying health insurance there was...well, nothing.

The insurance broker walked into my office and after exchanging pleasantries she showed me three options for health insurance. The first option was with a certain insurance company that the broker clearly wanted us to use. There were color brochures for this carrier with great family photos; broad smiles and even bigger fonts. The other proposals didn't come with the fancy colorful brochures (or even brochures at all for that matter). It was clear that the broker wasn't being transparent and had her own agenda to pursue. The broker was getting great commissions from this one particular carrier and that was it. I asked basic questions that in any other industry would be easy and obvious to answer or research. She just smiled.

I was told what the premiums would be and how there were basically two options available to my employees. They could have a $20 or $50 copayment coupled with a few deductible options. So (basically), the “actual” consumers of the health services (a.k.a. the employees), would believe that the cost of the services are either $20 or $50 - in their minds this is the total bill. There was no skin in the game for my employees.

There was nothing that my employees could do to lower the overall cost of the plan. If every single one of my employees was in perfect health and never even saw a doctor, my plan's rates would be guaranteed to increase over 10% a year. So what is the incentive? For me to be creative? For my employees to care? There was nothing we or anyone else could do about the cost. We were helpless and that's how it must feel for every employer or insured group that pays insurance premiums to a fully insured carrier or exchange marketplace policy.

Like you, I figured that maybe this was just my experience and that this one broker was an anomaly, but I have since realized that this is the norm. The broker who actually offers expertise, consults with their clients and focuses on data and plan design is the anomaly. For most of us, we are at the whim of the carriers.

There is no shopping for rates unless you want to strip down or increase the contributions of your employees.

Imagine buying a car and being told every year that you will pay more for the same car (that you hardly used), or you can strip it down in an effort to maintain the payment level and keep the same monthly rates. Next year you will only have a 10% increase if you agree to remove the leather interior! That is exactly what happens with healthcare. The reason “why” is because nobody expects or demands anything different. The options available via the exchanges, for many, are even worse. Many people only have one option - like in the old Soviet Union where the select few who could afford it had the choice of buying a Russian Lada in black or white; the rest get what they’re given.

Think about this for a second. People spend more time choosing the big screen for their living room than they do where and how they get their health care. New parents spend more time researching the day care center for their children than the hospital or pediatrician that treat the same children. CFOs across the country spend so much of their time trying to find ways to increase profit and reduce expenses yet rarely think about health care costs. They look at the revenue stream and the expense lines to see what they can do to cut costs and increase profitability. Most CFOs just assume that their health insurance will go up, and compare it to the cost (penalty) of offering nothing; that the expenditures are essentially a fixed cost that grows each year. There is hardly any discussion relating to how to lower it since these individuals feel powerless to do anything about it.

As someone who risked it all and started my own business, there was no way I was going to adopt this approach with my health care spend. This was the moment I realized that I needed control over my healthcare dollars and looked at self-funding my employee benefit plan for the first time, almost a decade ago, and we have never looked back. The beauty of self-funding is that you can lay your own path. You are in total control of your health plan and you can design the features to meet the needs of your employee population.

The reality is this – a health plan design for a tire manufacturer should not be the same as for a chain of yoga studios. Unfortunately in today’s fully insured market – where a carrier sells you a cookie cutter policy, it is. By having access to the claims data, a self-funded employer can actually see how and where your employees are spending the plan's health care dollars. Using the data analytics readily available only to a self-funded plan, you can then design a plan that meets your needs.

Incentivizing Our Employees through Unique Plan Design

Medical service providers are businesses. They service customers who pick what to buy, but don’t pay the fee directly. A kid at a baseball game with dad’s credit card will buy more hot dogs, regardless of the price, and the vendor knows it. When the price isn’t something the consumer considers, the supplier has no reason to cap it.

If your employees do not care about the cost of health care, then costs will never decrease. Step one then, is to care. With fully funded insurance, savings belong to the insurance carrier. I understand not caring about that! But with self-funding, most employees (wrongfully) feel that if a self-funded plan saves money then the money just goes into the CEO’s pocket. This is not true, as every dollar recouped or not spent goes back into the general assets of the plan, which is a combination of employee and employer contributions. To combat this incorrect perception, we have educated our employees about who pays for the plan (they do), and incentivized our employees to actually care about the cost of the care they get – not just their co-pays, deductibles and out-of-pockets.

It all starts with your health insurance employee plan document. When you open The Phia Group plan document, the first thing you see is a section titled “cost containment incentives.” It truly is an actual page in the document that tells employees how they can make money and put cash in their pocket by looking at the whole bill and not just their co-pay. The first time an employee gets money in exchange for creating plan savings, word spreads like wildfire throughout the organization. People talk about it at the water cooler; and whether it’s $100 in savings or $30,000, every bit counts and adds up.

As mentioned, our plan document features numerous provisions enabling participants to enjoy substantial savings and benefits when they take proactive measures to contain overall plan expenditures. We address the various instances where responsible, cost-containment behavior is incentivized.

For instance, we created a claim audit review program designed to reward employees for identifying erroneous charges on bills recoverable by the plan. Simply put, if the patient identifies something questionable in their “bill” (actually, the explanation of benefits or “EOB” since participants rarely see the provider bill itself), and the plan doesn’t have to pay it or is able to recoup the payment, the patient gets 25% of the savings in their pocket, regardless of the amount. Trust me; we only pay for services that actually occurred and are valid! One employee received a check for over $10,000 for identifying $40,000 in claims we didn’t have to pay. This is promoted across our entire organization.

This next one has likely saved us many thousands in potential claim costs. Participants who preemptively consult with our human resources department regarding non-emergency “to-be-scheduled” medical procedures, to discuss options available to the participant, can receive a financial reward. We had a recent situation where one of our employees needed a medically necessary surgery. The employee’s surgeon could have performed the operation at two different facilities. The employee met with our HR team and after reviewing the claims data available to us we realized that the higher quality facility would have a total cost of $7,000 to perform the operation, while the other facility, using the same surgeon, would cost $40,000. We saved $33,000 and our employee received 25% of this amount in a check payable to them! That’s called having skin in the game.

At any other self-funded plan, employees would just go to the place that may be closer to their home, or maybe they know a friend who works at the hospital, or they pick one over the other for any other reason ... perhaps they choose a location with better parking because at the end of the day, they have the same co-pay and deductible regardless of where they go. They have no idea that one facility will cost the plan tens of thousands of additional dollars for the same exact procedure. However, at our company they do know and they do care ... and that’s a real difference maker.

We have another provision stating that there is no co-pay for the use of urgent care facilities in lieu of a hospital’s emergency room. Think about how much time and money this saves the patient and the large bill that doesn’t exist for the plan. We took it a step further by stating that the co-pay (normally applicable to diagnostic services if performed at a hospital) is waived if the service is sought at any self-standing non-hospital facility. What this provision has done is change the behavior of our employees. When they need testing done, they ask if it can be done at a non-hospital facility. In addition, in order to encourage the use of generic medication whenever possible, we waived any co-pay.

The cultural change affects every aspect of our health plan and the reduction of overall plan spending. Under our current network, you can purchase a nebulizer after the network discount for a total plan cost of $200. If you go to, you can purchase that same nebulizer for $118 with free two day shipping on Amazon Prime. It’s a savings of $82 and the employee receives a check for 25% of that amount. While it’s a small amount compared to the overall plan expense, it’s a huge change in our employees’ behavior. They look for ways to reduce the cost, whether it’s big or small, because that $20.50 is added to their paycheck.

The Future is Now

Instead of telling their employer plan sponsor clients to pay more in premium, deductibles, out of pockets and co-pays, brokers should be telling their clients and employees the real reason behind the high cost of health insurance – the unjustifiable facility charges. Facilities are taking advantage of the fact that most employees only care about their out of pocket, co-pays and deductibles – not the entire bill. This is in essence the best thing about networks and the worst thing about networks. There is no patient noise because they don’t care. If they only have to pay $20, the fact that it costs the employer $20,000 or $200,000 doesn’t matter. So how do we get the employees to care? Easy. Self-fund your health plan, teach the participants how it’s funded, instill an appreciation for the fact that the medical bills are being paid with their money, and give them cash – incentivize savings.

At the day of the day, what really matters to employers? Do they care what the network is, what the logo looks like, what the overall discount is, how many free tickets to the ballgame they receive or how fancy the website looks? I would argue no. As an employer myself, I feel that I have the right to answer this question with some level of authority. I want my employees to be happy. I want my employees to feel secure and that security includes a respectable pay check for a hard week’s work and health insurance coverage that will be there for them and their loved ones when they need it most.

The only way to ensure there is reliable health coverage for my employees in the future is to innovate and get everyone to care. When an insurance carrier collects premium, takes all the risk associated with paying medical bills, and none of us know (or have a reason to know) what things cost, we don’t care. If we don’t care, we don’t innovate. The simplest ways to innovate right now and get the most bang for our buck is to put ourselves and our employees in a position of financial risk and reward, tied to healthcare spending, focus less on discounts off of arbitrary prices and focus more on what is actually being charged.

We can revolutionize health care and insurance in this country. Self-funding is the first step towards offering the innovation, technology, plan design, and customization tied to having skin in the game, and that is what this country needs.

What You Don't Know Can Hurt You: Be Prepared For the Unintended Consequences of Effective Cost Containment
By Christopher M. Aguiar, Esq.

The cost of healthcare in the United States is out of control, and virtually everyone operating in the world of healthcare should know the root of the problem. As stated by Gerard Anderson, a healthcare economist at the Johns Hopkins School of Public Health, ‘the prices are too @#$% high.'[i] A sweeping statement that encapsulates the healthcare conundrum in five simple words. Many in the industry are giving it their all to try to combat those prices, and in no area is that more prevalent than in the world of self-insurance, where a new cost containment idea appears to service daily. But to launch those ideas without a full understanding of all the elements of a self-funded benefit plans and all the issues that may arise can put plans and their advisors in the line of fire. Whether it is through ineffective implementation of a cost containment strategy (make sure your plan language is strong before you start repricing those medical claims), misunderstanding the many relationships a plan enters into (consider your stop loss and network obligations before you try to implement any cost containment initiative), or not evaluating the situational prudence of a particular strategy, administrators must avoid going into any cost containment venture blindly.

Why would any plan or administrator rush into a decision with such broad implications on its benefit plan? Quite simply, the pressure is on. Increasingly, courts are holding plans and advisors responsible for their duties as plan fiduciaries and careful oversight and dissemination of plan assets is under a microscope Unless you have been living under a rock, you know how aggressively health costs are rising, but just in case, consider the following statistics:

1. Healthcare inflation has outpaced inflation of the consumer price index every year dating back to at least 2005. [ii]
2. In 2015, Healthcare inflation outpaced the consumer price index by 900%. [iii]
Those statistics do not even specifically reference some of the shortfalls of the highly touted savior of healthcare, the Affordable Care Act (the ACA).
3. According to the Henry J. Kaiser Family Foundation, between 2014 and 2015, Benchmark Silver Premiums were either flat or increased up to more than 10% in the majority of the country. [iv]
4. The number of exchange participating insurers is down approximately 25% from 2013 to 2016 with major players such as Aetna, United Health Care, and Humana all pulling themselves from the marketplace. [v]

Due to the continued increase in costs, benefit plans and their advisors continue to develop viable ways to provide robust benefits. When faced with challenges, business owners rely on their entrepreneurial spirit and seek innovative answers; many are looking to self-insurance as their alternative.

An excellent example of some innovative approaches for which those who seek alternatives often underestimate the downstream consequences is a reference based pricing approach to claims payment. Perhaps the most innovative and often discussed strategies, reference based pricing is still utilized by a small percentage of plans because its implementation is complicated and can be difficult and volatile. There are different types of reference based pricing plans that can help minimize the disturbance while maximizing their impact on savings. Some plans choose to go with a very aggressive approach, severing all arrangements with networks and instead paying all claims as if they are out of network by setting pricing parameters based on several data references derived from publicly available sources such as Medicare or hospitals' cost data. On the surface, an approach like this can be sold quickly by savvy sales professionals because they can tout hundreds of points in savings, virtually overnight. Unfortunately, there are some very important details that must be considered before proceeding: 1) no pricing model will be successful unless you have airtight plan language; 2) unless you work with a stop loss insurer that understands the complexities of a reference based pricing model and who will support the efforts, any reference base pricing approach will likely fail; and most importantly, 3) any aggressive repricing model will experience backlash as hospitals use the best resource they have against the benefit plans, the patients. The stark reality and the unrest it causes often leads to the demise of such innovative endeavors. As so many self-funded professionals will tell you, and especially with the new batch of organizations looking to self-fund in a post-ACA world, once burnt, a self-funded employer flees to the world of the fully insured, never to take on the risk of self-funding again, regardless of how lucrative the rewards might be.

Amongst all of the innovative approaches discussed in the self-insured marketplace, all of which could have a separate article concerning the potential consequences of an ineffective implementation or execution of the model, many of the consequences and considerations discussed above are relatively contained within the confines of the model itself. But what about these models' impacts on other, oft overlooked, perhaps more downstream cost containment tools? Bear in mind that many of the cost containment mechanisms that are sought after and publicized today are designed to control costs before the claims are actually paid, whereas more traditional cost containment strategies (e.g. subrogation) are focused on recovering funds that are already spent. So every cost containment model designed at reducing the amount spent will necessarily have an impact on the execution of an effective third party recovery program.

Consider this example: ABC, Inc. sponsors a self-insured employee benefit plan. It utilizes a referenced based pricing model with no network obligations; instead, it has established very effective plan language that provides for payment of 200% of some reference price. John Smith is a beneficiary of the benefit plan and suffers injuries in an automobile accident. The benefit plan receives $200,000.00 in medical bills. Mr. Smith brings a third party claim and obtains the full insurance limits available to him, $50,000.00. Of that $50,000.00, he owes his attorney a 33% contingency fee, leaving him with a net settlement of $33,333.37. Assume that 200% of the reference price as established by the terms of the plan totals $100,000.00. Because the plan established its program effectively, the plan's payment is entirely defensible. On the surface, the provider received a fair payment derived from publicly available data which covers the costs incurred in providing the services as well as an additional amount to ensure profitability. So, what is the problem? Recall that the provider's initial bill for its services was for $200,000.00. When Mr. Smith went to the hospital, he signed a document wherein (the hospital will argue) he agreed to pay any balance remaining once his insurance pays for the services. As a result, the provider in this case now puts a lien on Mr. Smith's settlement for $100,000.00, i.e. the difference between the $200,000.00 charge and the $100,000.00 paid by the plan. Of course, Mr. Smith also has an obligation to reimburse the Plan the full amount of his settlement.

Balance billing, the practice by which the provider seeks the remainder of a bill from a patient after the insurance payment, is an unintended consequence of a reference based pricing strategy and can negatively impact the plan’s rights in a third party recovery case. It occurs because the only way to prevent a provider from seeking full payment from a patient is to enter into a contract wherein the provider agrees not to bill the patient upon receipt of payment from the plan, subject to other conditions. Without this agreement, in almost every situation, the provider is free to request payment from Mr. Smith. As this hypothetical example is designed to illustrate, the provider’s ability to bill Mr. Smith for the remainder of the bill causes complications in the plan's ability to recover the third party funds from Mr. Smith’s settlement. Note that even if Mr. Smith wanted to issue reimbursement to the Plan, he now has a rather large elephant in the room – a $100,000.00 provider lien. In this scenario, the best a plan can likely hope for is that the provider agrees to some split between the parties of the remaining $33,333.37 rather than insist on full payment. Otherwise, the only way to successfully recover money for the plan is with a lawsuit challenging the enforceability of the agreement Mr. Smith signed when he arrived at the hospital. In many jurisdictions, the plan participant's lawyer will simply deposit the money with the courts and file an interpleader, i.e. an action which forces all interest holders to appear before the court and prove their claim to the money.

As many who have engaged in any dispute with a hospital over a perceived debt can attest, providers will make their claim with exhaustive persistence often refusing to concede the actual value of their services or the questionable legality of their contract with patients guaranteeing payment. In order to obtain a recovery, the plan or its administrator may need to engage legal counsel and incur additional expenses thereby calling into question the prudence of such a pursuit; once those costs are factored in, and in light of the limited funds available, it may no longer make financial sense to pursue the recovery. Some advisors will stress the plan’s duty to seek every recovery dollar as required by the terms of the plan and its fiduciary duty under ERISA. While this is unquestionably a very important obligation of the plan, many plan advisors will forget the second, perhaps more important duty of a benefit plan administrator, to exercise prudence in its administration of plan assets.

In the end, it is imperative for plans and administrators to understand the complexities and consequences of every decision and benefits strategy they choose to utilize. There is a bevy of innovative tools and cost containment mechanisms that can be used to help benefit plans maximize savings. These include but are not limited to the reference based pricing strategies discussed above as well as some of the more hybrid approaches customized to give benefit plans the best of both worlds (strong plan language controlling out of network charges and some form of network for a feel as seamless as their fully-insured counterparts), self-insured plans can be tailored to fit the needs of the plan. As more benefit plans become more aggressive and experts come up with new strategies, it is important that those who establish benefit plans understand the full range of issues that may arise from their decisions. Utilizing experts that understand the self-insurance industry is an absolute necessity. Whether an administrator, a plan document drafting partner, a repricing agent, or a subrogation expert, understanding the self-insured marketplace improves the experience for the benefit plan, and puts it in the best position to succeed, and ultimately, remain self-insured.




[v] Edmund F. Haislmaier: Senior Research Fellow, Center for Health Policy Studies,

Plan Appointed Claim Evaluator (PACE)
Making determinations on medical claim appeals is a frightening prospect. The process can involve complex factual, legal, and medical issues, and can distract a plan administrator from its ordinary business functions, posing a significant resource drain. The PACE service is designed to let the plan administrator shift the fiduciary duty away, onto the PACE, for final-level, internal claim appeals.

Questions & Answers
PACE Flyer
Guide To Implementation
Guide To Appeals
PACE Webinar Slides

In the classic TPA arrangement, the TPA does not assume fiduciary duties, instead relying on the plan administrator for guidance on claims and appeals that require discretion. Many TPAs are still living in the past – an era where Plan Sponsors embraced fiduciary duties – but now,  plans and their brokers exist in a new paradigm, in which a TPA not offering a fiduciary option stands at a substantial disadvantage. As such, business opportunities are lost.

With this in mind, The Phia Group has developed PACE.  With a PACE, plan sponsors and TPAs assign the riskiest fiduciary duty (that is, the power to make payment decisions in response to final appeals), to The Phia Group.  This authority carries with it the most risk, because it is this final payment directive that will be scrutinized upon external review.

Self-funding veterans and novices alike will benefit from PACE. Groups that are moving from fully-insured or ASO arrangements can use PACE as a valuable tool to aid in the transition; these groups have never before had to be the fiduciary of their plans – and with the PACE, that daunting responsibility can be delegated to a neutral and capable third party.

The PACE not only enables the TPA to obtain new business not previously available to it, but also encourages client “stickiness” and also creates a new profit center for the TPA in the form of an administrative fee paid directly by The Phia Group to the TPA, in exchange for the TPA’s facilitation of the PACE service. In other words, PACE adds unprecedented value to the TPA from both a business and a revenue perspective.

In addition to having a third party expert analyze all appealed claims before they reach an external review, the PACE also ensures that legally mandated independent review organizations (IROs) are in place, and the PACE handles facilitation of external appeals with these IROs. Regardless of whether the PACE upholds or reverses a denial, the PACE’s service continues to apply.  From handling external appeals of denied claims to negotiating amounts payable for claims deemed to be covered by the benefit plan, the PACE works to ensure the correct and optimal outcome every time. This includes coordinating efforts with stop-loss, plan sponsors, brokers, and TPAs whenever these partners do not align.

As we know, any entity exercising control over a benefit plan or its assets may be deemed to be a fiduciary; third party administrators, brokers, and any other entity making decisions on behalf of these benefit plans may be dealing with liability for which it simply isn’t prepared. PACE is a way for the employer to be able to focus less on the complexities of its health plan, fiduciary duties, and stop-loss concerns, and more on what matters – its business.

PACE is also a way for the TPA to rest easy knowing that it is not unwittingly assuming fiduciary duties on final appeals.

For years, self-funded plan sponsors and TPAs have asked how they can avoid the risks inherent in self-funding, while still enjoying the benefits of that plan structure.  According to our CEO, Adam Russo, “With a PACE in place, we’re taking a giant step in the right direction. It’s a game changer.”

2nd Quarter Newsletter 2015

 The past few months have brought so much intrigue to our industry.  Everywhere you looked, something or someone was affecting health care and the insurance industry as a whole.  We saw the Supreme Court make a few monumental decisions that will affect how plans are written in the future and the viability of the ACA.  We saw interesting court cases placing more potential fiduciary risks upon brokers and administrators.  We watched and reacted as more states attempted to limit the ability for smaller employers to self fund their benefits through the use of stop loss coverage and last, but certainly not least, we have seen a monumental increase in the DOL audits to our clients and the industry at large.  If there ever was a time that The Phia Group’s services were needed, this is it!

There is no question that health claims costs continue to skyrocket and the use of so called wrap discounts on many of these claims isn’t helping to reduce the burden.  If you are looking for some innovative options to stand out from the pack, please contact me as there are so many great ways to truly make a powerful impact on behalf of your employer plans.  We can save you and your plans significant claim dollars, you just need to strategize and identify your major pain points.

The next quarter will continue to be eventful so while you enjoy your summer weather, please be sure to let us know if you need some assistance – we are here for you.  Happy reading

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4th Quarter Newsletter 2014

I’d like to start by thanking all of you that have chosen The Phia Group as your trusted partner. I know very well that other options are available to you, and we are inspired and thankful everyday that you place your trust in us. I have always, and will continue to promise, that our team of recovery specialists, plan drafters, paralegals, lawyers, and support staff will do everything in our power to maximize the benefits while lowering the cost of your health benefit programs!

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3rd Quarter Newsletter 2014

Well, the fall is definitely upon us! Over in Boston, leaves are falling, changing to majestic landscapes, and the nights are getting cold; but The Phia Group is just heating up. We have so much information to share with you this newsletter from new service offerings to case law to regulatory changes. One of the things I wanted to share with you is the amazing conference I had the privilege to speak at this past weekend in Oklahoma City; the First Free Market Medical (FMMA) Association conference. It is rare that I am overwhelmed with new information, but this forum did the trick. The goal of the Free Market Medical Association is to bring together physicians, surgeons, providers, facilities, and support businesses to provide necessary resources to promote a successful industry. Its focus is to defend the practice of free market medicine without the intervention of government or other third parties.

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2nd Quarter Newsletter 2014

What a spring we have had here at The Phia Group. From travelling across the country speaking at various venues, hosting our own Phia Forum a few weeks ago, to our new service offerings; we have been extremely busy here at the home office. Now that the summer is here, you would expect that things would slow down but that’s not the case at all. As the temperature rises, so does our work load, as the number of issues facing the self insured industry continues to grow. Who said that health insurance is boring!?!?!?

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1st Quarter Newsletter 2014
Well… “ObamaCare” is here, and so are we.  The sun continues to rise in the east, and set in the west; and business goes on.  Some of you have reaped the benefits of change, while others have suffered; but the reality is that for most of the industry, not much has changed.

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