Valentine’s Day is upon us, and we’re feeling the love. Too often we, as an industry, spend our time discussing issues, problems, and concerns, and don’t dedicate enough time to the features and opportunities that make self-funding great. We focus so much on “how we save” self-funding, that we forget to celebrate the reasons why self-funding is worth saving in the first place. Join the team as they discuss what makes self-funding such a great option for so many employers and employees, as well as the incredibly cool new innovations rolling out in 2019, that will be sure to make self-funding a sweetheart for even more employers this year and beyond.
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By: Jon Jablon, Esq.
This is a topic we’ve discussed numerous times in memos, phone calls, conferences, webinars, and any other time reference-based pricing is discussed – and it continues to be a relevant topic throughout the industry. A health plan utilizing some sort of RBP will get the most bang for its buck if the language in its SPD is strong – and of course if the language is weak, the plan’s payment methodology will be extremely difficult to enforce, and could even subject the Plan Administrator to liability.
Simply put: if your plan is using reference-based pricing – whether for all claims, only out-of-network claims, facility only, or any other subset of claims – your plan must have clear and accurate language.
Clear language describes what the plan will pay in a comprehensible manner. An example of clear verbiage is “This plan’s benefits equal 150% of the applicable Medicare rate, when such rate can be calculated by the Plan Administrator.”
An example of unclear verbiage is “All claims are paid at 150% of Medicare. Participating facility claims are subject to this rate only if the physician is nonparticipating. All facility claims are paid at the lesser of the reference based pricing amount or 70% of billed charges when inside the plan’s service area.” (Both examples are direct quotes from SPDs.)
Accuracy is just as important as clarity, if not more; an example of accurate verbiage is “When a given service is performed by an in-network provider, the Maximum Allowable Charge will be the PPO rate applicable to that provider. For all other claims, this plan pays the lesser of the following factors…”.
An example of inaccurate verbiage is “All in network claims are subject to code review and will be paid based on an amount deemed usual and reasonable and customary by this Plan, including but not limited to a multiple of the prevailing Medicare allowance.” (Again, both quotes are taken from real SPDs).
These are just a few examples of what we see on a daily basis; as medical providers begin to treat RBP differently than ever before, it is similarly more important than ever to make sure the plan’s language is optimal.
As a final note, the idea that language needs to be strong, clear, and accurate applies to all plans – not just those using RBP. It just so happens that RBP is a bit more novel than other traditional plan designs, so RBP language is sometimes less well-established in many SPDs. But together, as an industry, we can fix that!
By: Brady Bizarro, Esq.
In 2012, the annual cost of insulin needed to treat patients with type 1 diabetes was $2,864. Today, the cost has risen to over $6,000. For working-class families already struggling to keep up with everyday expenses, this increased economic burden has forced some to choose between food and life-saving medication. CBS News has reported that more than one-quarter of Americans living with diabetes have cut back on their insulin usage to ration their supply, and that can be dangerous. Skyrocketing insulin prices are just one example of high prescription drug costs, which the Trump administration has made it a priority to address.
We have written a lot before about the administration’s proposals to lower drug costs: from ending pharmacy gag rules to outlawing the use of co-pay coupons, ideas for controlling costs were in no short supply. Ideas and tweets, however, have a limited impact. Real legislation is needed to produce meaningful reform, and as we are now well into 2019, there are indications that bipartisan action may be on the horizon.
Soon after taking over powerful congressional committees, Democrats began scheduling hearings and reaching out to drug companies asking for detailed information regarding their pricing practices. On February 7th, Democrats, including 2020 hopeful Senator Sherrod Brown (D-OH), unveiled a bill that would allow Medicare, the largest purchaser of pharmaceuticals in the country, to negotiate drug prices directly with drug manufacturers. The Medicare Negotiation and Competitive Licensing Act would permit such negotiations and strip drug manufacturers of their patent protection for a drug if those negotiations failed. For self-funded plans, this is key. Not only would negotiated Medicare rates provide a benchmark for pricing (as is the case for most medical services), but failed negotiations would allow generic versions of expensive drugs to market much earlier than previously allowed by law.
For now, lawmakers are hoping to get President Trump to support this bill. The president’s support would put significant pressure on Republican congressmen to support the bill. As always, we will bring you the latest developments as they unfold.
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Let’s Escargot & Meet LCARA: In this episode Ron and Brady discuss the new legal compliance and regulatory affairs team (“LCARA”) with team member Philip Qualo, and specifically address recent efforts to promote hospital transparency.
In this episode, the crew once again sits down with a valued team member, whose role sits at the crossroads between technology and healthcare. Ensuring that the privacy and security issues hounding all businesses don’t threaten The Phia Group as it leverages technology to better serve its clients, Ashley is unique not only at the company – but industrywide. Listen in to find out why, and what you need to do to get her seal of approval.
By: Chris Aguiar, Esq.
I read what I thought was a decent article this week on some of the advantages of self-funding but wanted to take an opportunity to comment/elaborate. Always great to see self-funding be touted in the public eye via highly visible media sources. It can certainly be difficult to give a very detailed explanation of this complex risk model in a capped word count article, but something jumped out at me that I thought relevant to note. The author describes self-funding generally as “the employer pays for its own employees’ claims, or at least to a certain amount, while larger claims would be handled by insurance companies”. Certainly that is a model we’ve all seen, but it is indeed only one model and the exact kind of description that drives the misconception that a self-funded plan that uses a traditional stop loss model is not fully self-funded and is therefore insured.
It's important to understand that many self-funded plans do not utilize the hybrid approach this description implies. To the casual observer this description suggests that a $1,000.00 claim is paid by the self-funded plan while a $100,000.00 claim is paid by some other health insurance arrangement entered into by the employer; that’s simply not accurate, certainly not among The Phia Group’s clientele. Rather, for many self-funded plans the plan is at all times responsible for the medical bills and, only after the paying, seeks reimbursement from another insurance company. That company from which the plan seeks reimbursement is not a health insurance carrier, rather, it’s a financial insurance vehicle that protects and ensures the viability of the Plan to make sure benefits continue to be available for all employees/beneficiaries of the plan.
So, just like the $1,000.00 medical bill, the employer/self-funded plan receives the $100,000.00 claim and must evaluate whether it is eligible for coverage and provide said coverage. Only then, does it submit a reimbursement request (assuming the $100,000.00 is above the applicable deductible). It is often the case that for some reason or another, the plan allows for coverage but the request for reimbursement is denied under the terms of the stop loss insurance policy. Certainly, that self-funded plan would tell you that they were unable to “transfer the risk” on that particular claim.
The description above alone is almost 350 words – so we certainly can’t expect an article of about 750 words intended to cover both self-funding and Direct Primary Care, one of the more innovative approaches being utilized by employers to provide more cost effective health plans to their employees, to describe it in depth. Notably, the author did not quote Mr. Thaxter when making that description, so it’s impossible to know exactly how it was described to him. As practitioner in the self-funded space, it’s incumbent on us to do everything we can to educate those who are self-funded, or looking to become self-funded on the benefits, the risks, and strategic and innovative steps that can be taken to minimize the risk and maximize the reward – more cost effective medical benefits!
Catch the article here - https://thebusinessjournal.com/self-funded-insurance-options-come/?fbclid=IwAR3D-CxhWa1vrUy1lkmNMKJTt3cAuucs6v5q7zT4mkQA7ytD9oBQsyl92Pc
How payers, providers, and those of us who serve them, can work together as a team and achieve a winning plan for the future of healthcare. In this episode, Adam, Ron and Brady, talk about how providers – like plan sponsors – are concerned with the state of things and want to identify what’s wrong, what’s right, and how we can collaborate on a new approach that works for us all, as members of a single industry – healthcare.
By: Ron E. Peck, Esq.
Let me first begin by reporting some good news. Those who follow our organization closely recall back in July that I announced my wife’s diagnosis of Non-Hodgkin’s Lymphoma. Six months later, I am pleased to announce that she is in complete remission. It will be some time before she can be deemed well and truly “cured,” but this news is still something I am thrilled to share with you. To the many (many) people who sent me well wishes, prayers, and requests for updates; thank you. Relevant to this blog post, however, I also want to thank the providers – the people who saved my wife’s life, and ensured my three year old son still has his mother.
As I work on behalf of the self-funded health benefits industry, including employers, employees, brokers, stop-loss carriers, MGUs, TPAs, and pretty much every entity that plays a role in the formation and administration of said plans – one attitude consistently seems to pop up. As payers, we assume the worst of the payees. In other words, we routinely state that the rising cost of health care is the providers’ fault. The affordability of health benefit plans (or lack thereof) is driven solely by exorbitant – and dare I say it – criminal pricing by hospitals and providers.
This desire to place all the blame on providers demonizes them, casts them in the light of an “enemy,” and eliminates any chance of coordinating with providers in an effort to peacefully resolve differences of opinion – hopefully before a patient is negatively affected – and fix the system we agree is flawed.
Many times have I been asked to assist in a situation where a provider has billed one amount for services rendered, the benefit plan pays a lesser amount it deems to be reasonable, and the patient is balance billed. After reviewing the entirety of the situation with the provider, sometimes they agree to accept some amount situated between their original charged amount, and the amount paid. The offer is fair, yet upon reviewing it with the plan sponsor or administrator, they refuse to pay more. The rationale sometimes has to do with fiduciary duty (fair), sometimes relates to financial limitations and stop-loss availability (understandable), but sometimes the stated rationale is akin to: “I’m tired of those crooks milking me for all I’m worth, and I refuse to negotiate with terrorists.”
It pains me to see this happening. I count myself lucky to live in an area where there are so many incredible providers of healthcare. More of my friends are providers than any other profession, and without exception, they are all 100% focused on improving patients’ health, and 0% focused on charge-masters, billing schemes, and squeezing plans dry. The issues (and there are many of them) are more a symptom of a broken system than intentional malfeasance on the part of all providers. Most providers, like us, are people so exasperated by their day-to-day duties that they throw their hands in the air and default to an “us versus them” mentality.
If payers and payees cannot work together to identify a middle ground that works, is fair, and is viable long term for all involved, then “someone else” will do it for us… and I fear what that “solution” will look like. Feel the burn?
This is why I am asking every person who reads this missive to step back, and remember who we are dealing with, and perhaps – on occasion – give them the benefit of the doubt. They, like us, are caught in a broken system whose shortcomings perpetually fuel a death spiral; and they – like us – are just trying to do right (as they see it) for their employer and their industry.
Do we truly believe hospitals want to bite the hand that feeds them, or do they look at their own (albeit inefficient and poorly conceived) processes, witness how we in the payer community are trying to “shortchange” them, and they – like us – become defensive?
The bottom line is this. We need to adopt and obey a process by which providers are adequately rewarded for their noble work, and on both sides waste is eliminated, innovation is awarded, and cost-containment isn’t a dirty word. Lastly, we need to change our perspective and understand that we are all (payer and payee) part of the same entity – the healthcare industry – and that without one, the other will cease to thrive.
By: Kelly E. Dempsey, Esq.
A legal earthquake hit the self-funded industry last week and seemed to result in multiple tremors of legal actions throughout the week. In addition to all the cases about contraceptives, the Eighth Circuit Court of Appeals issued a large blow to the self-funded industry by siding against UnitedHealth in a lawsuit brought by out-of-network providers due to UnitedHealth’s process of cross-plan offsetting (see Peterson vs. UnitedHealth Group, Inc.). Cross-plan offsetting means the claims administrator is recouping funds for one plan that were overpaid by reducing payments from a second plan to the same provider. The process was created due to the struggle to recoup overpayments from out-of-network providers. With no contract in place, providers are reluctant to refund a plan if the payment is equal to or less than billed charges.
In defending against the lawsuit, the core problem for UnitedHealth is that the plan documents did not support the practice. UnitedHealth had to get a bit creative with their arguments by arguing that they had discretionary authority to interpret the terms of the plan. The court did not accept this argument, but while the court implied that cross-plan offsetting violates ERISA’s fiduciary duties, it stopped short of saying the process does violate ERISA.
What does this mean for TPAs and employers? As offset amounts are generally not large, the likelihood of litigation is relatively low; however, there is still the potential for the DOL and other courts to weigh in on whether or not this practice violates ERISA fiduciary duties. If a plan (or TPA) wishes to proceed with this process, this case is another reminder to make sure the plan document supports the process by which claims are being administered.