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Why Plan Sponsors should be Upfront with Workers about Self-funding
By Zack Pace, Senior Vice President, CBIZ, Inc., Employee Benefit News (Full text) (EBN)

Self-funded health plans don’t have health insurers, only health plan administrators. The knowledge that their employers are paying the claims of the plans dramatically changes employees entire outlook on health benefits and total compensation.


For example, a friend said:
• “When I tell people at work that [our employer] is paying all our claims with cash, people look at me like some wild conspiracy theorist. But the evidence is all there — they want us to be cost-conscious: the health fund incentives, the biometric screenings, the surveys. It’s just odd that [the plan being self-funded] is not discussed openly. Both sides, it would seem, would benefit from information sharing here.”
A human resources executive shared this comment:
• “This is such a good point! I am always surprised when the “average worker” does not know if their plan is self- funded or the impact that has. When I share with them why it matters, you see the lights come on.”
The Majority of Workers are Covered by Self-funded Health Plans
As benefits professionals, we know that most Americans receiving health benefits through group health plans are covered by a self-funded plan. Per the 2015 Kaiser Family Foundation and Health Research & Educational Trust Employer Health
Benefits Annual Survey:
• 63% of all covered workers are covered by a self-funded plan
• 83% of covered workers employed by a firm with 200 or more workers are covered by a self-funded plan
However, are those of us sponsoring self-funded plans effectively communicating to our employees that the plan is self-funded and explaining why that matters?
One of the strongest headwinds in communicating this point is our society’s habit of calling health plan administrators “health insurers.” Even I’m guilty of this from time to time. Thus, employees covered by self-funded plans are constantly hearing the terms “health insurance company” and “health insurer.”

Why are the terms health insurance company and health insurer so pervasive?
1. Many health insurers in the individual and small-group market (e.g., Aetna, Anthem, CIGNA, UnitedHealthcare) also offer claims administration and network services to self-funded medical plans. We tend to associate these brands and their logos with health insurance companies.
2. Policymakers and the media often don’t distinguish in their communications between an insured health plan and a self-funded plan. For example, have you heard a presidential candidate in this election cycle cite that for most American workers, the employer, not an insurance company, is paying the health claims? I haven’t.
So how can an employer sponsoring a self-funded health plan effectively communicate to its employees that the plan is self-funded and explain why that’s important?
1. First, eliminate the terms health insurance company and health insurer from the employee communication materials and strive to eliminate the terms from the company vocabulary.
2. Next, explain the basics of how the self-funded plan works. For example, communicate that the network secures discounts from physicians and hospitals, the health plan administrator adjudicates claims, and the care-management nurses help coordinate and improve the quality of care. Underscore that the employer is paying all of the claims, except, generally, for those above a certain catastrophic level.
3. Then, explain why employee stewardship of the health plan financially benefits all parties. For example, point out that total compensation consists of cash wages plus benefits compensation. Emphasize that increases to benefits compensation generally reduce increases to cash wages. As a visual tool, use Slide 4 of the 2015 Kaiser Family Foundation and HRET Employer Health Benefits Annual Survey’s Chart Pack. The graph demonstrates that since 1999, health plan costs have increased 203%, and cash earnings have increased 56%. You could also share your own history of health plan increases vs. cash compensation increases. Of course, this argument falls apart quickly if a company treats cash compensation and benefits compensation as uncorrelated budget silos.
Once employees begin to understand why smaller increases in health plan costs will raise cash compensation levels, ask for their help. For example:
1. Ask for their ideas and feedback on how to improve workplace health.
2. Ask them to support the wellness initiatives you are investing in and to provide ideas to improve and expand those programs.
3. Ask them to take the phone call from the health plan’s care-management nurse.
Finally, consider developing an incentive plan that rewards employees if the plan’s performance runs better than expected (ask your ERISA attorney and benefits consultant about the permitted incentives).

A Changing Industry: Navigating the current (Events)
The self-funded industry changes rapidly and without notice. In recent memory, the biggest culprit has been the ACA - and in its aftermath, there have been numerous regulatory guidelines and court cases that have helped interpret the ACA's provisions. Still, though, there are many other changes occurring at any given time. Examples include assignments of benefits, discrimination, preemption, bankruptcy, subrogation, stop-loss, and more.

Thank you for joining The Phia Group's legal team as they described recent goings-on within the legal and regulatory framework in which we all operate. Being aware of changes within the industry can be important to take the necessary action as well as to be able to predict and prepare for what might be on the horizon.

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The Replacements
As the self-funded industry evolves, benefit plans are forced to evolve with it or get left in the dust. Employees need quality coverage – but providing robust yet affordable programs has proven difficult for many self-funders. This conundrum can be addressed by changing inefficient or archaic processes; in response to contractual handcuffs limiting your ability to target cost drivers, too many health plans and TPAs overreact, thinking that the solution is to trash their plan entirely, and to try something new and untested – trading security for savings.

When it comes to benefits, don’t remove, don’t reduce... replace! Avoid the extreme sides of the spectrum, achieve balance, and ensure your own viability with “The Replacements.” Thank you for joining The Phia Group on Tuesday, February 16th, as we identified the trouble spots found in all benefit plans, and helped develop strategies to carve them out and replace faulty portions with new alternatives – without harming the rest of the plan!

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Sky-Rage: Bills, Debt, Lawsuits Follow Helicopter Medevac Trips
By Cindy Galli, Stephanie Zimmermann & Brian Ross

The helicopter ambulance that rushed Shauna Laswell to a Las Vegas hospital after a heart attack may have saved her life.

But when she got the air ambulance bill, she says she “almost had another heart attack.”

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TPA of Self-Insured Health Plan Not Subject to Texas Prompt-Pay Law
From the February 18, 2016 EBIA Weekly

[Health Care Serv. Corp. v. Methodist Hosps. of Dallas, 2016 WL 530680 (5th Cir. 2016)]

Available at http://www.ca5.uscourts.gov/opinions/pub/15/15-10154-CV0.pdf

The Fifth Circuit has ruled that a third-party administrator (TPA) of employer-sponsored self-insured health plans is not an insurer subject to the Texas Prompt Payment Act. A hospital sued the TPA for over $31 million under the state law, which generally requires insurers to pay benefit claims within 30 or 45 days (depending on the claim’s format), or face penalties. The TPA argued to the trial court that the Texas law does not apply because the TPA is not an “insurer” providing coverage through a “health insurance policy,” as required by the law. It also contended that ERISA preempts the application of the state law to claims arising under self-insured health plans. The trial court ruled that the state law by its terms does not apply to the TPA’s administration of self-insured plans; because of this conclusion, it did not address ERISA preemption.


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The Top 10 Lessons of a Reference Based Pricer
By Jason Davis

Where to gather to discuss reference based pricing (RBP), you will have three opinions.

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Montanile Changes Subrogation – How Will You Respond?

Take Your Money and Run!
Montanile Changes Subrogation – How Will You Respond?


On January 20, 2016, The Supreme Court of the United States decided in favor of the plan participant in the case of Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan (Click here to read the decision). The Supreme Court held that the Plan could not recover from Montanile, the plan participant, after he received a third party settlement and spent the money.

Third party recovery just got much more difficult.


If benefit plans don’t have air-tight language, and if they fail to proactively intervene before a plan participant spends settlement proceeds, the Supreme Court has indicated that the benefit plan is left with no recourse. For this reason, those without substantial resources dedicated to the pursuit will have a much more difficult time ensuring that their clients’ rights are enforced.

Please join The Phia Group for a free webinar on Tuesday, February 2nd, at 1:00pm (EST), where we will describe the Montanile case, its impact, and how it changes everything.

ERISA Plan Cannot Recover Settlement Funds That Have Been Spent
MyHealthGuide Source: William H. Payne IV and René E. Thorne

Case: Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, Supreme Court Ruling

The U.S. Supreme Court has narrowed, ever so slightly, the ever-changing definition of “appropriate equitable relief” under ERISA Section 502(a)(3). In the above case, Montanile, the high court addressed whether a plan fiduciary can recover medical payments made on behalf of a participant when the plan fiduciary has not identified third-party settlement funds still in the participant’s possession at the time the plan fiduciary asserts its reimbursement claim.


On 1/20/2016, the Supreme Court held in an 8-1 ruling that when a plan participant has spent — on nontraceable items such as fees for services or travel — all the settlement proceeds that could have been used to reimburse the plan, the plan fiduciary may not reach the participant’s other assets as a broader means of recovery.

Case Background

The facts of Montanile were mostly undisputed by the parties. Plaintiff, Board of Trustees of the National Elevator Industry Health Benefit Plan (the “Plan”), was an employee welfare benefit plan, which reserved for itself in its summary plan description (SPD) “a right to first reimbursement out of any recovery.” Montanile, a plan participant, was injured in a car accident, and the Plan paid out more than $120,000 in medical expenses on his behalf.

Meanwhile, Montanile retained counsel to pursue personal injury damages and ultimately settled for $500,000. When the Plan attempted to enforce its right to reimbursement and subsequent negotiations broke down, Montanile’s attorney notified the Plan that he would distribute the settlement funds to Montanile unless the Plan objected within 14 days. After the Plan failed to respond by the deadline, the funds were distributed to Montanile. The Plan then waited six months before suing under Section 502(a)(3)(B) of ERISA to enforce an equitable lien on the settlement funds, during which time Montanile spent most of the proceeds.

District Court Ruling

The district court in Montanile was facing a situation where restitution could theoretically expose Montanile’s general assets to a judgment: the third party settlement funds earmarked to reimburse medical expenses paid by the Plan had either been spent or comingled by Montanile by the time the Plan filed suit. Acknowledging the lack of Eleventh Circuit authority on point, the district court found that the Plan had a right to reimbursement on the grounds that “a beneficiary’s dissipation of assets is immaterial when a fiduciary asserts an equitable lien by agreement.” The Eleventh Circuit easily affirmed the decision in Montanile relying on its recent holding in AirTran Airways, Inc. v. Elem, 767 F.3d 1192 (11th Cir. 2014).

Supreme Court Ruling

In the Supreme Court, the issue became whether spending settlement funds could destroy the enforcement of a lien. Justice Thomas, writing for the majority, explained that:
• “… where a defendant has already spent proceeds that are subject to reimbursement — a restitution claim may only be asserted where funds or property in the defendant’s possession are clearly traceable back to the proceeds that were subject to reimbursement and, where such traceable funds or property exist, the plan can create and enforce an equitable lien over such funds or property.”
Rejecting the Plan’s arguments that ERISA’s general objectives, concepts of fairness and the fact that the equitable lien was by agreement – by virtue of being set forth the in SPD – justified a recoupment, Justice Thomas clarified that enforcing an equitable lien over a participant’s general assets is not “typically available” relief under the principles of equity.
The majority remanded the case back to the district court to determine “how much dissipation there was” and whether Montanile mixed the settlement funds with his general assets. So, there is still some possibility of recovery by the Plan.
Plan Should Have Acted More Expeditiously To Secure Funds

From a public policy and legal theory perspective, the broad question put to the Court in Montanile — what is “appropriate equitable relief”? — was unlikely to spawn a new “tracing” rule for all types of reimbursement claims. Instead, the Montanile decision demonstrates that all but one of the justices — Justice Ginsburg, who dissented in the case — are unwilling to turn ERISA Section 502(a)(3) into a damages free-for-all.
At the end of the decision, Justice Thomas explained that the Plan should have acted more expeditiously to secure the settlement proceeds before they were dissipated. That statement is the complete scope of Montanile: equitable tracing rules for plan reimbursement remain in place and plans need to act promptly if they want to be repaid.

What Does the Montanile Decision Mean to Plan Fiduciaries?
A narrow decision of this nature has two practical impacts for plan fiduciaries.
• First, SPDs should include language that puts participants on notice of the plan’s reimbursement rights in the case of a tort recovery and the obligation of participants to guard and not spend any medical expense funds received in a tort recovery that may be subject to the plan’s claim for reimbursement.
• Second, plan fiduciaries must anticipate the need to enforce and monitor the plan’s subrogation rights when plan assets are paid related to personal injury scenarios and should establish administrative procedures to carry out such enforcement and monitoring.
As an example of the importance of the second point, in AirTran, the plan only learned of the defendants’ full recovery — $425,000 instead of $25,000 — by accident when the defendants put a copy of the wrong check in the mail! It is incumbent upon plans to communicate with all parties in a tort suit, calendar important deadlines, and consult with outside counsel when third-party settlement funds are on the horizon.
Please follow this link to a comprehensive Jackson Lewis article concerning Montanile: http://www.jacksonlewis.com/publication/supreme-court-erisa-plan-cannot-recover-settlement-funds-have-already-been-spent

How to Proactively Manage Self-Funded Employer Health Plans Recommendations by a Hospital Legal Advisor
MyHealthGuide Source: Emily M. Scott

As more patients join self-funded plans, hospitals face new challenges regarding billing and collection.

The Chargemaster Challenge

The increase in self-funded employer health plans has triggered an unintended consequence for hospitals with respect to payment for services: a rise in patients considered “self-pay” or “uninsured” by hospital billing departments. With the exception of large employers like Boeing or Wal-Mart, self-funded plans rarely contract directly with providers. In the absence of a contractual agreement, hospitals routinely charge patients enrolled in self-funded plans according to the prices established in the hospital’s chargemaster or charge description master — the comprehensive price directory of goods, services and procedures that can be billed by the facility.


Each hospital has its own unique chargemaster, and prices can — and usually do — vary greatly. A hospital’s chargemaster typically serves as the starting point for price negotiations with commercial insurance companies and government payers. Because of their size and bargaining power, these payers are able to secure rates significantly more favorable than those listed on the chargemaster for the goods and services hospitals provide to their members.

The Role of Third-Party Administrators

Because chargemaster rates are higher than most negotiated contract rates, employers with self-funded plans often hire third-party administrators to analyze hospital bills and assign repriced costs — much lower than the chargemaster rates — to each service and supply. The employer then pays the hospital bill at the repriced cost determined by the administrator, calling it “reasonable” payment for the hospital’s services. However, these payments typically cover only a fraction of the patient’s total hospital bill.

Hospitals then find themselves in the unenviable position of billing the employer, the patient or both to recoup the balance of the patient invoice. When the patient refuses to — or cannot — pay the balance, the delinquent bills are turned over to collection agencies. Notably, many third-party administrators also assist balance-billed employers or employees with collections activity and resulting lawsuits. These lawsuits can be costly for hospitals, both in terms of legal expenses and in reputational damage.

A Proactive Approach

Hospitals can — and should — take steps to manage billing and collection for patients with self-funded health plans.

Take charge of your chargemaster. Are your prices rational and defensible? Pursuant to the 2014 guidelines issued by the Centers for Medicare & Medicaid Services, hospitals are required by the ACA to make public their standard charges for the items and services they provide. CMS has interpreted “standard charges” to mean the prices established in the chargemaster. (Some states, like Massachusetts and New Hampshire, already make such pricing information available.) A common chargemaster complaint is that the prices listed bear no relation to the actual cost, the amount usually charged or the amount hospitals actually accept from payers.

Consideration of these issues is an essential step in ensuring that chargemaster prices are rational and defensible. A chargemaster should be:
• Consistent. Track specific items in different hospital departments to ensure that prices are internally consistent. Evaluate any differences in costs throughout a health system’s various facilities and investigate the reason for the variance.
• Comparable. Compare your chargemaster prices with the acquisition costs of equipment, items, supplies and drugs. Track markups and compare those with the payments received from commercial and governmental payers. If possible, review the pricing data of your peers.
• Current. Conduct a chargemaster analysis every year. Have a team and process in place to evaluate new items as they are added, and adjust as necessary.
• Collaborative. Talk with your physicians about physician preference items, and the effect they can have on cost-per-case variability. Look for opportunities to partner with physicians to establish reliable procedure cost estimates.
Communicate with patients and with the public about your facility’s prices — before and after you provide services. If you choose to make the chargemaster available online, include a Frequently Asked Questions page explaining how to understand and use the information it contains. List the name and contact information of individuals at the hospital who can navigate the chargemaster and educate patients about potential charges.
• Provide comprehensive information about the hospital’s financial assistance plan and how to apply; offer patients assistance with eligibility determinations.
• For scheduled procedures, consider offering nonbinding cost estimates for patients who will be self-pay.”
• Describe all prompt-pay discounts, self-pay discounts, cash-only discounts, charity care and other available discounts or assistance.
• Hire and train financial counselors who can work with patients to review their itemized bills for accuracy and establish payment plans if necessary.
• Maintain a clear and comprehensible collections policy.
Empower your staff to handle self-funded plans. As you become aware of local employers with self-funded health plans, maintain an updated list of such employers that is accessible to admissions personnel. To the extent possible, have admissions personnel provide detailed information to affected patients, including a plain-language explanation of the patient’s financial responsibility for health care expenses.

Specifically, make sure patients understand that an assignment of benefits could mean balance billing after the claim is submitted to the employer (or employer’s third-party administrator) for payment. Make sure your admissions staff are trained to recognize patients with self-funded plans and are able to address patient inquiries or refer patients to financial counseling. Offer — and document the offer of — the opportunity at admission to ask questions about how patients will be billed for services. Finally, if you encounter multiple patients with the same employer, consider offering contracted prices to the self-funded plans.

To paraphrase Heraclitus of Ephesus (c. 535–475 B.C.E.), “The only constant is change.” These ancient words seem particularly applicable in today’s health care environment. As hospitals navigate the post-reform era, statutory and regulatory changes will create new challenges that call for flexible and creative solutions. Continued success — and survival — will demand that hospitals engage their staff, providers and community in ways that will allow all stakeholders to have a voice in those solutions.
About the Author

Emily M. Scott is a partner and member of the health care practice at Hirschler Fleischer in Richmond, Va.

Saving Stop-Loss - Protecting a Key Self-Funding Ingredient in a Hostile World
Saving Stop-Loss - Protecting a Key Self-Funding Ingredient in a Hostile World

Stop-loss is vital to the self-funded marketplace, and for good reason – because catastrophic claims can bankrupt an employer in the blink of an eye. Not all is well in the land of stop-loss, however, as forces – both internal and external – conspire against stop-loss carriers. Regulators, fearing the impact self-funded adverse selection may have on PPACA exchanges seek to eliminate self-funding by striking at stop-loss. Meanwhile, many will attest that some stop-loss carriers have taken a more heavy handed approach to cost containment. There are different types of carriers and MGUs in the marketplace, with varying attitudes toward discretion, plan language, bill auditors, caps on payable amounts, and many other aspects of a reinsurance arrangement that can be the difference between being able to comfortably self-fund a health plan and being forced into the fully-insured market.

Thank you for joining The Phia Group’s legal team on Tuesday, January 19, 2016, as they provided first-hand insight into the self-funded market’s reliance on stop-loss and threats to that industry, including what TPAs and brokers should look for – and look out for – when advising health plan sponsors regarding stop-loss options.

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