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The Phia Group, LLC – 1st Quarter Newsletter – 2015
The Book of Russo 

It’s finally baseball season and here in Boston that means the snow is finally gone (fingers crossed) and we can start seeing our dirty yards again.  The idea of 50 degree weather makes me want to jump into my shorts as soon as possible.  The long, harsh winter we had sure made it tough to get to work each day but as long as the industry is getting bigger and busier, we just find a way to get the work done.  Speaking of work, the first quarter has been full of it!  From subrogation issues to exclusion problems to state insurance commissioners messing around with stop loss carriers (hello New Mexico), the first three months of 2015 have been quite eventful.  We are excited about the rest of this year as we expand our service offerings and enhance those we already have in place.  I spend much time talking to leaders in our industry to ensure that we here at The Phia Group stay on top of the ever growing issues facing the country.  There’s so much more to do but we all should be proud of what we have accomplished thus far.  Happy reading! 

Letter from the Editor 

Spring has finally sprung, and with a record-breaking winter of over 100 inches of snow in Boston, it couldn’t come a moment too soon.  It was unquestionably a cold few months, but make no mistake about it, we are always turning up the heat.  A lot happened this past quarter and we are excited to bring you the latest news and notes about how The Phia Group is focusing on being trailblazers for innovation in the Self-funded industry.  This installment of the newsletter is packed with announcements of new offerings, the latest from the Supreme Court of the United States relating to ERISA preemption, and of course, registration information for our April webinar.  This is a newsletter you aren’t going to want to miss. Stay tuned for some changes coming in the editorial lineup of The Phia Group Newsletter.  Thank you for continuing to Learn With Us, Plan With Us, and Save With Us!!!

Stop the Presses

The Phia Group Announces the Release of a Preventive Care Template available in the Phia Document Management® Software 

As the cost of healthcare rises, employers are looking for inexpensive ways to keep their employees covered and satisfy new federal requirements. Preventive Care Only plans are the perfect solution. With today’s ever changing rules and regulations, Preventive Care Only plan documents provide employees with basic affordable coverage. Offered in conjunction with other offerings, a Preventative Care Only plan can result in huge savings for the employer, while offering complete coverage to employees and avoiding any ACA tax penalties!

The growing demand for Preventive Care plans is providing a substantial influx of opportunities in the self-funded world, and Phia Document Management® has streamlined the process of setting up these innovative plan strictures while still following federal compliance regulations. Creating compliant, efficient and consistent Preventive Care plan documents has never been easier than with Phia Document Management®! Preventive Care materials are available now.

For more information regarding Preventive Care templates, Phia Document Management®, and The Phia Group’s other innovative offerings, please contact Toussaint Anderson III, PDM Project Manager, by email at tanderson@phiagroup.comor by phone at 781-535-5662.

 

Free Monthly Webinar

Register Now – Spots Are Limited! 

“Survival of the Fittest” – Best Practices to Perfect a Modern TPA 

Thursday, April 23, 2015

1:00 PM EST to 2:00 PM EST 

Join The Phia Group on April 23, from 1 to 2 PM EST, as they discuss best practices and new methodologies TPAs are considering, in their quest to remain relevant in a modern healthcare arena.  Covered topics will include innovative services, products, and processes being used today, and developed for tomorrow.  The Phia Group will identify both the issues and solutions that seem to be spreading, and how proactive administrators are addressing both.

Join The Phia Group’s legal team as they discuss the best practices for TPA’s and how this can help you!

ATTENTION:  If you do not receive a confirmation email shortly after registration with webinar log-in details, check your spam filter for emails from customercare@gotowebinar.com

Reporting Portal Unleashed:  The Phia Group Responds to Clients’ Needs

With 2015 in full swing, we wanted take a moment to tell you about some exciting news! At the start of the year we went live with our new and highly anticipated Online Reporting Portal!  It was designed so that our clients could access their reports anytime!  All reports can be generated within the portal and exported into excel format and manipulated.  This is a feature our clients asked for, and as is our custom, The Phia Group delivered!

New Reports:

Aging Report

This report provides a look at the average duration from case activation to resolution, by Case Type. Viewable results include total cases, total recovery cases, and average days(duration). In addition, the report displays comparisons to the aging, of case types, across all of Phia’s clients allowing you to compare results globally.

Historical Overview Report

This report will serve as a running overview of recovered cases and their corresponding values/recovery amounts per quarter and year. For overviews “to-the-day”” and statistics prior to 2008, requests should still be made through the appropriate Client Account Manager.

Report Enhancements:

Email the Claim Recovery Specialist (CRS) – You will now have the ability to directly email the Claim Recovery Specialist handling the case you’re inquiring about. Please click on the name of the “CRS” located at the end of case in the column titled “Current CRS (click to email)” where you will be able to email them directly (see below screen shot).

As always, we truly value our client’s feedback and used it to create a user-friendly portal.  If you have any thoughts or suggests about the portal, we are always looking to improve our products – and the most valuable information we have is all of you!

If u have any questions about the reporting portal, please contact Jennifer Marsh at 781-535-5634.

 

Fighting For Your Right …. The Phia Group Takes It to Wisconsin Auto Insurer

Note from the Editor:  Over the past several weeks, a few members of The Phia Group’s legal team, spearheaded primarily by Pamala Parette with the direction of Christopher M. Aguiar, Esq., battled the legal department of a well-known auto insurer in the state of Wisconsin and won! Basically, the auto insurer was refusing to issue payment from the medical payment coverage policies of plan participants relying on the position that the law not only didn’t require them to reimburse our clients, but in fact, it was our clients who owed them money!?

About 2 months ago, select members of the legal team conferred, analyzed applicable case law, and devised a plot to fight back.  Simply, they picked one case that was worth a fight and effort, but more importantly, didn’t put our clients at risk of owing money to the auto insurer, and subrogated against the insurer.  We are happy to report that as a result of these efforts, The Phia Group was able to obtain a 100% reimbursement of claims paid by the Plan on this case from the auto insurer’s medical payment coverage, as well as an admission that the auto insurer’s policy was flawed and would be remedied.

Pamala’s experience in the auto insurance arena was pivotal in this effort.  What many of our clients may not know is before Pamala made her transition to the world of TPAs & self-funded plans, she spent several years as a claim adjuster for several auto insurance companies.  Her experience there provided her with intimate knowledge of appropriate policies and procedures in claims handling.  Pairing that experience with the prospect of our filing a complaint with the Wisconsin Department of Insurance provided to be a formidable strategy that will lead to more savings for our clients! A great team effort worth mention!!!

 

SCOTUS to Weigh in on OP Recovery as an Equitable Remedy 

Can You Identify A Fund? … By: Catherine Dowie

This past week, the Supreme Court granted certiorari in yet another ERISA subrogation case.  This time it was an appeal from an 11th Circuit decision, and the question presented to the court was:

Whether, under the Employee Retirement and Income Security Act of 1974 (ERISA), a lawsuit by an ERISA fiduciary against a participant to recover an alleged overpayment by the plan seeks “equitable relief” within the meaning of ERISA Section 502(a)(3), 29 U.S.C. § 1132(a)(3), if the fiduciary has not identified a particular fund that is in the participant’s possession and control at the time the fiduciary asserts its claim.

There is currently a 6-2 circuit split (in favor of plans overpayment recovery), but the Solicitor General has sided with the 2 opposing circuits in a previous case.

The plan participant is claiming that the Plan did not assert its lien until after settlement, and while the funds were held in trust for several months while his attorney attempted to negotiate with the Plan, an impasse resulted in the attorney requesting that the Plan either accept the final offer or file suit; if he did not receive a response in 14 days, he would release the funds.  The Plan failed to respond and by the time suit was filed, the plan participant was no longer in possession of the full amount of the Plan’s interest.  The full settlement was $500,000.00 and the Plan’s interest was $121,044.02, attorney’s fees and costs were $263,788.48.

Arguments haven’t been scheduled yet …. Stay tuned!!!

 

Check This Out!!! 

Pricing Healthcare is becoming a national hub for direct-pay healthcare.  The company helps quality healthcare facilities across the U.S. put together and publicize affordable, direct-pay pricing for their procedures.  They then work with self-funded employers to realize savings by steering their employees to these facilities.  Prices are typically 35% to 65% below average insured rates, and are available to anyone paying cash upfront (or 30 days same as cash for employers and other benefit groups).  Price lists are free for anyone to access, and almost all posted rates include the facility, physician, and anesthesiologist fees bundled into a single global price.  Facilities currently listed on https://pricingHealthcare.com include hospitals, surgery centers, and imaging centers.  The company is rapidly expanding its list of participating facilities by partnering with facility management companies, third party administrators, and employers in all 50 states.

On the Road Again … 2015 Upcoming Presentations in the 1st Quarter

 

4/8: IOA Re Management Meeting – Blue Bell, PA
4/13: NFP Conference – Washington, DC
4/15: BevCap Best Practice Workshop – Orlando, FL
4/28: Berkley Captive Symposium – Cayman Islands
5/5: RCI Forum – Scottsbluff, NE
5/13: Optum Clinical/Claims Roundtable – Mohegan Sun, CT
6/7- Leavitt Trustee Conference – Big Sky Montana
6/15 – SOA Meeting – Atlanta, GA
 

From the Blogosphere

 

http://passionforsubro.com/ppaca-survives-another-scotus-challenge/
 

Source:  http://www.benefitspro.com/2015/01/13/ppaca-survives-another-scotus-challenge?eNL=54b5562e160ba0a4078cf212&utm_source=BenefitsProNewsAlert&utm_medium=eNL&utm_campaign=BenefitsPro_eNLs&_LID=169432474
 

http://passionforsubro.com/partners-completes-takeover-of-doctors-group/
 

Source: http://www.bostonglobe.com/business/2015/03/11/partners-takeover-doctors-group-will-add-millions-health-costs-state-panel-says/l6bngLSgVDcxNn7FEi0XmN/story.html
 

 http://passionforsubro.com/hips-dont-lie-replacements-on-the-rise-as-busy-boomers-age/
 

Source:  http://www.nbcnews.com/news/us-news/hips-dont-lie-replacements-rise-busy-boomers-age-n307126
 

http://passionforsubro.com/four-reasons-why-reference-based-pricing-could-become-the-norm-for-self-insured-employer-groups/
 

Source:  http://www.amwins.com/Pages/Client%20Advisories/reference-pricing-1.15.aspx?spMailingID=10515356&spUserID=MjU1NDQ0NjE3MwS2&spJobID=462527109&spReportId=NDYyNTI3MTA5S0
 

The Stacks

 

To Be, Or Not To Be … A Fiduciary

        by Andrew Silverio, Esq.

The Employee Retirement Income Security Act (“ERISA”) provides the federal regulatory framework for private sector employee benefit plans.  As one of the primary goals of ERISA is to establish a uniform statutory framework for employee benefit plans, a major feature is the preemption of most state regulation which touches on employee benefit plans falling within its scope.  It is because of this that a self funded employee benefit plan under ERISA is essentially immune to most forms of state regulation, and must look primarily to ERISA (and of course, the Affordable Care Act in the case of health and welfare plans) for regulatory guidance.

Plan fiduciaries are those exercising discretionary authority over plan assets, plan management, or both.  ERISA holds these plan fiduciaries to a high standard; such fiduciaries have significant duties toward their respective benefit plans and their participants, and must carry out these duties prudently, faithfully adhere to the applicable plan document, and act in the best interests of the plan and its participants.  A significant aspect of this fiduciary status, and the reason it is so important to know whether one is acting as a fiduciary, is the personal liability imposed on fiduciaries for breaches of their duties.  In the context of a health plan, a breach of fiduciary duty can result in enormous damage to the plan, damages which can then be claimed from the responsible fiduciary’s personal assets.

Most agreements in the industry contain numerous disclaimers and indemnifications, purporting to evade any fiduciary liability and adamantly denying fiduciary status. However, many plans, TPAs and vendors focus far too much on contractual disclaimers and indemnifications, and too little on the nature of their actual activities. While it is required that an ERISA plan have at least one “named” fiduciary pursuant to its plan document, this is by no means the only way to attain fiduciary status.  “An entity’s status as a fiduciary hinges not solely on whether it is named as such in a benefit plan, but also on whether it ‘exercises discretionary control over the plan’s management, administration, or assets.’” Hartsfield, Titus & Donnelly v. Loomis Co., 2010 WL 596466, 2 (Dist. N.J. 2010), citing Mertens v. Hewitt Assocs., 508 U.S. 248, 252 (1993).

In addition to precluding any attempt to disclaim fiduciary status, ERISA also does not allow one to disclaim fiduciary liability.  See 29 U.S. Code § 1110(a), “Any provision in an agreement or instrument which purports to relieve a fiduciary from responsibility or liability for any responsibility, obligation, or duty under this part shall be void as against public policy.” Although this liability cannot be “extinguished”, it can be allocated, by one who understands the nature of the fiduciary status and its corresponding duties and liabilities. Pursuant to 29 U.S. Code § 1105(c), the “instrument under which a plan is maintained” may expressly provide for an allocation of fiduciary responsibilities (other than those of a trustee) among named fiduciaries.  Additionally, the instrument may allow such named fiduciaries to designate persons or entities other than named fiduciaries to carry out fiduciary responsibilities. More importantly, if a fiduciary allocates such a responsibility to another person, “…then such named fiduciary shall not be liable for an act or omission of such person in carrying out such responsibility…” 29 U.S. Code § 1105(c)(2).  In other words, once a named fiduciary properly delegates away a fiduciary duty, they are released from liability to the extent of the scope of the duty delegated.

They are not released from all liability, however.  The original fiduciary still has fiduciary duties in prudently selecting a party to appoint as a fiduciary, as well as following the proper plan procedure for doing so, and reasonably monitoring the actions of the appointed fiduciary.  Once a fiduciary duty is properly allocated, the original fiduciary can be held liable for a breach of that duty only through ERISA’s rules on liability between co-fiduciaries (or through his own breach in imprudently selecting or failing to monitor the designated fiduciary). Under these rules, one is liable for the actions of a co-fiduciary only if he knowingly participates in or conceals the co-fiduciary’s breach, enables the co-fiduciary’s breach through his own breach of fiduciary duties of prudence and diligence, or has knowledge of the co-fiduciary’s breach and makes no effort to cure the breach. 29 U.S. Code § 1105(a).

Once an examination of an entity’s activities in relation to the plan is complete, the next question is of course what to do about this liability.  An option is to identify activities which subject your company to fiduciary liability and manage this liability by delegating them out to another party as discussed above, making sure to follow proper plan procedure in doing so.  Another option is to acknowledge this responsibility and ensure adequate protections are in place, via various forms of insurance policies. It is important to note that the “fidelity bond” required by ERISA will not protect a fiduciary from personal liability.  This bond, required for any person who handles plan funds, is in place to protect the plan in the event of dishonest conduct which damages the plan.  It will not help the responsible party in the event of a breach.

No matter which course of action is undertaken, a thorough understanding of one’s responsibilities and liabilities in any given situation gives crucial insight into the true value of the services being provided.  There is a good reason agreements which openly assume fiduciary status and liability come with higher fees than those which disclaim such status.  If the activities to be performed under an agreement will subject one to fiduciary liability regardless of contract language, why not assume that liability in the agreement?  If assuming additional liability in the agreement, this risk and its potential costs should be taken into account in calculating the TPA’s fee.  Additionally, an entity armed with this knowledge is better equipped to assess the extent of the liability it truly wishes to take on.

 

Never More Important …

By:  Ron E. Peck, Esq.

Sr. VP & General Counsel

The Phia Group, LLC

 

As employers begin to seriously consider self-funding for providing health benefits to their employees, figuring out how to contain costs is a balancing act we must all master.

Before the Patient Protection and Affordable Care Act (PPACA) was implemented, carriers and employers knew there would be costs involved.  In the wake of these new expenses, many employers’ knee jerk reaction was to analyze the “Pay or Play” mandate, and realize that the penalties for not offering coverage was less than the cost they’d incur maintaining their policies.  Many savvy employers and brokers, however, learned about the benefits of self-funding.  No wonder that we saw growth in self-funding in Massachusetts following the passage of “RomneyCare,” and similar self-funded growth nationwide following the passage of “ObamaCare.”

As employers with healthy, low risk lives, chose to self-fund; so too did employers with high risk lives take advantage of the health insurance exchanges.  Paying a relatively small penalty to send costly employees to the exchange is an enticing option.  As this influx of costly lives flooded the exchanges, the hope had been that healthy lives would join them, balancing the risk.  Sadly for supporters of PPACA, the healthy lives remained (or became) self-funded.  Seeing this disaster as a risk to PPACA, many have joined forces with state insurance commissioners and the NAIC to make self-funding less attractive for otherwise healthy employee groups.  Due to the federal preemption created by the Employee Retirement Income Security Act of 1974 (“ERISA”), they have been unable to attack self-funded plans directly.  Instead, they have restricted the ability of stop-loss insurance carriers to offer protection to self-funded plans.  Without being able to secure stop-loss with a reasonable deductible, many employers who were interested in self-funding cannot accept the kind of increased risk they are now being asked to bear.  Only if the costs can be contained, can the risks inherent in a “higher deductible” stop-loss policy be deemed acceptable.

Some believed that by giving “everyone” insurance, the amount charged for medical care would decrease.  Once the number of patients with deep pockets increased, however, so too did prices.  Changing “who” pays had no effect upon “how much” is paid.

Six years following the passage of RomneyCare in Massachusetts, a so-called “cost control” or “Health Reform 2.0” law was passed; (the legal name is Chapter 224 of the Acts of 2012).  The bill sets annual spending targets, encourages the formation of accountable care organizations, and establishes a commission to oversee provider performance.

We can hope that we see such change at a federal level, but in the meantime, it falls upon us to identify ways to contain costs, and keep self-funding viable.  Health plans must renew their focus on such “classic” cost containment measures as:

– Subrogation & Recoupment of Funds from Liable Third Parties

– Overpayment Identification and Recovery

– Eligibility Audits & Fraud Detection

 

In addition, now is the time to consider “new” cost containment methods, such as:

– Revisiting How Out of Network Claims are Priced

– Revisiting How The Plan’s Network is Structured, and Negotiating Better Deals in Exchange for Steerage

– Carving Out High Cost Procedures, and Negotiating for Their Payment on a Case-by-Case Basis

– Focusing on Preventative Care, Wellness, and Other Low Cost / High Reward Benefits

By focusing on cost-containment, employers can take steps to reduce the risk they face, making the attack against stop-loss and self-funding less impactful upon our ability to self-fund.

 

UPDATE:  SCOTUS Denies CERT in the 2nd Circuit … Now What?

            By Christopher M. Aguiar, Esq.

A few months ago, the 2nd Circuit took it upon itself in the case of Wurtz v. Rawlings to throw a bit of a wrench in the ability of a benefit plan to remove a law suit brought to enforce anti-subrogation laws to federal court.  Industry pundits advocated for the Supreme Court of the United States to once again step in and resolve a pre-emption dispute relating to subrogation for an almost unprecedented 4th time in 15 years.

Unfortunately, this time it was not to be.  Just last week the Supreme Court denied an application to hear the case and now leaves a bit of a dispute in the law; essentially, the standard for removal to federal court is different in the 2nd Circuit than in almost any other federal jurisdiction in the country.  Self funded benefit plans can take solace in the fact that it seems the 2nd Circuit case does not apply to them, but plaintiff lawyers in the pertinent states are doing a great job at ignoring the part of the case that excepts those plans from this rule, so those handling subrogation claims in the 2nd Circuit must be prepared for a bit of a war to ensure their ability to preempt state law anti-subrogation laws continues unfettered.

 

Phia Group Case Study

 

Claim Negotiation & Sign-off

The Phia Group received a large claim from a hospital in the southeast. The claim in at $155,000, and included two surgical implants; after a preliminary discussion with the hospital’s billing office, The Phia Group’s request for settlement was escalated to the hospital’s management. By referencing the hospital’s cost and reimbursement data, The Phia Group was able to show the hospital’s management that the charges were simply not reasonable, and that the charges were not payable under the Plan Document. In turn, however, the hospital challenged the relevance of Phia’s review by suggesting that there was a PPO network in play, so the “reasonableness” of their charges was irrelevant. The Phia Group’s legal department reviewed the matter, and was able to identify a chink in the PPO contract’s armor – and The Phia Group was able to successfully argue that the PPO contract did permit the payer to reduce the payable amount based on what is reasonable under the Plan Document. Additionally, The Phia Group leveraged its data to discuss the hospital’s actual costs of procuring the implants, which the hospital did not counter. The Phia Group’s legal team sent the hospital’s management a memorandum describing its position, as well as a settlement proposal – and the hospital’s management signed the agreement without further argument. The network discount would have required a net payment of $109,000 – but The Phia Group secured a settlement for $52,000, resulting in $57,000 in additional savings for the payer.

Billed:$155,000
Network Rate: $109,000
Paid: $52,000
Additional Savings: $57,000

The Phia Group, LLC – 1st Quarter 2015 – The Stacks
The Stacks

To Be, Or Not To Be … A Fiduciary
by Andrew Silverio, Esq.

The Employee Retirement Income Security Act (“ERISA”) provides the federal regulatory framework for private sector employee benefit plans.  As one of the primary goals of ERISA is to establish a uniform statutory framework for employee benefit plans, a major feature is the preemption of most state regulation which touches on employee benefit plans falling within its scope.  It is because of this that a self funded employee benefit plan under ERISA is essentially immune to most forms of state regulation, and must look primarily to ERISA (and of course, the Affordable Care Act in the case of health and welfare plans) for regulatory guidance.

Plan fiduciaries are those exercising discretionary authority over plan assets, plan management, or both.  ERISA holds these plan fiduciaries to a high standard; such fiduciaries have significant duties toward their respective benefit plans and their participants, and must carry out these duties prudently, faithfully adhere to the applicable plan document, and act in the best interests of the plan and its participants.  A significant aspect of this fiduciary status, and the reason it is so important to know whether one is acting as a fiduciary, is the personal liability imposed on fiduciaries for breaches of their duties.  In the context of a health plan, a breach of fiduciary duty can result in enormous damage to the plan, damages which can then be claimed from the responsible fiduciary’s personal assets.

Most agreements in the industry contain numerous disclaimers and indemnifications, purporting to evade any fiduciary liability and adamantly denying fiduciary status. However, many plans, TPAs and vendors focus far too much on contractual disclaimers and indemnifications, and too little on the nature of their actual activities. While it is required that an ERISA plan have at least one “named” fiduciary pursuant to its plan document, this is by no means the only way to attain fiduciary status.  “An entity’s status as a fiduciary hinges not solely on whether it is named as such in a benefit plan, but also on whether it ‘exercises discretionary control over the plan’s management, administration, or assets.’” Hartsfield, Titus & Donnelly v. Loomis Co., 2010 WL 596466, 2 (Dist. N.J. 2010), citing Mertens v. Hewitt Assocs., 508 U.S. 248, 252 (1993).

In addition to precluding any attempt to disclaim fiduciary status, ERISA also does not allow one to disclaim fiduciary liability.  See 29 U.S. Code § 1110(a), “Any provision in an agreement or instrument which purports to relieve a fiduciary from responsibility or liability for any responsibility, obligation, or duty under this part shall be void as against public policy.” Although this liability cannot be “extinguished”, it can be allocated, by one who understands the nature of the fiduciary status and its corresponding duties and liabilities. Pursuant to 29 U.S. Code § 1105(c), the “instrument under which a plan is maintained” may expressly provide for an allocation of fiduciary responsibilities (other than those of a trustee) among named fiduciaries.  Additionally, the instrument may allow such named fiduciaries to designate persons or entities other than named fiduciaries to carry out fiduciary responsibilities. More importantly, if a fiduciary allocates such a responsibility to another person, “…then such named fiduciary shall not be liable for an act or omission of such person in carrying out such responsibility…” 29 U.S. Code § 1105(c)(2).  In other words, once a named fiduciary properly delegates away a fiduciary duty, they are released from liability to the extent of the scope of the duty delegated.

They are not released from all liability, however.  The original fiduciary still has fiduciary duties in prudently selecting a party to appoint as a fiduciary, as well as following the proper plan procedure for doing so, and reasonably monitoring the actions of the appointed fiduciary.  Once a fiduciary duty is properly allocated, the original fiduciary can be held liable for a breach of that duty only through ERISA’s rules on liability between co-fiduciaries (or through his own breach in imprudently selecting or failing to monitor the designated fiduciary). Under these rules, one is liable for the actions of a co-fiduciary only if he knowingly participates in or conceals the co-fiduciary’s breach, enables the co-fiduciary’s breach through his own breach of fiduciary duties of prudence and diligence, or has knowledge of the co-fiduciary’s breach and makes no effort to cure the breach. 29 U.S. Code § 1105(a).

Once an examination of an entity’s activities in relation to the plan is complete, the next question is of course what to do about this liability.  An option is to identify activities which subject your company to fiduciary liability and manage this liability by delegating them out to another party as discussed above, making sure to follow proper plan procedure in doing so.  Another option is to acknowledge this responsibility and ensure adequate protections are in place, via various forms of insurance policies. It is important to note that the “fidelity bond” required by ERISA will not protect a fiduciary from personal liability.  This bond, required for any person who handles plan funds, is in place to protect the plan in the event of dishonest conduct which damages the plan.  It will not help the responsible party in the event of a breach.

No matter which course of action is undertaken, a thorough understanding of one’s responsibilities and liabilities in any given situation gives crucial insight into the true value of the services being provided.  There is a good reason agreements which openly assume fiduciary status and liability come with higher fees than those which disclaim such status.  If the activities to be performed under an agreement will subject one to fiduciary liability regardless of contract language, why not assume that liability in the agreement?  If assuming additional liability in the agreement, this risk and its potential costs should be taken into account in calculating the TPA’s fee.  Additionally, an entity armed with this knowledge is better equipped to assess the extent of the liability it truly wishes to take on.

 

Never More Important …

By:  Ron E. Peck, Esq.

Sr. VP & General Counsel

The Phia Group, LLC

As employers begin to seriously consider self-funding for providing health benefits to their employees, figuring out how to contain costs is a balancing act we must all master.

Before the Patient Protection and Affordable Care Act (PPACA) was implemented, carriers and employers knew there would be costs involved.  In the wake of these new expenses, many employers’ knee jerk reaction was to analyze the “Pay or Play” mandate, and realize that the penalties for not offering coverage was less than the cost they’d incur maintaining their policies.  Many savvy employers and brokers, however, learned about the benefits of self-funding.  No wonder that we saw growth in self-funding in Massachusetts following the passage of “RomneyCare,” and similar self-funded growth nationwide following the passage of “ObamaCare.”

As employers with healthy, low risk lives, chose to self-fund; so too did employers with high risk lives take advantage of the health insurance exchanges.  Paying a relatively small penalty to send costly employees to the exchange is an enticing option.  As this influx of costly lives flooded the exchanges, the hope had been that healthy lives would join them, balancing the risk.  Sadly for supporters of PPACA, the healthy lives remained (or became) self-funded.  Seeing this disaster as a risk to PPACA, many have joined forces with state insurance commissioners and the NAIC to make self-funding less attractive for otherwise healthy employee groups.  Due to the federal preemption created by the Employee Retirement Income Security Act of 1974 (“ERISA”), they have been unable to attack self-funded plans directly.  Instead, they have restricted the ability of stop-loss insurance carriers to offer protection to self-funded plans.  Without being able to secure stop-loss with a reasonable deductible, many employers who were interested in self-funding cannot accept the kind of increased risk they are now being asked to bear.  Only if the costs can be contained, can the risks inherent in a “higher deductible” stop-loss policy be deemed acceptable.

Some believed that by giving “everyone” insurance, the amount charged for medical care would decrease.  Once the number of patients with deep pockets increased, however, so too did prices.  Changing “who” pays had no effect upon “how much” is paid.

Six years following the passage of RomneyCare in Massachusetts, a so-called “cost control” or “Health Reform 2.0” law was passed; (the legal name is Chapter 224 of the Acts of 2012).  The bill sets annual spending targets, encourages the formation of accountable care organizations, and establishes a commission to oversee provider performance.

We can hope that we see such change at a federal level, but in the meantime, it falls upon us to identify ways to contain costs, and keep self-funding viable.  Health plans must renew their focus on such “classic” cost containment measures as:

– Subrogation & Recoupment of Funds from Liable Third Parties

– Overpayment Identification and Recovery

– Eligibility Audits & Fraud Detection

 

In addition, now is the time to consider “new” cost containment methods, such as:

– Revisiting How Out of Network Claims are Priced

– Revisiting How The Plan’s Network is Structured, and Negotiating Better Deals in Exchange for Steerage

– Carving Out High Cost Procedures, and Negotiating for Their Payment on a Case-by-Case Basis

– Focusing on Preventative Care, Wellness, and Other Low Cost / High Reward Benefits

 

By focusing on cost-containment, employers can take steps to reduce the risk they face, making the attack against stop-loss and self-funding less impactful upon our ability to self-fund.

 

UPDATE:  SCOTUS Denies CERT in the 2nd Circuit … Now What?

            By Christopher M. Aguiar, Esq.

A few months ago, the 2nd Circuit took it upon itself in the case of Wurtz v. Rawlings to throw a bit of a wrench in the ability of a benefit plan to remove a law suit brought to enforce anti-subrogation laws to federal court.  Industry pundits advocated for the Supreme Court of the United States to once again step in and resolve a pre-emption dispute relating to subrogation for an almost unprecedented 4th time in 15 years.

Unfortunately, this time it was not to be.  Just last week the Supreme Court denied an application to hear the case and now leaves a bit of a dispute in the law; essentially, the standard for removal to federal court is different in the 2nd Circuit than in almost any other federal jurisdiction in the country.  Self funded benefit plans can take solace in the fact that it seems the 2nd Circuit case does not apply to them, but plaintiff lawyers in the pertinent states are doing a great job at ignoring the part of the case that excepts those plans from this rule, so those handling subrogation claims in the 2nd Circuit must be prepared for a bit of a war to ensure their ability to preempt state law anti-subrogation laws continues unfettered.

"To Be Or Not To Be"... A Fiduciary - Do You Even Have A Choice?

Being a fiduciary is serious business. Determining whether you are one can also be very complicated. Case law increasingly establishes that being a fiduciary has more to do with the action one takes, than the contract one signs. Entities working on behalf of self-funded benefit plans may be unknowingly taking on fiduciary status. Are you a fiduciary? What are the advantages and disadvantages of taking on that burden? What can you do to protect yourself?

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SIIA State Legislative/Regulatory Update Report
March 16, 2015 — This is your weekly update of state legislative/regulatory developments affecting companies involved in the self-insurance/alternative risk transfer marketplace. Should you have any questions on information provided in these reports and/or would like to alert SIIA to new state legislative/regulatory activity (health care, workers’ compensation and/or captive insurance matters) we may have missed, please contact Adam Brackemyre, Director of State Government Relations directly at 202/595-0641, or via e-mail at abrackemyre@siia.org.

Maryland- Stop Loss Bill Amendments Proposed

In the face of stiff opposition by SIIA and allied stakeholders, the principal backers of HB 552/SB 703 proposed significant changes to the legislation, including lower attachment points and a study of several issues.

The drafted amendments would decrease the proposed minimum individual attachment point to $22,500 and minimum aggregate attachment point to 120 percent. In addition, Maryland would establish a study committee to review various issues relating to the stop loss and the Affordable Care Act (ACA) including how many businesses would be affected by the ACA’s “small group” definition change and how other states regulate stop loss insurance. The study would require two reports, one due in 2015 and a second due in 2016.

SIIA and its allies have received the proposed amendments and are discussing a unified response.

Contact SIIA’s Director of State Government Relations, Adam Brackemyre at abrackemyre@siia.org if you have additional questions.

New Mexico- Stop Loss Bulletin Rescinded
Last Tuesday, the New Mexico Department of Insurance rescinded Bulletin 2015-005 by issuing Bulletin 2015-010. As previously reported, Bulletin 2015-005 required all new and renewing stop loss contracts to meet the ACA health insurance standards and, according to SIIA members, had frozen the stop loss market and created chaos in the insurance market.

Sources in Santa Fe report that the department of insurance heard opposition from numerous angles, both public and private. Legislators heard significant opposition from constituents and expressed concern to the department. One influential insurance committee legislator had multiple conversations with the superintendent, as did a former insurance superintendent. Major employers, including a major public university that has a self-insured health plan with stop loss, also faced the loss of their current insurance plan and expressed opposition.

The newest insurance bulletin will establish a study committee for the issue and SIIA will watch for its formation and any opportunity to engage.

New York State- Albany Day on the Hill
Last week, SIIA hosted a successful lobby day, which included participation by about 20 representatives of association members and other allied stakeholders.

Individuals representing the following companies participated:
Aetna
AIG
Cigna
CoreSource
Diversified Group
ELMC Group
Guardian
H.H.C. Group
Leading Edge Administrators
UltraBenefits, Inc.
UnitedHealth/Optum
WellNet

At breakfast, Senator James Seward, the sponsor of S.2366 said that the legislation will be heard in his committee very soon. In reviewing the Senate Insurance Committee’s schedule, S.2366 is on the calendar for today.

Assembly Insurance Chair Kevin Cahill’s breakfast comments were more vague and nuanced, reflecting the reality that the chairman must consult with many Assembly stakeholders to advance legislation in that body. SIIA already knew this and scheduled 21 targeted meetings, primarily with Assembly Democrats, to garner support for Chairman Cahill’s legislation, A.1154.

Departing to the capitol, SIIA members split into three teams to cover meetings with nearly all Assembly Democrats on the Insurance Committee, Assembly and Senate leadership and the New York State exchange. In general, meetings went very well. Most Assembly Members were supportive and some even promised to co-sponsor the legislation. SIIA’s lobbyist will be following up with co-sponsorship requests and with offices where SIIA members met with staff members.

From all indications, this was a very productive day and we took necessary steps to advance the legislation in the New York State Assembly. SIIA will carefully assess the next steps we need to take, which may include another round of meetings in Albany. At this time, the need for another large Lobby Day is unlikely.

To SIIA’s knowledge, only one regional insurance carrier has expressed opposition to A.1154/S.2366 and it was apparent in meetings with Assembly Insurance Committee members that SIIA was the only group to have brought A.1154 and the stop loss ban to the legislator’s or staff’s attention.

Again, a big “thank you” to everyone who attended the day in Albany and to the many others who either facilitated a colleague’s attendance or whose schedule changed at the last minute and precluded his or her attendance.

Florida- Stop-Loss Legislation Update
Legislation moving through a House committee has some odd language that may preclude lasering.

SIIA has been monitoring the progress of House Bill 731, which at first appeared to codify Florida regulation requiring a $20,000 minimum individual attachment point and other elements of the NAIC Model Stop Loss Act. However, the substitute bill added this language “A stop-loss insurance policy authorized under this section must cover 100 percent of all claims equal to or above the attachment point…”

SIIA does not believe the intent of the bill sponsor is to preclude lasering and will work with members and allies to address this.

Utah- Technical Corrections Legislation Affecting Stop Loss Advances
Utah House Bill (HB) 24 is swiftly moving toward passage.

As previously reported, HB 24 contains Department of Insurance (DOI)-supported language, developed in part by conversation that DOI staff had with SIIA members, deleting a mandatory stop loss universal application and clarifying stop loss carrier liability if a plan sponsor terminates.

SIIA expects this legislation will be sent to the Governor’s office soon

Pushback & Counter-Attack
Pushback & Counter-Attack

Pushback & Counter-Attack – How attorneys, providers, and the government are combating your efforts to contain costs… and what you should be doing about it!!!!

ERISA has been a target of scrutiny since its passage. Rights to subrogation, coordination of benefits, audit claims and enforce plan provisions – though pillars of cost containment – are constantly attacked. Attempts to prudently manage plan assets, though required by federal law, are met with pushback at every level. Now, with the passage of PPACA, old and new methods to maximize plan benefits and minimize costs are challenged. Join The Phia Group’s team of attorneys on Thursday, February 12th at 1PM as they discuss the hurdles we face, both old and new; and what we can do to not only survive, but thrive in the face of such adversity.

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Anthem Data Breach Implications for Employers
By Chris Rylands & Carrie Byrnes

As has now been widely reported, Anthem, Inc. was the unfortunate target of a cyber-attack potentially impacting 80 million current and former customers. Some reports have indicated that the HIPAA breach notification rules will not apply to this breach. However, the information stolen appears to include individually identifiable information, potentially including health plan enrollment information. Enrollment information, in the hands of a health plan, is protected health information (PHI), so it is possible that the HIPAA data breach notification rules are applicable. As such, both insured and self-funded customers utilizing Anthem as their TPA should review information concerning the Anthem breach carefully before concluding that the HIPAA breach notification rules do not apply.


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IMPLANT WARS!
IMPLANT WARS!

IMPLANT WARS: How monitoring provider self-referrals, & negotiating based on actual costs can result in major plan savings!

Those who fail to identify ways to separate themselves from the pack through new, innovative cost containment processes will be left behind. Yet, even the most diligent administrator feels powerless in the face of excessive costs, finding it nearly impossible to negotiate claims with providers, or apply reasonable and appropriate pricing. Thriving requires tackling you plans’ biggest cost drivers; but how can you carve out, monitor, and negotiate “the big claims?” Kick-off the new year by joining The Phia Group’s CEO, Adam V. Russo and his legal team, as they discuss this important topic and introduce you to their newest offering; Implant Cost Pro! This is a webinar not to be missed.

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Federal Court Keeps TPA As Third-Party Defendant in Suit Between Stop Loss Carrier and Group
MyHealthGuide Source: Thomas A. Croft, Esq., 1/10/2015, StopLossLaw.com Article

Case: Unimerica Insurance Company v. GA Food Services, Inc., et al., No. 8:14-cv-2419-T-33TBM, In the United States District Court for the Middle District of Florida, Tampa Division, December 10, 2014) Court Ruling

This case is a federal civil procedure professor’s dream. One can easily imagine it as a part of a first-year law student’s final exam. I discuss it because the backdrop for all the procedural issues is a stop loss dispute between a carrier and a group and its TPA, and it illustrates just how convoluted things can become in such controversies. I will do my best to keep things simple.


Case Background

Our story begins in Minnesota, where the carrier filed suit against the group (“GA Food”) to obtain a refund of a portion of claims paid respecting a Plan beneficiary with end stage renal disease in the amount of $248,887. After paying the claim, it was learned that the individual became eligible for Medicare and lost coverage under the Plan during the time the claims were incurred (according to the carrier), resulting in a refund due for the amount the carrier had paid. After learning of the Medicare issue, the carrier applied an offset to another claim, leaving a net amount of refund alleged to be due of $129,655.

TThe carrier, a Wisconsin corporation, sued in federal court in Minnesota, where it had its principal place of business. There was federal jurisdiction in Minnesota because of “diversity,” in that GA Food was a Florida corporation with its principal place of business in St. Petersburg, Florida.
• [Note: for there to be subject matter jurisdiction in federal court for a case based on state law, the dispute must involve a certain minimum amount and be between citizens of different states. Corporations are deemed to be citizens of both their state of incorporation and the state where their principal place of business exists.]
GA Food filed a motion to transfer the case to federal court in the Middle District of Florida. One federal court may transfer a case to another federal court under a federal statute, 28 U.S. C. §1404, to any other federal district “where it might have been brought” for “the convenience of parties and witnesses,” even over the objection of one the parties. The Minnesota Court found that a transfer to the Middle District of Florida would serve the interests of justice, noting that the case involved a coverage dispute involving a Florida corporation and a Florida employee under a stop loss policy issued under Florida law. The Court also noted that the TPA (not yet a party to the case in any way nor yet asked by either existing party to be added as a party to the case) was BCBSF–a Florida corporation based in Jacksonville, Florida, and that non-party witnesses (presumably from BCBSF) were located there. Finally, the Court noted that the substantive law of Florida would likely apply to the dispute (probably due to a Florida choice of law provision in the stop loss policy).

Accordingly, the Minnesota Court sent the case to the Middle District of Florida, but did not specify to which division of that District it should go.
• [Many federal districts have “divisions” established by statute, which require that cases arising in specified counties be tried in the division encompassing that county].
TPA Added as Third Party Defendant
This case landed in the Jacksonville division. On its own motion, the Jacksonville federal court noted in an order that “no relevant conduct between the two current parties [i.e., Unimerica and GA Foods] is alleged to have occurred in the Jacksonville Division.” The Jacksonville Court noted that GA Food’s principal place of business was in St. Petersburg–a part of the Tampa Division–and that “the only reference made to the Jacksonville Division is in contracts between [GA Foods] and businesses not party to this case [i.e., BCBSF]. Ultimately, the case was transferred to the Tampa Division, but not before GA Foods filed a motion to add BCBSF as a third-party defendant. The motion was not decided before the transfer to the Tampa Division, however.
• The apparent theory of the motion to add BCBSF was that it was liable to GA Foods in the event that GA Foods was ultimately found liable to Unimerica for the refund, allegedly because it either breached its Administrative Agreement with GA Foods in paying the claim in the first place, or negligently did so. The Tampa federal court granted permission for GA Foods to file its third-party complaint, and then BCBSF moved to dismiss it on several grounds.
First, BCBSF contended that it was not properly added under Federal Rule of Civil Procedure 14(a), which governs third-party actions, arguing that this dispute was between a stop loss carrier and an insured under a policy to which BCBSF was not a party, and, accordingly, it could not be liable under that policy for any refunds and was improperly added to the case under Rule 14. Further, BCBSF argued that the Court should not exercise jurisdiction over GA Foods’ claim due to “exceptional circumstances” and “compelling reasons” for declining jurisdiction under 28 U.S.C. § 1367(c)(4).

The nuances of Rule 14(a) and Section 1367 are the subject of a great deal of case law and scholarly jurisprudence, and are well beyond the scope of the instant article. However, in brief, the Tampa Court concluded that, because the stop loss policy and the Administrative Agreement between GA Foods and BCBSF both incorporated the Plan Document, the parties were sufficiently “inextricably intertwined” such that the requisites of Rule 14(a) were satisfied.

Under Section 1367, a federal court can decline to exercise jurisdiction over a third-party claim for a “compelling reason,” as BCBSF argued it should in this case. Here, that reason was that there was a provision in the Administrative Agreement between GA Foods and BCBSF that stated that “all actions or proceedings instituted by [GA Foods] or [BCBSF] hereunder shall be brought in a court of competent jurisdiction in Duval County, Florida.” Ironically, Duval County is the county seat of Jacksonville, Florida, whence this case came.

Here is where the analysis gets somewhat dicey. The Tampa Court concluded that the clause quoted above (“the forum selection clause”) did not apply for three reasons.
• First, the Court observed that the forum selection clause did not literally apply because neither GA Foods nor BCBSF “instituted the action”–Unimerica did.
• Second, the Court noted that GA Foods had in fact filed its motion to add BCBSF while the case was still before the Jacksonville Division of the Court, such that the “third-party proceedings” were initiated there, notwithstanding that GA Foods motion to add BCBSF was not granted until after the case had been transferred to the Tampa Division.
• Third, the Tampa Court concluded that it was not clear that the forum selection clause applied to “third-party actions being brought supplementary to already initiated proceedings,” as here.
Lastly, BCBSF challenged the third-party complaint on the grounds that it failed to state a claim upon which relief could be granted under Federal Rule of Civil Procedure 12(b)(6). In other words, BCBSF argued that an exculpatory provision in the Administrative Agreement operated to relieve it of any possible liability to GA Foods, even if all the other factual allegations in the third-party complaint were true. The Court determined that its interpretation of this exculpatory provision at this stage of the proceedings would be premature, and denied the BCBSF’s Rule 12(b)(6) motion.

So that, boys and girls, is how a Minnesota case ended up in Tampa. And the merits of the case have not yet even begun to be addressed.

About the Author

Thomas A Croft is a magna cum laude graduate of Duke University (1976) and an honors graduate of Duke University School of Law (1979), where he earned membership in the Order of the Coif, reserved for graduates in the top 10% of their class. He returned to Duke Law in 1980 as Lecturer and Assistant Dean (1980-1982) and as Senior Lecturer and Associate Dean for Administration (1982-1984). He also taught at the University of Arkansas-Little Rock law school, where he was an Associate Professor of Law (1990-91), earning teacher of the year honors.

Until 2004, when he specialized in medical stop loss litigation and consulting, Tom practiced general commercial litigation. He was a partner in the litigation section of a major Houston firm in the late 1980s, and moved to the Atlanta area in 1991. He has been honored as a Georgia “Super-Lawyer” by Atlanta Magazine for the last eight years running, and holds an AV® Preeminent rating from Martindale-Hubble®.

Tom currently consults extensively on medical stop loss claims and related issues, as well as with respect to HMO Excess Reinsurance, Medical Excess of Loss Reinsurance, and Provider Excess Loss Insurance. He maintains an extensive website analyzing more than one hundred cases and containing more than fifty articles published in the Self-Insurer Magazine over many years. See www.stoplosslaw.com. He regularly represents and negotiates on behalf of stop loss carriers, MGUs, Brokers, TPAs, and Employer Groups informally, as well as in litigated and arbitrated proceedings, and has mediated as an advocate in many stop-loss related mediations. Tom can be reached at tac@xsloss.com.

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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4th Quarter 2015 Newsletter – Phia News
New Faces at Phia

• Joseph Huddleston – Claims Support

• Alex Theberge – Office Management Assistant

Movers & Shakers!!!!

• Christopher M. Aguiar – Now licensed to practice law

• Sean N. Donnelly – Now licensed to practice law

• Jen Marsh – Customer Service Manager

• Christine Sands – Team Leader, Claims & Case Support

• Ashley Schramm – Advanced to CRS IV and now handles worker’s compensation cases

• Jason Kemp – Transition to CRS IV handling Bodily Injury Cases

• Danielle Bates – Transitioned from Assistant to Case Investigator

• Amanda Grogan – Advanced to Claims Recovery Specialist II

• Nick Murphy – Advanced to Manager, Claim Analysis

• Mike Mears – Advanced to Senior Claims Analyst

• Jason Thibodeaux – Advanced to Senior Claims Analyst

• Todd Geiger – Joined Claims Analysis as a Senior Claim Auditor

• Lisa Tamulynas – Moved from Recovery Department to Phia Group Consulting

• Tumi Gugushe – Transition to Legal Assistant

Phia Gives Back in 2014

JFS of Metrowest – Christmas came early for this bunch of great kids at JFS, to whom The Phia Group dedicated a year of service and support!!!

The 2015 Charity is …Susan J. Komen of Massachusettes – The Komen Promise

The Komen Promise– To save lives and end breast cancer forever by empowering people, ensuring quality care, and energizing science to find the cures.

For more information visit www.komenmass.org/site/c.6oIEJTPxGcISF/b.7453505/k.BDD2/Home.htm

Additions to the Phamily

Danasha Reddick’s New Baby … Dariyah
Elizabeth Welcome’s New Baby … Ryliegh