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Welcome to the Fiduciary Jungle!

By: Ron E. Peck, Esq.

I am tired; so very tired.  Is it my two year old son, waking up in the middle of the night and begging to play with his toy choo choo?  No.  It’s the posts and articles written by individuals such as Dave Chase, and our own Adam Russo, which keep me up.  In particular, it’s their entries discussing fiduciary obligations, and breach of duty.  For some time now, we’ve been hearing about employees suing employers over mismanagement of 401(K) and pension plans.  These fiduciaries are being accused, by the employees of wasting the plan’s (aka their) money on less-than-advisable investments.  From Lorenz v. Safeway, Inc., 241 F. Supp. 3d 1005, 1011 (N.D. Cal. 2017) to McCorvey v. Nordstrom, Inc. filed in the California Central District Court on November 6, 2017, this year has been replete with examples of employees holding fiduciaries’ feet to the fire when it comes to prudently managing plan assets.

In each situation, the fiduciary invests the plan’s money, or uses the plan’s money, to purchase less than stellar investments or excessive fees.  The plaintiffs in these cases have literally said that their plan fiduciary used plan assets to pay one fee to one vendor, when another vendor could have done the same (or better) job for half the price.  Yes – they are talking about 401(K) fund management… but you and I both know that if this same plaintiff (and their attorney) knew self-funded health plans are paying one facility one-thousand-times more to do something that another facility would have done as well for thousands less … that these benefit plans are overpaying claims in error and not seeking to recoup refunds … that these benefit plans are paying claims for which a third party is responsible and are not seeking reimbursement … that these benefit plans are accepting insignificant discounts on inflated provider charges – simply to enjoy the peace and quiet that comes from using a wrap network for out of network claims … if plan beneficiaries (investors) knew about these and other ways their plan fiduciaries waste and abuse plan funds, I’m confident a similar lawsuit would soon follow.

We are all very lucky that the brokers, administrators, and fiduciaries managing 401(K) and pension plans were the first target, as it serves as a warning for those of us in the health benefits arena to shape up and take action now, before it’s too late.  The writing is on the wall; what will you do about it?


MA Contraceptive Reform Update
By: Jen McCormick, Esq.

The continually evolving health care rules and regulations may be unsettling for employers, particularly if they are trying to finalize their 2018 benefit offerings. In addition, this unease may create confusion for employees trying to weigh their options for health care for next year.  Massachusetts women, however, shouldn’t have to worry about whether contraceptives will be available at no cost.

Despite the potential changes and uncertainty that may exist at the federal level, the Massachusetts House passed a bill last week to create clarity for these benefits for women. This bill would ensure that women retain access to no cost birth control, apart from what may happen with ACA.  Note that Massachusetts is not alone in trying to codify contraception requirements, as other states have taken measures to match the federal requirements.

The interesting piece of this Massachusetts reform, however, is that the bill would further expand the ACA requirement by permitting women to access a 12 month supply (after a three month trial), instead of limiting the supply to the typical one to three months at a time.  The Massachusetts House bill will go to the Senate next. Many believe that the bill will proceed with support.  


Massachusetts on Track to Pass a Significant Cost Containment Bill
By: Brady Bizarro, Esq.

Massachusetts, like Phia, is a cost-containment leader and on the front lines of the battle to contain health care costs. Last month, Massachusetts State Senators proposed a comprehensive reform bill focused on health care cost containment, specifically focusing on prescription drug prices and hospital costs. They, along with the Millbank Memorial Fund, spent the past year looking at what other states have done to try and curb health care costs. This bill was addressed last at the state’s Massachusetts Association of Health Plans (“MAHP”) conference by Senate President Stanley Rosenberg (which I attended). The report’s recommendations reveal that the Commonwealth is moving toward adopting many of the cost-containment strategies we already recommend to our clients, including: increasing the use of alternative payment methodologies, encouraging value-based choice, increasing consumer awareness, and mitigating provider price variation.

Unsurprisingly to our industry, the state identified pharmaceutical drug costs as a significant driver of rising health care costs. The bill empowers state agencies to conduct additional oversight of drug manufacturers and pharmacy benefit managers (“PBMs”). Notably, pharmacists would be required to inform consumers if a prescription’s retail price is less than they would pay through insurance, and to charge them the lower price. Drug manufacturers and PBMs are required to report drug pricing information to the state’s Health Policy Commission (HPC).

With regard to reigning in hospital spending, the bill aims to reduce unwarranted price variation among hospitals, out-of-network billing, and hospital readmissions. The state’s idea is to set the benchmark for readmissions at 20% for 2017-2020 and to disincentive out-of-network billing by establishing an upper limit for the non-contracted commercial rate for both emergency and non-emergency out-of-network services.

The Senate is expected to vote on this bill before the holiday recess begins on November 15th. If the bill passes the upper chamber, the debate would move to the Massachusetts House of Representatives, which could make significant changes. We will be monitoring the progress of this legislation.


Usually and Customarily Denied
By: Jon Jablon, Esq.

An increasingly common problem that self-funded plans face is that plans subject to network agreements pay claims correctly and timely and at the negotiated rate, but when the claim is submitted to stop-loss, stop-loss denies a portion of the paid claim as excessive compared to the carrier’s U&C provision.

The first question a plan should ask is whether the carrier was correct in denying the claim. For instance, if the stop-loss policy defines U&C as the prevailing charge in the area, the carrier has limited its ability to reduce the claim except based on the prevailing charge in the area, so the basis for reducing the claim is severely limited.

To contrast, if the stop-loss policy defines U&C as the lesser of the prevailing charge in the area or, say, 150% of Medicare – then the carrier has the right to perhaps reach a lower determination of payability.

This might seem like a question that shouldn’t need to be asked – and we agree! – but there are so many moving parts in the self-funded industry and so many differing interpretations of contracts that it makes sense to cover all possible bases.

No matter who the carrier is, we urge health plans to not make any assumptions about what will or will not be covered. Since many stop-loss policies contain their own definitions of U&C, a health plan should coordinate with its stop-loss carrier as early in the policy year as possible (or even, ideally, prior to signing) to determine how the carrier will treat network payments in terms of U&C.

We urge health plans to learn from others’ mistakes, and make sure all the relevant contracts align before signing them. The questions of how a stop-loss policy defines U&C and how the carrier will treat network rates are important parts of the shopping-around process!

Another One Bites the Dust
By: Brady Bizarro, Esq.
    
It turns out that the reports of Obamacare’s death were greatly exaggerated, at least for the 2017 calendar year. Earlier this week, Senate Republicans scrapped their last-ditch effort to repeal and replace the Affordable Care Act (“ACA”). This time around, the repeal bill, named after its sponsors, Senator Lindsey Graham (R-SC) and Senator Bill Cassidy (R-LA), received a sudden burst of momentum in the past few weeks, mostly due to the September 30th deadline, after which procedural protections expire and Republicans will need sixty (60) votes to pass a healthcare bill.

Like the earlier repeal bills, Graham-Cassidy would not have truly repealed the ACA, but it would have made fundamental changes to it. The centerpiece of this bill was the proposed repurposing of nearly all federal money currently allocated to states for premium tax credits, cost-sharing reductions, and the Medicaid expansion, into a giant block grant distributed to the states. Along with this pinch of federalism, the bill’s sponsors proposed repealing the individual and employer mandates and providing some flexibility to insurers with regard to ACA coverage mandates (provided those insurers offered “adequate” alternative coverage options). In the end, however, this bill ran into the same hurdles that plagued the other repeal bills; moderate Republicans were unwilling to make deep cuts to Medicaid and roll back protections for people with pre-existing conditions, at least not without hearings and regular order.

Now, many political supporters of the President are urging him to turn the page to tax reform, a policy area where Republicans are more unified and perhaps the last opportunity for the Trump Administration to secure a major legislative victory before the end of the year. That does not mean that the GOP is about to abandon the top campaign promise of most Republicans in Congress. We fully expect Republican leaders and the Trump Administration to revisit this issue after they deal with tax reform (possibly after Thanksgiving). Just this week, Senator Graham told reporters that he was optimistic and that it is merely a question of “when,” not “if” repeal was going to happen.

So where does this all leave us? What does this mean for the self-funded industry? It means that for the rest of 2017, Obamacare is staying put. Whether or how strictly the Trump Administration will enforce the ACA remains to be seen. The President has already indicated his intention to sign as many executive orders as he can to ease the regulatory burden of the ACA (his first proposal, to permit states to sell policies across state lines, really only affects the fully-insured market). Meanwhile, HHS, the IRS, and other federal agencies will have to prepare for open enrollment on the exchanges and a new coverage year.


In God We Trust; All Others Pay CASH…I wish…
I love calling a provider before medical services are rendered to settle on financial terms, and I love it when they have a reasonable cash price ready for me – but it’s all too rare to get a reasonable price easily.  Usually, I need to wade through concepts and terminology like “regular rates,” “commercial contracts,” and “networks,” and excuses like “I’ll see what I can do,” “our clients don’t process claims that way,” and plenty more. It never ends.

I want to pay a cash lump-sum for a service you’ve provided hundreds (or thousands) of times, and you really can’t tell me the price?

However, with the steady emergence of more consumers being responsible for paying for their medical care (in the form of higher OOP) and perhaps continued provider frustration, more providers are now offering cash discounts (thanks to transparency pioneers like Surgery Center of Oklahoma). Consider these other examples:

[This clinic] does not accept any third-party payment and makes no apologies for this. In order to keep costs down for the uninsured and the increasing number of patients who have high copays and deductibles, we choose to not assume the massive overhead involved in billing third-party payers. This has the added benefit of eliminating bureaucratic hassles and intrusions into the doctor-patient relationship, ensuring confidentiality of patient information and keeping our typical charges usually between the costs of an oil change and a brake job.1

* * *    

[This health system] offers cash pricing for selected services. Cash-pricing packages must be paid in advance of receiving services. Insurance will not be billed and claim forms will not be provided. If you would like information on cash packages, please call …2  

* * *

Does [this hospital] offer a discount if I self-pay for services? [This hospital] offers a 75 percent discount on eligible services to patients who pay out of pocket for medical services — whether it’s because you don’t have insurance, your insurance doesn’t cover the services, or you’d prefer not to bill through your insurance provider.3

Swedish Health Services may have seen the writing on the wall when they decided to lower their charges for certain outpatient services (bear in mind these are ordinary charges, not cash rates). On their old billing platform, an MRI of the brain was billed at $6,143; the new billing is $1,810 (70% less).

In many ways, cash rates are a type of network unto themselves. Providers are basically saying, “If you can pay cash at the time of service, these are the rates, and they are good. If you want us to bill an insurer, have the claim repriced, pended, denied, re-coded, covered, denied, covered, we will bill you our much maligned chargemaster rates, and the claim will be paid with our equally maligned network rates.”   

We are truly only at the beginning of this trend, and it is difficult to assess how many providers are now offering cash rates and how many are publicizing that fact; offering cash rates can be viewed as a form of direct-to-consumer contracting.

The American Academy of Private Physicians estimates there are about 6,000 physicians in the US who contract directly with their patients without an intermediary. That is roughly 1% of physicians, but this number has reportedly been growing at a rate of 25% per year for the last four years 4, and despite the fact that this is decimal dust compared to the market at large, the trend is likely to continue.

All things considered, we need more providers to step up and post their cash prices for consumers to consider.  The providers who pioneer in this area will be rewarded with business from a large market that is getting increasingly desperate for honesty and transparency.

1 Sean Parnell, “The Self-Pay Patient”, January 2014, pg. 28
2 https://www.uclahealth.org/pages/patients/patient-services/cash-pricing.aspx
3 https://www.elcaminohospital.org/patients-visitors-guide/billing/faq
4 Sara Rosenbaum, “Additional Requirement for Charitable Hospitals: Final Rules on Community Health Needs Assessments and Financial Assistance”, http://healthaffairs.org/blog/2015/01/23/additional-requirements-for-charitable-hospitals-final-rules-on-community-health-needs-assessments-and-financial-assistance/ (January 23, 2015)

Natural Disasters (Hurricanes Harvey and Irma) - Don’t Let Them Wreak Havoc on Your Health Plan

By: Kelly Dempsey, Esq.

The last few weeks have been difficult for several states and U.S. territories.  Hurricanes Harvey and Irma have caused significant flooding and damage.  In addition to the loss of power, many people are homeless and corporations/employers are without a place to conduct business.  Depending on the level of damage, it may take a long time for different areas of the country to rebound and rebuild.  Chances are that employee benefits, specifically the health plan, are the last thing on employers’ and employees’ minds, but there are some very important considerations.  So what do Hurricanes Harvey and Irma mean for employers, employer sponsored health plans, TPAs, and employees?  

Self-funded health plans are required to comply with various federal laws that carry different responsibilities including, but not limited to, ERISA, COBRA, FMLA, HIPAA, and the ACA.  These federal laws come with a wide array of notice requirements and time frames for processing claims and appeals and other requests for documents or information.  As such, the Department of Labor and the Department of Health and Human Services (collectively referred to as “the Departments”) have issued press releases and bulletins that provide general guidance and limit exposure to penalties.  These press releases were specifically issued after Hurricane Harvey; however, it’s likely that additional releases will be issued to address Hurricane Irma.  Below are links to important press releases; however, the following is one of the key summary statements:

The guiding principle for plans must be to act reasonably, prudently and in the interest of the workers and their families who rely on their health plans for their physical and economic well-being. Plan fiduciaries should make reasonable accommodations to prevent the loss of benefits in such cases and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time-frames.

Health plans and their supporting vendors will likely need to review situations on a case by case basis to determine what is reasonable for each plan and employer.

If you’ve listened to any recent Phia Group webinars, presentations or podcasts, or read our blog or published articles, you already know we’ve been focusing on leaves of absence and gaps between handbooks and plan documents.  You’re probably thinking, “Yes, I know, so what’s your point?”  With all the damage to homes and job sites, it is possible employees may seek leaves of absence and/or employees will ask questions about existing leaves of absence and how the leave is impacted if an employer ceases operations.  While FMLA is generally not available for employees to use as time off to attend to personal matters such as cleaning up debris, flood damage, home repair, etc., FMLA may come into play if an employee or their family member suffers a serious health condition as a result of the hurricane.  For those employees that were already out on FMLA, if an employer ceases operations, the time operations are stopped would not count towards FMLA leave.  As always, FMLA and other leave situations should also be reviewed on a case by case basis.   

In summary, the Departments have issued guidance specifically related to Hurricane Harvey; however, we anticipate additional guidance associated with Irma as well.  The bottom line is that employers, health plans, and applicable vendors will need to act reasonably when administering the health plans (i.e., processing claims and appeals, issuing notices such as COBRA notices, etc.) and take into consideration the locations and entities that were impacted and allow grace periods or other relief as applicable.

Important Press Releases and Relevant Guidance:
- U.S. Department of Labor Issues Compliance Guidance For Employee Benefit Plans Impacted by Hurricane Harvey
- Secretary Acosta Joins Vice President Pence in Texas
- FAQs for Participants and Beneficiaries Following Hurricane Harvey
- Hurricane Harvey & HIPAA Bulletin: Limited Waiver of HIPAA Sanctions and Penalties During a Declared Emergency


Hope for Self-funded Plans in Connecticut..
By: Chris Aguiar, Esq.

Subrogation is tough.  Even the best language possible is susceptible to issues like limited funds, or worse, a Plaintiff’s attorney who refuses to acknowledge the realities of the law.  Of course, self-funded benefit plans who find themselves subject to state law, such as government entities, can find themselves in even worse positions when located in certain areas of the Country.  New York, New Jersey, and Pennsylvania, to name a few, are notoriously averse to the rights of benefits plans.  Connecticut was among the worst on that list …until now.  As of October of 2017, the State of Connecticut has enacted an exception to its anti-subrogation law which will give self-funded benefit plans some reprieve.  

Connecticut HB 6221 takes its cue from some of the other anti-subrogation states who have provided an exception to their law for cities, towns, and municipalities; allowing them to take advantage of some more of the cost saving benefits of self-funded plans.  Specifically, it allows self-funded local government entities with a third party interest to seek recovery from judgments or settlements obtained by plan participants.  While this is great news, this change doesn’t come without limitations.  The bill appears to only allow recovery from the part of the judgment or settlement that represents payments for medical, hospital, or prescription expense damages.  This will no doubt entice plan participants and their lawyers to structure settlements in such a way as not to include those damages.  Either way, it gives plans, administrators, and their recovery partners another tool to utilize.


A House Divided
By: Ron E. Peck, Esq.

In the world of self-funding, everyone plays a role.  The broker advises, the employer customizes their plan and funds it, the claims administrator (TPA, ASO, etc.) processes claims, and stop-loss provides financial insurance.  When the lines get blurred or we start asking people to do the jobs of others, we either create new opportunities or destroy the foundation.  It all depends upon whom we’re asking, what we’re asking them to do, and whether they are stepping on any other toes when so doing it.

Consider, for instance, when a benefit plan asks its stop-loss carrier whether they should or shouldn’t pay a claim.  Stop-loss is not health insurance.  It is a form of financial reinsurance.  Health insurance receives medical bills, processes the claims, and pays medical service providers for care rendered to insured individual patients.  Stop-loss allows others to handle the “health insuring,” and instead provides protection to such health benefit plans against debts – incurred by those benefit plans – when payable claims exceed a deductible.  They despise it when a plan asks them whether the plan should pay or deny a claim.  They don’t want to be the fiduciary, or deemed responsible for wrong payment decisions.  They aren’t paid to make such decisions, or incur such exposure.  As such, most stop-loss carriers have traditionally told the plan that they (the carrier) cannot make the call, and that the plan will have to comply to the best of their ability with the plan document.  That, when the claim is submitted for reimbursement to the carrier, only then will they judge the payability.

The problem?  Some carriers want to have their cake and eat it too.  They won’t tell the plan what to pay and what to deny, but they will happily criticize the plan’s decisions after the fact.  Again – let me stress that I’m talking about a minority of carriers.  These very few can ruin the reputation of an entire industry, however, and that is why it is so important to address this growing problem.

With increasing frequency – a lack of communication or presence of conflicting interpretation is resulting in stop-loss and benefit plans disagreeing regarding what is payable, how much is payable, and thus – what is covered by stop-loss.  Even more tragically, the growing number of disputes between plans and stop-loss carriers is leading to an increased number of claims paid by benefit plan sponsors that are not reimbursed by stop-loss, resulting in employers enduring negative experiences with self-funding, financial ruin, and legislative scrutiny.

For instance, a plan document may define the maximum payable rate as “usual and customary,” and define that as being a number calculated by reviewing what most payers pay.  The plan takes that to mean “private payers,” while stop-loss includes Medicare as a “payer” when calculating the payable rate.  Or, perhaps the plan applies usual and customary only to out of network claims – choosing to pay per a PPO network contract whenever possible, but stop-loss interprets the term “maximum payable” to apply to all claims – in and out of network; arguing further that the plan document controls the plan, and stop-loss only insures the plan.

The number of claims I’ve seen independently audited by the carrier, resulting in the carrier chopping away at the amount paid by the plan – in an effort to define what they feel is the “payable” amount – and the resultant conflicts will not benefit the industry.  When a self-funded employer who sponsors a self-funded plan, also uses a PPO (to avoid balance billing of their members), and that plan pays $100,000 in “discounted claims” … they expect stop-loss to pay everything paid beyond the $60,000 deductible; a refund of $40,000.  It is, after all, why they pay for stop-loss, and is something they depend upon to self-fund.  Imagine, then, when the carrier “reprices” the $100,000 using Medicare,  and decides no more than $10,000 should have been paid… well short of the $60,000 deductible.  They may even go so far as to “advise” the plan to ask the provider to refund $90,000 to the plan.

This employer will point a finger at their broker, their TPA, and stop-loss.  Taking the carrier’s advice to heart, and challenging the outrageous provider bills and/or PPO terms is the last thing they are going to do.  The sooner we realize this form of “tough love” doesn’t work, and ultimately only provides fuel for politician’s anti-self-funding rhetoric, the better.

To address this issue, it behooves both the plan (and its TPA) and stop-loss to examine the plan in its entirety during the underwriting process.  What do I mean by “entirety?”  The plan document is not enough.  A plan is more than an “SPD.”  It is also the network contracts, employee handbooks, and any other document or obligation that dictates how the plan will actually be administered.  Only by laying all of those cards on the table ahead of time and agreeing collectively how the plan will be administered in all such circumstances can disputes like the ones I described be addressed before real money is at stake.


Reverse Medical Tourism
By: Jen McCormick, Esq.

On the way home to Boston from a recent international family vacation, I had the pleasure of sitting next to a young gentleman.  He was very friendly and didn’t seem to mind a wiggly toddler so we started to chat.   He told me that he would be in Boston for a month with his father (who was also on the flight), because his father needed medical treatment.  He explained that the services his father needed were not available on the island, and his father’s health insurance would cover a small part of these services via ‘reverse medical tourism.’  The gentleman implied that the family would be covering the balance.  It shouldn’t have come as a surprise that US hospitals are likely enthusiastic to offer services to affluent international patients (maybe because they might pay the hospital at a higher rate than an insurance company).  

During the flight, the gentleman also wanted to know if he could ask me a few questions about where to go in Boston.  Of course I was ready and excited to tell him all the places to visit and see in Boston, but he instead pulled out a list of medical supplies that needed to be purchased (some for the trip and some to bring home).  The gentleman explained that he had been instructed to purchase these basic supplies to avoid having insurance pay for them and/or due to some of these items being difficult to locate (or too expensive) on the island.  

On a daily basis we work to ensure employers are aware of how they can stretch their budgets while still providing comprehensive benefits to their loyal employees.  One popular way is via international medical tourism.  My chat with this gentleman on my short flight home was a reminder that medical tourism works in a variety of ways - US patients are seeking services abroad to obtain services and care at more affordable rates, while at the same time the international patients are seeking services in the US because they can afford to self pay.