By: Jon Jablon, Esq.
There are hundreds of novel ideas that have permeated the self-funded space over the last couple of decades, many of which have the potential to be very beneficial to self-funded plans. I mention that they have the potential to be beneficial not because it’s lawyerspeak (well, not just because of that), but because I mean exactly that: some programs could be beneficial, but are implemented in such a way that renders them either ineffective, noncompliant, or something in-between.
A perfect example, and one we face nearly every day, is the phenomenon of claim repricing – whether based on Medicare rates, “traditional” U&C, the “black box” approach (the “black box” is where claims are put into one side of the box, and then magically come out the other side with a new price attached), or anything else.
Check out the title of this post. If a rate has been negotiated and the payer has agreed to pay a certain amount, then that is a contract, and has to be adhered to! If a plan is subject to a network agreement but decides to reprice claims at a lower amount than the network rate, the plan can always – always – expect pushback. This is a phenomenon that is certainly not exclusive to this industry; imagine writing a letter to Bank of America, saying “I know I agreed to pay $2,500 per month for my mortgage, but I talked to Quicken and they told me that’s too much – so I’ll give you $1,100 a month instead.” Let me know how that turns out…
But seriously: when we suggest language for health plans to use to contain costs, the second sentence of our suggested definition – second only to a simple sentence that introduces the definition – notes that “The Maximum Allowable Charge will be a negotiated rate, if one exists….” That is designed to account for the fact that many claims (most, in fact) are subject to some sort of contract. Whether a network agreement, or a single-case agreement, or “letter of agreement,” or any other contract under any other name, a given negotiated rate must be paid, or the payor will subject itself to losing the discount, or the very real possibility of a lawsuit.
“But doesn’t the Plan Document control all other documents?” Tricky question. Does it trump the network contract? No. But does it trump all other obligations of the Plan? Yes. That’s why not having accurate plan language can be trouble. Take, for example, the alarmingly common scenario in which the plan owes a PPO rate, but the Plan Document provides that the Plan will pay 150% of Medicare for all claims. The Plan Administrator (the party responsible for compliance with the Plan Document) is required by law to follow the terms of the Plan Document, and pay all claims at 150% of Medicare – but the Plan Sponsor (the party to the network contract) is required by contract to pay the network rate. Since only one amount can be paid, the Plan Sponsor and Plan Administrator (often the same entity!) need to figure out which document will be followed, and which will be ignored.
I won’t bore you with the details of the implications of each choice, suffice it to say that it’s always a good idea to make sure the Plan Document says what the Plan will actually do. If your documents don’t line up, you’ll have all sorts of problems. If the Plan follows the network contract and doesn’t pay claims at the 150% of Medicare stated within the Plan Document, then the Plan Document shouldn’t say that! That is a compliance issue as well as a stop-loss issue.
If you want to be bored with the details of what might happen if a health plan violates its PPO contract or violates its Plan Document, feel free to contact PGCReferral@phiagroup.com. For now, though, I’ll leave you with a quote from Mark Twain: “Better a broken promise than none at all.” (That’s actually really terrible advice. Do not apply that quote in this scenario.)
By: Kelly Dempsey, Esq.
A few weeks ago we reported the two lawsuits that have challenged the contraceptive coverage rule changes issued by the Trump administration. For the purposes of this blog, we will skip a review of the procedural process that allows parties not subject to a lawsuit to appeal an injunction – just note that there is a process that must be followed before a party can intervene.
With that said, an appeal was filed by the Little Sisters of the Poor, Jeanne Jugan Residence (“Little Sisters”) that challenges the preliminary injunction obtained by California and four other states. As a reminder, the injunction blocks the implementation of the interim final rules from October 2017 that broadens the exemptions from the contraceptive mandate. The Little Sisters have also appealed the Pennsylvania case.
At the same time as the appeals from the Little Sisters, the March for Life Education and Defense Fund has also been granted permission to intervene in the California case and has subsequently filed an appeal.
Movement through the courts on these types of cases can be slow, but movement is movement. We will continue to watch these cases as the develop and will further address the implications for self-funded plans when action needs to be taken.
By: Ron Peck, Esq.
I’ve been reading articles about the Amazon / JPMorgan / Berkshire Hathaway foray into healthcare, and how this alliance will likely disrupt the market. The analysts seem to think these powerful entities will “fix” what’s “broken” by collecting data, analyzing the data, and customizing benefits to match user need. Forgive me, but isn’t that already something self-funded employers can do today? Indeed, for decades, the ability to collect usage information, and customize your self-funded plan to meet the specific needs of your population has been a benefit of self-funding. If you’ve not already leveraged this to your advantage, shame on you. You already have the same tools at your disposal that the likes of Amazon tout as what makes them special, and you’ve done nothing with it? Ouch.
Another “advantage” these new players in the market supposedly have is the “power of transparency.” They will publish the prices of medical care, for all to see. Setting aside the legal and contractual hurdles one must overcome to “publish prices,” and ignoring the fact that there IS NO FIXED PRICE to publish, as the amount charged varies from payer to payer, day to day, depending upon the weather and logo on the card… forgetting all of that and pretending that there actually is a readily available fixed fee for services to “reveal,” why (or how) will this change anything? If the consumer of healthcare (the patient) is different than the purchaser of healthcare (the plan or insurance carrier), how will knowing the price change the consumer’s behavior?
If I go to a baseball game, and am paying for beer and hot dogs out of my own pocket – if the prices are “transparent” – I may hesitate to drop $20 on solo cup of watered down “beer?” But… if someone else is paying? Give me the keg! Until the consumer actually benefits or suffers based on their purchasing decisions, transparency – means – nothing.
Wait … strike that. Transparency means something… something BAD. In psychology, we’ve identified a certain human behavior and titled it, “the irrational consumer.” In a nutshell, this behavior is seen when a person purchases a more expensive option for no other reason than it’s more expensive. They believe that the higher price must be associated with higher quality. Additionally, it’s an opportunity to use the purchase as an indicator of status. Thus, even when an “as good” or “better” option is offered for less, people will purchase the less-good/more-expensive option, either to impress people with their ability to spend, and/or because it must be better – it’s more expensive.
Introduce transparency into healthcare (intending to get patients to be better about spending) and you run the risk of seeing irrational consumerism in healthcare. People will ignore indicators of quality, and – (horror) – simply seek care from the most expensive provider.
“Clearly” this isn’t what we intended when we all started singing transparency’s praises. Let’s figure out how to achieve rational pricing in healthcare, and teach consumers what is truly “good” healthcare, before creating plans that force patients to have skin in the game. Then and only then would transparency make sense to me.
By: Patrick Ouellete, Esq.
The Employer Shared Responsibility Provision of the Affordable Care Act (ACA) continues to serve as a polarizing topic among employers and ACA supporters as the Internal Revenue Service (IRS) moves forward with its compliance efforts. Regardless of disposition, however, applicable large employers (ALEs) should take note of IRS enforcement trends to date in 2018.
Employers that have 50 or more full-time equivalent employees must offer coverage that meets minimum value and affordability standards, as defined by the ACA. Those that do not meet these reporting requirements (also called the Employer Mandate) are to be assessed penalties by the IRS.
Each Employer Shared Responsibility Payment (ESRP), or tax penalty, is assessed based on whether an ALE offered minimum essential coverage to at least 95 percent of its full-time employees (and their dependents) and the number of employees who were offered (or not offered) coverage. An ALE member that owes the payment of $2,000 for each full-time employee (after excluding the first 30 full-time employees) would pay $166.67 monthly (i.e. 1/12 of $2,000) per month per full-time employee. The $2,000 amount is indexed for inflation:
The Congressional Budget Office and Joint Committee on Taxation estimated back in 2014 that penalty payments by employers would total $139 billion from 2015 to 2024. It will bear watching whether those numbers come to fruition. The IRS noted in a November 2017 FAQ that non-compliant ALEs would retroactively be assessed employer shared responsibility payments that have accrued dating back to 2015. Following through with its promise, the IRS has already begun to send out IRS Letter 226J notices to employers to notify them of ESRP liabilities relating to ACA information filings for the 2015 tax year. The IRS provided a FAQ to ALE recipients in January 2018 as to how to understand and respond to these letters, which may be a good start for those unfamiliar with Employer Mandate and ESRP regulations.
These recent IRS sample letters and FAQs reinforce the reality that employer responsibilities related to the ACA’s Employer Mandate do not appear to be going away any time soon. ALEs would be wise to have their proverbial documentation ducks in a row in the instance they receive an IRS Letter 226J notice. Employer groups in the self-funded health insurance industry should to stay up to date on IRS announcements to best understand the agency’s enforcement plans. It is incumbent upon these groups to review its applicable Forms 1094-C and 1095-C documentation and have a potential response strategy in place.
By: Kelly Dempsey, Esq.
It is time to hit the pause button one more time on a regulation change. As noted in a prior blog post, the contraceptive coverage requirement for non-grandfathered plans is one of the ACA rules the Trump administration has already modified. The prior accommodation rules that allowed some employers to decline an offer of coverage for contraceptives had a narrow definition of religious entity, while the new rule created an exemption that broadened the scope of employers who could decline to offer contraceptive coverage. Thus the new rules essentially allow any company that is not publically traded the ability to refuse to cover contraceptives on moral or religious grounds. The process for the exemption is also much more relaxed than the accommodation process.
Several states have sued the Trump administration over the rules, including Pennsylvania, California, Washington, and Massachusetts. Several states (Delaware, Maryland, New York and Virginia) have joined California in efforts.
Two of these cases, Pennsylvania and California, have now created a pause in enforcement of the Trump administration’s rules that applies nationwide. On Friday, December 15, a federal court judge in Philadelphia issued an injunction that ordered the Trump administration not to enforce the new rules. The lawsuit alleges that the new rules violate the Firth Amendment (the rules apply to only women) and the First Amendment (the rules place employers’ religious beliefs over the constitutional rights of women). On Thursday, December 21, a federal court judge in California took a slightly different approach and issued an injunction on the basis that the administration failed to include a notice and comment process before implementing the new rules.
It appears the Trump administration is evaluating options on how to proceed – which likely means there will be an appeal.
From a self-funded plan perspective, employers that have obtained an accommodation under the prior rules should seek to maintain that accommodation instead of seeking an exemption under the new rule.
As with any court case, the timeline for resolution is unclear, so employers and TPAs should stay tuned for developments.
By: Jon Jablon, Esq.
When working with air ambulance providers to discuss appropriate pricing, it is common for providers to suggest that Medicare rates are inappropriate due to Medicare’s habitual underpayment air ambulance providers. In this manner, when a payor suggests payment at a percentage of Medicare, many providers demand more, suggesting that the Medicare-based payment is unreasonably low, and therefore payment derived from that is low as well.
In apparent agreement with that thought, The 115th Congress has introduced HR3378. Short-titled the “Ensuring Access to Air Ambulance Services Act of 2017,” this bill is designed primarily to alter the Medicare reimbursement to air ambulance providers. The bill apparently contemplates that air ambulance providers are being underpaid by Medicare, because starting in 2018 the Medicare base rate will increase by 12%, prior to any cost data being reported by those providers. For 2019 and 2020, that increase will jump to 20%. Beginning in 2019, air ambulance providers are required to report a comprehensive set of cost data elements, and beginning in 2020, that reporting includes quality data as well. As of 2024, the bill also creates a “value-based purchasing program,” which entails giving each air ambulance provider a performance score and increasing or decreasing payments based on that. Reported cost data will eventually (2021) be used to recalculate the base rate of air ambulance services.
The bill in its current form specifies that the data disclosures will eventually be made public, which can be useful for self-funded plans to be able to benchmark claims. Often health plans have only the provider’s billed charge and a Medicare rate to work with when determining payment, but if cost data is publicized, that creates new benchmarking possibilities.
So, if this bill passes, what will it mean for you? If Medicare rates are irrelevant to you or your health plans, then this likely means very little for you – but if you or a client are one of the thousands of health plans that consider Medicare rates when determining payment for air ambulance services, then it means your Medicare calculations (and therefore payments to air ambulance providers) will increase a bit for 2018, and a bit more for 2019 and 2020. Come 2021, they may increase or decrease again based on cost data, and come 2024, they may increase or decrease yet again based on performance indicators. In other words: expect higher payments in 2018, another increase for the following two years, and then unpredictable increases or decreases from there.
Although it may seem intuitive to assume that the government’s admission that these providers are underpaid by Medicare will lead to an increase in charges across the board, my assumption is that charges billed to self-funded payors will not increase as a result of this bill, even if it becomes law. Many air ambulance providers already justify their billing by citing operating costs, and this new bill does nothing to change those costs. An air ambulance provider would be hard-pressed to use either the assumptions or effects of this bill to justify increasing charges across the board.
The bill is still in its infancy, so it is likely that if it ultimately becomes law, it will have been changed quite a bit in the process; we’ll just have to wait and see what happens with this one.
By: Brady Bizarro, Esq.
Perhaps the single most important piece of the Affordable Care Act (“ACA”) is its “individual mandate.” It is literally the glue holding all of Obamacare together. Since 2014, every American (with minor exceptions) has been required to obtain health insurance coverage that meets the government’s definition of “minimum essential coverage” or pay a penalty. The latest version of the Senate tax plan, which narrowly passed on December 2nd, eliminates the individual mandate. According to the non-partisan Congressional Budget Office (“CBO”), this will result in thirteen (13) million fewer individuals having health insurance coverage by 2027. Yet, that is only one fraction of the impact eliminating the individual mandate would have on the health insurance market overall. The primary impact would be the unraveling of the health insurance market because of what is known as the “death spiral.”
Recall that the ACA addressed the problem of unaffordability for individuals with preexisting conditions through its “guaranteed-issue” and “community-rating” provisions. Together, they prohibit insurance companies from denying coverage to these individuals or charging them higher premiums based on their health status. These provisions do not address the problem of healthy individuals choosing to forgo coverage until they become sick or in some cases entirely. This is a phenomenon known by health policy experts as “adverse selection,” and, if left unsolved, it inevitably leads to a “death spiral” in which only the sickest people remain in the health insurance market. In fact, the “guaranteed-issue” and “community-rating” provisions make this problem worse, since insurers would be forced to cover these individuals and be barred from charging them higher rates.
The individual mandate solves the problem of the death spiral because it forces healthy people into the insurance risk pool and allows insurers to subsidize the costs of covering sick individuals. Without the mandate, insurance companies may find it exceedingly difficult to make a profit and are very likely to leave the marketplace (especially the individual exchanges which tend to insure the sickest people). The CBO has already estimated that premiums on the marketplaces will increase by at least ten percent (10%) in 2019 if the individual mandate is repealed.
The truth is, no one knows for sure how many young, healthy individuals will drop their health insurance coverage if the mandate is repealed. For employer-sponsored plans, especially self-funded plans which tend to be less expensive than their fully-insured counterparts, it may be that healthy workers keep their coverage as part of their overall benefit packages. Arguably, the bigger risk is to those who purchase individual coverage. As for hospitals and providers, they can expect to provide increased uncompensated emergency room care as at least some of those individuals who voluntarily (or involuntarily) drop their health insurance coverage will inevitably end up in the emergency room to receive medical treatment.
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?