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A Little 2017 Holiday Cheer… Subrogation Style!

By: Chris Aguiar, Esq.

On the heels of the NASP conference in Austin, Texas I felt it appropriate to bring along some Holiday Cheer after a questionable 2016.  Everything in the subrogation world in 2016 was viewed through the prism of the Montanile decision where the Supreme Court ruled the a plan who allowed its participant to obtain a settlement fund and not do enough to enforce its reimbursement right could be held without a remedy if the participant spent the settlement funds on non-traceable assets.  After 15 years of decisions favoring benefit plans, Montanile seemed like a little bit of coal under the tree, and some worried that it signaled a shift that might lead to more scrutiny on benefit plans and burdens being shifted onto benefit plans in order to enforce their rights.  I’m happy to report this Holiday season that those fears may have been premature.

I just returned from Austin, Texas where the Country’s best and brightest subrogation attorneys converged at the NASP Conference to chat about the year in subrogation and I can tell you that 2017 has given us a fair amount to be thankful for and hope that the tide has not turned as courts continue to render decisions that are favorable to benefit plans.  For example, in Mull v. Motion Picture Indus. Health Plan, 2017 U.S. App. LEXIS 13949, the 9th Circuit joined the 5th, 6th, & 11th Circuits in deciding that a recovery provision referenced only in an SPD can be enforceable when the SPD is adopted as all or part of the plan.

There also appears to be some positivity surfacing in the courts for MAO’s and their ability to enforce the same rights and obligations upon Medicare recipients as traditional Medicare.  Courts historically held that MAOs did not have an implied federal right of action to sue primary payers in Federal Court.  Over the past year, however, courts have ruled that there is indeed a right of action and that, much like with traditional Medicare, there can be severe penalties levied against parties who do not comply with the requirements of reimbursement under the Medicare Secondary Payer Act, such as treble damages as well as fines of $1,000.00 a day for a carrier’s failure to report.

So, don’t let Montanile and 2016 get you down.  There are several strategies that can be utilized to both ensure that a plan participant  and/or their attorney will cooperate with a plan’s right of reimbursement, and in the event that funds do get disbursed – that isn’t the end of the analysis.  And as is often the case with the law, if you wait long enough the law changes.  The important thing is to make sure you have the resources to stay abreast of all the changes and strategies to maximize recoveries.

Now enough about subrogation … let’s go get ready to spread some actual Holiday Cheer ….. a Merry Christmas and  Happy Holidays to all!

Not all Illegal Act Exclusions are Created Equal

By: Kelly Dempsey, Esq.

The drug addiction crisis in many parts of the United States is a reoccurring news headline, so it’s no secret that the prevalence of medical claims related to driving while under the influence of drugs and/or alcohol also appears to be on the rise. Illegal acts and illegal drugs exclusions are prevalent in self-funded plan documents, but the million dollar question is does the wording in the plan document align with the plan’s intent?

There are many different versions of illegal acts exclusions – some include references to misdemeanors or felonies, while others refer to acts that are punishable by any period of incarceration. The first step to ensuring the plan language meets the needs of the employer is to determine what types of acts the employer intends to include in the illegal acts exclusion. This doesn’t mean the plan needs to specifically list examples of illegal acts but instead use broader descriptions. For example, a plan could exclude felonies and misdemeanors, but not civil infractions or minor traffic violations. Unfortunately illegal acts exclusions can be a bit more complex because of variations in state law so it’s important that employers keep this in mind. It’s of the utmost importance that the plan creates an exclusion that outlines the employer’s intentions and motivations for what should be considered excluded under their illegal acts exclusion.

The plan administrator of a self-funded plan will always retain discretionary authority to interpret the terms of the plan document. While self-funded plans have broad discretionary authority as a fiduciary, the plans must ensure this discretion is utilized in a uniform and consistent manner.  For example, a self-funded plan cannot be discriminatory with claim payment (i.e. deny claims for Sally who is in a DUI, but pay claims for Joe who was in a DUI). However, in order to avoid a breach of that fiduciary duty in use of their discretion, the plan administrator must not act in an arbitrary or capricious fashion.  As we’ve seen in the recent Macy’s court case, it’s important to align plan language with how the claims are administered – so the plan will also need to ensure that the third party claims administrator can process claims in a manner that aligns with the plan’s intent.

As with all exclusions, illegal acts exclusions must be reviewed on a case by case basis to determine their applicability. The key factors are generally a combination of the facts of the specific situation, how the exclusion is worded, and applicable state law and/or guidance. Ultimately, the plan will be using its discretionary authority when determining whether or not to exclude coverage.

Empowering Plans Segment 22 - The Biggest Threats to Self-Funding: A Lightning Round
In this episode, The Phia Group’s CEO, Adam Russo, Sr. VP, Ron Peck, and Attorney Brady Bizarro discuss the biggest threats to the self-funded industry. From expanded fiduciary liability to stop-loss denials to a real threat to the ACA’s individual mandate, our experts give their thoughts in a fast-paced discussion.

Click here to check out the podcast!   (Make sure you subscribe to our YouTube and iTunes Channels!)

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?

Living in the Now: Prepare for 2018


A new year is approaching, and we are in the middle of renewal season; meaning it’s time for some serious preparation. Making sure your clients are cared for is no easy task; are you prepared to protect your plans, save them money, and grow your own business in 2018?

Join The Phia Group’s legal team discuss where the market is heading and what you need to do to keep up with it.

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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.

Montana SB44 and State Efforts to…Do What, Exactly?
By: Jon Jablon, Esq.

A few months ago, Montana passed SB44, which created a new part of the Montana Code Annotated (the MCA). The new provisions have been added because, according to the legislature’s statement of purpose, “in many cases the high charges assessed by out-of-network air ambulance services and limited insurer and health plan reimbursements have resulted in Montanans incurring excessive out-of-pocket expenses….” For once, I don’t disagree with a state law’s purpose. Unlike many other states’ laws, which justify themselves as correcting health plan coverage deficiencies, this law exists because of high provider charges, and the legislature acknowledged that, at least to some extent. The “limited insurer and health plan reimbursements” is a byproduct of high provider charges, rather than a separate problem; it’s a problem created by the medical provider who have gouged payers for decades.

To start, note that it is likely that ERISA will preempt this law as it relates to self-funded health plans governed solely by ERISA, since the primary purpose of this law is to determine reimbursement by a health plan to a medical provider. Courts have consistently interpreted ERISA as preempting state laws purporting to change the allocation of risk between the insurer and the insured, and this apparently does exactly that by dictating what the insurer must pay. Seems like a textbook candidate for preemption.

According to the “Hold Harmless” section of the law (MCA 33-2-2302), a health plan is required to tender payment to an air ambulance provider within 30 days of claim receipt based on either (i) billed charges, (ii) a negotiated rate with the provider, or (iii) the median amount the insurer or health plan would pay to an in-network air ambulance service for the services performed.

The law goes on to provide for dispute resolution, which applies after payment is made, and if a party disputes the other party’s contention of whether any further payment obligation exists. This is potentially troublesome because it does not say that the parties can engage in dispute resolution right off the bat if either party disputes the reimbursement allegedly due; this implies that payment must first be made, and then the parties can engage in dispute resolution. Needless to say, that’s not ideal for a health plan.

The dispute resolution provisions start out on a high note (the procedure outlined in the law “is to be used to determine the fair market price of the services”). Then there’s another very sensible provision (“[p]ayment of the fair market price calculated pursuant to 33-2-2305 constitutes payment in full of the claim”). Those factors include fees usually charged and accepted as payment in full by the provider and other providers, Medicare rates, the context of the flight, and crew qualifications. This is all looking good!

But then it takes a turn.

The very next provision, referring specifically to dispute resolution, says “[a] determination under this section is not binding on the insurer or health plan and the air ambulance service.”

I am dumbfounded. That’s as anticlimactic a statement as any law can contain. The legislature’s inclusion of that last bit undermines the entire provision; once you find out that it’s not binding, you can basically just stop reading and forget what you read. It’s like reading something purporting to be a “true story” and then at the end there’s a disclaimer saying “none of this actually happened.” Not good.

So, then, where do we stand regarding payment amounts due to out-of-network air ambulance providers in Montana based on this law? It’s hard to know. Payment is apparently required to be made within 30 days, and then it can be challenged (with non-binding dispute resolution…?) – but if a health plan is first required to tender payment based on either billed charges, a negotiated rate, or the median network rate accessed by the plan, then it seems that this law is going to do more harm than good.
I wonder if Montana’s penal code is non-binding, too?

Empowering Plans Segment 21 - Planning for Stormy Seas Ahead
In this episode, Adam, Ron, and their guest star – VP of Consulting Jennifer McCormick, Esq. – discuss all of the many issues creating waves as it relates to benefit plan documents, and what steps we can all take to safely navigate those waters – including setting sail on The Phia Group Flagship Template!

Click here to check out the podcast!   (Make sure you subscribe to our YouTube and iTunes Channels!)

Phia Undercover: Two Chargemasters at Addiction Centers
At Phia we sincerely try to be reasonable in all our provider settlements, but every once in a while we have problems achieving our goals.  A few weeks ago, we received claims with four different addiction centers, using the same biller.  This biller was billing $4,500.00 per day for detox, $1,200.00 for labs – the works.  We were asking for reasonable per diem rates which we typically get without too much hassle; they offered 10%, and then 20% and then 50% (which was still ridiculous).

They kept telling us all the other agreements they had with large PPOs or other “big” cost-containment vendors were for 50% discounts – so what was our problem, why were we asking for a greater discount?
Because that is the Phia way and discounts mean nothing!  We tried nearly everything to break through:

•    We sent them the plan document language and had an attorney argue the merits
•    We blitzed them with objective data
•    Eventually we even tendered conditional payments to try and settle the dispute…which they actually sent back!

Nothing was working, and we were stuck – but necessity is the mother of invention, and so we invented a way to push for a better rate.

I had recently read the book “Scar Tissue” by Anthony Kiedis (lead singer for the Red Hot Chili Peppers).  In his book he describes his struggles with addiction and the costs of treatment…and they were way less than what I was seeing billed, and it occurred to me that Kiedis was paying cash for his treatment (he could certainly afford it). That gave me an idea…

Using pseudonyms and personal email accounts, we emailed each addiction center advising that we were inquiring about the costs for treatment.  To be honest, we intimated that we were personally seeking treatment, which we understand could be seen as in poor taste; please note that I am married to a marriage and family therapist and so I am not insensitive to mental health issues – but diligence for our client was the priority.

We advised that we did not want to use “insurance” but wanted to see the private pay rates instead, which they quoted, and shockingly they were 10-20% of what the insurance rates were, representing 80%-90% discounts off the billed charges.  They have (at least) two completely separate charge masters: one for self-paying individuals, and one for insurance.

Taking off our self-pay beanies and putting our Phia cowboy hats back on, we informed the biller that we were aware of their private pay rates and with that in mind, we strongly urged them to reconsider our offer.
Miracle of miracles, they signed off, and we were able to close the accounts for a fair rate with a signed agreement. A little creativity and some elbow grease can go a long way!