UNRAVELING FAQ #31

Monday, May 2nd, 2016
3:30 PM (EST) to 4:30 PM

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Reference-based pricing is unquestionably a hot topic in the self-funded industry today. So hot, in fact, that the federal government has taken an active interest in it for the third time now; in its latest FAQ, published just last week (FAQs about Affordable Care Act Implementation, Part 31), the regulators reiterate concerns regarding network adequacy and how it relates to – and regulates – reference-based pricing arrangements.

Join us on Monday, May 2, at 3:30pm (EST) as The Phia Group’s legal team and special guest Tim Martin of Payer Compass help unravel the mystery of the DOL’s latest FAQ – and what it means for you and your plans.

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By Zack Pace, Senior Vice President, CBIZ, Inc., Employee Benefit News (Full text) (EBN)

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


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

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

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

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

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

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

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