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Phia Group Media

The Double-Edged Sword of Discretion: How Even Great Plan Document Language Can Cause Gaps in Coverage
Nearly all Plan Documents have some mention of discretionary authority. The ability to interpret the terms of the plan is necessary to receive deference from the courts, and is needed since not every conceivable scenario can be planned for within the plan document. When it comes to stop-loss, however, open-ended discretion can be a deal-breaker. Particular areas of concern include definitions of Usual and Customary, Medical Necessity, and Experimental/Investigational – and gaps between the Plan Document and the employee handbook are more and more prevalent. When an employer, seeking to exercise blanket discretionary authority, offers to extend coverage to employees on leave, despite the plan document clearly ending coverage well before then, that discretionary authority begins to seem arbitrary and capricious.

Thank you for joining The Phia Group's legal team on April 27, 2017, as they analyzed some of the pros and cons of discretion, what can be done to avoid these difficult situations, and some changes we have made to our own health plan to fix the same issues for our own organization and users of our plan document template.

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Transparency – It’s Not Just for Ghosts

By: Kelly Dempsey, Esq.

If you’re paying any attention to the news these days, you know that the healthcare industry as a whole has been facing some pretty large issues.  In addition to “repeal and replace,” we’re also faced with the skyrocketing cost of healthcare in the United States.  Both topics are focused on money – either loss of money by insurers who are now threatening to leave the Marketplace or the high costs of new drugs that have hit the market, that have the potential to cripple employer health plans.  While both of these are clearly issues that need attention, let’s look at something other than the turmoil in the Marketplace or shiny new things that are also fueling the fire.  

What about the costs of standard medical procedures?  When your doctor says you need a medical procedure and you actually think to ask “how much will this cost,” do you get a straight answer?  In some cases, you might. Maybe you’ll get a ballpark figure. But most of the time, the response will be wishy-washy because the procedure is unique to you and the providers cannot foresee complications that may change the projected cost.  

You may be thinking, “Ya, ya, ya.  I’ve heard this speech about price transparency before.”  In the past I had the same thought, but then I experienced the radical difference in charges for the same service and my view has been forever shifted.  I received the same procedure two years apart, at two different facilities, in two different states.  It’s been quite a while since these procedures happened, but I still think about it often.  

A few years ago (ok, maybe more than a few, but who’s counting), I had flu-like symptoms and also some sharp-shooting pains on both the left and right side of my abdominal area that I just couldn’t shake with extra rest and sleep.  My mom (a nurse) suggested that my issues may have been related to my gallbladder, so I took some over-the-counter medicine and my symptoms disappeared.  But a week later, I was back to where I started despite still taking the medication.  I reluctantly went to the doctor (in northeast Ohio), who said that there were many possibilities, but that it could be appendicitis.  My doctor told me that the last time she had seen someone with sensitivity to the abdominal region (i.e., sensitive to the touch), she didn’t send them for a CT scan, but the end result was appendicitis and emergency surgery was performed.  I didn’t have the classic symptoms of appendicitis, but a CT scan was ordered just to be sure.  I won’t bore you with the details, but the CT scan showed that it was appendicitis and I had a scheduled surgery to remove my appendix.  Weeks later the bills started rolling in, including a bill for the CT scan…$1,900.  I’d never had a CT scan before, so I had no idea what to expect, but $1,900 clearly wasn’t it (and I think this was after the PPO discount).    

Two years later, I found myself feeling under the weather.  I went to the doctor and an ultrasound was ordered.  Of course my appointment was on a Friday and it was a holiday weekend, so I had to wait to get the ultrasound, but I had a trip to Niagara Falls planned and I wasn’t cancelling it.  Unfortunately before I could have the ultrasound done, I woke up early on a Saturday morning with more sharp-shooting pains, but this time more in my side and back.  Being out of state, I didn’t know where else to go except to the emergency room at the hospital in Niagara Falls, New York.  The doctor who saw me took one look at me and said “kidney stone, but we’ll do a CT scan to confirm.”  A few hours later a kidney stone was my official diagnosis.  I spent six hours in the emergency room before I was discharged.  By this time I was working in the industry and dreaded the bills I knew I would be getting.  To my surprise, the bills weren’t nearly as large as I had anticipated.  Of course there were three: the hospital, the ER doctor, and the interpretation of the radiology report, totaling a little over $3,000.  This wasn’t nearly as high as I anticipated.  The hospital bill was itemized, and as I read through it, I stumbled upon the CT scan charge… “$234.”  I thought to myself, “ummmm, excuse me?  That can’t be the only fee for the CT scan.”  I decided that this couldn’t be accurate and waited for another radiology bill to arrive.  No additional bills ever arrived.  

I’m not a medical professional and I’m sure there were differences in the CT scans (maybe the type of machine, etc.), but how could I be charged $1,900 for a CT scan and two years later be charged $234 for a CT scan?  Considering the second procedure was in New York, and Niagara Falls is twice the population than my tiny suburban city outside of Cleveland, Ohio, I was sure the New York charges would be higher, but they weren’t.  The difference in charges for the same (or very similar procedure) is an issue that has stayed with me.  

In doing more research and looking at the figures, it’s amazing to see the variances in the cost-to-charge ratio (i.e., how much a provider charges compared to how much it actually costs them to do a procedure) from provider to provider.  The ACA’s price transparency provision really never got off the ground and other proposed bills haven’t had much success – it’s also unclear if the current administration is motivated to support price transparency.  As the self-funded industry looks at cost containment measures as a whole, medical tourism is growing in popularity, especially when there are high value providers that are willing to offer services at lower costs and be more transparent with pricing.  Medical tourism and other cost containment methods, as well as consumer education, can help employer health plans contain costs; however, there is a need to look at the bigger picture and strive for more price transparency to help stabilize and support our fragile healthcare industry.   

Empowering Plans Segment 06 - An Employer Call to Action
A podcast dedicated to employers. Our goal is to show employers what they can do to improve their health plan and plan performance, without relying on third parties. It’s time for employers to get into the game!

Click here to open the Podcast!

Pay the Cost to be the Boss!
By: Ron Peck, Esq.

Between Friday and Saturday I was feeling under the weather.  By Easter Sunday, my chest was terribly congested, my nose running, breath wheezing, and more.  My assumption was that on this holiday, I wouldn’t be able to find a provider – and given my breathing issues – I might find myself in the ER.  I contacted my local Urgent Care anyway, and – lo and behold – they were open.  30 minutes later I was being tested for flu, and hooked up to a nebulizer to ease my breathing.  The quality care I received, on this holiday, aside… I want to address the global issue as I see it.  I knew which options were available to me, and made an effort to pursue the option that was best for me AND my employer (as well as our self-funded benefit plan), because we have made efforts to ALIGN THOSE INTERESTS.  I was educated, aware, and incentivized to check the urgent care option before rushing to an emergency room.

Too many employers, that wisely choose to self-fund their health plan, assume that once they pick a claims processor and broker, they are off the hook and some third party will take over.  This dereliction of fiduciary duty saddens me.  Being self-funded means more than funding claims directly.  It means taking ownership over your staff… your team… your second-family (for, indeed, I consider my co-workers to be a second family; who else besides family occupies so much or our time?), and ensuring they understand the options available to them.  Making sure they understand how different choices impact the company, the plan, and their own financial bottom lines needs to be a priority for the employer.

Ask the average American employee if their health plan is self-funded.  They don’t know.  There is a greater than 60% chance they are self-funded, but they will instead quote the name of their network.  Ask how much a visit to the ER costs, compared to their primary care or urgent care, and they will quote the co-pay.

Employers!  Self-funders!  This is a call to action.  Stop passing the buck.  Start explaining how your plan is funded, and take proactive measures to align employee and employer interests.  Information is power.  Furthermore, don’t resort to a high deductible plan – again passing the buck – (this time onto the employee).  How is any employee supposed to “shop around” if they have no access to the cost of care?  As an aside, I think it’s hilarious how we gripe over the ACA, and how “Obama” focused too much on “who” is paying, and not enough on “how much” is being paid… that shifting the burden onto insurance doesn’t solve the issue of cost… and then we turn around and increase deductibles; ignoring the cost and instead shifting the burden.  When we simply pass the buck instead of addressing the cost head-on, we are just as bad as the politicians we complained about!

To that end, transparency is king; regardless of whether the plan is paying dollar number one and incentivizing employee behavior, or the employee is paying the first few thousand dollars via a high deductible.  That’s why I’m excited by organizations like The Free Market Medical Association, and the recent surge in subscription based direct primary care.  By investigating trends like these, educating employees about their plan’s funding mechanism, and actually incentivizing them to behave in a way that benefits them and the plan, we will begin to see real change – just like I did this past Sunday.

The Phia Group's 2nd Quarter 2017 Newsletter
Phia Group Newsletter 2nd Quarter

Phone: 781-535-5600 |

The Book of Russo:
From the Desk of the CEO

Happy spring to all of you. This is my favorite time of the year as baseball begins, the kids can run outside here in Boston, and I get some sanity by enjoying the weather. At The Phia Group, it's no different. This is the time of year when it's truly heating up from a cost containment and consulting level. Brokers, employers, stop loss carriers and administrators are starting to see outrageous claim charges from the first quarter and reaching out to us for assistance. The bottom line is that we are here to empower you and your plans. I urge you to check out the case study from our unwrapped service, as well as the amazing initiative we have put together from a social media aspect. We decided this year to not only offer industry leading webinars, but also to expand our voice though shorter podcasts and intuitive blog posts.

We are here to make this industry better for everyone, by doing what we can to lower the overall cost of care. I love this fight, and we here at The Phia Group are passionate about this goal and our overall mission. Thank you for believing in us and reaching out. Happy reading.

Phia Group Case Study: Handbook, Schmandbook
Service Highlight of the Quarter: Phia Unwrapped
Fiduciary Burden of the Quarter: Strictly Abiding by the Terms of the Plan Document
New Services Announcement: The Phia Group: Catering to More of Your Needs
From the Blogosphere
The Phia Group’s 2017 Charity
The Stacks
Phia’s Speaking Events
Employee of the Quarter
Phia News

Phia Group Case Study: Handbook, Schmandbook

A client of The Phia Group faced a situation in which the group’s Plan Document referenced an extension of coverage for up to 24 months for participants unable to actively work due to disability. To contrast, the employer’s Employee Handbook referenced an extension of coverage for up to 36 months, or longer if deemed appropriate by the employer. The group’s stop-loss policy provided coverage only for the length of time dictated by the plan document (24 months).

The health plan’s broker referred the Plan Document and stop-loss policy to The Phia Group’s consulting team to perform a Gap-Free Analysis. As part of this analysis, it was discovered that the Plan Document’s leave provisions did not align with those in the stop-loss policy. The Phia Group’s team also included a note to ensure that if the Plan Document was changed, the Employee Handbook may need to be changed to align as well. Upon receiving the Gap-Free Analysis, the group’s broker asked The Phia Group to review the Employee Handbook and make whatever changes were necessary for the documents to align; upon review, the additional discrepancy was discovered and remedied.

Three months later, after the Plan Document and Employee Handbook were amended to alleviate the gaps in coverage, a member requested 18 months of leave from the employer. The employer was free to grant the leave based on other terms in the Employee Handbook, but the employee was informed that after twelve months, coverage under the Plan would terminate. As luck would have it, during the fifteenth month of the employee’s leave, she incurred significant medical claims that, if paid by the Plan pursuant to its former language, would have been denied by stop-loss. By addressing gaps in coverage, the Plan successfully avoided a large stop-loss denial.

Service Highlight of the Quarter: Phia Unwrapped

In the past, wrap networks provided a great amount of value to health plans. They effectively enlarged the plan’s primary network, somewhat like being able to utilize T-Mobile’s cell phone towers when out of AT&T range. The old theory, however, no longer holds true. Just as primary networks add less and less value as the magnitude of medical bills increase dramatically and arbitrarily, so to have wrap networks become more cumbersome than they are valuable.

Phia Unwrapped is designed as a replacement for non-contracted claims – whether they would normally be subject to a wrap network or treated as out-of-network. Phia Unwrapped is a way of keeping the plan’s primary network as always, but ensuring that all other claims are repriced accurately and responsibly, that patients have an advocate to help them through any potential balance-billing, and that the plan has experienced legal and negotiation support on the back end to secure the best possible outcomes.

In the Plan year 2014-2015, an 1,100 life Employer Group had 32% combined “savings” from their out-of-area wrap PPO program and out-of-network claim “solutions.”  Dissatisfied with these so called solutions and hearing about the strategic merits of reference based pricing (RBP) the employer switched to Phia Unwrapped. This switch allowed the group to pay a reasonable amount on claims while also providing support for members to make sure they were not caught in the crossfire with a provider attempting to collect abusive charges.

The results? In the Plan year 2015-2016, the employer had 74% savings paying 140% of Medicare, totaling an additional $2.8 Million in savings compared to traditional solutions.  Though the employer was initially concerned about “noise” from the members (who to this point only had out of pocket differentials for going out of network), Phia's industry leading balance billing support managed by Attorneys ensured that there was minimal member disruption (2%). 

What does “disruption” look like?

The group had an out-of-network emergency trauma claim, which was billed at $241,000.  Upon receipt of the out-of-network claim, the pre-setup EDI feed sent the claim to Payer Compass for re-pricing, pursuant to the Phia Unwrapped program. The third-party administrator subsequently received pricing back from Payer Compass; the Plan’s language – which specified payment at 140% of Medicare – allowed a little over $81,000. In accordance with the Phia Unwrapped service, the claims administrator paid the claim at the allowed amount.

Three months later the hospital balance billed the patient, at which point the patient spoke to Payer Compass and The Phia Group, clearly concerned about the balance billing. After a few rounds of back-and-forth with the hospital, the bill was escalated to The Phia Group’s Provider Relations department, which had been authorized to negotiate on the Plan's behalf. After a series of lengthy negotiations, which included email and phone correspondence with the hospital CFO, The Phia Group and the hospital reached an agreement to settle the claims for a total payment of 175% of Medicare, yielding significant savings from billed charges. These savings proved to be much higher than the 20% discount that the Plan would have realized if it still used the wrap network.

In the next billing cycle, The Phia Group reimbursed the difference between what it had originally billed as its fee and what it now billed for the final savings:

Plan Exposure:                                             
Final Payment:                                             
Phia Intervention Saved:   

Whatever your out-of-network volume, Phia Unwrapped is the solution you have been waiting for.

Fiduciary Burden of the Quarter: Strictly Abiding by the Terms of the Plan Document

ERISA is very clear that the Plan Administrator is required to administer benefits strictly in accordance with the terms of the applicable plan document. Plan Administrators, though, are often faced with difficult situations – situations where paying a claim that might otherwise be excluded under the plan document would avoid considerable headache, appease a member of the C-suite, or more accurately reflect what the drafter of the plan document intended, even if the language does not provide for that outcome.

We at The Phia Group have been presented with many situations in which the plan document says one thing, but the Plan Administrator wants to do another. Our advice is always the same – be careful and mind your fiduciary duties – but at the end of the day, the Plan Administrator is the decision-maker and should do what it feels is appropriate, being mindful that stop-loss will likely not be quite so sympathetic to the Plan Administrator’s deviation from the terms of the plan document.

One such example came in the form of a particular plan working to administer an exclusion for illegal acts. A twelve-year-old plan participant committed an illegal act, according to the plan document, when the child inadvertently drove an ATV on a public road in a jurisdiction that considers it a crime to ride an ATV on that road. In the next county over, this would not have been a crime – and the child reportedly was not aware that he had entered a jurisdiction where his actions were a crime. There was an ATV crash, and claims were incurred. Upon being presented with claims related to the accident, the plan’s TPA read the language of the plan document, analyzed the facts of the case, and came to the conclusion that the claims should be denied. Since these were not claims that were doubtful or disputed, the TPA rendered the determination without the need for any discretion.

Upon discovering the denial, the group was not happy. According to the group, it never intended for its “illegal acts” exclusion to apply to a twelve-year-old on an ATV; this, according to the Plan Administrator, was a simple mistake on the part of the child, who was not aware what he was doing was illegal. The Plan Administrator was eager to overturn the denial to effect what it considered its real intent – which was to punish acts committed by adults, with knowledge of the illegality of their actions.

Is it appropriate to read such an exception into the terms of the plan document? If the plan document says “illegal acts” but the Plan Administrator wants to apply the exclusion to some illegal acts but not others depending on the circumstances, it creates a potential problem in that the Plan Administrator has failed to strictly abide by the terms of the plan document. This means the plan document has been administered inconsistently.

Practically speaking, do people usually complain about claims being paid? Of course not. But legally speaking, is the Plan Administrator permitted to create exceptions to unambiguous language on a case-by-case basis? Not according to ERISA. Violating fiduciary duties is a problem – especially in light of the Department of Labor getting stricter about audits whenever there is even a hint of impropriety. It is not likely that anyone would report this fiduciary violation – but that does not mean it is a good idea to violate the fiduciary duty to begin with. The Phia Group’s attorneys will attest to the notion that a low likelihood of punishment for a fiduciary violation is neither an excuse nor a good reason to commit the violation.

As mentioned above, the stop-loss carrier would likely not be pleased about the Plan Administrator’s determination either. If the Plan Administrator wants the language changed, the Plan Sponsor should effect an amendment – but as far as stop-loss is concerned, the plan document has been underwritten as-is and a claim, such as this one, should be denied by the Plan. As we have all seen first-hand, when a stop-loss carrier receives a claim for reimbursement that should not have been paid by the
Plan in the first place…well…let’s just say it’s not an ideal situation.

New Services Announcement: The Phia Group: Catering to More of Your Needs

Leave of Absence ReviewWith The Phia Group’s Leave of Absence Review, employee handbooks, health benefit plan documents, and stop-loss policies align, all while remaining compliant with applicable law. Click here to learn more!

Flagship Plan DocumentWith The Phia Group’s Flagship Plan Document, clients can enjoy speedy & efficient production of best-in-class plan documents, with minimal time or monetary investment. Click here to learn more!

If you would like to speak with one of our specialists regarding the new services we offer, please feel free to contact us at so we can schedule a call.

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From the Blogosphere

ACA to AHCA… A Look Back on the Past 7 Years. Seven years in the making.

Health Insurance is NOT Health Care. Sit back, relax and enjoy Ron Peck’s metaphors.

U.S. Airways v. McCutchen – Where Are They Now? It seems like it was just yesterday.

The Guilty Shall Remain Nameless - Yet I Shall Shame Them… Again. Quote: “Yes… Is there someone else here I can talk to?”

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The Double-Edged Sword of Discretion: How Even Great Plan Document Language Can Cause Gaps in Coverage

On April 27, 2017, The Phia Group will present “The Double-Edged Sword of Discretion: How Even Great Plan Document Language Can Cause Gaps in Coverage.”

Click HERE to Register!

On March 23, 2017, The Phia Group presented “Medical Bill Blues: Pre-Payment Contracting and Negotiation, Pricing Alternatives, and Post-Payment Recovery of Overpayments,” where we analyzed the various ups and downs we associate with "provider relations.”

On February 15, 2017, The Phia Group presented “Top Miscues Employers Make When It Comes To Their Health Plans ... And What We All Can Do To Become Health Plan Heroes.”

On January 19, 2017, The Phia Group presented “Back to The Self-Funding Future – Which Echoes of 2016 Will Continue to Impact Self-Funding in 2017,” where our legal team talks about how the past decade has ushered in both outrage and opportunity for self-funded plans.

On January 4, 2017, The Phia Group presented a brief webinar to describe some changes recently made to our reporting portal.

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On April 4, 2017, The Phia Group presented “The AHCA Failed: Where To Next,” where our legal team discusses the recent, stunning failure of the GOP’s American Health Care Act.

On March 13, 2017, The Phia Group presented “Attack of the Killer Savings,” where we identify facilities that provide the best outcomes for the least cost.

On February 28, 2017, The Phia Group presented “The Journey Continues,” where Adam Russo & Ron Peck discuss what makes our health benefit plan unique.

On February 13, 2017, The Phia Group presented “The Next Episode,” where we talked about what makes our health plan a source of savings.

On January 30, 2017, The Phia Group presented our very first podcast, “The Maiden Voyage.”

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The Phia Group’s 2017 Charity

The Phia Group's 2017 charity is the Boys & Girls Club of Brockton. 

The mission of The Boys & Girls Club is to nurture strong minds, healthy bodies, and community spirit through youth-driven quality programming in a safe and fun environment.

The Boys & Girls Club of Brockton (BGCB) was founded in 1990 to create a positive place for the youth of Brockton, Massachusetts. It immediately met a need in the community; in the first year alone, 500 youths, ages 8-18, signed up as club members. In the 25 years since, the club has expanded its scope exponentially by offering a mix of Boys & Girls Clubs of America (BGCA) nationally developed programs and activities unique to this club.

Since their founding, more than 20,000 Brockton youth have been welcomed through their doors. Currently, they serve more than 1,000 boys and girls ages 5-18 annually through academic year and summertime programming.

Monthly Donations From Phia

For more information or to get involved, visit

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The Stacks

Self-Funded Health Plans May Have a New Ally in the Fight Against Specialty Drug Prices
By: Brady Bizarro, Esq.

Throughout the bitter and seemingly endless presidential election cycle, Donald Trump and Hillary Clinton vehemently disagreed on almost every issue, especially those involving health policy. Yet, there was at least one health policy issue on which both candidates agreed: prescription drugs are too expensive. For self-funded health plans, this is old news. The industry continues to face increasing costs overall, and prescription drugs make up a significant portion of those costs. Specialty drugs are particularly culpable. Specialty drugs accounted for 32 percent of all drug expenditures in 2014 despite making up less than one percent of all written prescriptions, according to research conducted by Express Scripts.

Click here to read the rest of this article.

Appealing to Reason
By: Jon A. Jablon, Esq.

The language is exceedingly common within benefit plans. We’ve all seen it; in order to appeal a denial, a medical provider must be specifically appointed by the patient as the patient’s “authorized representative.” Only members may appeal their own claims, unless they appoint someone to do so. Some third-party administrators and plan administrators even have a form that a member must fill out. These are long-held maxims by many – but are they truly compliant?

Click here to read the rest of this article.

Held Captive by Appeals
By: Tim Callender, Esq.

Prior to the passage of the Affordable Care Act, self-funding was already healthy and growing. Since the passage of the Affordable Care Act (and predominantly due to the ironic increase in healthcare insurance costs through the fully-insured, carrier model) we have seen self-funding grow even more. Although this growth has been significant, there are some employer groups – primarily small and mid-sized groups – that have struggled to find a sustainable path into self-funding nonetheless.

Click here to read the rest of this article.

As Employer-Sponsored Plans Multiply, Self-Funding Remains an Attractive Option
By: Brady Bizarro

As the new year begins, we can reflect on annual reports and surveys recently released by federal agencies and non-profit organizations which measure public and private healthcare spending and reveal trends in national health policy. One of the most prominent reports is the National Health Expenditure Accounts report, which was released in December by the Centers for Medicare and Medicaid Services. Some of CMS's findings forecast tough times ahead for employer-sponsored health insurance. Now, more than ever, employers will need to develop innovative approaches to continue offering affordable coverage to their employees.

Click here to read the rest of this article.


To stay up to date on other industry news, please visit our blog.

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Phia’s Speaking Events

Adam Russo’s 2017 Speaking Engagements:
• 2/22/17 – TABA Spring Conference – Austin, TX
“The Good, The Bad, and the Naughty – Ethics: Simple Mistakes vs. Breach”
• 3/16/17 - IMA National Independent Agency Consortium – Bonita Springs, FL
“Not Your Grandmother’s Self-Funding: Best Practices for a Changing Industry”
• 3/21/17 – Advantage Benefits RBP Seminar – Grand Rapids, MI
“The Best Gets Better - Getting the Most Out of Your Self-Funded Plan”

Adam Russo’s Upcoming Speaking Engagements in 2017:
• 4/24/17 - Berkley Captive Symposium – Grand Cayman Islands
“The Best Gets Better - Getting the Most Out of Your Self-Funded Plan”
• 5/4/17 – Benefest – Westborough, MA
"Multiple Personalities - The Biggest Issues Impacting Plans & Employers, and Instances Where They are Their Own Worst Enemy"

Ron Peck’s 2017 Speaking Engagements:
• 4/3/2017 – Eastern Claims Conference (ECC) – Boston, MA
“The Good, The Bad, and The Ugly: Understanding Reference Based Pricing in the Special Risk Market”

Tim Callender’s 2017 Speaking Engagements:
• 2/2/17 – Alaska Association of Health Underwriters – Anchorage, AK
“Innovation and Cost-Containment In the Self-Funded Space”
• 2/27/17 – LBG Advisors: Benefits Symposium – Anaheim, CA
“Innovation and Cost-Containment In the Self-Funded Space”

Tim Callender’s Upcoming Speaking Engagements in 2017
• 5/22/17 - Group Underwriters Association of America Annual Conference - Denver, CO
“The Future of Health Plans”
• 7/17/17 - Health Care Administrator’s Association TPA Summit - St. Louis, MO
“Conference Emcee”

Jen McCormick’s 2017 Speaking Engagements:
• 3/29/17 – SIIA Executive Forum – Tucson, AZ
“Department of Labor Audits”

Brady Bizarro’s 2017 Speaking Engagements:
• 1/22/17 – Texas Association of Benefit Administrators (TABA) – Austin, TX
“Healthcare Policy under the Trump Administration”

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Get to Know Our Employee of the Quarter:
Erik Graber

Congratulations to Erik Graber, the Phia Group’s Q1 2017 Employee of the Quarter!

“Erik embodies everything Phia is about from our mission statement to our vision to our culture.  Throughout Q1, Erik has been tenacious in his pursuit of teaching and training new team members; giving them the tools essential to succeed in their roles.  The life of an IT Director is not a glamorous one and Erik works assiduously, oftentimes nights and weekends – sacrificing precious family time – to meeting and exceeding his goals and deadlines to ensure our company runs seamlessly.  If there is an issue you can rest assured Erik will promptly handle the matter – possibly with a bit of sass and sarcasm!  Erik is truly an asset to The Phia Group, and we’re fortunate to have him!”

Congratulations Erik and thank you for your many current and future contributions.

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Phia News

Promotions at Phia:
• Keith McMahon was promoted from CI to CRS III
• Lauren Vermette was promoted from legal assistant role to CI
• Cara Carll was promoted to Team Leader of the MedPay & Work Comp. Tier
• Kerri Sherman was promoted to Team Leader of BI Tier & Case Investigation
• James Newell was promoted to Team Leader of Claim & Case Support
• Angela Grande was promoted to CRS III
• Katie Delaney was promoted to Team Leader of the Quality Analysts.
• Jude McNeil was promoted to Team Leader of the Call Center in Customer Service
• Lisamarie DeCristoforo was promoted to Team Leader of Case Evaluation in Customer Service

New Hires This Quarter:
The Phia Group has added 5 new employees to its staff this quarter. They include:
• Matthew Painten was hired into our Marketing department
• Jeff Hanna was hired into our Accounting department
• Randal Moody was hired into our IT department
• Krista Maschinot was hired into our Phia Group Consulting department
• Victoria Pace was hired into our Phia Group Consulting department

Open Positions at Phia
• Case investigator
• Attorney I
• ETL Specialist
• Data Architect
• IT Technologist
• Product Analyst

Click here for more information or to apply today!

Additions to the Phamily:
• Tara Trojano gave birth to a baby girl, Emily Rose, on 02/09/17
• Liz Welcome gave birth to a baby boy, Quinton Jay Robert Pereira, on 02/01/17

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Cyborgs – Moving From Science Fiction to Science Fact
By: Garrick Hunt

The word “cybernetics” tends to invoke images of Robocop or The Million Dollar Man.  These examples are just the creation of the imagination, but how far away are we really from such technological and biological advancements?

The answer is that it has already begun. While we don’t have 7-foot-tall walking cyborgs that administer swift justice in some kind of post-apocalyptic nightmare world, we are seeing advancements in the realm of prosthetic limbs, ocular augmentation, and even artificially grown organs.

While I was recently traveling, I picked up a National Geographic which had an amazing article on the future of human evolution and how humans are beginning to influence biological advancements. The article discussed a man, who was born colorblind and underwent a procedure that implanted a device (a sort of antenna) at the back of his head. This device can interpret the ultraviolet (UV) light spectrum and infrared (IR) spectrum, then convert these light waves into sound that feeds to his brain and allows him to “hear” color. Technology is helping this man use synesthesia, often considered a disorder of sorts, to his advantage.  What could this mean for the future of healthcare?  Who would be responsible for the costs of such augmentations? What would be the medical standards and indications of such an adventurous advancement?

Implants, like the one described above, offers a glimpse of the future.  While all of this seems a little farfetched, I would argue that no one anticipated George Klein’s electric wheelchair in the early twentieth century nor the profound change it would cause in our industry and in the lives of so many people. No one thought that anyone would be able to afford one, and now I can buy one on eBay for a cool $700, cheaper than a road bike.

The initial shock of new technology will always be a cost concern.  For example, exoskeletons, like those being developed for the military to  increase  lifting power and allow the wearer to walk and run long distances without becoming fatigued, are currently very much cost-prohibitive, yet these  devices are also being developed for paraplegics to utilize in the civilian sector. The ReWalk is one such exoskeleton that has been FDA approved, and at a price point of $70,000, it poses a high cost barrier that most people could never afford on their own. This means benefit plans may be on the hook for this new bill and others like it. Now, if a healthy individual wants to squander their savings to purchase an exoskeleton and pretend to be Iron Man, then all the power to them – but what about someone who needs it?

It’s not just exoskeletons; many prosthetic limbs can cost up to $50,000 in the current market.  Throw in a few computer chips and motherboards that allow for advanced articulation and a wide range of movement, and we could be looking at a hefty $100,000 price tag for that prosthesis. It seems likely that early medical applications of new technologies would bring with them medical indications for periodic maintenance, upgrades, or replacement… on the health plan’s dime.

There are three major ways a health plan can address this emerging technology; all three stem from solid plan language. First, a plan should assure it has the ability to review invoices against some sort of cost standard. Ensuring that the plan includes language indicating that alternating pricing, at the Plan Administrator’s discretion, will be applied when a particular medical device exceeds the set standards will help ensure that the plan has secured its right to properly utilize such standards. Secondly, a plan should including language that grants the plan the ability to suggest to the member a more cost-effective treatment option so long as it does not reduce the quality of treatment – and if the member foregoes that suggestion, the plan should ideally retain the right to limit its payment for the chosen service to the price of the lower-cost service that the member has chosen to forego. This means that while the plan will cover treatment for medical device, it will only do so up to a reasonable cost limit, and members are encouraged to not be extravagant simply because their OOP amount is the same either way.  Finally, a plan must include strong “experimental and investigational” language, ensuring that the procedure is FDA approved, has been adequately tested, and is actual applied science rather than still science fiction.

It will still be many years before we see a proper medical cyborg, but this doesn’t mean that we shouldn’t prepare for costs now…

My Trip to the Emergency Room
By: Jen McCormick, Esq.

Since becoming a mom, I’ve experienced two pretty scary parenting adventures – taking a toddler to Disney World solo and taking a toddler to the emergency room. While I faced long lines, costly food, and anxiety during both events, it was the emergency department visit that by far was the scariest.

After a same-day sick visit at the pediatrician’s office, we were sent to the emergency room. Our pediatrician administered a treatment onsite, but after not quickly seeing results or improvement in my toddler’s condition, we were sent to the emergency department. This was terrifying to hear, but also a bit surprising to me. My toddler seemed in good spirits and seemed happy.

Of course I didn’t want to second guess the doctor, especially when my child’s health may be on the line, but I had to ask why they needed us to rush to the emergency department – was something happening and I just didn’t realize it? Not exactly. The pediatrician said that our toddler’s oxygen level was too low and his respiratory rate was too fast – and he needed to be monitored and that was not something the pediatrician’s office could do or had time to do.

I couldn’t help but question whether this was the most effective (cost or otherwise) way to manage care. Then again, it was my toddler and being a mom superseded my desire to argue. We went, and were monitored, and I continually questioned what was happening (and why) during each treatment step.

We try to encourage patients to take control of their health care – make informed decisions and properly utilize the emergency room (for emergency situations). I am not suggesting that our situation was not urgent or an emergency, but it was unexpected that the next step for us was the emergency department.  Maybe this is a trend (sending patients to emergency departments after a primary care visit) or due to time or resources. Either way, question what is happening so you better understand, and more importantly, ensure you receive the most appropriate care (particularly for our patients too young to speak for themselves).

The Stacks – 2nd Quarter 2017
Self-Funded Health Plans May Have a New Ally in the Fight Against Specialty Drug Prices
By Brady Bizarro, Esq.

Throughout the bitter and seemingly endless presidential election cycle, Donald Trump and Hillary Clinton vehemently disagreed on almost every issue, especially those involving health policy. Yet, there was at least one health policy issue on which both candidates agreed: prescription drugs are too expensive. For self-funded health plans, this is old news. The industry continues to face increasing costs overall, and prescription drugs make up a significant portion of those costs. Specialty drugs are particularly culpable. Specialty drugs accounted for 32 percent of all drug expenditures in 2014 despite making up less than one percent of all written prescriptions, according to research conducted by Express Scripts.

Self-funded health plans employ a variety of cost-containment strategies in an effort to ameliorate the fiscal burden of prescription drugs. These include increased cost-sharing (through copayments, coinsurance, and deductibles) and utilizing manufacturer copay cards and tiered benefit programs. Now, the self-funded industry may be given new tools by the President-elect to fight the pharmaceutical companies.

Chief among President-elect Trump’s health policy priorities is his campaign promise to “repeal and replace” the Affordable Care Act. In addition, he has announced at least two priorities which depart from conventional conservative thinking and have important implications for the future of self-funding: requiring price transparency from all healthcare providers and permitting consumers to import drugs from overseas.

As part of Trump’s plan for “Healthcare Reform to Make America Great Again,” the President-elect proposed that Congress must:

Remove barriers to entry into free markets for drug providers that offer safe, reliable and cheaper products. Congress will need the courage to step away from the special interests and do what is right for America. Though the pharmaceutical industry is in the private sector, drug companies provide a public service. Allowing consumers access to imported, safe and dependable drugs from overseas will bring more options to consumers.

It is hard to overestimate the savings a self-funded health plan can realize if permitted to import drugs from overseas. One of the main reasons why prices for brand-name drugs are typically lower in most developed countries than in the U.S. is because of increased negotiating power. In the U.S., the government has forfeited its negotiating power. Medicare, the largest single purchaser of prescription drugs in the U.S., is prohibited by law from negotiating prices with pharmaceutical companies. By contrast, in the United Kingdom, brand-name drug prices are generally much lower because the government and the industry negotiate agreements which contain set spending caps and require drug companies to reimburse the government any amount which exceeds the cap. While some of these agreements do contain opt-out provisions for the reimbursement requirement, most pharmaceutical companies agree to these contracts as-is in order to gain access to a much larger market.

Also consider the case of Canada, which is often touted as a prime example of a source of low-cost prescription drugs. The Canadian government negotiates with pharmaceutical companies on behalf of the public. As a result, brand-name and even generic drugs are less expensive in Canada than they are in the United States. In 2004, the median prescription drug prices in Canada were nearly 79 percent lower than those in the U.S., according to the Patent Medicine Prices Review Board Annual Report. The 2013 report revealed that Canadian consumers still paid less than half of what U.S. consumers paid for patented-drug products. If the President-elect succeeds in pushing through legislation which ends the ban on foreign drug imports, U.S. consumers could realize similar savings.

This would not be the first time that a politician has attempted to lift the ban on importing foreign drugs. The Safe and Affordable Drugs from Canada Act of 2015 was sponsored by Senator John McCain (R-AZ) and had bi-partisan support, including from Senator Bernie Sanders (D-VT). The bill remains stalled in the Senate Committee on Health, Education, Labor, and Pensions. There was also an attempt to permit importation in 2009 while the Affordable Care Act was being pushed by Democrats, but that effort also failed. Despite past failed attempts, there are many reasons to think that the importation of prescription drugs from overseas may actually become legal (at least in some form) under a Trump Administration.

First, public support for change and increased price transparency is at an all-time high, especially in light of recent, high-profile price-gouging controversies. In August 2015, Turing Pharmaceuticals acquired the exclusive rights to distribute Daraprim, a drug used to treat AIDS-related symptoms. A month later, the company raised the price of Daraprim from $13.50 per pill to $750 per pill overnight, an increase of over 5,500 percent (before 2010, the drug cost $1 per pill). A joint study by the Infectious Disease Society of America and the HIV Medicine Association found that the increase in price would result in an average bill of $634,500 per year for most patients. In response to the public outcry, the CEO of Turing Pharmaceuticals defended his company’s actions, citing the need to modernize the drug and create new alternatives with fewer side effects. A year later, the price of the drug is $375 in the U.S., and between $1 and $2 per pill internationally.

Turing Pharmaceuticals is not the only company to drastically increase the price of its brand-name drugs and face near-universal criticism. Mylan, a global generic and specialty pharmaceuticals company, faced an even bigger political firestorm in the summer of 2016 when it raised the price of a two-pack supply of its popular EpiPen to $608 (the same two-pack EpiPen is available in the United Kingdom for $69). The EpiPen, which sold for $100 as recently as 2009, is an epinephrine auto injector device used to control allergic reactions to food and environmental allergens. What made this case more contentious was a media report revealing that over the past eight years, while the price of EpiPens increased 461 percent, the salary of Mylan’s CEO rose 671 percent, up to $18.9 million a year.

Although many experts agree that these examples are egregious, it is important to note that there are enormous costs associated with pharmaceutical research and development. Furthermore, there is a very real need to encourage drug development as a matter of good public health and public policy. This is why the U.S. government provides regulatory protections to assist pharmaceutical firms in the development of life-saving drugs. Nonetheless, recent polling confirms that Americans are fed up with the price of brand-name drugs. Nearly eight in ten Americans agree that drugs are too expensive, and almost 86 percent agree that pharmaceutical companies should be required to reveal how drug prices are set, according to a survey released by the Kaiser Family Foundation in September 2016.

In addition to the public outcry over specific pricing controversies, the Food and Drug Administration (FDA) has sent mixed signals regarding the agency’s willingness to enforce the ban on foreign drug imports. The FDA’s website explains that the agency has a policy “that it typically does not object to personal imports of drugs that FDA has not approved under certain circumstances . . .” Those circumstances include when less than a three-month supply is imported, and when the consumer importing the drug verifies in writing that it is for her own use and provides contact information for the doctor providing her treatment.

Perhaps most importantly, President-elect Trump will enjoy the benefits of a Republican-controlled House and Senate. While in recent weeks he has shown signs of scaling back some of his campaign promises, this particular health policy initiative enjoys bi-partisan support. As such, there may be no better opportunity to push through legislation lifting the ban on safe, dependable imported drugs.

Appealing to Reason
By Jon A. Jablon, Esq.

The language is exceedingly common within benefit plans. We’ve all seen it; in order to appeal a denial, a medical provider must be specifically appointed by the patient as the patient’s “authorized representative.” Only members may appeal their own claims, unless they appoint someone to do so. Some third-party administrators and plan administrators even have a form that a member must fill out. These are long-held maxims by many – but are they truly compliant?

In what it has deemed a frequently asked question, the Department of Labor, in its Benefit Claims Procedure Regulation FAQs , has asked itself “Does an assignment of benefits by a claimant to a health care provider constitute the designation of an authorized representative?” The Department of Labor simply, and helpfully, led its answer with the word “no.” To elaborate on this “no,” the DOL wrote that “Typically, assignments are not a grant of authority to act on a claimant's behalf in pursuing and appealing a benefit determination under a plan.”

But how much does that truly clarify? Without some context, it is fairly unhelpful – and in context, it is revealed that this guidance from the DOL is somewhat inaccurate.

An authorized representative is one who is authorized to act as the representative of another – a description that could scarcely be any clearer. In our sense, an authorized representative is generally used in the context of the right to appeal. To illustrate the utility of this concept, consider three scenarios; in all three, a plan member has received services from a non-contracted medical provider, and in all three the Plan’s available benefits are not quite enough to cover the provider’s full billed charges. Appeals will occur – but the difference in the scenarios hinges on exactly who is appealing, and on whose behalf.

In scenario number one, the health plan systemically prohibits all assignments of benefits, and pays benefits directly to the member. The member endorses the Plan’s payment to the provider to compensate the provider for its services – but the provider is dissatisfied with the payment amount. In this scenario number one, the provider may not appeal to the health plan unless the provider appeals on the patient’s behalf, since the provider itself was due benefits from the patient, rather than from the health plan, since there was no assignment of benefits – and in such case the provider would need to be appointed by the member as the member’s authorized representative, since the provider has no independent right to benefits from the health plan in this scenario. In other words, the provider would need to appeal on the member’s behalf, and would therefore need to be the member’s authorized representative to do so.

In scenario number two, there is again no assignment of benefits, but the provider decides to balance-bill the member instead of getting involved in the appeals process. The member, rather than the provider, appeals directly to the Plan. Members, of course, are always claimants and are always entitled to appeal to the health plan if the member feels that a greater amount of benefits should be paid. In this scenario two, there is no need for the member to appoint the provider as the member’s authorized representative, since the member needs no representative if she appeals on her own behalf.

Now, consider scenario number three, where there is a valid assignment of benefits from the member to the provider (as is almost universally the case in self-funded health care). Through the assignment of benefits, the provider is invited to submit its claims directly to the health plan, and receives only partial payment of its billed charges in return. In this scenario three, the provider desires to appeal the denial. The provider submits an appeal to the health plan – in accordance with all of the plan’s written and established procedures – and the third-party administrator answers the provider with a letter stating that only members may appeal, unless the member fills out a specific form to authorize the provider to appeal on the member’s behalf. How compliant is that, though? Might the health plan be at risk of noncompliance if it denies providers the right to appeal their own claims?

An authorized representative, as described above, is one who is authorized to be the representative of another. In a case such as this, a medical provider might be authorized to act as the representative of the member, therefore becoming the member’s personal representative. Consider, however, federal regulations that afford all claimants the right to appeal; claimant is a term of art that explicitly includes participants and beneficiaries . A beneficiary is defined as “a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.”

Forget the legalese; the important thing is to note that medical providers, if benefits are assigned to them, are beneficiaries, as that term is defined by the regulations – and beneficiaries become claimants when they submit claims to the health plan. If you remember, all claimants are empowered to submit claims to the health plan, appeal a denial of those claims, and even ultimately sue for redress under ERISA. (As one court put it, “there is now a broad consensus that when a patient assigns payment of insurance benefits to a healthcare provider, that provider gains standing to sue for that payment under ERISA § 502(a). ”)

The same regulation that defines “claimant” also provides that:

Every employee benefit plan shall establish and maintain a procedure by which a claimant shall have a reasonable opportunity to appeal an adverse benefit determination to an appropriate named fiduciary of the plan, and under which there will be a full and fair review of the claim and the adverse benefit determination.

According to these regulations, not only are claimants afforded the right to file claims, but they are also guaranteed the right to appeal, by imposing this responsibility upon the health plan to afford claimants the right to appeal. The relevant regulations unambiguously explain that a claimant may appeal an adverse benefit determination. Moreover, the text of ERISA itself provides that “A civil action may be brought…by a participant or beneficiary…to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan. ” To simplify, again, claimants can sue for benefits. Since medical providers are claimants if they are assigned plan benefits, then providers can appeal and ultimately sue if necessary.

As another court wrote, somewhat more bluntly, “the assignment is only as good as payment if the provider can enforce it. ” This is a matter of public policy, and seems fairly intuitive; if a provider has the right to submit a claim, and the health plan has the right to tender a denial of that claim, practically speaking, why should the provider not also have the right to appeal the denial of its claim? According to courts and the regulations, the provider does in fact have this right.

We now know that medical providers who have been assigned benefits can submit claims, appeal denials of those claims, and sue for redress pursuant to ERIA. It should be noted, however, that although the law on the topic may be established, not everyone is on the same page, as is so often the case in our industry.

The DOL’s answer to its own question (“Does an assignment of benefits by a claimant to a health care provider constitute the designation of an authorized representative?”) continues by specifying that “An assignment of benefits by a claimant is generally limited to assignment of the claimant's right to receive a benefit payment under the terms of the plan.”

But how can that be the case? Claimants have the right to appeal, and claimants include anyone “designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.” The regulations say one thing, but the DOL’s FAQ seems to say the opposite.

The DOL’s answer to its own question yields an absurd conclusion: that a provider that has accepted an assignment of benefits and submitted claims to a health plan is not a claimant. According to applicable law, however, either the provider accepts assignment of benefits and submits claims, and therefore earns the right to appeal and sue – or the provider does none of those things. These rights are not discrete; they are a package deal, inseparable from one another. Each right – the right to submit claims, the right to appeal a denial, and the right to sue under ERISA – has “not for individual sale” marked on its label.

The confusion doesn’t stop there, though. Coming back to the Department of Labor’s answer to its own frequently asked question, the Department has stated that “[t]ypically, assignments are not a grant of authority to act on a claimant's behalf in pursuing and appealing a benefit determination under a plan.” This is a correct statement, although very misleading in context. It is true that an assignment of benefits does not grant a provider authority to act on a claimant’s behalf – because a provider who has received an assignment of benefits is a claimant unto itself, and is not acting on anyone else’s behalf. The provider therefore needs no authority to act on anyone’s behalf.

Where do we go from here? There is conflicting guidance; FAQs are suggestive rather than binding, but most take them as gospel nonetheless, since they are explicitly designed to be written in plain English rather than the legalese of the regulations.

The rules surrounding who has what rights and under what circumstances are undoubtedly confusing at times; guidance provided by our regulators is sometimes confusing, vague, and – at times – even contradictory. This is one of those times, and affording all relevant rights to medical providers is an important topic now more than ever in the face of incoming bouts of regulatory scrutiny of the self-funded industry and the fiduciaries who act within this space.

As health plans struggle to contain costs, health plan administrators, third-party administrators, and brokers should be careful not to handicap themselves by employing the same thinking as prior decades simply because that’s what has always been done. Performing an in-depth review of claims and appeal processes – and the rest of the health plan to boot – is the best way of staying ahead of the curve and ensuring compliance and viability.

Held Captive by Appeals
By: Tim Callender, Esq.

Prior to the passage of the Affordable Care Act, self-funding was already healthy and growing.  Since the passage of the Affordable Care Act (and predominantly due to the ironic increase in healthcare insurance costs through the fully-insured, carrier model) we have seen self-funding grow even more.

Although this growth has been significant, there are some employer groups – primarily small and mid-sized groups – that have struggled to find a sustainable path into self-funding nonetheless.  For purposes of this article I will refer to these employers as “Small-Mids.”  Obviously, opinions differ as to what a “small” or “mid-sized” employer group is, but for today’s discussion, we are looking at employer groups ranging from 50 employees up to approximately 200 employees.  

One of the primary barriers to entry for Small-Mids is the financial risk inherent to the self-funded model.  Even with a stop-loss policy in place (assuming the employer is domiciled in a state that has not regulated stop-loss to the point of making it prohibitive to gain a policy for a small to mid-sized employer), many Small-Mids do not have the cash reserves necessary to make it through a high health spend year before stop-loss reimbursement might kick in. There are programs in the market such as “level-funding” whereby an employer’s risk is effectively capped at a certain figure in exchange for a set monthly expense, but such programs are still in their infancy and not very widely-used.

 In the traditional market, however, figure in a handful of dialysis claims, one or two air ambulance claims, and one plan member on a growth hormone prescription, and the Small-Mid is running for the hills.  Lest we forget that Small-Mids are often terrified of financial ruin on many fronts to begin with, let alone bearing the risk of high claims exposure.  For them, it is unquestionably easier to sign up for that prototypical fully-insured option and trade financial risk for predictable premiums. The problem, though, is that predictable premiums are generally high premiums.

Another barrier to entry for the Small-Mids is the appeals experience.  “What do you mean, ‘appeals experience,’ Tim?” you might ask.  In short, as those of us working in the self-funded health plan space know, a health claim’s denial triggers appeals rights.  These appeals may be pursued by the plan member, a plan beneficiary, or even the medical provider through an assignment of benefits or appeals authorization.  The typical claims and appeals cycle tends to look something like this:

(1)    A claim for health benefits is submitted to the plan-sponsor’s third-party administrator by the Claimant (the Claimant might be the plan member, a plan beneficiary, or a medical provider);
(2)    The claim is adjudicated, by the TPA, pursuant to the terms of the governing plan document, as created and adopted by the plan-sponsor;
(3)    The claim is denied pursuant to the terms of the plan document;
(4)    The Claimant files a first-level appeal.
(5)    The first-level appeal is handled by the TPA.  Sometimes input from the plan-sponsor is solicited, sometimes not.  Every TPA / plan-sponsor relationship is different.
(6)    The denial of benefits is upheld by the TPA / plan-sponsor at the conclusion of the first-level appeal process.
(7)    The Claimant files a second-level appeal.  
(8)    The TPA will handle the second-level appeal in one of two ways: (i) it will review the second-level appeal, provide a recommendation to the plan-sponsor regarding the determination, and ask the plan-sponsor to make a final determination based on the TPA’s recommendation; or (ii) the TPA will submit the second-level appeal to the plan-sponsor, in its entirety, for the plan-sponsor to review and determine, on its own, whether the denial should be upheld or overturned.
It is step (8) where the wheels typically come off for an existing self-funded plan and it is step (8) that is a significant barrier for Small-Mids to get past when they analyze and consider self-funding.  Imagine a Small-Mid that is privately held and made up of hard-working, blue-collar employees and blue-collar leaders who have risen to positions such as Vice President of H.R., or Chief Operations Officer.  Suddenly, it is these leaders who are faced with a second-level appeal based on the medical necessity of cortisone injections for the treatment of migraines; suddenly it is these leaders who are faced with a second-level appeal based on the interpretation of a complex plan exclusion, such as the “hazardous activities exclusion” or the “illegal acts exclusion.”  We have all heard these stories and we are all familiar with the fallout that might occur when a Small-Mid is faced with this daunting task.  

Additionally, how many stories exist of the closely held Small-Mid’s leadership team suddenly faced with a second-level appeal that directly concerns their highest performing sales person?  Or, more generally, consider the heartache involved for any Small-Mid’s leadership team when they must decide an appeal on a health claim for a well-known and well-loved employee, regardless of his or her title! Many Small-Mids have close-knit employee populations, many of whom have been coworkers and friends for years.
 How many times have we heard, “we make motorcycle clutches and just wanted to provide our employees with good health benefits!  We never signed up to make these types of decisions!”  Another group leaves self-funding and then the horror stories trickle downstream, preventing other Small-Mids from moving toward self-funding.  Or, if the Small-Mid stays in the self-funded space, there is a very real chance that they unknowingly breach their fiduciary duty as a plan-sponsor, time and again, when they throw their hands in the air and pay claims that should not be paid pursuant to the governing plan document, simply because of the emotion, heartache, and the difficulty of handling complex appeals.

Solutions to the problems discussed above do exist, and these solutions are exploding across the industry and across the country.  The captive model is one such solution, primarily focused as a remedy to the Small-Mid’s concern over self-funding and financial devastation.  Captive risk-sharing is not a new idea – yet it is not as common in the self-funded health space as we all might think.  Time and again, my colleagues and I are surprised as we travel and speak on self-funding topics, all around the country, to learn that many employers, not to mention their brokers, have either never heard of captive risk sharing or have simply never invested the time to learn much beyond the basics.  

The proof is in the pudding. The numbers show that properly-run captive programs, filled with Small-Mids, are breaking down doors and bringing Small-Mids into self-funding through the assurance of responsible, managed risk-sharing.  Whether heterogeneous (made up of groups spanning multiple industries) or homogeneous (groups within the same industry) in makeup, a captive provides a common goal amongst its members to keep costs down and prop one another up through the safety net of a pool of funds that many might view as a “rainy day fund.”  

Regarding the second barrier to entry for Small-Mids, directly handling health claim appeals, there are solutions covering that problem as well.  Third-party, second-level appeals outsourcing is becoming more prominent in the self-funded industry.  Historically, the only option that might exist for a plan sponsor was to hope it landed with a TPA that might be willing to handle second-level appeals, usually for a fee.  But, most TPAs steer away from this administrative add-on for two reasons.  (1) it drastically blurs the line between who is acting as a fiduciary for the plan and (2) it can create a potential conflict of interest and call objectivity into question when the same entity has adjudicated the initial claim, handled the first appeal, and then went on to handle the second appeal.  

Figure in a solution that can handle the appeals concerns discussed above and we are looking at the pinnacle method to eliminate the two most prominent barriers to self-funding faced by Small-Mids: financial concerns over claims exposure, and managing appeals.  

As Employer-Sponsored Plans Multiply, Self-Funding Remains an Attractive Option
By Brady Bizarro, Esq.

As the new year begins, we can reflect on annual reports and surveys recently released by federal agencies and non-profit organizations which measure public and private healthcare spending and reveal trends in national health policy. One of the most prominent reports is the National Health Expenditure Accounts report, which was released in December by the Centers for Medicare and Medicaid Services. Some of CMS's findings forecast tough times ahead for employer-sponsored health insurance. Now, more than ever, employers will need to develop innovative approaches to continue offering affordable coverage to their employees.

Healthcare expenditures grew more than two percent faster than the overall economy in 2015. Spending was up overall by nearly six percent in 2015, up to $3.2 trillion, or $9,990 a person. Private health insurance spending increased by seven percent, with annual premiums for employer-sponsored family plans already topping $18,000 this year (up three percent from last year). Prescription drug spending, high-cost patients, and an increased use of services were cited as the primary cost drivers.

To the surprise of many health policy experts, many of whom had warned of a mass exodus from employer-sponsored plans to the exchanges, the CMS data also shows that enrollment in employer-sponsored plans rose slightly in 2015. As a result, an increasing number of small and mid-sized employers in particular will face the burden of soaring healthcare costs in 2017.

Self-funding an employee health plan remains one of the most effective cost-containment strategies for employers with a relatively healthy workforce and a willingness to customize a plan. From 2013 to 2015, the number of mid-sized firms that "self-insure" jumped nearly 20 percent, according to the Employee Benefit Research Institute. Among small companies, that share is now up seven percent. As the cost of maintaining fully-funded plans continues to rise, in large part spurred by the Affordable Care Act's coverage mandates, we can expect these numbers to rise.

Self-funding provides employers with flexibility and the opportunity for employee engagement when designing their health plans. Employers can avoid many state-based coverage mandates and administrative costs because of federal preemption of state health insurance regulations. They can work with third-party vendors to analyze claims data and implement unique risk controls such as wellness programs, smoking cessation initiatives, and tiered prescription drug benefits.

A more recent development in the self-funded industry has been the increased use of employer incentive programs. These programs reward employees with cash and other incentives if they create savings for the health plan by voluntarily obtaining care from lower-cost healthcare providers. Many resources exist that enable employees to determine what various providers of different medical services commonly charge for certain services, and what to expect in terms of the quality of their outcomes. For example, third-party organizations routinely provide objective analyses of medical billing by claim type and by facility, while others measure how many mistakes are made by providers. These resources provide quality metrics, a comparison of prices, and even letter grades based on factors such as quality outcomes and lack of provider error. In its Review of State Reports (2008-2015), Freedman Healthcare confirms that "high prices do not directly correlate with high quality of care -- in other words, the highest paid providers do not necessarily provide the highest quality of care." For some procedures, the price discrepancy can be substantial. For example, one employer reported a price difference of $18,000 for a gastric sleeve procedure between two facilities in Louisiana.

While these programs can help alleviate the financial burden, cost will not be the only concern for employer-sponsored care this year. Under a new administration, employers will also face legislative and regulatory uncertainty. President-elect Trump has vowed not only to repeal and replace the Affordable Care Act, but to reduce regulations overall at the federal level. This would be a welcome development for employers, but it remains to be seen which provisions of the Affordable Care Act will be left in place. For example, if the Trump Administration moves to repeal the employer mandate, employers would no longer be required to offer health insurance to their full-time employees. Also, employers would no longer need to report coverage to the IRS or determine the value and affordability of their plans.

Despite the uncertainty, Trump has promised to keep in place two of the most popular ACA provisions; the ban on denying coverage to individuals with pre-existing conditions and the extension of dependent coverage up until age 26. Health policy experts have warned that these two components of the ACA are only viable if accompanied by coverage mandates, which would diversify insurance risk pools. Whether or not the employer mandate is preserved, employers seeking affordable coverage options for their employees will continue to benefit from the flexibility of self-insuring.

I Fought The Law and…Unpredictable Results Ensued
By: Jon Jablon, Esq.

Are you a landlord? If so, you might know that the law is not on your side. Or, are you a criminal? The law isn’t on your side either, but that one might be more obvious. Last question: are you a benefit plan with members being balance-billed?

There are certain legal protections that our country’s various legislative and regulatory bodies have put in place, such Section 501(r) of the Internal Revenue Code, so-called “surprise billing” legislation, and others – but in general, the majority of medical providers are not subject to legal restrictions in terms of whether they can balance-bill patients. In other words, in most circumstances, a medical provider is permitted to balance-bill a patient for the full balance on a non-contracted claim.

There are many health plans, TPAs, and brokers who want nothing more than to show a facility who's boss and refuse to pay another cent. Are there tactics and arguments that can be used to combat balance-billing? Of course there are! But, if a medical provider calls the plan’s bluff and continues to balance-bill, there is the real threat of collections and potentially a lawsuit, which many of us have witnessed first-hand, and it can be a nightmare for the patient.

For health plans that want to stand strong and not negotiate, litigation is an option! Litigation instituted by the health plan or the patient, that is. Even just the threat of litigation can have great effects on balance-billing support; many facilities, when faced with allegations of egregious billing and evidence that their charges are dozens of times Medicare rates, will close out accounts, or look to sign a direct contract for open and future claims.

Look out, though – because if a medical provider says “let’s dance” in response to a threat of litigation, the plan sponsor or patient will need to either back down or follow through. If the latter, it’s truly unpredictable how the court might react. On the one hand, non-contracted claims must, like all other non-contracted transactions in any other market, be billed at some measure of the fair market value. On the other hand, the patient generally signs the provider’s standard assignment of benefits form that says, in small print, “if your insurance doesn’t pay this whole bill, you agree to pay the rest.” In that case, can the claim truly be called non-contracted, after the patient has agreed (read: contracted) to pay the balance?

There are certain factors that work in the plan’s and patient’s favor, but there are perhaps just as many factors that work against them in a given case. It’s a tough call; whether or not to litigate should depend on many factors, including claim size, balance size, and the bill as a percentage of Medicare. For a $3,000 claim billed at 180% of Medicare, I’d recommend against litigation – but for a $150,000 claim billed at 1,300% of Medicare, it might be worth rolling the dice…

Repeal and Replace Faces a False Start - Affordable Care Act Review

By: Brady Bizarro, Esq.

After the surprising collapse of the American Health Care Act (“AHCA”), House Speaker Paul Ryan (R-Wis.) remarked, “We’re going to be living with Obamacare for the foreseeable future.” Tom Price, the Secretary of Health and Human Services, proclaimed that Obamacare was “the law of the land.” In the immediate aftermath of the stunning political defeat, many political analysts concluded that the effort to repeal and replace Obamacare was finished. Only a few days later, however, there were talks of reviving the legislation over the next few weeks. The President himself took to social media to proclaim, “We are all going to make a deal on health care . . . that’s such an easy one.”

What changed? Republican leaders faced immense pressure from conservative activists, interest groups, the insurance lobby, donors, and constituents to follow through on one of their most significant campaign promises. In addition, the President has targeted individual congressmen, mostly from the House Freedom Caucus, and pressured them to get on board with the AHCA. Whatever the Republicans decide to do, they need to act fast. The legislative calendar is jam-packed with other top priorities, including passing a budget and tackling tax reform. Additionally, insurers are developing premiums and benefit packages for health plans to offer in 2018, and these will need to be reviewed by federal and state officials over the summer.

In the immediate future, despite the legislative failure, the Trump Administration still has plenty of ways it can cripple the ACA. The President himself has said the law would “explode” on its own, but that process could certainly be accelerated. For example, the Administration could block funding for ACA subsidies, refuse to enforce the individual and employer mandates, and redefine Essential Health Benefits (“EHBs”).

That last part, redefining EHBs, could have a significant impact on employer-sponsored health insurance. In fact, a new bill is in the works, and one of its provisions (included by the Freedom Caucus) is to repeal EHBs entirely. Essential Health Benefits are requirements that insurers have to cover services like maternity care, mental health care, and hospitalization. According to Republican lawmakers, removing these requirements would significantly lower the cost of certain health plans because they would not be forced to cover a defined list of services.

We will continue to follow new developments closely, especially those that impact employer-sponsored health care.

Contact The Phia Group today about an affordable care act external review!