By: Ron E. Peck, Esq.
Twelve years ago, I was dragged out of the comfort of my office and taken to East Texas, to present before a Third Party Administrator client of ours. After Adam Russo (our CEO) spoke about the cost savings achieved by our best-in-class subrogation services, and Michael Branco (Principal and CFO) explained how our cutting edge software allows us to identify more opportunities than anyone else, it was my turn to talk. I was assigned the simple responsibility of discussing how our subrogation clients receive our innovative SPD/Plan Document language (at the time, focused solely on subrogation) free-of-charge. I wasn’t then the show-stopping public speaker I am today, and Adam felt the need to jump in with, “It’s not just the language. Ron’s an attorney, and he’ll personally look over your plan documents. He’s working day and night; weekdays and weekends.” In response, a well-meaning woman in the audience remarked: “Oh dear! Ron… What do your friends think of that?” In response I announced, “Plan Docs are my friends…” and the legend was born.
In that time I’ve managed to regret that statement (more times than once), but the foundation remains. Plan documents were, and continue to be, the bedrock. Any and all rights our plans seek to assert must first find footing in the SPD. Moreover, inconsistencies, weaknesses, and shortcomings also find their roots grounded in the plan document. For good and for bad, the SPD is all, and all is in the SPD. For this reason, I and my team constantly scream at the top of our lungs: “Update the SPD! Review and revise now, before it’s too late…” Yet, here (as in so many other things), it is too easy to beg forgiveness, and inconvenient to ask permission.
Are there scenarios where a plan document can be revised, and the new terms applied “retroactively?” Can language adopted in March of 2018 reach back and apply to claims received in January of 2018? Certainly. But only in limited situations, and only when it will not have a negative impact upon beneficiaries; only when the language (or lack thereof) had no impact between then and now. Yet, too often, issues pop up … mistakes, errors, shortcomings… either failures to abide by the law, or oversight that leads to costly obligations. These problems come to our attention BECAUSE someone has already relied upon the plan document they received; the issue is rooted in the plan document, and as such, we can’t ask for a “do-over.”
Look at it this way. If you were an inventor, and you invented a time machine for no reason other than to invent a time machine, you could go back in time and change things. As long as the change you make doesn’t impact the “future” you (so that you will still invent the time machine), the change will be allowed. If, however, you invent a time machine specifically with the intent to change a specific event that happened in the past, even if you do invent the time machine, you won’t be able to change that “one thing” in the past that inspired you to invent the time machine. Why? Because if the thing that happened in the past, which inspired you to invent the time machine, is changed – then you won’t be inspired to invent the time machine, won’t go back in time, and won’t change the event. It’s a paradox, and nature abhors a paradox.
The same thing applies here. If some event causes you to reevaluate your plan document, identify an issue, and fix the problem – then you can’t go back and apply the language retroactively, since the triggering event (that caused you to make the change) also, by its nature, means that the change can’t be made retroactively without impacting someone or something.
For instance: if you wanted to exclude cosmetic surgery, mistakenly issue a plan document in January of 2018 that covers cosmetic surgery, and in March of 2018 realize the plan document actually covers cosmetic surgery, you can fix that mistake in March, and have the “new” language apply both in the future, and retroactively, as long as no one is impacted. If, however, the only reason you discovered the mistake (in March of 2018) is because a plan member received cosmetic surgery in February of 2018 (thinking it was a covered service, in reliance upon the language they received in January), then you are stuck covering those claims.
What really burns me, is that (often) we identified and notified the client about the issue, but (at the time) the “fix” was too much of a burden. Now, with that crack in the foundation leading to a collapse of the home, our clients ask for a solution. Certainly, we can (and do) identify and resolve the issue, so that – moving forward – the problem will not be a problem again. Yet, then the inevitable query pops up: “Can we apply the new language retroactively.” For the reasons shared above, too often the answer is, “No.”
If the “problem” is on my desk, chances are it’s NOT because someone just happened to notice an issue in the plan document, it hasn’t impacted anyone or anything yet, and there is a desire to fix the language (and apply the fix retroactively) before the issue actually causes any confusion. No, no, no… If the “problem” is on my desk, it’s because a patient or provider has already sought to enforce the language as written, and a gap or legal violation was discovered after the fact. Cost containment measures the plan “meant” to apply were not set forth in the SPD. Stop loss won’t cover something. The law voids something else. Regardless, even if we can “fix” the problem now, the damage that was done, is done.
So… I say this: You have one shot at this. You must make sure the SPD is perfect, BEFORE it’s handed to participants. BEFORE they seek care in reliance upon its terms. BEFORE providers provide care in reliance upon those terms. This document is written in ink, not pencil, and once it’s signed and dispersed, assume it’s a one way road. With that in mind, respect my friends – the plan documents – and get it right the first time.