By: Erin M. Hussey, Esq.
In our previous blog post, The Final AHP Rules Take a Hard Hit, we discussed the court decision that vacated (1) the bona fide provisions (including the provisions about a substantial business purpose, control, and the expanded commonality of interest requirements), and (2) the working owner provisions from the Final Rule on Association Health Plans (“AHPs”). The court remanded their decision to the Department of Labor (“DOL”) to determine how this ruling would affect the rest of the Final Rule given the severability clause. The DOL has provided an initial response via Question and Answers (“Q&As”). Those DOL Q&As detail the following:
“The Department disagrees with the District Court’s ruling and is considering all available options in consultation with the Department of Justice including the possibility of appealing the District Court’s decision and the possibility of requesting that the District Court stay its decision pending an appeal. At this time, we have not reached a decision on how to proceed.”
As such, without any action from the DOL, it appears the above-noted bona-fide and working owner provisions remain inoperative. However, the House and Senate have taken matters into their own hands. On April 11th, Sen. Mike Enzi (R-WY) and Lamar Alexander (R-TN) introduced a bill in order to protect the AHP Final Rule (S. 1170). The text of the bill is not available yet but will be made available here: https://www.govtrack.us/congress/bills/116/s1170. Sen. Enzi noted the following in his statement on the legislation:
“I rise to introduce the Association Health Plans Act of 2019 . . . My bill will simply codify the Labor Department's final rule to provide certainty for current enrollees and to ensure the pathway remains available for new association health plans to form.”
The following day, on April 12th, U.S. Representative Tim Walberg (MI-07), joined by Rep. Michael C. Burgess, M.D. (TX-26) and Rep. Virginia Foxx (NC-05), introduced the Association Health Plans Act of 2019 (H.R. 2294). The text of that bill is not available yet but will be made available here: https://www.congress.gov/bill/116th-congress/house-bill/2294.
While it is unlikely these bills will get bipartisan support, this legislation will be something to keep in mind while we await the ultimate outcome of the AHP Final Rule.
By: Jon Jablon, Esq.
We’ve seen it a thousand times: a health plan document provides that the plan will pay the lesser of certain factors, including billed charges, the applicable network rate, and the plan’s U&C rate (however it may be calculated). The old way of thinking in the industry is that this language gave the Plan Administrator a lot of leeway in determining appropriate payments – but it’s “the old way of thinking” for a reason.
Consider this scenario, with the language mentioned above: an out-of-network provider bills $20,000 for services, and the plan’s U&C rate is $13,000. The plan can simply pay the “lesser of” billed charges or U&C – netting payment of $13,000. There’s no contract, and no requirement to pay more than U&C. Easy stuff; very straightforward.
Now, consider this scenario: an in-network provider bills $20,000 for services; the plan’s U&C rate is $13,000; the network rate is $18,000. The plan’s language obligates the Plan Administrator to pay the “lesser of” those figures which is the U&C rate – but the network rate contractually obligates the payor to pay $18,000! Payment of the “lesser of” – that is, strict compliance with the plan document – results in violating the network contract, which can result in a contentious situation at best – but at worst, a lawsuit by the provider and possibly loss of network access (sometimes even on the TPA level, depending on the situation).
That’s what some might call a “double-edged sword,” where the Plan Administrator must make the choice either to violate the network contract and abide by the strict terms of the Plan Document (thus fulfilling its fiduciary duty), or to violate the Plan Document and abide by the terms of the network contract (thus fulfilling its contractual payment obligations). It’s a tough choice – but one that a Plan Administrator can avoid having to make in the first place, with the right plan language!
When the plan document obligates the Plan Administrator to pay less than the amount required by a separate contract, the Plan Administrator’s contractual and fiduciary obligations are at odds with one another. But it’s avoidable!
My advice? Make sure the Plan Document provides that the amount the Plan Administrator will pay is the contracted rate, if there is one. (And, hey – if that network rate doesn’t seem like it’s adding enough value, ditch the network. There are viable alternatives!)
As with so many stories in the self-funding universe, the moral of this one is to make sure your plan language lines up with your contracts. If you want to make the plan language tighter, or you think it can be better, or even if you just want to test its tensile strength to see what’s what, contact The Phia Group’s consulting division, at PGCReferral@phiagroup.com.
The healthcare space is rapidly evolving – and self-funding is no exception. Legislators, regulators, and courts are constantly providing new guidance – some good, some not. For this month’s webinar, we’re going to present some current events; we’ll discuss how they can help or hurt self-funded players, and what you can do to take advantage of them (or avoid the pitfalls created).
Join The Phia Group’s legal team for an hour as they tackle some of the most relevant topics currently affecting our industry, and explain what they mean to you and your business.
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In the latest episode of Faces of Phia, Adam and Ron reminisce on Andrew Silverio's Undergraduate adventure. Tune in for an episode filled with trips down memory lane, international drug importation, and predictions about the future of prescription drugs!
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Last night, a federal judge in Washington, D.C. ruled that the Department of Labor’s new rules that expanded the sale of association health plans (“AHPs”) violate existing law. Those rules applied to fully-insured AHPs in September 2018, to existing self-funded AHPs in January 2019, and would have permitted new self-funded AHPs on April 1, 2019. If this ruling stands, it will have a significant impact on the self-funded industry. The Phia Group will have extensive analysis of this decision in the coming days. For now, join Adam and Brady as they unpack this 43-page order and discuss what it all means for employers, TPAs, brokers, and the broader industry.
Join The Phia Group’s Ron Peck and Brady Bizarro as they discuss Brady’s recent trip to Austin and presentation at the Texas Association of Benefit Administrators; with a focus on employee engagement, new ideas for cost containment, and an in depth analysis of pending litigation challenging the legality of ObamaCare. Yeah… You’ll want to tune in for this one.
In this episode of Faces of Phia, Adam and Brady interview the superpowered controller of The Phia Group. From adventures in the Steel City to conquering “nice problems to have,” the team covers it all in this candid discussion.
In this can’t miss episode of Empowering Plans, Brady and Ron dissect the President’s State of the Union Address, and focus in on how it will impact those of us servicing health benefit plans – and the entire healthcare industry. This one is going to be huge.
Valentine’s Day is upon us, and we’re feeling the love. Too often we, as an industry, spend our time discussing issues, problems, and concerns, and don’t dedicate enough time to the features and opportunities that make self-funding great. We focus so much on “how we save” self-funding, that we forget to celebrate the reasons why self-funding is worth saving in the first place. Join the team as they discuss what makes self-funding such a great option for so many employers and employees, as well as the incredibly cool new innovations rolling out in 2019, that will be sure to make self-funding a sweetheart for even more employers this year and beyond.
By: Brady Bizarro, Esq.
In 2012, the annual cost of insulin needed to treat patients with type 1 diabetes was $2,864. Today, the cost has risen to over $6,000. For working-class families already struggling to keep up with everyday expenses, this increased economic burden has forced some to choose between food and life-saving medication. CBS News has reported that more than one-quarter of Americans living with diabetes have cut back on their insulin usage to ration their supply, and that can be dangerous. Skyrocketing insulin prices are just one example of high prescription drug costs, which the Trump administration has made it a priority to address.
We have written a lot before about the administration’s proposals to lower drug costs: from ending pharmacy gag rules to outlawing the use of co-pay coupons, ideas for controlling costs were in no short supply. Ideas and tweets, however, have a limited impact. Real legislation is needed to produce meaningful reform, and as we are now well into 2019, there are indications that bipartisan action may be on the horizon.
Soon after taking over powerful congressional committees, Democrats began scheduling hearings and reaching out to drug companies asking for detailed information regarding their pricing practices. On February 7th, Democrats, including 2020 hopeful Senator Sherrod Brown (D-OH), unveiled a bill that would allow Medicare, the largest purchaser of pharmaceuticals in the country, to negotiate drug prices directly with drug manufacturers. The Medicare Negotiation and Competitive Licensing Act would permit such negotiations and strip drug manufacturers of their patent protection for a drug if those negotiations failed. For self-funded plans, this is key. Not only would negotiated Medicare rates provide a benchmark for pricing (as is the case for most medical services), but failed negotiations would allow generic versions of expensive drugs to market much earlier than previously allowed by law.
For now, lawmakers are hoping to get President Trump to support this bill. The president’s support would put significant pressure on Republican congressmen to support the bill. As always, we will bring you the latest developments as they unfold.