By: Jon Jablon, Esq.
Reference-based pricing is one of the most mysterious self-funding structures out there. At its core, it’s a simple enough idea: the plan changes what it pays for non-contracted claims. At its most basic level, it’s a way to redefine the traditional notion of U&C; generally, RBP plans base payment on some percentage of the Medicare rate. Guess what, though? If your plan defines U&C based on a database such as FairHealth (for instance), that’s a form of RBP too!
RBP isn’t a structure with a well-defined set of rules. Different plans, TPAs, and vendors do things very differently. The common denominator is that pricing for claims isn’t based on billed charges or an arbitrary percentage off billed charges, but an objective metric based on the value of services. If the plan considers rates set by a popular database to be indicative of the value of services, then that’s the reference upon which prices are based (there’s the R, the B, and the P!).
While of course there are practical differences between popular databases and Medicare, the easiest example being differences in the actual amounts generated), the major conceptual difference is that providers are generally more likely to accept rates generated by popular databases as payment in full than to accept Medicare rates as payment in full from the same payors. Even though the majority of hospitals do accept Medicare, the prevailing opinion among hospitals is that Medicare rates are essentially thrust onto them in a contract that they sign out of necessity (since many hospitals would lose a large percentage of their business if they didn’t accept Medicare). While payors may consider Medicare rates or a percentage above them to be reasonable, the majority of hospitals tend to disagree – at least at first.
When a health plan accesses the FairHealth database (again, just for example) to obtain pricing, there is often no patient advocacy needed, since many providers access the same database or consider those rates to be generally accepted – but to contrast that to Medicare-based pricing, a plan paying Medicare rates is much more likely to need some sort of advocacy since Medicare rates are not nearly as widely-accepted by providers. Patient advocacy is one of the must-haves in “traditional” RBP, which typically uses Medicare rates.
The morals of this story: (1) you may already be using RBP without realizing it! And (2) make sure your RBP program has patient advocacy, if necessary. If your chosen RBP payment methodology doesn’t need patient advocacy, then your RBP experience will probably be a bit simpler – but if you do need it, don’t skimp on it.
By: Ron Peck, Esq.
For those who did not tune into the “Empowering Plans” podcast, wherein I revealed why I’ve been absent from other recent Phia Group podcasts and webinars, please do check it out. In that recording, I describe my wife’s diagnosis (the specific type of Non-Hodgkin’s Lymphoma she’s fighting), and early lessons learned through her diagnosis. Key among them is the need for second (and even third opinions) to ensure the right diagnosis is ultimately achieved. I implore plan sponsors to pay for – and advocate for – second (and third) opinions. The funds expended on these opinions more than pay for themselves when we avoid unnecessary (and possibly dangerous) treatments for the wrong conditions.
The next lesson learned has been about and orbits around communication. Communication is comprised of more than just what we say, but how we say it. To effectively communicate, it’s necessary to put ourselves in the shoes of the ones with whom we’re communicating. Empathy is the greatest Rosetta Stone. With that in mind, my wife experienced a failure in communication not because the communicator was unclear, but rather, their focus, medium, and other elements missed the mark.
For instance, there were specific instructions she needed to follow to secure certain medications in accordance with rules set forth by the PBM. Nothing was withheld, and the coverage is great – but only if the rules are obeyed. The issue, however, was that the rules were communicated via US Mail (a/k/a “snail mail”). I love my mail carrier as much as the next red blooded American, but – if we’re being empathetic – we need to accept that a cancer patient is likely falling behind on their mail, and are unlikely to rush to open a letter that doesn’t look like a bill. To ensure the patient knows about the particulars of the program, we should notify them when the first dose is filled by notifying the pharmacist (so the message can be conveyed at the point of sale), and electronically (via phone call, text, e-mail, etc.). This is one silly little example of things we may not spot from the payer perspective, but as a patient, suddenly it’s clear.
Likewise, case management. Again, the benefit plan attempts – in its estimation – to go above and beyond in its servicing of the patient, assigning a case manager to the patient’s case. This person, the patient believes, is supposed to offer advice, act as a second set of eyes on proposed care, and generally look out for the patient’s best interest. In our mind, that would include financial interests too, right? Yet, when a conflict arose between the provider and plan representative, the case manager was quick to report to my wife – the patient – that the conflict was raging, claims would likely be denied, and she – the cancer patient – should encourage her oncologist (the person, the patient believes, that stands between her and certain death) to work with the plan.
Now, from the case manager’s perspective, they foresee the patient enduring financial hardship if the matter isn’t resolved, and they are trying to act preemptively to avoid it. This is not a bad thing! Yet, from the patient’s perspective, they are being dragged into matters of money – irrelevant and unimportant – compared to their own battle to survive.
Again, we need to step into the shoes of the patient and ask: “How would I feel if I received a call, threatening to deny my claims and saddle me with debt, unless I turn on my doctor and become their adversary on the plan’s behalf?” We know this isn’t the purpose of the case manager’s efforts, but this is how the patient (and if we’re honest – even we) may interpret it during such a time of stress and grief.
Moreover, if the patient is enraged by this turn of events, they may take this “heads up” from the case manager to be a directive from the plan administrator – and suddenly the case manager is looking like a final, fiduciary decision maker. I worry here, because we do not want this independent third party case manager to suddenly be a fiduciary, or impact the actual fiduciary, by “making decisions” on the plan’s behalf – without the plan’s authorization.
As my wife continues to battle cancer, my eyes continue to be opened as it relates to the patient perspective, and how they may interpret things we in the benefits industry often say without concern. I look forward to continuing to share my observations with you.
You may have heard about our new Phia Certification program, through which The Phia Group requires all employees to be “certified” to the company’s satisfaction. Certification is obtained by watching, reading, and listening to a series of training materials and then taking a series of tests to confirm the employee’s understanding of our industry and all aspects of The Phia Group’s operations.
One particularly noteworthy question is:
Which of the following is the most accurate?
As you may have surmised, the answer is option B, which is essentially an “all of the above” type of answer. This is especially noteworthy because we find that folks in our industry often think of “gaps” as occurring only between the plan document and stop-loss policy, while in practice there are lots of other gaps that can cause lots of unforeseen problems for health plans.
A perfect example – and one that we deal with quite frequently – is when there is a gap between the plan document and a network contract. This can be one the most problematic of all gaps, since it can come out of nowhere. The issue arises like this:
A plan incurs an in-network claim, billed at $50,000. The SPD provides the plan the responsibility to audit all claims, and an audit reveals that the appropriate payable rate (the plan’s U&C rate) for this claim is $30,000. Meanwhile, the network contract provides a 10% discount off billed charges for this particular claim – resulting in the plan paying $30,000 based on the SPD, but owing $45,000 as the network rate. This is a very common scenario and not one that can be solved quite so easily; even if the plan says “oh right – the network contract! We’ll pay the network rate to avoid a fight with the network,” the dilemma may not be over, since stop-loss presumably has underwritten coverage based on the assumption that the plan’s U&C rate will be paid, resulting in stop-loss possibly denying the $15,000 paid in excess of the plan’s U&C rate. Even though there’s a network contract and the plan may have no choice but to pay it, there’s always the chance that the stop-loss policy will define its payment on other terms.
Moral of the story? Gaps in coverage can arise between the plan document and any other document – including network contracts, ASAs, stop-loss policies, employee handbooks, PBM agreements, vendor agreements, and more. Check your contracts, and make sure your SPD aligns with all of them! (Email PGCReferral@phiagroup.com to learn more.)
By: Erin Hussey, Esq.
The Complications Surrounding Intermittent FMLA Leave
The Family Medical Leave Act (“FMLA”) is a federal law requiring certain employers (employers who employ 50 or more employees, for at least 20 workweeks in the current or preceding calendar year, in a 75 mile radius), to provide eligible employees an unpaid, job-protected leave of absence that continues the employee’s health benefits. It is offered for family and medical reasons and an eligible employee may take up to 12 workweeks of leave in a 12 month period. This timeline appears straightforward, but complications arise when employees take this leave in separate blocks of time, even an hour at a time (when it is medically necessary and for the same serious health condition). This is called intermittent FMLA leave.
Employers should ensure they are administering intermittent FMLA leave properly given the complications it can present:
1. Recordkeeping: Complications can occur with tracking intermittent FMLA leave because an employee’s schedule could vary from week to week and the employer may have to measure FMLA in hourly increments or less. When these intermittent FMLA leaves occur, an employer must be diligent in tracking the leave to avoid liability of non-compliance with FMLA. For example, in Tillman v. Ohio Bell Tel. Co., 545 F. App'x 340 (6th Cir. 2013), an employee was out on intermittent FMLA leave and the employee did not provide information when asked by the employer for recertification of that leave. The employer subsequently terminated the employee. Since the employer kept thorough records of this, the court upheld the employee’s termination and the employer won the lawsuit.
2. Communication: It is important for an employer to maintain communication with the employee who is out on intermittent FMLA leave. For example, in Walpool v. Frymaster, L.L.C., No. CV 17-0558, 2017 WL 5505396 (W.D. La. Nov. 16, 2017), the employee was terminated and he brought suit claiming interference with his intermittent FMLA leave and that his discharge was in retaliation of his right to take FMLA leave. The employer claimed that the employee did not follow normal policies and procedures for giving notice of an absence. However, the employee won the case. The bottom line here is that if the employer believes the employee has provided inadequate notice, the employer should maintain communication with the employee before taking any immediate adverse action.
3. Paid v. Unpaid: In a recent Opinion Letter dated April 12, 2018, the Department of Labor’s Wage and Hour Division addressed a situation where an employee requested 15 minute breaks every hour under FMLA. This creates complications for employers because FMLA is unpaid and determining which 15 minute breaks are unpaid under FMLA, and which ones are paid, can be difficult for employers to track. This issue is discussed in the Opinion Letter.
The takeaway here is that employers should determine what their best practices will be for administering intermittent FMLA properly. Once the employer determines what their best practices are, the employer should implement them and administer their employees’ intermittent FMLA leaves accordingly.
By: Chris Aguiar, Esq.
I fight for the rights of my clients every single day. Typically, though, the fight takes place while sitting in the confines of my office by way of telephone or email communication. Recently, though, it has become increasingly more common for The Phia Group to have to actually appear in court in front of a judge or administrative board; such was the case last week. An administrative worker’s compensation board in California who is constantly attempting to reduce its workload and eradicate the existence of worker’s compensation liens they so lovingly refer to “Zombie Liens”, or liens that have been bought/sold/assigned. Simply, the board refuses to want to deal with those types of liens. What a surprise to me, then, when several of my clients had their liens summarily dismissed without any due process or a hearing on the matter since, as we know, no assignment of rights occurs to the administrator or vendor in a traditional self-funded situation. So, off to California I went on behalf of a client to explain to the board it’s fundamental misunderstanding of self-funding and how the interests of our clients have not been sold or assigned to The Phia Group or the claims administrator, rather, we are simply acting on their behalf in an effort to recoup funds that are rightly of the self-funded benefit plans and their beneficiaries.
Make no mistake, this was no easy task. The Administrative Judge was hell bent on removing our client’s lien and though I don’t think I made any allies, I was able to effectively convince her that the lien should be reinstated because although she was confident that her reading of the law was clear, members of her own organization had ruled all over the map with regard to the law that was so abundantly clear it could not possibly be interpreted in a manner inconsistent with this judges opinion (…. Can you sense my sarcasm here?).
In the end, The Phia Group was able to get its 2nd lien in as many attempts reinstated. We’ll keep fighting the good fight on behalf of our clients, and while I enjoy California very much, I hope to be able to win these from the comfort of our offices in Braintree from here on out. Here’s hoping!
By: Ron E. Peck
As the winds gust and snow continues to fall this first week of April (seriously?) I won’t allow myself to despair. I remind myself that warmer days are around the corner. My son and I gaze out the frosted window, looking to the skies hoping to see a ray of light, and a warming air, melting the frozen tundra that is our lawn. Our beloved New York Metropolitans aka “Mets” somehow continue to pull off win after win, and I know that – despite things seeming tough now – better days lie ahead. I could be talking about the weather, or I could be talking about a different climate. Do I have a (frozen) finger in the breeze, or, am I measuring the temperature of our industry? At the risk of uttering a cliché, in our industry, it truly is the best of times and the worst of times. Employers are moving to a self-funded model for their health benefits in heretofore-unknown volume; results are benefits that are more robust, at less cost for employees and employers. Yet, as this newly discovered bounty enriches the lives of its members, we also see a rise in regulation, and scrutiny. Consider the attorney, fresh from his or her attack against financial advisors – looking for another kill. Brokers who sold 401K plans and managed pensions suddenly found themselves the target of fiduciary breach lawsuits by the people they had previously served. All it took was an economic downturn, lost funds, and the employees suddenly asked, “Hey! What happened to my money, and who’s responsible for its absence?” If you think an advisor who is penalized for a few mistakes in their asset management services is bad, wait until those same employees ask, “Hey! Who used my money to buy a $500 box of tissues???” As the floodgates open, and more people join the happy ranks of the self-insured, let’s recall the words of “the bard” himself, The Notorious B.I.G.: “Mo money, mo problems.” As we service more plans, help more people, and work with more funds – we must (I believe) adopt a new level of prudent asset management. Sooner or later, someone will ask, “What did you do with my money?” And we must all be proud to report the truth. Like spring, we too need to weather the bad to enjoy the good. I see – like flowering flora in it’s infancy, poking forth from the thawing earth – members of our industry also emerging with ideas, drive, and an eye toward the best days to come. Offering advice, new services, and ways to do more with less, we must confidently say: I am a fiduciary that has done his or her duty, and then some!
There are hundreds of novel ideas that have permeated the self-funded space over the last couple of decades, many of which have the potential to be very beneficial to self-funded plans. I mention that they have the potential to be beneficial not because it’s lawyerspeak (well, not just because of that), but because I mean exactly that: some programs could be beneficial, but are implemented in such a way that renders them either ineffective, noncompliant, or something in-between.
A perfect example, and one we face nearly every day, is the phenomenon of claim repricing – whether based on Medicare rates, “traditional” U&C, the “black box” approach (the “black box” is where claims are put into one side of the box, and then magically come out the other side with a new price attached), or anything else.
Check out the title of this post. If a rate has been negotiated and the payer has agreed to pay a certain amount, then that is a contract, and has to be adhered to! If a plan is subject to a network agreement but decides to reprice claims at a lower amount than the network rate, the plan can always – always – expect pushback. This is a phenomenon that is certainly not exclusive to this industry; imagine writing a letter to Bank of America, saying “I know I agreed to pay $2,500 per month for my mortgage, but I talked to Quicken and they told me that’s too much – so I’ll give you $1,100 a month instead.” Let me know how that turns out…
But seriously: when we suggest language for health plans to use to contain costs, the second sentence of our suggested definition – second only to a simple sentence that introduces the definition – notes that “The Maximum Allowable Charge will be a negotiated rate, if one exists….” That is designed to account for the fact that many claims (most, in fact) are subject to some sort of contract. Whether a network agreement, or a single-case agreement, or “letter of agreement,” or any other contract under any other name, a given negotiated rate must be paid, or the payor will subject itself to losing the discount, or the very real possibility of a lawsuit.
“But doesn’t the Plan Document control all other documents?” Tricky question. Does it trump the network contract? No. But does it trump all other obligations of the Plan? Yes. That’s why not having accurate plan language can be trouble. Take, for example, the alarmingly common scenario in which the plan owes a PPO rate, but the Plan Document provides that the Plan will pay 150% of Medicare for all claims. The Plan Administrator (the party responsible for compliance with the Plan Document) is required by law to follow the terms of the Plan Document, and pay all claims at 150% of Medicare – but the Plan Sponsor (the party to the network contract) is required by contract to pay the network rate. Since only one amount can be paid, the Plan Sponsor and Plan Administrator (often the same entity!) need to figure out which document will be followed, and which will be ignored.
I won’t bore you with the details of the implications of each choice, suffice it to say that it’s always a good idea to make sure the Plan Document says what the Plan will actually do. If your documents don’t line up, you’ll have all sorts of problems. If the Plan follows the network contract and doesn’t pay claims at the 150% of Medicare stated within the Plan Document, then the Plan Document shouldn’t say that! That is a compliance issue as well as a stop-loss issue.
If you want to be bored with the details of what might happen if a health plan violates its PPO contract or violates its Plan Document, feel free to contact PGCReferral@phiagroup.com. For now, though, I’ll leave you with a quote from Mark Twain: “Better a broken promise than none at all.” (That’s actually really terrible advice. Do not apply that quote in this scenario.)
There is no question that the vast majority of folks in self-funding, whether benefit or service providers, have a goal in mind; providing cost effective benefits to the insured. Ask many in academia or even representatives of government agencies, and the story they tell about self-funded plans isn’t quite so favorable. Despite our mission and mandate in the law, to make decisions pursuant to the terms of the benefit plan to protect ALL plan beneficiaries, decisions that plans need to make quite often put all of us on this side of the isle in contentious situations. It’s always important to remember that the personalities and agenda often drive action and decisions must be considered carefully not only for their impact today, but their impact into the future. Every decision can have a ripple effect, either financially or on future treatment of claims. On top of that, every decision has the potential to end up in Court.
“Freedom Fighters” feed on this dynamic. We’ve all dealt with them before; Attorneys who believe “justice” must be done for their clients and will stop at nothing, even waving fees or taking on costs, to have their name on the case that potentially changes the game. Just this week, a member of The Phia Group’s Subrogation Legal team approached me about a case in Ohio (the 6th Circuit) asserting that a well-known case in the 2nd Circuit (Wurtz v. Rawlings) stands for the proposition that a self-funded ERISA plan cannot obtain ERISA preemption when the plan participant brings an action to enforce a state anti-subrogation law. There are several things wrong with this his argument that Wurtz applies to this Ohio Case. First, since the Wurtz decision arose in the 2nd Circuit, it does not have any binding authority on cases in the 6th Circuit. Second, the decision makes clear in footnote 6 that the benefit plan in that case was fully insured, and not a private self-funded benefit plan – accordingly, the analysis (and possibly the outcome) would likely be different. Finally, the Court in Wurtz went to great lengths to stretch the applicable law holding that a plan cannot claim preemption on a defensive pleading when the participant brings an action to enforce a state anti-subrogation law. These holdings by the court fly in the face of everything we understand about self-funded plans – since a claim on the basis of an anti-subrogation law is essentially a claim to which the Plan participant is not entitled to benefits under the Plan, it would appear that it is without doubt “related to” the provision of benefits. Yet, the court found a way to work its way through the analysis to hold the exact opposite.
What’s more, this “Freedom Fighter” has waived his fees and costs and indicated he has no intention of reimbursing the Plan and that if the Plan wants to be reimbursed, it should bring suit and face the argument brought forth in Wurtz v. Rawlings. Now, whether his intent is to fight for his client and ensure that justice is done, or that he can bolster his resume as the lawyer that expanded that interpretation of the law to another area of the Country, is of limited consequence. The Plan is left with the prospect of brining suit on a case worth $50,000.00, and enduring the costs, time, and risks associated with litigation.
There are several strategies that can be utilized here, but it's important to understand that every action has an opposite and immediate reaction, and decisions made in this case could not only cost the plan money, but change the law in a meaningful way with respect to future claims. Being able to seamlessly maneuver all of these issues is imperative to a successful outcome. Plans also must be cognizant of their definition of success and understand the risks of making any meaningful decision.
Following a Maryland Senate and House of Delegates vote on January 12, 2018, Maryland became the latest state to mandate paid sick leave for employers with 15 or more employees.
According to Maryland’s Healthy Working Families Act (“the Act”), which will go into effect on February 11, 2018, applicable employers are required to provide one hour of paid (at the employee’s regular wage rate) sick leave for every 30 hours worked. Notably, employers with 14 or fewer employees are required to offer one hour of unpaid sick and safe leave for every 30 hours worked. Employees may begin accruing leave on January 1, 2018 and earn up to 40 hours of sick leave annually.
Permissible uses for earned sick and safe leave include:
• Caring for or treating an employee’s mental or physical illness, injury, or condition
• Obtaining preventive medical care for the employee or employee’s family member
• Caring for a family member with a mental or physical illness, injury, or condition
• Taking time away from work due to domestic violence, sexual assault, or stalking of employee or employee’s family member
• Taking maternity or paternity leave
Employers that offer self-funded health plans should take note of the Act’s requirements and review their current policies, including continuation of health coverage, to determine if they are in compliance with this new law.
To be eligible for this leave, employees must regularly work more than 12 hours per week, be at least 18 years of age, and not serve as independent contractors or as-needed employees. Notice is also a significant element of the Act, as employees must notify the employer at least seven days prior to being out of work when requesting a foreseeable leave. Additionally, employers must maintain records of paid sick time accrual and usage.
The Act will preempt any Maryland sick and safe leave laws enacted after to January 1, 2017, but any laws enacted prior will remain intact. Arizona, California, Connecticut, Massachusetts, Oregon, Vermont, Washington, and the District of Columbia have also enacted legislation requiring paid employee sick leave.
See the full Act here.