By: Jon Jablon, Esq.
As those of us involved in self-funding know, there are multiple considerations involved in most decisions. Even something as simple as negotiating a pre-payment bill can involve questions such as: (1) Will the stop-loss carrier reimburse the negotiation fees? (2) Will the agreement hold up if the provider or plan changes its mind? (3) Does the TPA incur liability if it enters into the agreement on behalf of the health plan? (4) How should the TPA treat patient responsibility pursuant to the agreement? ...etc.
And that's just pre-payment negotiations, which are generally considered to be very straightforward!
Reference-based pricing is far more complicated than simple, "traditional" pre-payment claim negotiations. Post-payment negotiations of any kind add a layer of complication, but add to that the human factor (i.e. the employee!), and situations tend to be delicate and can quickly become volatile.
All that aside, however, the purpose of this blog post is actually to talk about how stop-loss treats RBP. There are certainly different ways that different carriers view RBP in general - some view it as a boon, yet others as a bane. An issue that comes up across many different carriers, however they may view RBP, is reimbursement and calculation of "Usual and Customary" in the stop-loss policy.
Many carriers define U&C in the "traditional" way, which is often calculated simply as an amount the carrier deems reasonable as the result of an audit. That can be very dangerous to a plan using a PPO, since network rates are almost universally higher than stop-loss carriers' audits of claims - but for an RBP plan, even though payments are lower, something that cannot be ignored is the potential to settle large claims after the initial payment.
If the policy will cover this type of top-up settlement payment (and that's a big "if"), you'll still need to investigate how the policy will treat the allowable amount paid. Many medical providers will not settle claims for amounts less than the amount a stop-loss carrier's conservative auditor deems payable, which can result in denied claims!
As always, the best general advice we can give is that if a health plan incurs a large non-contracted claim that is paid subject to Medicare-based pricing, it may be worth it to discuss the potential outcomes with the carrier, since balance-billing can happen, and the plan may need the carrier's cooperation down the line! Without proactive communication, though, the chance of getting the claim covered by stop-loss diminishes significantly.
By: Chris Aguiar, Esq.
As the saying goes, many of the basic skills we need to be effective in life are taught to us early. “Use your words” – a common instruction given to young children who are struggling to express themselves or communicate effectively, is an instruction I still use daily – albeit with a slight adjustment. Especially with matters relating to plan administration, words alone aren’t enough! it’s important to use the correct words to avoid any confusion and ensure that everyone reading the plan understands exactly what you mean!
A common example we often encounter is the exclusion of benefits incurred while someone is driving under the influence (“DUI”). Some plans use provisions excluding benefits arising from “serious illegal activity” or “felonious activity” and expect those exclusions to operate in a DUI situation. You might be thinking, “yeah, Chris, a DUI is seriously illegal activity”. While virtually everyone will agree that a DUI is seriously illegal, in the law it may not always be considered a “serious illegal activity”. Imagine someone is considered to be a very small amount over the limit (e.g. 0.0804) and they crash into a tree only to have an officer determine that they were in fact engaged in a DUI. They were not drastically over the limit, did not injure anyone but themselves, and this was their first offense. Is it conceivable someone might look at these facts and determine that this particular incident did not rise to the level of “serious illegal activity”? Certainly, the participant seeking to have their benefits paid might believe the activity not to be sufficiently serious, and you can bet their lawyer will fee the same way. Furthermore, based on the facts above, the act would be considered a misdemeanor rather than a felony. It is quite possible neither of the provisions could be upheld!
The point is this – while this issue is not simple enough that a preschooler could handle it, plans can protect themselves by being careful how their provisions are drafted by using words that clearly state their intent. If you intend to exclude benefits when injuries arise while a participant is driving under the influence, ensure the terms of the exclusion clearly state that intent! Understanding the correct words to use is almost always the difference between a valid and invalid denial!
By: Brady Bizarro, Esq.
On February 26th, and again in early April, top executives from major pharmaceutical companies and PBMs testified before the Senate Finance Committee. The companies represented included Pfizer, Merck, John and Johnson, CVS, Express Scrips, OptumRx, and others. Led by Chairman Grassley (R-IA) and Ranking Member Wyden (D-OR), the Committee sought to address the problems of continued price increases, free loading, and price transparency. They also portrayed PBMs portrayed as the shadowy middlemen who may be making these problems worse through their increased use of rebates.
The hearings proceeded mostly as Q&A sessions. When asked whether the CEOs consider negative public opinion when setting list prices, all said yes, meaning price isn’t just a function of administrative or research and development costs. Their answer Implies that if no one got upset, prices would go up more. One senator pointed out that if Humira (a drug used to treat arthritis and Crohn’s disease) were its own company, the drug would be among the Fortune 500 companies all by itself, larger than General Mills, Halliburton or Xerox.
The drug manufacturers claimed to support the Trump administration’s proposed rebate reform rule. That rule as proposed applies to Medicare Part D rebates only (which are still very large). Senators are also developing bills aimed at reforming the rebate system. Two CEOs told the Committee that they would lower their list prices if the rebate ban was extended to the private market.
Between these two hearings (for the manufacturers and then for the PBMs), the drugmakers and PBMs essentially blamed each other for high prescription drug prices. Popular ideas discussed were potentially tying U.S. drug prices to international prices. There was also serious support for value-based purchasing arrangements (sometimes called risk-sharing agreements) that tie drug payments to patient outcomes. That would mean that if a particular drug fails to produced a particular clinical or financial outcome, a price reduction would be triggered or a refund. Senators noted that these arrangements are complicated because of anti-kickback laws and proposed rebate reform rules, though. Price transparency will help gain more evidence in knowing if you're paying a fair price during claim negotiations. In the end, all parties agreed that the status quo isn’t working for patients, payers, or society.
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.
By: Erin M. Hussey, Esq.
Whenever a self-funded health plan covers mental health/substance use disorder (“MH/SUD”) benefits, we review the plan to assess whether these benefits are covered in parity with medical/surgical benefits in order to ensure compliance with the Mental Health Parity and Addiction Equity Act (“MHPAEA”). A recent case, however, has added another layer to compliance when it comes to covering MH/SUD benefits.
In Wit v. United Behavioral Health, 2019 WL 1033730 (N.D. Cal. 2019), class actions were brought against an insurer by plaintiffs who were “at all relevant times a beneficiary of an ERISA-governed health benefit plan” administered by the insurer. In the capacity of administering MH/SUD benefits, the insurer had developed “Level of Care Guidelines and Coverage Determination Guidelines (collectively, “Guidelines”) that it uses for making coverage determinations” of MH/SUD benefits. Those Guidelines were the main issue in this case as well as how they were utilized to adjudicate claims.
Interestingly enough, the plaintiffs' claims against the insurer did not include a violation of the MHPAEA. Instead, the plaintiffs asserted two ERISA claims: (1) breach of fiduciary duty and (2) arbitrary and capricious denial of benefits. The Plaintiffs argued that the insurer breached its fiduciary duty by:
“1) developing guidelines for making coverage determinations that are far more restrictive than those that are generally accepted even though Plaintiffs’ health insurance plans provide for coverage of treatment that is consistent with generally accepted standards of care, and 2) prioritizing cost savings over members’ interests.”
The plaintiffs also argued that the insurer improperly adjudicated and denied claims because of the overly restrictive Guidelines, and the use of those Guidelines was arbitrary and capricious.
The court ruled that the insurer breached their ERISA fiduciary duty and that the actions were an arbitrary and capricious denial of benefits, and concluded that the insurer’s Guidelines were overly restrictive and not in line with accepted standards of care. The court emphasized that the insurer placed “an excessive emphasis on addressing acute symptoms and stabilizing crises while ignoring the effective treatment of members’ underlying conditions.”
This case is a reminder that the claim guidelines utilized and the process of adjudicating and denying claims must be held to certain standards to ensure ERISA compliance when administering MH/SUD benefits.
When President Trump nominated Scott Gottlieb to be commissioner of the Food and Drug Administration (“FDA”) in March of 2017, critics were quick to point out his deep ties to the pharmaceutical industry. They had little hope that he would have the wherewithal to overcome perceived conflicts of interest and challenge the industry on important issues facing consumers and payers. Scott Gottlieb, however, proved to be a rarity, seemingly immune to regulatory capture. He received bipartisan praise as one of the administration’s most effective regulators. His departure in April will be a loss for the self-funded industry and for healthcare cost containment as a whole.
Dr. Gottlieb focused his efforts in three key areas: rising drug prices, the opioid epidemic, and the underage use of e-cigarettes. Under his leadership, the FDA worked to strengthen and speed up the review process for generic drugs. In 2018, first-time generic approval grew by 24%. In all, the FDA approved 971 generic drugs in 2018, an all-time high. With respect to the opioid crisis, which has killed some 85,000 people since 2017 and led to an enormous spike in treatment costs to payers, Dr. Gottlieb took a hard stance on opioid prescribing limits and approved a mobile app to help those with substance use disorder recovering through outpatient treatment. Finally, under Gottlieb, the FDA cracked down on teen vaping by announcing rules to restrict the sale of flavored e-cigarettes, supported banning menthol cigarettes, and reduced nicotine levels in cigarettes.
Soon after he announced his departure, the Trump administration named an interim replacement, Dr. Ned Sharpless, who now heads the Cancer Division of the National Institutes of Health (“NIH”). The search for a permanent replacement is still underway.
By: Andrew Silverio, Esq.
In recent weeks, we have seen an influx of questions regarding the practice of procuring prescription drugs from abroad, particularly Mexico (Canada has historically been the most popular source). The issue has also been popping up in the news, and a program for public employees in Utah to venture to Tijuana to pick up their prescriptions is now live. The potential for significant savings compared to domestic pricing for (essentially) the same drugs is what is driving the popularity of this trend. We won’t get into the legal standing of this practice – feel free to reach out if you’d like information on that topic – but we wanted to highlight a potential risk that we generally don’t see employers consider when looking at programs like this – not a legal or contractual risk, but a health risk stemming from the drugs themselves.
It is true that drugs manufactured for sale abroad can be chemically identical or sometimes even manufactured in the same facilities as their U.S. counterparts. However, this is not always the case, and quality control can be an issue, as can more nefarious problems with counterfeit drugs. Countries designated as “Tier 1” (such as Canada) have comparable safety standards to those in the United States, but the fact remains that the FDA has no authority or ability to oversee drugs manufacturer for sale abroad (even drugs that come off the same conveyor belt as their U.S. counterparts).
Even at home, quality control issues happen. Per a recent CNN article, “there’s no end in sight for one of the largest prescription drug recalls in recent memory.” Numerous different blood pressure medications, from several manufacturers, have been pulled from shelves due to contamination related to “NDMA” (N-nitrosodimethylamine), a chemical which is used to make liquid rocket fuel. This chemical, and another which has been identified called NDEA (N-Nitrosodiethylamine), interfere with DNA replication which can result in cancer, and the issue goes back years, not months. These foreign manufacturers may be taking all the same appropriate corrective action for drugs packaged for sale elsewhere, but the FDA simply doesn’t have the ability or authority to make sure of it.
Finally, in the event a patient visits a foreign country to retrieve their medications and ends up receiving tainted or counterfeit products and having adverse effects (whether due to a lack of FDA oversight or not), that patient will not have the benefit of any domestic laws relating to product safety or medical malpractice. If any recourse against the manufacturer or pharmacy is available at all, they will likely need to return to the source of the drug and operate within an unfamiliar legal system. Of course, if the patient’s health plan actively encouraged the patient to get their drugs from a less reputable foreign source rather than the pharmacy up the street, the plan itself could potentially be liable – and a much more appealing target than a foreign pharmacy. If you need an independent consultation of your health plan, contact us today!
By: Philip Qualo, J.D.
Each year more and more Americans overdose on prescription opioid drugs. In fact, the Centers for Disease Control and Prevention (CDC) reported that deaths attributed to opioid abuse and addiction now exceed car crashes as the leading cause of unintentional death in the United States. Opioid addiction has grown exponentially in recent years and is now officially the deadliest drug crisis in American history, more than heroin and cocaine combined.
Opioid drugs are routinely prescribed by healthcare providers for its lawful intended purpose, to treat severe pain. As access to healthcare has increasingly become available to all Americans from diverse backgrounds, this specific drug crisis is unique in that it crosses all social, economic and racial boundaries. This broad demographic substantially increases the likelihood that the opioid epidemic will eventually make its way into every employer’s workforce.
Employers sponsoring group health plans can incur significant financial and legal risks when dealing with plan participant opioid abuse, such as an increased use of emergency room services, hospitalizations, related medical costs, and even an increase in workers’ compensation claims. As a result of opioid abuse, the cost per claim continues to grow, as well as the number of painkillers per claim. For example, a 2012 study conducted by The Hopkins-Accident Research Fund Study, found that workers prescribed even one opioid had average total claim costs that were more than three times greater than claimants with similar claims but who were not prescribed any opioids.
Employers who sponsor self-funded health coverage have a particular advantage in combatting the opioid epidemic in their own workforce as they have the flexibility to design their health plans in ways that could potentially discourage opioid abuse among plan participants. For example, allowing for low cost access to, or otherwise incentivizing participation in, popular alternatives to pain management. These alternatives provide plan participants with a variety of options to treat pain without the use of prescription drugs. The most common alternatives to pain management are acupuncture, chiropractic care and physical therapy. Such alternatives are likely far less expensive than the financial and legal risks associated with prescription opioid abuse.
Self-funded health plans also have the ability to ensure that healthcare providers in their networks are following CDC guidelines. These guidelines are intended to improve the way opioids are prescribed to ensure patients have access to safer, more effective chronic pain treatment while reducing the number of people who misuse, abuse, or overdose from these drugs. In the alternative, self-funded health plans could consider implementing a three-day limit on opioid prescriptions for initial pain treatment as the CDC has found that the probability of addiction increases on day four.
Regardless of how employers and/or plan sponsors choose to address the opioid epidemic, it is important that employees and plan participants are educated about opioid abuse and its potential consequences. Employees that are educated about the drug crisis and their healthcare options are more likely to make informed decisions regarding their pain.
I read what I thought was a decent article this week on some of the advantages of self-funding but wanted to take an opportunity to comment/elaborate. Always great to see self-funding be touted in the public eye via highly visible media sources. It can certainly be difficult to give a very detailed explanation of this complex risk model in a capped word count article, but something jumped out at me that I thought relevant to note. The author describes self-funding generally as “the employer pays for its own employees’ claims, or at least to a certain amount, while larger claims would be handled by insurance companies”. Certainly that is a model we’ve all seen, but it is indeed only one model and the exact kind of description that drives the misconception that a self-funded plan that uses a traditional stop loss model is not fully self-funded and is therefore insured.
It's important to understand that many self-funded plans do not utilize the hybrid approach this description implies. To the casual observer this description suggests that a $1,000.00 claim is paid by the self-funded plan while a $100,000.00 claim is paid by some other health insurance arrangement entered into by the employer; that’s simply not accurate, certainly not among The Phia Group’s clientele. Rather, for many self-funded plans the plan is at all times responsible for the medical bills and, only after the paying, seeks reimbursement from another insurance company. That company from which the plan seeks reimbursement is not a health insurance carrier, rather, it’s a financial insurance vehicle that protects and ensures the viability of the Plan to make sure benefits continue to be available for all employees/beneficiaries of the plan.
So, just like the $1,000.00 medical bill, the employer/self-funded plan receives the $100,000.00 claim and must evaluate whether it is eligible for coverage and provide said coverage. Only then, does it submit a reimbursement request (assuming the $100,000.00 is above the applicable deductible). It is often the case that for some reason or another, the plan allows for coverage but the request for reimbursement is denied under the terms of the stop loss insurance policy. Certainly, that self-funded plan would tell you that they were unable to “transfer the risk” on that particular claim.
The description above alone is almost 350 words – so we certainly can’t expect an article of about 750 words intended to cover both self-funding and Direct Primary Care, one of the more innovative approaches being utilized by employers to provide more cost effective health plans to their employees, to describe it in depth. Notably, the author did not quote Mr. Thaxter when making that description, so it’s impossible to know exactly how it was described to him. As practitioner in the self-funded space, it’s incumbent on us to do everything we can to educate those who are self-funded, or looking to become self-funded on the benefits, the risks, and strategic and innovative steps that can be taken to minimize the risk and maximize the reward – more cost effective medical benefits!
Catch the article here - https://thebusinessjournal.com/self-funded-insurance-options-come/?fbclid=IwAR3D-CxhWa1vrUy1lkmNMKJTt3cAuucs6v5q7zT4mkQA7ytD9oBQsyl92Pc
By: Ron E. Peck, Esq.
Let me first begin by reporting some good news. Those who follow our organization closely recall back in July that I announced my wife’s diagnosis of Non-Hodgkin’s Lymphoma. Six months later, I am pleased to announce that she is in complete remission. It will be some time before she can be deemed well and truly “cured,” but this news is still something I am thrilled to share with you. To the many (many) people who sent me well wishes, prayers, and requests for updates; thank you. Relevant to this blog post, however, I also want to thank the providers – the people who saved my wife’s life, and ensured my three year old son still has his mother.
As I work on behalf of the self-funded health benefits industry, including employers, employees, brokers, stop-loss carriers, MGUs, TPAs, and pretty much every entity that plays a role in the formation and administration of said plans – one attitude consistently seems to pop up. As payers, we assume the worst of the payees. In other words, we routinely state that the rising cost of health care is the providers’ fault. The affordability of health benefit plans (or lack thereof) is driven solely by exorbitant – and dare I say it – criminal pricing by hospitals and providers.
This desire to place all the blame on providers demonizes them, casts them in the light of an “enemy,” and eliminates any chance of coordinating with providers in an effort to peacefully resolve differences of opinion – hopefully before a patient is negatively affected – and fix the system we agree is flawed.
Many times have I been asked to assist in a situation where a provider has billed one amount for services rendered, the benefit plan pays a lesser amount it deems to be reasonable, and the patient is balance billed. After reviewing the entirety of the situation with the provider, sometimes they agree to accept some amount situated between their original charged amount, and the amount paid. The offer is fair, yet upon reviewing it with the plan sponsor or administrator, they refuse to pay more. The rationale sometimes has to do with fiduciary duty (fair), sometimes relates to financial limitations and stop-loss availability (understandable), but sometimes the stated rationale is akin to: “I’m tired of those crooks milking me for all I’m worth, and I refuse to negotiate with terrorists.”
It pains me to see this happening. I count myself lucky to live in an area where there are so many incredible providers of healthcare. More of my friends are providers than any other profession, and without exception, they are all 100% focused on improving patients’ health, and 0% focused on charge-masters, billing schemes, and squeezing plans dry. The issues (and there are many of them) are more a symptom of a broken system than intentional malfeasance on the part of all providers. Most providers, like us, are people so exasperated by their day-to-day duties that they throw their hands in the air and default to an “us versus them” mentality.
If payers and payees cannot work together to identify a middle ground that works, is fair, and is viable long term for all involved, then “someone else” will do it for us… and I fear what that “solution” will look like. Feel the burn?
This is why I am asking every person who reads this missive to step back, and remember who we are dealing with, and perhaps – on occasion – give them the benefit of the doubt. They, like us, are caught in a broken system whose shortcomings perpetually fuel a death spiral; and they – like us – are just trying to do right (as they see it) for their employer and their industry.
Do we truly believe hospitals want to bite the hand that feeds them, or do they look at their own (albeit inefficient and poorly conceived) processes, witness how we in the payer community are trying to “shortchange” them, and they – like us – become defensive?
The bottom line is this. We need to adopt and obey a process by which providers are adequately rewarded for their noble work, and on both sides waste is eliminated, innovation is awarded, and cost-containment isn’t a dirty word. Lastly, we need to change our perspective and understand that we are all (payer and payee) part of the same entity – the healthcare industry – and that without one, the other will cease to thrive.