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Know when to fold ‘em

By: Chris Aguiar, Esq.

Last week, I teased this blog post on Linkedin with vague commentary about effective cost containment not being just about recovering as much money as possible, but also about being knowledgeable and understanding when its best to cut losses.  One of the attorneys in our office is currently working on a file where a benefit plan may be ill-advisedly pushing the limits of the law.  You see, in subrogation and reimbursement cases, there is a rule called the “Made Whole Rule”.  This rule is one of equity that operates to eliminate a plan’s recovery rights when a plan participant does not recover the full amount of their damages (i.e. they weren’t “made whole”).  Now, those of us with private self-funded plans that enjoy the benefit of state law preemption can point to our plan terms and the current state of Federal law which holds that clear and unambiguous language that disclaims application of this rule and others like it will control and allow plans to recover regardless of whether the participant was made whole.

This plan, however, is unfortunately governed by state law as it is not a private self-funded benefit plan; preemption does not operate in its favor.  The participant had $800,000.00 in medical damages, alone, and received a $1,000,000.00 settlement.  Those numbers alone may indicate to some that the participant was, indeed, made whole.  However, the damages discussed above are ONLY the medical damages.  We have yet to discuss any other damages, including but not limited to:  1) lost wages (present and future) 2) pain and suffering 3) future care, etc.  The list of damages in serious accidents such as this can be extensive, and all of those categories hold considerable value and are compensable in the eyes of the law.  The particular jurisdiction in which this plan sits happens to have one of the most aggressive made whole rules in the country, and the judges there tend to be very pro participant.  Accordingly, it’s a safe assumption that given the participant will really only receive about $600,000.00 after fees and costs of pursuit – it’s quite easy to see that the participant will not likely be considered to have been “made whole” in the eyes of the court.

Despite that, The Phia Group’s attorney has been able to negotiate for a reimbursement of approximately 20% the Plan’s interest.  Should the Plan decide to try to enforce a right of full reimbursement, and the court apply the made whole rule, the Plan will receive no recovery at all and will have endured the extra time, expense, and possibly even media fallout for ‘dragging its participant through this ordeal’, of protracted litigation.

Plans, and we as their advisors, must be cognizant of the rules of the jurisdictions in which we operate and realize when a good outcome is unlikely.  Sometimes, even if one has a good case and can win and recover its entire interest, the cost of doing so paired with the inability to obtain reimbursement of the costs of pursuit can render the action moot, because the cost can in many instances outweigh the interest.  This is even more true, of course, in situations where the Plan is likely to lose.

Effective cost containment is about looking at the situation and determining the most cost effective approach – winning does not always equate to the best outcome.


Even the best Plans can backfire!

By: Chris Aguiar, Esq.

As we saw last week, you cannot add the Patriots’ winning the Super Bowl to the list of absolutes in life (despite what my New England brethren might tell you).  After death and taxes, few things are a given.  Something similar can be said, that success is not a given, in the world of subrogation/reimbursement. 

Last week, I had the pleasure of traveling to Kansas City, Kansas to testify on behalf of a client in a Preliminary Injunction Hearing in Federal District Court as we attempted to obtain a Temporary Restraining Order, a court proceeding to officially freeze the ability of an attorney or his client from spending money to which the Plan asserts an equitable lien by agreement.   We spent weeks preparing, researching, committing facts to memory, and rehearsing examinations so that we could put our client in the best position to succeed.  Unfortunately, the Judge had other Plans.  Despite having witnesses from Kansas and beyond ready to testify – the Judge did not allow any testimony to be heard.

In the end, we were ultimately able to secure everything we needed for our client, but it's notable that something as simple (and typically predicable) as the procedure that a hearing will follow was entirely up to the discretion of the Judge that day.  The Judge seemed to have an agenda, and there would be no deviating from it.  We ended up on the right side of that agenda, but what if the alternative had been true –a significant risk given that Kansas qualifies as an anti-subrogation state.  It’s very important in subrogation cases to consider all options.  In many cases there is no doubt that the Plan’s rights are strong, but enforcement often comes at a significant cost.  Unfortunately, in the world of Health Subrogation where Plan expenses appear to be limitless while tort reform and other factors allow auto policies to be limited to, in many cases, less than $100,000.00, the cost of enforcing the rights of the Plan in full can leave the Plan worse off than it started.   That can even be true when things go exactly right – imagine when a Judge decides to throw a wrench into “the Plan”!


Nice to see you, 2018. Should we Expect more of the same?

By: Chris Aguiar, Esq.

Wow!  What a year 2017 has been.  As I sit here and prepare to start the New Year off with a bang by heading to Kansas to testify in federal court on behalf of a client, I’m reminded of just how much more complex subrogation (and self-funding in general) has become.  More and more of our clients (and The Phia Group, as well) are being dragged into court to defend their practices and attempts to curb the cost of health care.  This is especially on my mind because just this week two Courts in different areas of the Country ruled in favor of our clients. Hospitals challenging our attempts to be innovative, attorneys in anti-subrogation states trying to punish us for being effective at what we do and finding massive holes in their laws, or attorneys on behalf of their clients pushing the limits of current subrogation law and attempting to simply disburse settlement funds in an effort to avoid the reimbursement rights of self-funded benefit plans, prudent management of plan assets is harder than ever before; I don’t expect that trend to reverse.  Even the Federal Government is throwing some interesting curveballs into the rotation.  What will the impact of the changes to Healthcare Reform be on the mandates that were such pivotal cornerstones to The Affordable Care Act and what impact will that  have on the employer-sponsored health plans?

Though it always seems like everything is up in the air, one thing is for certain – self funding is not for the weak.  With a target constantly on our backs, we have to be diligent and make sure we are crossing all of our T’s and doing everything by the book (err … the plan document).  Any misstep is being dissected by those on the other side of the table as they continue to try to search for ways to invalidate the benefits of self-funding.  Whatever 2018 has in store – The Phia Group is proud to be standing on the front lines with our clients and look forward to what I expect to be another action packed year.

Thank you to all of our clients and partners, congratulations on all of your successes, and a Happy New Year to all.  Let’s show 2018 what we’ve got!
 


A Little 2017 Holiday Cheer… Subrogation Style!

By: Chris Aguiar, Esq.

On the heels of the NASP conference in Austin, Texas I felt it appropriate to bring along some Holiday Cheer after a questionable 2016.  Everything in the subrogation world in 2016 was viewed through the prism of the Montanile decision where the Supreme Court ruled the a plan who allowed its participant to obtain a settlement fund and not do enough to enforce its reimbursement right could be held without a remedy if the participant spent the settlement funds on non-traceable assets.  After 15 years of decisions favoring benefit plans, Montanile seemed like a little bit of coal under the tree, and some worried that it signaled a shift that might lead to more scrutiny on benefit plans and burdens being shifted onto benefit plans in order to enforce their rights.  I’m happy to report this Holiday season that those fears may have been premature.

I just returned from Austin, Texas where the Country’s best and brightest subrogation attorneys converged at the NASP Conference to chat about the year in subrogation and I can tell you that 2017 has given us a fair amount to be thankful for and hope that the tide has not turned as courts continue to render decisions that are favorable to benefit plans.  For example, in Mull v. Motion Picture Indus. Health Plan, 2017 U.S. App. LEXIS 13949, the 9th Circuit joined the 5th, 6th, & 11th Circuits in deciding that a recovery provision referenced only in an SPD can be enforceable when the SPD is adopted as all or part of the plan.

There also appears to be some positivity surfacing in the courts for MAO’s and their ability to enforce the same rights and obligations upon Medicare recipients as traditional Medicare.  Courts historically held that MAOs did not have an implied federal right of action to sue primary payers in Federal Court.  Over the past year, however, courts have ruled that there is indeed a right of action and that, much like with traditional Medicare, there can be severe penalties levied against parties who do not comply with the requirements of reimbursement under the Medicare Secondary Payer Act, such as treble damages as well as fines of $1,000.00 a day for a carrier’s failure to report.

So, don’t let Montanile and 2016 get you down.  There are several strategies that can be utilized to both ensure that a plan participant  and/or their attorney will cooperate with a plan’s right of reimbursement, and in the event that funds do get disbursed – that isn’t the end of the analysis.  And as is often the case with the law, if you wait long enough the law changes.  The important thing is to make sure you have the resources to stay abreast of all the changes and strategies to maximize recoveries.

Now enough about subrogation … let’s go get ready to spread some actual Holiday Cheer ….. a Merry Christmas and  Happy Holidays to all!
 


Words With No Meaning - Subrogation Accident Questionnaire

By: Chris Aguiar, Esq.

Google “average words spoken per day” and you might see some interesting entries – such as, men use 7,000 words a day on average, as compared to women’s 20,000.  When deciding what to write about today – it struck me that so much of my day handling issues on behalf of the benefit plans I represent have to do with words; which ones are used, the context in which they are used, and what they mean.  When having discussions with the Phia Team, we always find ourselves asking, “what does that mean”?  That’s because so much of the law, especially in health plan law, rests on just how clear the terms of the Plan are.  It’s important that everyone be on the same page.  When someone uses the word “normal”, everyone thinks they know what that means – but in reality, it means something slightly different to everyone.  Norms are subjective, so use of the word isn’t necessarily sending the same message universally.  When viewed that way, of course there are misunderstandings.

This whole line of thinking stemmed from a subrogation investigation I was involved in a few weeks ago.  Interestingly, it wasn’t on behalf of a client - I was involved in it for my sister.  My sister fell down the stairs at home and sprained her ankle– and of course, she received an accident questionnaire; naturally, she called me and the following conversation ensued:

… Cell phone rings …

Sister: Hi Chris, I got a letter from my insurance company asking about my ankle.  Isn’t this what you do for a living?

Me:  Yes, it is.  What do you need?

Sister:  Why are they asking me this?

Me:  … Gives long detailed explanation about subrogation and why the insurance company would be asking this question… (Omitted in the interests of brevity)

Sister:  I don’t want to deal with this, what do I do?

Me:  Put that you fell at home and let’s see if they ask any more questions.

As it turns out, the insurance company didn’t ask any more questions.  You might be thinking, “of course they didn’t, Chris – your sister fell at home”.  Well, that’s only partly true.  See, to my sister she was “home” but as far as the insurance company is concerned, she wasn’t.  That’s because my sister doesn’t own her home – she lives in the 2nd floor walk-up apartment owned by my immigrant parents.  Technically, she could bring a claim against my parents and as we know, so could the insurance company.  See “home” is another word on a list of words I call “words with no meaning.”  “Home” is where you lay your head at night, but depending on the context in which it’s being used – it isn’t necessarily something you own, and that has implications on a subrogation investigation.

But I knew what any good subrogation investigator knows – and that is that most of the time, the insurance company will get an accident letter that reads “fell at home” and they close the investigation without further research.  It may not have been a lot of money, but for my immigrant parents, it was a headache I didn’t want them to have to deal with, and it was definitely a lost recovery opportunity for the insurance company.  If you just take the words that people say at face value, you may misunderstand what they actually mean because the fact of the matter is, you have a different idea in your head of what was meant when they used certain words.  Whether it’s in your everyday conversations or in the terms of an employee benefit plan – make sure you say what you mean and you mean what you say.  Prepare yourself properly for a subrogation accident questionnaire. In your day to day life, it most often leads to minor misunderstandings and maybe some hurt feelings, but in the world of health benefits, it could lead to lengthy legal disputes and significant losses in Plan assets.


U.S. Airways v. McCutchen – Where Are they Now?
By: Chris Aguiar, Esq.

The health benefits industry can feel like a whirlwind, especially for self-funded plans.  We always seem to be running around trying to figure out how to comply with the law, only to have it change and start the cycle all over again.  We are experiencing this as we speak with the Affordable Care Act (a.k.a. Obamacare) and its possible successor, the American Health Care Act.  As a result, we tend to move on from issues more quickly once they seem to be resolved even though perhaps they linger.

Remember McCutchen?  In the subrogation world, U.S. Airways v. McCutchen was a big deal.  It finally answered the question that every benefit plan, TPA, and recovery vendor was fighting over since the beginning of time on their subrogation cases; can a court override the terms of a private, self-funded benefit plan under the purview of ERISA?  U.S. Airways lost the case, but the decision that now clarified and established the law was clear; specific unambiguous plan language rules the day.  Of course, the Montanile decision threw a bit of a curveball into our world, but that’s a blog post for another day. Fast forward almost four years (that’s right, the Supreme Court decision in McCutchen came down in 2013 – can you believe it was already that long ago?); does anyone know what happened to U.S. Airways?  

In addition to what turned out to be the main issue in the McCutchen case, that the plan terms were not good enough for the Third Circuit, there were many more issues to consider when the case was remanded (i.e. sent back) to the lower courts for additional findings.  As it turned out, U.S. Airways utilized BOTH a Summary Plan Description (SPD) and a Plan Document (PD).  That alone was not the kiss of death, but the SPD explicitly provided that the terms in the PD controlled if there was a conflict. Unfortunately for them, there was!  The SPD provided for recovery from McCutchen’s underinsured motorist coverage (UIM), but the PD did not.  Since the PD was the controlling document in that case, U.S. Airways was not entitled to a recovery against the UIM.

So what was the ultimate outcome?  U.S. Airways was entitled to assert its $64,000.00 lien against $10,000.00 in liability coverage rather than against $100,000.00 in UIM coverage.  It is important to know all of the facts and understand all of the factors that might impact your case.  As we saw in U.S. Airways v. McCutchen – language in the SPD and/or PD was deficient and contradictory – and that led to U.S. Airways losing out on recoveries as well as the costs of bringing those actions.  Every case is different, and every entity has its own motivations as to why they engage in litigation, but it is important to make sure you have all your ducks in a row and that you have the tools needed to actually win the fight, or you might get stuck holding the bag.  The McCutchen case helps us in the subrogation world every single day because of what the Supreme Court ultimately held, but the law can change on any given day.  Make sure you are prepared for the whirlwind!


Court Nixes Health Plan’s Subrogation Claim
Posted December 22, 2015, 3:11 P.M. ET
By Carmen Castro-Pagan
A health plan isn’t entitled to reimbursement of $48,000 in medical expenses it paid on behalf of a minor beneficiary who was injured in an all-terrain vehicle accident, the U.S. District Court for the District of Arizona ruled.


In granting the beneficiary’s motion to dismiss, Judge Diane J. Humetewa ruled Dec. 17 that the plan’s reimbursement clause was unenforceable because it wasn’t included in the formal plan document, but instead was part of the summary plan description. The court further held that in light of the conflict between the plan and the SPD, the terms of the master plan controlled.
The case is Apollo Educ. Grp. Inc. v. Henry, 2015 BL 419831, D. Ariz., No. 2:15-cv-00143-DJH, 12/17/15

The Supreme Court Seeks Solutions to the Latest Challenges to Subrogation Rights in Montanile Case
By Catherine Dowie

The facts of the latest healthcare subrogation challenge on the SupremeCourt’s docket (Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan) will be familiar to many. As you may recall from the June 2015 article,“TheRoad to Recovery: Subrogation Gets Its Day in Court… Again,” following a motor vehicle accident, Robert Montanile’s health plan paid over $120,000 on his behalf, subject to all plan terms, including a subrogation and reimbursement provision.
Read more…

FEHBA Preempts Kansas Anti-Subrogation Regulation
By Carmen Castro-Pagan
The Federal Employees Health Benefits Act preempts a Kansas administrative regulation prohibiting subrogation and reimbursement clauses in health insurance contracts of federal government employees, the U.S. Court of Appeals for the Tenth Circuit ruled .
The appeals court, in the Oct. 29 opinion, joining other federal courts in ruling that FEHBA preempts state laws limiting subrogation and reimbursement clauses. The decision confirmed the lower court’s ruling that a federal employee must reimburse her insurer because federal common law also displaced Kansas regulation.
The case is Helfrich v. Blue Cross & Blue Shield Ass’n, 2015 BL 356222, 10th Cir., No. 14-3179, 10/29/15 

The Problem with Wraps
By Adam V. Russo, Esq.
(As published in Thompson Information Services’ Employer’s Guide to Self-Insuring Health Benefits)

If you are a long time reader of mine, I would first like to say thank you for being the only person other than my mother to read what I write.  It is extremely kind of you to do so!  As a loyal reader, you would also know that it doesn’t take a lot to get me going and in the self insured industry it seems like something new happens on a weekly basis that gets my water boiling.  For the past few years, amongst the threat of the exchanges and the state regulation of stop loss, nothing has bothered me as much as the wraps!  Wrap networks that is.  If PPO networks weren’t bad enough, in case you have a claim that doesn’t belong to a network, you can always pay the claim through the wrap network.   So if one network wasn’t enough, with a wrap you can even work with more.

What we have is an industry phenomenon.  TPAs and self funded plans complain about their networks all the time.  How the discounts are bad, how you don’t have the ability to audit the claims, how the networks really work on behalf of the hospitals and not the plans. Everyone seemed to complain about them yet need them to attract clients that aren’t willing to go the reference based pricing route.  You need a network to survive as I am told by every executive that has been in the industry longer than I have been alive.

Yet at the same time, these professionals long for the day when they see a large claim and have the ability to fight the facility about the excess charges, save their clients money, look like a hero to the broker, have the stop loss carrier thank them, and make the TPA some extra revenue from the savings they found.  The problem is they have this option right now and it’s called the out of network or wrap network claim.  Every day I see TPAs and self funded employee benefit plan throw good money down the proverbial toilet.

Wraps are everywhere yet I don’t see how they can actually help any self insured plan.  Before I start ranting about wrap networks too much, let me formulate a typical example for you and I will use our own self funded plan to illustrate.   The Phia Group’s self funded plan has primary access to the Blue Cross network in Massachusetts.  Over 98% of all of my plan’s claims are under $1000 and there is a network discount that applies to all in network facilities.  I cannot audit these claims, I cannot negotiate these claims but the reality is that I do not need to and I don’t want to.  The claims are small and the discounts off the charges are reasonable.  There is no need to make much of a fuss.  Now, the remaining 2% of claims are the issue and while my hands are pretty much tied on the large in network claims, luckily I am in Boston where there is a lot of competition for my dollar and the charges by the well respected hospitals in the city aren’t too much when compared to Medicare pricing.  So, you must be asking by now where is the problem.

The problem exists when there is a large claim outside of my network.  For example, let’s say I am on business in Montana and while on a trip, I decide to go skiing.  Let’s knock on some wood please as I keep the hypothetical going.  Let’s say I break my leg and need to be rushed to a rural hospital that is obviously not in my network.  This would be viewed as an out of network claim.  At this point I have two options, hire a negotiator to get the claim resolved or access a wrap network through my administrator that can offer immediate access to discounts without having to worry about picking up the phone and trying to work out a deal and ensure that there is no balance billing to me.  Even when the plan or administrator hires a firm to negotiate a claim, all that may be happening is that the negotiating firm is accessing the wrap discount rate and making a quick deal.  They aren’t negotiating anything but you think they are.  They are just accessing the same wrap network rate that anyone else (including you) can.  It’s stealing your money since not only are you paying way too much on the claim, you are paying the negotiation company a percentage of the so called savings for doing two minutes of work for you.

Wrap networks are a great option on a low dollar claim when the hassle of negotiating a deal isn’t worth the money but most out of network claims are large claims since they are typically emergency situations.  The greatest thing about wrap networks is that you do not have to use them!  This is what most of my clients do not understand.  There is a huge difference between a primary network and a wrap network. The biggest being that contractually you may be bound to pay the network rate on a primary PPO regardless of how outrageous the claims may be but in the wrap scenario, the use of the wrap is optional.  This is absolutely huge when it comes to finding some true savings.

I have spent almost two years convincing my TPA clients that there is a distinct difference between primary network and wrap claims yet so many administrators use the same claims process on both.  In this industry when someone says in-network they include wrap claims top that definition but they are just dead wrong.  Educating plan administrators on this is huge since if people do not know they have options then they will never choose an option.  As you know, the plan has a fiduciary duty to be prudent with plan assets.  Too many times they are being fooled by these so called cost containment firms that these claims are being negotiated when all that is happening is that the company is applying the agreed up wrap discount rate.  It’s embarrassing that we have snake oil salesmen in our industry but the reality is that we have plenty of them.

If you want to save some easy money for your plan, carve out these large out of network claims, place strong language into your plan document, and hire a true claims negotiation firm that will use innovative data and legal techniques to negotiate a fair deal and get signed off agreements on each claim.   A single claim can save your plan hundreds of thousands of dollars.  I see millions upon millions wasted every month by those in the dark.  Please do not continue to be one of them.

There is widespread confusion in the marketplace as the claim negotiation companies like to state that they negotiate your claims but the reality is that in many instances there is no actual negotiation as these vendors just access the wrap network so-called discounts and spend approximately 5 seconds on the actual claim.  Basically anyone on the street could actually get the same discounts that many of these wraps have just by picking up the phone and calling the facility.  You just tell them that you want 20% off the bill in exchange for sending the money within 30 days.  People do this with their credit card bills every day.  There is an entire industry built around credit card negotiations.  This is no different as you can do this yourself.  Think about it – these are out of network claims that otherwise would have balance billing to the member.  Do you really think that these facilities want to be chasing dollars from members by collecting ten dollars a week?  Of course not!  They want the money from the deep pockets of a health plan right away even if it’s 50 cents on the dollar.

Then there is the actual wrap contract that is no better in most cases than the typical primary network access contract.  The rate is set at the percentage of billed charges and with wraps the discounts are much smaller that the primary networks.  In addition, the plan is also specifically prohibited from using any sort of usual and customary or clinical editing logic.  Therefore, the one time you can actually audit the claim for excess charging, you agree not to!  The wrap agreement is also tethered to a participating provider agreement – and that, of course, is still confidential like in primary networks.

The bottom line is that wrap contracts are just as bad as primary contracts, except often worse, because the discounts are lower. A TPA is doing its groups a disservice if it accesses a wrap network instead of negotiating claims. That’s especially true when it comes to a complimentary or supplemental wrap when the payer is not obligated to use the wrap.  In these situations it would be insane not to negotiate the claims. A claim that can be out of network if the payer so chooses is always better off paid as out of network with the ability to negotiate than using a wrap network meager discount.

The best approach is to have well written plan document language that gives you the best possible weaponry to negotiate these claims.  You must leverage favorable plan language into settlements with providers that result in a plan payment of far less than it would have otherwise had to pay if a network rate was used.

There are hundreds of vendors that negotiate claims; most TPAs are either familiar with more than a few or perform their own negotiations. Either way, though some providers will negotiate robotically without regard to whether the plan is required to pay their bills, others – including the most egregiously charging ones, with expensive legal counsel to prevent exactly this – scrutinize the plan document language and are able to pick apart arguments to negotiate. Defining usual and customary as the prevailing charge in the area, grouping payment based on the provider rather than the claim, and not affording the plan administrator the proper discretion to determine payable amounts are examples of plan language that will make cost containment unduly difficult.

Here is what you should be stating in your plan document to ensure the most rights possible when it comes to negotiating large out of network claims.  The plan should state that claims must be reasonable meaning that services and fees are in compliance with generally accepted billing practices for unbundling or multiple procedures.  Usual and customary shall mean the lesser of fees that a provider most frequently accepts from the majority of patients for the service or supply, the cost to the provider for providing the services, the prevailing range of fees accepted in the same area by providers, and the Medicare reimbursement rates.   Usual and Customary charges may be determined and established by the Plan using normative data such as Medicare cost to charge ratios, average wholesale price for prescriptions and manufacturer’s retail pricing for supplies and devices.

At the end of the day, you want to give your plan as many options as possible to get the biggest savings possible on a claim.  Networks – especially large ones – are not known for their sensitivity to the plan’s problems. There are dozens of different scenarios that can arise within any given plan that will lead to a dispute with the network over payable amounts.  Having clear language that comports with network agreements and discussions with providers regarding carve outs are crucial aspects of effective cost containment programs when using networks. Some networks allow plans to engage in creative cost containment techniques such as carving out dialysis, specialty drugs, air ambulance claims, and carving out certain specific providers – but many others don’t.

Here is my bottom line – if you have a large claim (define large based on your risk level) and have the ability to negotiate the claim, do it.  Prepare yourself for the opportunity by having the best possible language in your plan document, ensuring that your administrator doesn’t automatically send these claims to a wrap network that you don’t need to use, and ensure that you work with a claims negotiator that not only has the ability to work a claim but has access to the best claims data, legal minds, and plan language to ensure maximum savings.  Besides it’s your fiduciary duty to do it so stop breaching your obligation to be prudent with plan assets.  The employee benefit plan bank account will thank you for it.