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The Fax Machine and a Lesson in Incentives

By: Brady Bizarro, Esq.

Let’s face it: fax machines are horrible and outdated. From busy signals to unreadable printouts to incorrect destinations, it is no wonder most industries abandoned them last century. In our industry, which deals extensively with providers, it’s the primary way to communicate. Understanding why can give you a glimpse into the broader problems with healthcare policy in this country today; a misalignment of economic incentives.

Almost all providers have digitized their own patient records. This was done largely thanks to the Obama administration. In 2009, as part of the stimulus bill, the government passed the Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”), which included nearly $30 billion to encourage providers to switch to electronic records. Statistics reveal that the number of hospital systems using electronic records went from nine percent in 2008 to eighty-three percent in 2015. So far so good. So, what went wrong? Why is the fax machine still the primary way doctor’s offices communicate?

The issue is not digitizing records: the issue is sharing them. When doctors want to retrieve patient records from another doctor’s office, they turn to the fax machine. They print out records, fax them over to the other provider, and that office scans them into their digital system. Needless to say, this is inefficient, and a misreading of economic incentives is to blame.

The government, at the time, assumed that providers would volunteer to share patient data amongst themselves. This data, however, is considered proprietary and an important business asset to most providers. If other hospital systems could easily access and share your medical record, you could more easily switch providers. Switching providers may be a good thing for a patient who is shopping for better value care, but most providers perceive this ability as a threat to steerage. After all, hospital systems compete with one another for steerage.

As in the case of other healthcare policy problems, chief among them out-of-control spending, doctors, nurses, patients, lawmakers, everyone is frustrated; yet, a solution has thus far been out of reach. The proposed solutions divide policymakers among ideological lines as is often the case with healthcare spending: some feel that more government regulation is needed; others feel that fewer regulations are needed. The Trump administration has so far proposed deregulation in this area and giving patients more control over their own medical records. This is one of the four priorities recently accounted by the Department of Health and Human Services (“HHS”). Time will tell if this approach will finally lead to the demise of one of the most despised pieces of technology in medicine.


The Tangled Web of Eligibility

By: Kelly Dempsey, Esq. 

In past blogs, we’ve looked at eligibility issues from the perspective of leaves of absence, continuation of coverage, and the subsequent gaps that can arise if the plan language is not clear. For this blog, we’ll back up a bit and look at the bigger picture.

Eligibility issues are typically very fact specific – meaning employers and TPAs have to look at the details of an individual’s situation in order to determine if someone can join the plan, modify enrollment, and/or leave the plan during the plan year. Joining the plan involves HIPAA special enrollment rights and plan obligations – the requirements are clearly defined. Special enrollment rules also come into play when an employee’s life situation changes and the employee seeks to add dependents to the plan. At first thought leaving the plan seems to be a no brainer situation – if the employee wants to leave, let them leave…right? Not so fast.

More often than not, health plan contributions are made pre-tax through a cafeteria plan. If a cafeteria plan is involved, the situation can get complicated with the additional consideration of permitted election change rules. Section 125 permitted election change rules can limit an employee’s ability to leave the plan or make other modifications to elections, such as changing the amount of an FSA contribution. To add one more layer, Section 125 is essentially a ceiling and not a floor – meaning it is up to the employers whether or not to include only some of the permitted election changes instead of all permitted election changes available under Section 125.

Now an employer and TPA not only have to review specific facts, but they have to apply two sets of rules and two plan documents (the medical plan and the cafeteria plan). For example, an employee asks the employer to drop health plan coverage saying that “it’s too expensive.” Without a change in status, cost change, or other situation outlined in the permitted election change rules, the employee could very well be stuck in the “web.”

It can be tricky to reconcile rules that overlap each other (side note, overlapping rules happen a lot in this industry…). If you need an extra set of eyes (since we aren’t spiders and don’t have 8), don’t hesitate to reach out to The Phia Group – our consulting team can help get you untangled.

Who knew eligibility could be so difficult?


Natural Disasters (Hurricanes Harvey and Irma) - Don’t Let Them Wreak Havoc on Your Health Plan

By: Kelly Dempsey, Esq.

The last few weeks have been difficult for several states and U.S. territories.  Hurricanes Harvey and Irma have caused significant flooding and damage.  In addition to the loss of power, many people are homeless and corporations/employers are without a place to conduct business.  Depending on the level of damage, it may take a long time for different areas of the country to rebound and rebuild.  Chances are that employee benefits, specifically the health plan, are the last thing on employers’ and employees’ minds, but there are some very important considerations.  So what do Hurricanes Harvey and Irma mean for employers, employer sponsored health plans, TPAs, and employees?  

Self-funded health plans are required to comply with various federal laws that carry different responsibilities including, but not limited to, ERISA, COBRA, FMLA, HIPAA, and the ACA.  These federal laws come with a wide array of notice requirements and time frames for processing claims and appeals and other requests for documents or information.  As such, the Department of Labor and the Department of Health and Human Services (collectively referred to as “the Departments”) have issued press releases and bulletins that provide general guidance and limit exposure to penalties.  These press releases were specifically issued after Hurricane Harvey; however, it’s likely that additional releases will be issued to address Hurricane Irma.  Below are links to important press releases; however, the following is one of the key summary statements:

The guiding principle for plans must be to act reasonably, prudently and in the interest of the workers and their families who rely on their health plans for their physical and economic well-being. Plan fiduciaries should make reasonable accommodations to prevent the loss of benefits in such cases and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time-frames.

Health plans and their supporting vendors will likely need to review situations on a case by case basis to determine what is reasonable for each plan and employer.

If you’ve listened to any recent Phia Group webinars, presentations or podcasts, or read our blog or published articles, you already know we’ve been focusing on leaves of absence and gaps between handbooks and plan documents.  You’re probably thinking, “Yes, I know, so what’s your point?”  With all the damage to homes and job sites, it is possible employees may seek leaves of absence and/or employees will ask questions about existing leaves of absence and how the leave is impacted if an employer ceases operations.  While FMLA is generally not available for employees to use as time off to attend to personal matters such as cleaning up debris, flood damage, home repair, etc., FMLA may come into play if an employee or their family member suffers a serious health condition as a result of the hurricane.  For those employees that were already out on FMLA, if an employer ceases operations, the time operations are stopped would not count towards FMLA leave.  As always, FMLA and other leave situations should also be reviewed on a case by case basis.   

In summary, the Departments have issued guidance specifically related to Hurricane Harvey; however, we anticipate additional guidance associated with Irma as well.  The bottom line is that employers, health plans, and applicable vendors will need to act reasonably when administering the health plans (i.e., processing claims and appeals, issuing notices such as COBRA notices, etc.) and take into consideration the locations and entities that were impacted and allow grace periods or other relief as applicable.

Important Press Releases and Relevant Guidance:
- U.S. Department of Labor Issues Compliance Guidance For Employee Benefit Plans Impacted by Hurricane Harvey
- Secretary Acosta Joins Vice President Pence in Texas
- FAQs for Participants and Beneficiaries Following Hurricane Harvey
- Hurricane Harvey & HIPAA Bulletin: Limited Waiver of HIPAA Sanctions and Penalties During a Declared Emergency


Keep Hands, Arms, Legs, and Feet Inside the Ride at All Times and Remain Seated Until the Ride Comes to a Complete Stop
By: Kelly Dempsey, Esq.

The last 7 years have been a wild ride and it’s not quite over yet.  As noted in many other posts and articles, the rules will be changing under the new administration and in recent weeks we’ve seen a clearer picture of how the rules will be changing, but there are still more steps in the process before TPAs and employers can start making changes to their processes and health plans.  Many are focused on the modifications to the requirements to offer and/or have coverage (i.e., the employer mandate and individual mandate) and it’s no doubt these provisions have had a large impact on how employers offer coverage and what they offer, as well as the costs to employers, individuals, and insurers.

To counteract the rising costs of healthcare due to ACA and other factors, like high medical and drug costs, many in the self-funded industry have explored other options and learned how to expand and better utilize the flexibility and dynamics afforded to self-funded plans in the cost containment realm.  From telemedicine, to medical tourism, to other incentive programs, and exploring other provider payment options like direct primary care, employers with self-funded plans have more opportunities to explore cost containment options and implement the options that can help the plan and employer save money, while tailoring their health plans to the needs of their employees.  Some cost containment programs, however, have added additional complications for a variety of reasons.

The birth of new cost containment programs includes reviewing current rules and applying those rules as we know them to the health plans.  If these programs are offered outside of the self-funded health plan, do the programs themselves become stand-alone health plans?  If yes, what rules are applicable?  Can these new programs qualify as excepted benefits and be excluded from certain (or all) provisions of ERISA, HIPAA, ACA, and other federal laws?  Are these programs compatible with IRS rules related to HSA qualified high deductible health plans (HDHPs)?  Do the answers change if the programs are implemented within the self-funded health plan?  Unfortunately, in many cases, the rules are not clear.

We know the new administration has big plans for modifications to current rules and creation of new rules and guidelines.  In addition to the employer and individual mandates, another key change we’ve heard about repeatedly is the modification to HSA rules.  If the new administration is modifying certain HSA rules to encourage employers and individuals to utilize HSAs, will the administration and agencies issue clarifying rules that address these questions?  Sadly this is another unknown and we’re stuck in this holding pattern with more questions than answers.

In some ways it feels like we’re right back where we started back in 2010 – waiting to see what rules and changes actually make their way through the approval process.  For time being, we have to buckle up and hold on until the ride comes to a complete stop.  As such, until we have finalized new rules with effective dates and clear guidance, it’s best to keep things status quo and maintain compliance with the rules as we know them today until the rules are implemented, finalized, and effective.

HIPAA Special Enrollment vs. Section 125 Permitted Election Change – There is a difference!
By: Jennifer McCormick, Esq.

An individual may want to adjust their health plan enrollment. For example, if a plan member’s spouse loses plan coverage due a reduction in hours it will likely trigger a HIPAA special enrollment under the health plan.  However, if that spouse discontinues their plan coverage because premiums increased a HIPAA special enrollment would not be triggered.   A permitted election change is separate, and would be outlined within the Section 125 cafeteria plan, not the health plan. HIPAA special enrollments and Section 125 permitted election changes do not necessarily overlap, and must be reviewed on a case by case basis.

Anthem Data Breach Implications for Employers
By Chris Rylands & Carrie Byrnes

As has now been widely reported, Anthem, Inc. was the unfortunate target of a cyber-attack potentially impacting 80 million current and former customers. Some reports have indicated that the HIPAA breach notification rules will not apply to this breach. However, the information stolen appears to include individually identifiable information, potentially including health plan enrollment information. Enrollment information, in the hands of a health plan, is protected health information (PHI), so it is possible that the HIPAA data breach notification rules are applicable. As such, both insured and self-funded customers utilizing Anthem as their TPA should review information concerning the Anthem breach carefully before concluding that the HIPAA breach notification rules do not apply.


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