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Spinning the Web of the Plan Document
By: Kelly Dempsey, Esq.

(No, this isn’t about spiders.)

The date was somewhere around August 25, 1999. The location was my 10th grade biology class. I remember taking in the scenery of a new classroom and looking at all the pictures and quotes my teacher had up on the walls. One in particular caught my eye:

“I know you think you understand what you thought I said, but I’m not sure you realize that what you heard is not what I meant.”

Once your head stops spinning, we can continue…

I’ve since learned this quote is attributed to the former head of the Federal Reserve Board, Alan Greenspan.  The context of this quote is still foreign to me, but I believe it can be applied to just about anything – so let’s apply it to plan documents.  

In general there are several entities involved in the process of administering an ERISA self-funded medical plan document, but ultimately the plan sponsor is responsible for ensuring the terms of the plan document meet the needs of the plan and its members. The plan administrator then has the fiduciary duty to administer the plan in accordance with the terms of the plan document. So when is the last time that you, the plan sponsor, have read the plan document cover to cover?  

Plan documents have to be reviewed and revised for any number of reasons, including regulatory changes – but sometimes plan documents are changed when the plan moves to a different claims administrator (i.e., hires a new TPA to administer claims, or moves from an ASO to a TPA or vice versa). The “rules” each claims administrator sets related to the plan document’s format may vary. Some TPAs will administer the document as-is. Some TPAs prefer to use their own plan document template, which the plan sponsor can either adopt from scratch or conform its existing benefits to.

I’ve written about “gap traps” before, and while this isn’t a really one of those as we typically use the term (which is most often relevant to gaps between a plan document and a stop loss policy), a type of gap arises if a restated document doesn’t mirror the prior plan document. For example, the prior plan document had an illegal acts exclusion that applies for any act that carries with it a potential prison sentence of one year. The restated plan document, however, doesn’t include this specific prison sentence limitation, which means the plan essentially will have to exclude more claims in order to comply with the terms of the plan document (such as, for instance, a DWI, which does not carry with it a sentence of up to one year, but is an illegal act!). While this would comport with the terms of the plan document, it is something for which plan members – and even the plan administrator – may not be prepared.

Another example is a situation where the prior plan contained a medical tourism program that includes many non-U.S. locations, so the plan did not include a foreign travel exclusion. When the two plan documents were “merged” such that the existing document and new format are combined, the new plan document accidentally contained both an international medical tourism program as well as a new exclusion for non-U.S. claims (because foreign travel exclusions are still fairly common). Needless to say, that type of contradiction can cause a slew of problems (including a potential gap with the stop loss policy).

The addition of a new exclusion, or even apparently minor verbiage changes within an existing exclusion (or definition, or benefit, or just about anything else, for that matter), can seem very insignificant, but has the potential for dire consequences if the intent of the plan is not reflected as clearly as possible.   

So, a few questions for employers, TPAs, consultants, brokers, and anyone else involved in plan document drafting:

•    Does the plan document actually say what the plan sponsor wants it to say?
•    Does it clearly outline what is covered?
•    Do the exclusions align with what the plan wants to be excluded?
•    If a plan document has been recently restated, have you confirmed that the terms of the new plan document are the same as the prior plan document?

It’s always best to triple-check these types of things.  Happy reading!


It's Never Too Soon
By: Jen McCormick, Esq.

Although the regulations may change, it's important to begin thinking about plan changes for the upcoming plan year.  The specifics for compliance requirements may still be unclear, employers should already be in process of contemplating cost containment updates.

There are many ways to add value to an employee health benefit plan. An employer should perform an annual review of their plan to confirm that the plan takes advantage of as many cost containment opportunities as possible. For example, does the plan have strong third party recovery language? Overpayments language? Clearly defined terms? Appropriate definitions? Vendor program with corresponding language? If not, the plan should be cognizant of what's missing or not working, so updates can be made.

In addition to cost containment, and while some rules are in flux, there are many regulatory requirements a plan must be aware of and having corresponding language. For example, is the employer subject to ACA Section 1557? Employer Mandate? Does the plan comply with the MHPAEA? Did the plan pick a benchmark for defining essential health benefits? With all the regulatory changes, plans should stay alert and ready to make renewal modifications.

Last, but definitely not least, employers should ask their employees to weigh in on the plan. Remember it's an employee benefit to offer coverage - so employers should be offering beneficial coverage.  For example, is there a specific service that many employees wish was covered? Could that be added to the plan? Is there a trend in services for employees for which you may want to offer an incentive?  Being self funded allows you to be creative - take advantage!

Plans have freedom to design benefits to suit their needs. With this privilege comes the need to plan ahead and be creative.  Employers should be proactive and ensure this opportunity to annually update the plan design is taken seriously!


Employer-sponsored Plans Should Prepare to be Taxed
By: Brady Bizarro, Esq.

The latest news in the repeal and replace saga is that congressional Republicans are pushing to get a bill to the Senate by the end of this month. The ambitious timeline means that lawmakers and independent analysts will have very little time to review the components of the bill. The lack of transparency is already causing problems within the Republican Party itself. Yet, parts of the bill have leaked, and there are some provisions which will prove controversial across the political spectrum; specifically those that affect employer-sponsored health insurance.

The new plan, for which President Trump has signaled support, would offer aged-based tax credits that are paid for by taxing employer-sponsored health insurance plans. Employer groups across the country are already signaling their opposition to this idea, which is essentially a new version of the Cadillac Tax which is part of the Affordable Care Act and was delayed until 2020.

Why do House Republicans wants to tax employers? The truth is that Republicans want to keep as many people covered by health insurance as possible, and that means subsidizing care. Lawmakers have identified taxing employer-sponsored plans as one of the only feasible ways to raise enough revenue to pay for these tax credits.

This is unwelcome news for the self-insured industry because if the replacement bill also eliminates the coverage mandates and essential health benefits, we could see more movement from employer-sponsored coverage to individual plans, especially among younger and healthier workers. If the government gives workers tax credits to buy individual coverage, and that coverage can be very skimpy and cheap, then healthy people will be tempted to buy individual coverage outside of their employer plan. All the more reason for employers to transition to self-funding to be able to offer quality care and competitive prices to keep young, healthy workers on their plans.

Empower Your Plans!
By: Adam Russo, Esq.The United Benefit Advisors recently came out with the average cost of premiums for health insurance in every state.  Massachusetts has an average monthly premium for single people of $554 and $1320 for family plans.  How is my company, The Phia Group, able to have premiums of $120 for individuals and $220 for families with no co-pay for generic drugs, no deductibles, and no co-pay for urgent care? Simply put, because our employees are educated about the cost of care and are incentivized to identify cheaper, quality options.  We can do the same for you, but you need to act.  Empower your plans!Ab

The Details of Your Coverage Plan Matter
By: Brady Bizarro, Esq.

Employers face many, many regulatory burdens. There is an ever-increasing number of federal regulations to abide by (although that might change), and each state maintains its own set of regulations. This can get very complicated. The family and medical leave laws are a prime example of this. In Oregon, for example, an employee can be eligible for up to 36 weeks of leave under certain specific conditions. It is essential that employers understand the eligibility criteria involved to avoid coverage gaps with a stop-loss carrier.

Keeping the “Benefit” in Benefit Plans
By: Ron E. Peck, Esq.

Once upon a time, employers offered employees “benefit plans,” with an eye toward attracting and retaining a talented workforce.  The word – benefit – literally means something good; positive; of added value.  At some point, though, health insurance became less of a benefit and more of an entitlement.  At first it was an entitlement in theory, only, but more recently it became an entitlement according to law.  Next, between minimum value plans and high deductible plans, these so-called “benefit” plans became a point of contention – bad blood – between employers and employees.  Employers are increasingly frustrated with the rising cost of medical services and medication, as well as their employees’ perceived lack of concern or “skin in the game.”  Employees see co-pays and deductibles rising, and assume that greedy employers and “insurance companies” are looking to give them less, while expecting more from them.  When did we stop thinking of these plans as a “benefit?”  Fortunately, there are a few entities that still believe that “benefit” in “benefit plan,” has meaning, and are offering innovative ways to cut costs without reducing coverage – focusing on needs and avoiding worthless, wasteful endeavors.  From directing participants to use only the best, most cost effective providers, to rewarding them for spotting errors… from providing benefits that people actually need, and carving out high cost rarely needed services… by engaging providers in negotiation and direct contracting rather than blind faith on a third party’s efforts… we are all empowering plans, and returning the “benefit” to benefit plans.

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.

Government Plans are Exempt from ERISA. What is the Definition of "Government"?
You already know that an employee benefit plan qualified as a “government plan” is exempt from ERISA’s framework.

But what is the definition of “government”? Some employers may not actually be government entities, and public private partnership may inject ERISA back into the framework.

This new case gives you the tests to apply to determine whether a government entity exists, which then means ERISA does not apply.   Smith v. Regional Transit Authority, __ F. Supp. 2d __ (E.D. La. May 10, 2013) [PDF] (whether the entity was created directly by the state, so as to constitute a department or “administrative arm” of the government, or whether it was merely administered by individuals responsible to public officials or the general electorate).

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