By: Philip Qualo, J.D.
The complex employment issues surrounding government actions to isolate the new and fatal strain rose to the level of national news this month, as more than 300 U.S. citizens were quarantined on a cruise ship in Japan after a man who disembarked in Hong Kong was diagnosed with the virus. After being quarantined for 14 days, the passengers were finally evacuated from the cruise ship on February 17th. The U.S. government has confirmed at least 14 of those Americans tested positive for the coronavirus just before departing Japan. The majority of U.S. passengers who continued to test negative for the coronavirus, however, will now have to contend with another 14-day quarantine upon reentry into the U.S. Although these passengers are likely relieved to have survived the exposure to virus with their health intact, their eventual return to the workforce has many employers confused on how to treat these leaves of absence, and more importantly, whether they are required to allow them to return to their jobs at all.
Surprisingly, federal laws enacted to protect Americans from job loss as a result of illness or disability generally do not protect individuals who are unable to report to work as a result of isolation and quarantine, but do not themselves suffer from a serious health condition. For example, the federal Family Medical Leave Act (FMLA) provides job-protected leave for specific medical and family reasons. Employers covered under FMLA must provide unpaid leave to an eligible employee who is incapacitated from working because of their own serious health condition or when they need to care for a family member with a serious health condition. So on the one hand, for the Americans that were infected with the coronavirus, FMLA protections will clearly apply to the absences as a result of the quarantine as there is clearly a serious health condition present, assuming the employer is subject to FMLA and the employee satisfies other eligibility criteria. Additionally, an employee caring for a spouse, child or parent infected with the virus will also may also be entitled to FMLA leave. On the other hand, for those Americans and their immediate family members who tested negative but continue to be subjected to isolation and quarantine measures, however, the rule is not so clear cut. Technically, without a serious health condition, or at minimum, some evidence of documented symptoms, FMLA will likely not apply.
Despite the lack of federal protections for employees who are quarantined as a result of exposure to the coronavirus, terminating employees as result of absence caused by quarantine protocols could still result in significant liability for employers under state laws. Recognizing the lack of statutory protections for employees in prior pandemics where isolation or quarantine was necessary, several states already have laws that explicitly prohibit the termination of an employee who is subject to isolation or quarantine. For example, in Delaware, Iowa, Kansas, Maryland, Minnesota, New Mexico, and Utah, an employer is prohibited from terminating an employee who is under an order of isolation or quarantine, or has been directed to enter isolation or quarantine.
For states that have yet to enact similar protections, there is an important exception to the employment-at-will doctrine that could still expose employers to liability when terminating an employee due to absences as a result of isolation and quarantine measures. Most states adhere to the common law employment-at-will doctrine, which generally allows an employer to terminate an employee from employment for any reason other than those prohibited by statute. Under the public policy exception, however, an employee may be deemed wrongfully discharged when a termination violates an explicit, well-established public policy. The public-policy exception is the most commonly accepted exception to the employment-at-will, recognized in the vast majority of states.
A claim for wrongful discharge in violation of public policy is grounded in the belief that the law should not allow an employee to be dismissed for engaging in an activity that is beneficial to the public welfare. As mandatory quarantine protocols have been implemented to protect the public at large from the coronavirus, a court could reasonably conclude that the quarantine of individuals during a pandemic serves the public good and that the termination of individuals who are isolated or quarantined violates public policy.
It is important to keep in mind that quarantine protocols are not voluntary for Americans exposed to the coronavirus, but rather mandated by public policy. Therefore, employers should exercise caution when deciding how to handle employee absences that result from these necessary measures implemented to protect the public at large. As some state laws and public policy exceptions to the employment-at-will doctrine could potentially expose employers to liability for wrongful discharge, we would recommend against terminating employees who have no choice but to comply with government efforts to isolate the deadly virus. It is important to keep in mind that since the coronavirus can be spread before an individual demonstrates symptoms, the quarantine measures that have been put in place have likely already saved countless of lives, and should not be discouraged by employers.
By: Andrew Silverio, Esq.
Anyone who works in health benefits is familiar with surprise billing – the specific kind of balance billing which occurs when a patient visits an in-network physician or hospital, and receives an unexpected balance bill from an out-of-network provider that they didn’t have an opportunity to select, and in many cases, didn’t even know they had utilized. Common culprits are anesthesiologists, assistant surgeons, and outside lab work.
We often think of this as primarily a problem for emergency claims. This makes a great deal of sense, since when someone presents at an ER or is brought there via ambulance, they likely won’t have an opportunity to ask questions about network participation or request specific providers. However, according to surprising data released in the Journal of the American Medical Association on February 11, 2020 entitled “Out-of-Network Bills for Privately Insured Patients Undergoing Elective Surgery With In-Network Primary Surgeons and Facilities (available at jamanetwork.com/journals/jama/fullarticle/2760735?guestAccessKey=9774a0bf-c1e7-45a4-b2a0-32f41c6fde66&utm_source=For_The_Media&utm_medium=referral&utm_campaign=ftm_links&utm_content=tfl&utm_term=021120), these bills don’t actually seem to be more likely to arise from emergencies or other hospital stays where patients have less of an opportunity to “shop around.”
The study looked at 347,356 patients undergoing elective surgeries, at in-network facilities with in-network surgeons. These are patients who had ample opportunity to select their providers, and indeed did select in-network providers for both the surgeon performing their procedure and the facility in which it would occur. Shockingly, over 20% of these encounters resulted in a surprise out of network bill (“Among 347 356 patients who had undergone elective surgery with in-network primary surgeons at in-network facilities . . . an out-of-network bill was present in 20.5% of episodes...”) The instances that involved surprise bills also corresponded to higher total charges - $48,383.00 in surprise billing situations versus $34,300.00 in non-surprise billing situations.
The most common culprits were surgical assistants, with an average surprise bill of $3,633.00, and anesthesiologists, with an average bill of $1,219.00. In the context of previous research indicating that “20 percent of hospital admissions that originated in the emergency department . . . likely led to a surprise medical bill,” it seems that even when patients are able to do their homework and select in-network facilities and surgeons, they are just as susceptible to surprise billing. (See Garmon C, Chartock B., One In Five Inpatient Emergency Department Cases May Lead To Surprise Bills. Health Affairs, available at healthaffairs.org/doi/10.1377/hlthaff.2016.0970.)
Many states have enacted protections against balance billing and surprise billing, with Washington and Texas both recently enacting comprehensive legislation. However, these state-based laws have limited applicability, and there are to date no meaningful federal protections for patients in these situations. Until such protections are enacted, patients are left vulnerable to sometimes predatory billing practices, and plans are left to choose between absorbing that financial blow or leaving patients out in the cold.
Last month, we discussed some disturbing trends surrounding prescription drugs, and what they mean for self-funding. The overwhelming feedback we received after last month’s webinar was that you, our viewers, want more information on this particular topic – so we’re back with a sequel!
Join The Phia Group’s legal team as they take a deeper dive on the topic of Rx drugs, tackle the difficult questions asked in last month’s webinar, and help plans protect themselves while staying ahead of the curve.
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By: Kevin Brady, Esq.
Every week, we seem some variation of the question: Will this program impact our HSA-Qualified HDHP status? The programs in question often include direct primary care, telemedicine, managed care, or some combination thereof. The answer, often to the disappointment of groups hoping to provide more value to their participants, is that these types of programs can often run afoul with the Internal Revenue Service’s strict requirements on High Deductible Health Plans (HDHP).
An HDHP must meet certain criteria to allow individuals enrolled to contribute to Health Savings Accounts (HSA). The problem arises when an HDHP no longer meets that criteria and therefore loses is qualified status.
For purposes of utilizing a HDHP with an HSA, the HDHP must comply with IRC § 223(c)(2). This section of the code provides the minimum deductible and the maximum out-of-pocket expenses required for a plan to be considered an HDHP. For example, in 2020, the minimum deductible was set at $1,400 for self-only coverage and $2,800 for family coverage. Further, a Plan considered an HDHP cannot contribute to the costs of non-preventive services until an individual’s deductible is met, and the participants cannot be enrolled in other health coverage as defined by the IRS. (See here for more information: Pub. 969)
So, when a client asks us the inevitable question, “will this program impact our HSA-Qualified HDHP status?” We typically look to determine two things; 1. Does the program inherently require the Plan to contribute to the cost of non-preventive services pre-deductible; and 2. does the program constitute other health coverage?
While it certainly requires a full and complete understanding of the proposed program, it has been our experience that the answer to at least one of these questions is often yes.
When these types of programs are included as benefits within the Plan, it often opens the door for the Plan to pay for non-preventive services before an individual’s deductible has been satisfied. Conversely, when the program is offered outside of the Plan, it often constitutes “impermissible other coverage” which renders individuals who are enrolled in both the program and the HDHP ineligible to contribute to their HSA.
If an individual makes contributions to their HSA during a period in which they are not eligible to do so, it could result in massive tax consequences for that individual and could also cause tax consequences on employers who contribute that individual’s HSA as well.
With the current guidance in place, it is difficult for groups to implement these types of alongside or within their HDHPs. This is unfortunate because the programs can often add enormous value for participants and also result in significant savings for Plans.
Luckily, in June of 2019, an Executive Order directed the Secretary of the Treasury to issue regulations to clarify the issue as to whether these types of programs can be offered within or alongside HDHPs without jeopardizing a participant’s ability to contribute to their HSA.
Given the Executive Order, and similar legislation making its way through Congress, we are hopeful that there will be new guidance to allow the expanded use of these types of programs with HDHPs in the new future. Until then, it is best to err on the side of caution and confirm that a proposed program doesn’t conflict with the IRS rules before implementing it into your benefits offerings.
In this episode, Adam and Ron interview industry legend, Ernie Clevenger, regarding CareHere, LLC, the future of consumer-centric medicine, technology – and most importantly – the MyHealthGuide newsletter!
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By: Jon Jablon, Esq.
You may have read the blog post that my colleague Andrew Silverio wrote about this case just a few days ago. (If you haven’t, check it out!)
After doing a deep dive into this case, there are a few specific things I want to bring up – and to do so, I’ll do some quoting from the complaint. The plaintiffs – certain medical providers that feel they have been victimized by Cigna – have made many allegations, some very specific, and some more sweeping in nature. While we have no basis to question the facts presented by the plaintiffs, it does seem that the logic employed in the arguments leaves something to be desired. Here are a few paragraphs from the complaint that I find most noteworthy from a self-funding point of view:
13. Plaintiffs’ incurred charges for the Cigna Claims total approximately $72,757,456.28, reflecting Plaintiffs’ usual and customary rates for the particular medical services provided. But Cigna has paid only a small fraction of this amount,—$16,937,637.50, which represents only 23% of its legal responsibility.
The plaintiffs are alleging that the 23% of the total billed charges paid to them by Cigna was “only 23% of [Cigna]’s legal responsibility.”
I’ll pause to let that ridiculousness set in.
These plaintiffs are actually alleging that Cigna’s legal responsibility is to pay 100% of billed charges, across numerous claims. Not surprisingly, the complaint doesn’t support that assertion with any plan language, law, or logic, and I can’t help but wonder what the drafter of this complaint was thinking.
20. In this example, Cigna has told the provider that the unlucky Cigna Subscriber owes it $60,316.07 as the amount not covered under the Subscriber’s Plan, but has told the Subscriber that he/she owes the provider only $895.25 because Cigna negotiated a 98% discount with the provider. In doing this, Cigna misrepresents to Cigna Subscribers that the amounts improperly adjusted by Cigna are “discounts.” This misrepresentation appears on most Cigna Claim Patient EOBs.
Here, the plaintiffs allege that the EOBs provided to them identify that the amount Cigna claims to be above its allowable amount is a discount. This is a common folly and one we strongly caution against making! RBP plans often fall into this trap, since their payments are always at an allowable amount lower than the provider’s billed charges; characterizing the disallowed or excess amount as a “discount,” when it is not, is misleading to providers (causing confusion and frustration, and ultimately hurting outcomes when combating balance-billing) and a misrepresentation to members.
121& 122. For emergency services, the ACA Greatest of Three regulation and New Jersey law require Cigna to reimburse Plaintiffs at least at the in-network rate at which Cigna would reimburse contracted providers for the same services. … Plaintiffs are therefore entitled to the total incurred charges for the elective and emergency claims at issue, less Patient Responsibility Amounts not waived by Cigna.
This is not quite accurate for two reasons. First, the plaintiffs misquote the “Greatest of Three” rule; the amount that must be paid is at least the median in-network rate that each individual plan would pay for the same services, rather than the blundering mischaracterization of “the in-network rate at which Cigna would reimburse contracted providers.” Those are important differences, and, frankly, the attorney should have known better.
Second, even if this premise were accurate as written, the conclusion drawn is still nonsensical. The plaintiffs have indicated that since the payment must be at least the in-network rate paid to the same provider, then the payment must be “total incurred charges” minus patient responsibility. In other words, these providers are suggesting that the in-network rate, across thousands of claims with multiple providers, is 100%. It’s true that 0% discounts exist, but they’re somewhat rare, and it is certainly not the case here that every single relevant discount, accessed by any of the relevant health plans, is 0%.
155. Exhaustion is therefore deemed futile pursuant to 29 C.F.R. § 2560.503-1(l) because Cigna failed to provide a clear basis for its denials and has refused to produce the requested documents necessary for Plaintiffs to evaluate the Cigna Claims denials. Cigna thus offered no meaningful administrative process for challenging its denials of the Cigna Claims.
This last example is another one where many self-funded plans run into unexpected issues. Called “futility,” this doctrine holds that appeals are not necessary, and a claimant can jump straight to a civil suit, if the plan renders appeals futile in any of various ways.
Here, if Cigna has truly issued insufficient EOBs, refused to provide substantiating documentation, and generally didn’t follow the applicable regulations, the providers have a very good argument that appeals are futile. What’s more, though, is that these actions constitute a breach of the Plan Administrator’s fiduciary duties to abide by applicable law and the terms of the Plan Document, which could subject the Plan Administrator to penalties as well as work against the payor in court.
We’re excited to see how this suit unfolds, and we’ll give you more updates when we can!
In this episode, Ron Peck and Brady Bizarro discuss the first Democratic debate of 2020 and the latest ruling from a federal appeals court on Obamacare. Time could be running out, both for the ACA and for the candidates for president. You do not want to miss our take on these issues and more!
By: Nick Bonds, Esq.
With the Legislature moving at a glacial pace, the Trump administration has doubled down on its policy objective to reduce health care costs through executive action and administrative rulemaking. A key part of their strategy involves a push to increase transparency in the health care industry – taking special aim at hospitals and drug manufacturers. The apparent logic being that if hospitals and drug makers have to share their actual prices, patient reaction will be strong enough to drag prices down. Experts disagree as to how effective these strategies would be in theory, but we may never have the opportunity to see their impact in practice.
High-profile initiatives to emerge from this approach have run in to a number of difficulties. The administration’s proposed rule requiring drug manufacturers to disclose their drugs’ list prices in their television ads has not been largely repulsed by the pharmaceutical industry, who have had a fair amount of success thus far blocking this rule in court. The pharmaceutical industry argued that this disclosure rule lacked authority and violated their free speech. Last summer, a federal judge in Washington, D.C. ruled that HHS exceeded its authority by compelling them to disclose their prices. HHS appealed, but this past week the U.S. Court of Appeals for the D.C. Circuit appeared unsympathetic. The appeals court agreed that HHS had not been granted the requisite authority by Congress to implement this drug pricing rule, and remained unconvinced that this pricing disclosure requirement would in fact help achieve the administration’s goal of bringing down drug costs. WE expect the administration to appeal yet again.
Announced last November, another transparency-minded federal rule requires hospital systems to disclose the price discounts they have negotiated with insurers for a wide swath of procedures. This disclosure is intended to inform patients of their prospective costs before they are incurred, empowering patients to shop around for the best prices. Here again, debate swirls as to whether this tactic would be effective. Meanwhile, hospital groups have implored the D.C. District Court to block these rules from taking effect echoing the arguments of the pharmaceutical companies before them: that the administration lacks the authority to implement its rule, and that the proposed rule violates their First Amendment rights. Time will tell if the courts come down on the administration’s side this time around.
Other Trump administration efforts have seen fewer setbacks: they have slashed regulations on short terms plans and association health plans (“AHPs”), more generic drugs have been approved, and they are plowing ahead with a notice of proposed rulemaking to allow importation of prescription drugs from Canada. Nonetheless, the number of Americans without health insurance continues to rise, as do marketplace premiums and the actual costs of care. The goal of reducing healthcare costs is an admirable one, we will see how effective the administration’s attempts will be.
Whether you are a fan of politics, profits, or identifying savings, you are likely keeping a close eye on pharmaceuticals. From life-preserving medications that have been around for decades (and whose price increases continue to outpace the national GDP) to specialty drugs that are inches away from FDA approval (and bankrupting most benefit plans), the cost tied to drugs is a hot topic. While congressional efforts to curb rising costs have stalled, pharmaceutical companies, pharmacy benefit managers (PBMs), and politicians continue to look for someone else to blame. Join The Phia Group as they discuss the Rx trends to watch for, the biggest threats to health plans, cost-containment strategies to implement, political efforts underway, and an injection of information you can’t do without.
In the final hours of 2019, a coalition of New Jersey medical providers filed a voluminous, 150-page complaint against CIGNA in federal court in New Jersey. The providers, in general, are challenging the validity of CIGNA’s reference-based pricing (“RBP”) program, which guides the payments of numerous self-funded plans in and around New Jersey. As would be expected with such a lengthy and thorough complaint, there are various causes of action being pursued – some allege criminal activities like “embezzlement, theft, and unlawful conversion,” and “a pattern of racketeering activity” under RICO. Others strike more directly at basic and common aspects of any RBP program, while others allege practices that, if the allegations are true, would certainly be reasonably classified as problematic.
In the coming weeks and months, we will be monitoring this case closely and providing in-depth analysis and commentary in our upcoming webinars and other releases, but for now, we wanted to highlight some key allegations being made. If the case progresses to any sort of substantive holdings, it could have significant effects on RBP as a whole, depending on which causes of action ended up “sticking.”
A key element of many of the complaint’s allegations is that CIGNA and its vendors, in repricing and processing non-contracted claims, fraudulently represent that the amounts paid are in fact agreed-to, contracted amounts which the providers have agreed to accept as payment in full. The providers state that there is in fact no agreement, which is almost certainly true, but also allege that the amounts actually paid are less than is required under the individual plans. For this second element, the complaint cites to no evidence. This issue would certainly be a matter of plan document language, which is not touched on in the complaint.
In support of these allegations that CIGNA fraudulently represents a nonexistent contractual agreement, the providers allege that the EOBs CIGNA sends to plan participants differ from those it sends to providers. Specifically, the patient EOB allegedly describes the portion of charges disallowed after repricing as a contracted discount, stating that the patient has saved money, while the provider EOB describes this same amount as an “amount not covered,” instructing providers not to balance bill the patient, but to contact CIGNA’s repricing company instead with any disputes. The providers give several examples of such claims paid at 1-3% of billed charges and describe a negotiation and dispute process which they allege is a “war of attrition,” aimed at creating delay, expense, and frustration rather than a good faith procedure truly aimed at resolution.
An allegation key to the RICO/racketeering causes of action stems from CIGNA’s billing practices, which the providers describe as a fraudulent scheme to convert plan assets. The complaint claims that CIGNA and its vendors retain a flat percentage of savings fee based on the initial repricing, and importantly, retain that full fee even when, after a negotiation/dispute process, the plans end up paying additional amounts, sometimes up to a full billed charge, negating any actual savings. For illustration, the complaint describes a situation in which a plan pays 1% of a billed charge, a 30% percentage of “savings” fee to CIGNA, then ends up paying the full billed charge after a provider dispute. The end result is the plan paying 130% of a billed charge, with the extra 30% going to CIGNA.
At the complaint stage, it’s important to remember that all the allegations described here are just that – allegations. Some take aim at practices which, if they are actually being engaged in, are objectively problematic, while others strike at core elements of RBP itself. We will be closely monitoring the case as it develops and providing commentary and analysis on an ongoing basis.