By: Jon Jablon, Esq.

There are hundreds of novel ideas that have permeated the self-funded space over the last couple of decades, many of which have the potential to be very beneficial to self-funded plans. I mention that they have the potential to be beneficial not because it’s lawyerspeak (well, not just because of that), but because I mean exactly that: some programs could be beneficial, but are implemented in such a way that renders them either ineffective, noncompliant, or something in-between.

A perfect example, and one we face nearly every day, is the phenomenon of claim repricing – whether based on Medicare rates, “traditional” U&C, the “black box” approach (the “black box” is where claims are put into one side of the box, and then magically come out the other side with a new price attached), or anything else.

Check out the title of this post. If a rate has been negotiated and the payer has agreed to pay a certain amount, then that is a contract, and has to be adhered to! If a plan is subject to a network agreement but decides to reprice claims at a lower amount than the network rate, the plan can always – always – expect pushback. This is a phenomenon that is certainly not exclusive to this industry; imagine writing a letter to Bank of America, saying “I know I agreed to pay $2,500 per month for my mortgage, but I talked to Quicken and they told me that’s too much – so I’ll give you $1,100 a month instead.” Let me know how that turns out…

But seriously: when we suggest language for health plans to use to contain costs, the second sentence of our suggested definition – second only to a simple sentence that introduces the definition – notes that “The Maximum Allowable Charge will be a negotiated rate, if one exists….” That is designed to account for the fact that many claims (most, in fact) are subject to some sort of contract. Whether a network agreement, or a single-case agreement, or “letter of agreement,” or any other contract under any other name, a given negotiated rate must be paid, or the payor will subject itself to losing the discount, or the very real possibility of a lawsuit.

“But doesn’t the Plan Document control all other documents?” Tricky question. Does it trump the network contract? No. But does it trump all other obligations of the Plan? Yes. That’s why not having accurate plan language can be trouble. Take, for example, the alarmingly common scenario in which the plan owes a PPO rate, but the Plan Document provides that the Plan will pay 150% of Medicare for all claims. The Plan Administrator (the party responsible for compliance with the Plan Document) is required by law to follow the terms of the Plan Document, and pay all claims at 150% of Medicare – but the Plan Sponsor (the party to the network contract) is required by contract to pay the network rate. Since only one amount can be paid, the Plan Sponsor and Plan Administrator (often the same entity!) need to figure out which document will be followed, and which will be ignored.

I won’t bore you with the details of the implications of each choice, suffice it to say that it’s always a good idea to make sure the Plan Document says what the Plan will actually do. If your documents don’t line up, you’ll have all sorts of problems. If the Plan follows the network contract and doesn’t pay claims at the 150% of Medicare stated within the Plan Document, then the Plan Document shouldn’t say that! That is a compliance issue as well as a stop-loss issue.

If you want to be bored with the details of what might happen if a health plan violates its PPO contract or violates its Plan Document, feel free to contact PGCReferral@phiagroup.com. For now, though, I’ll leave you with a quote from Mark Twain: “Better a broken promise than none at all.” (That’s actually really terrible advice. Do not apply that quote in this scenario.)