By: Jon Jablon, Esq.

Ah, the Plan Document! It’s the “supreme law of the land” governing the health plan’s benefits. Would that make ERISA the Declaration of Independence of self-funding, maybe? Freedom from the tyranny of state or federal laws that attempt to make their own rules for the plan rather than letting the plan govern itself?

Maybe. I don’t know. That’s the beauty of analogies, though; they don’t need to be perfect. If ERISA is the Declaration, though, we’ve got a serious problem. Back in 1974, Congress passed ERISA and explicitly and intentionally did not place limits on a health plan’s right to define its own payment, with very few exceptions. ERISA gave health plans freedom from chaotic and decentralized state laws, ensuring a uniform set of legal standards across the vast majority of this country’s self-funded health plans; health plans could define their own payments without regard to state law.

There have been federal laws passed through the years that render health benefits subject to a set of checks and balances. Take, for instance, the Affordable Care Act’s guarantee of a right to challenge certain denials via external review. That type of law is designed to ensure that clinical determinations are being made correctly. Although this adds an additional burden on plans and their TPAs, it’s tough to deny that ensuring the correct adjudication of benefits is a good thing.

The Consolidated Appropriations Act 2021, though, introduced the industry to the No Surprises Act, a broad consumer protection measure including numerous responsibilities related to payment and treatment of certain claims. One such requirement is for a plan to allow a provider to challenge the plan’s payment rate via Independent Dispute Resolution, or IDR, and to pay whatever amount the uncreatively-named “IDR Entity” decrees. Intuitively, some of us have been thinking “since ERISA allows a benefit plan to define its own payment, the IDR process should be very simple, right? The plan should come out on top as long as the plan did exactly what the SPD says! That’s how it’s been since 1974, with few exceptions, right?”

The No Surprises Act was Congress’ way of giving a big N-O to that one. The NSA provides that a health plan’s initial payment can still be whatever the plan deems reasonable (and the plan must still abide by ERISA, of course, which means still abiding by the plan document), but the IDR process may result in the plan having to pay an amount greater than what the SPD requires.

While there are certainly complications associated with paying an amount higher than what the SPD says, one of the biggest concerns plans have is their reinsurance coverage. If the plan says it pays all claims at 150% of Medicare, for instance, then the reinsurance carrier will have underwritten exactly that – and an IDR order to pay more for a given claim, although legally binding on the plan, cannot itself force the reinsurer to pay more than exactly what the SPD says (i.e. 150% of Medicare). The best case is that the reinsurance policy specifically provides for reimbursement at an IDR amount if applicable – but, anecdotally, we haven’t seen that. It’s an unknown amount of risk, and reinsurance carriers like to keep their risk as un-risky as possible. For that reason, many plans are trying their best to negotiate an acceptable rate prior to avoid IDR, under the theory that the plan still has an element of control over a negotiation, whereas once it’s in IDR, the outcome is designed to be “objective” and the ultimate resolution is out of the plan’s hands.

If you need any help with your payments, processes, or calculations, Phia can help! Feel free to reach out to your dedicated account manager or contact info@phiagroup.com.