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COVID-19 Testing & Cost-Containment

On April 1, 2020

By: Jon Jablon, Esq.

The CARES Act is brand new, obviously, but its treatment of the relationship between medical providers and health plans is anything but. As with just about all legislation to date on the topic of payor-provider relations, the legislature has not hesitated to essentially give all the power to the providers. The bill includes the following provisions:

SEC. 3202. PRICING OF DIAGNOSTIC TESTING.

(a) Reimbursement Rates.—A group health plan or a health insurance issuer providing coverage of items and services described in section 6001(a) of division F of the Families First Coronavirus Response Act (Public Law 116–127) with respect to an enrollee shall reimburse the provider of the diagnostic testing as follows:

(1) If the health plan or issuer has a negotiated rate with such provider in effect before the public health emergency declared under section 319 of the Public Health Service Act (42 U.S.C. 247d), such negotiated rate shall apply throughout the period of such declaration.

(2) If the health plan or issuer does not have a negotiated rate with such provider, such plan or issuer shall reimburse the provider in an amount that equals the cash price for such service as listed by the provider on a public internet website, or such plan or issuer may negotiate a rate with such provider for less than such cash price.

If there is a negotiated rate between the payor and provider, then the payor must pay that rate. If, however, there is no previously-negotiated rate, then the payor and provider can either elect to negotiate a rate (on a case-by-case basis, or globally – same as any other payment contract), or, if negotiation is not possible or not successful, the plan is required to simply pay the provider whatever price the provider has identified on its website. In other words, the plan must pay a negotiated rate, if there is one, but if not, the plan must pay whatever the provider demands.

Even in this time of near-universal employer financial hardship, the legislature has been very careful to not give a damn about the costs incurred by health plans – including self-funded employer-sponsored plans, many of which are struggling small businesses. It will never cease to amaze me.

Interestingly, the section of the bill immediately following the one quoted above reads:

(b) Requirement To Publicize Cash Price For Diagnostic Testing For COVID–19.—

(1) IN GENERAL.—During the emergency period declared under section 319 of the Public Health Service Act (42 U.S.C. 247d), each provider of a diagnostic test for COVID–19 shall make public the cash price for such test on a public internet website of such provider.

(2) CIVIL MONETARY PENALTIES.—The Secretary of Health and Human Services may impose a civil monetary penalty on any provider of a diagnostic test for COVID–19 that is not in compliance with paragraph (1) and has not completed a corrective action plan to comply with the requirements of such paragraph, in an amount not to exceed $300 per day that the violation is ongoing.

So, the law requires payment of either a negotiated rate or the provider’s published rate – and the same law requires the provider to publish its rate. But what if it doesn’t, or what if the particular provider doesn’t maintain a website at all, as many smaller offices don’t? Health plans should be wary about what happens in the event the provider fails to “make public the cash price for such test on a public internet website.” It’s tempting to take the “you didn’t comply, so if you don’t negotiate a reasonable rate, we’ll report you” approach – but some consider that at least extortion-adjacent. Instead, a good practice may be to simply inform the provider – if it hasn’t posted a price – that there is no option but to negotiate, and make sure you’re armed with reasoning for what you should reasonably be paying.

One thing is clear, though: RBP plans will need to be careful here, since the legislature’s primary aim seems to be that patients do not get balance-billed for COVID-19 testing. The traditional RBP approach, then – where the Plan determines its pricing and then pays its minimum to the provider – is not going to be a viable option under the current state of the CARES Act. If there’s no pre-negotiated rate with the provider, the Plan must pay the provider’s published rate, or negotiate on the spot – but we strongly caution all health plans against creating a situation in which balance-billing is even a possibility.

Waiving Copays and Deductibles for Testing Isn’t Enough – The Impact of COVID-19 on the Patient’s Pocket

On March 20, 2020

By: Kevin Brady, Esq.

In response to the mounting need to flatten the curve and slow the spread of COVID-19, the federal government has taken overt action in the passing of the Families First Coronavirus Response Act. The act effectively removes the financial barriers and facilitates access to testing, by requiring group health plans of all shapes and sizes to waive cost-sharing for expenses related to COVID-19 testing.

The federal mandate to waive all cost-sharing on testing is significant, but may not be enough to address the potential costs that patients may ultimately bear. The testing was free, but those who test positive now need care; and that care may be significantly costlier than one may think.

According to a brief prepared by the Kaiser Family Foundation (KFF), even those patients with health insurance could face significant financial pressure following the treatment of COVID-19. For purposes of the study, KFF did a deep dive on the potential costs of treatment for COVID-19 by researching data on the treatment of pneumonia, and the out-of-pocket costs that individuals with health coverage may expect.

For those patients with serious cases, extended inpatient hospitalization will likely be necessary. According to KFF’s analysis, the average cost of care (split between the health plan and the patient) for cases with major complications or comorbidities was $20,292. A patient with no complications can expect to pay around $1,300 (in cost-sharing alone) for treatment.

Another concern for patients is that we are still early in the year and most plan participants have not even come close to reaching their deductibles or out-of-pocket maximums. This fact alone may drive the average cost to patients even higher. Even those who may not owe a significant amount in cost-sharing may still be burdened by balance bills on out-of-network claims or even surprise bills on in-network claims. Needless to say, the potential cost of care for the treatment will likely be significant on health plans and patients alike. It will be interesting to see if further guidance from the federal government or major carrier will address this issue.

While most of us are impacted in some way- social distancing, work from home, restrictions on travel- it is important that we do not lose sight of those individuals who will require significant care as a result of COVID-19 and ensure that the potential costs associated with that care are addressed in kind.

How Flexible Can Your Plan Be?

On March 17, 2020

By: Kelly Dempsey, Esq.

Many federal regulations are set up to be a floor and not a ceiling – meaning employers and plans are permitted to be more generous than the federal regulation requires. This concept is important as we wade into unknown territories with the constant changes associated with coronavirus and the relevant employer and plan considerations. Two of the more common exceptions here are (1) permitted election changes for cafeteria plans under Code Section 125 and (2) requirements under HSA-qualified high deductible health plans (HDHPs), so we’ll review those quickly.

Section 125 contains specific events that qualify as permitted election changes – meaning if a specific event occurs, a participant may opt to modify their elections in the cafeteria plan (for example, stop paying premiums for medical coverage on a pre-tax basis or change how much is being contributed to an FSA or DCAP during the plan year). The rules indicate that an employer may include any of the permitted election changes in the cafeteria plan, but the employer is not permitted to provide options in addition to what the rules provide. Employers also do not have to include every permitted election change in their cafeteria plan, although most do choose to do so.

Our other example, IRS rules for HSA-qualified HDHPs, also have certain parameters for HDHPs where employers and plans are not allowed to be more generous (specifically, the minimum HDHP deductible and the maximum contribution to HSAs). Each year the IRS reviews these figures to determine if they should be modified based on cost of living changes.

In the absence of any federal or state law, employers with self-funded ERISA plans are generally permitted to expand continuations of coverage associated with leaves of absence or layoffs/furloughs (i.e., leaves and continuations not associated with FMLA or COBRA) for a timeframe that aligns with the employer’s business practices. In this time of great uncertainty with the spread of COVID-19, we understand many employers are in the process of laying off or furloughing employees due to financial strain or simply a stoppage or suspension of business operations. It’s highly likely that the federal government will issue additional guidelines related to leaves of absences and continuations of coverage in the near future, but until then, employers have broad discretion to amend their plans as they see fit. The key word here is “amend” – employers must go through the formal process of amending their SPD/PD if it does not align with the policy the employer is creating. Updating the SPD/PD to addressed modified continuations of coverage is crucial to ensure compliance with ERISA requirements and minimize the potential for creating a coverage gap with stop-loss. It’s still a bit unclear how stop-loss carriers will modify their processes (if at all) to accept changes to SPD/PDs in light of COVID-19 (i.e., if they will accept changes with less notice or if they’ll waive their right to modify premiums). The answers will likely reveal themselves soon.

The Difference – Healthcare vs. Insurance; Never Clearer

On March 16, 2020

By: Ron E. Peck, Esq.

For those who have followed my social media posts in the past, you’ll know that one issue I can’t escape is the constant political rhetoric regarding “healthcare,” and in particular, how politicians (and the general populace) refer to “healthcare” but in fact are referencing health insurance.  When they talk about the cost of healthcare, they don’t mean how much the provider charges for the care they provide.  Instead, they are referring to the premiums, co-pays, and deductibles for which the patient will be responsible out-of-pocket.  Those aren’t the costs of healthcare; they are the costs of health insurance.  I’ve said before, and will say again, health insurance can’t stich a cut or reduce a fever.  Health insurance isn’t healthcare; it’s one way by which we pay for healthcare.

This point has never been more clearly defined than by the current COVID-19 pandemic.

Note how the national dialogue is no longer about out of pocket expenses.  Instead, the public outcry is over a lack of testing kits.  People aren’t worried about their deductible; they are worried about being infected, and what they need to do to remain in relatively good health.  See how people are focused less on how much a cure “costs” and more about when a cure will exist?  Indeed – now that we truly need “health care” and not “health insurance,” people seem to understand what healthcare is, and what it isn’t.

When the dust settles, and the costs are tallied, we will need to determine who pays what to whom.  Until that time, however, the priority for all of us is to seek, improve, and prioritize health (our own and others) and healthcare – actual, true, health care – both quality of care, access to care, and effectiveness of care.

Until then, this global crisis has taught us:

  • Issues with the cost of healthcare boils down to the cost of the actual care.
  • Issues with the efficacy of healthcare boils down to the effectiveness of the actual care.
  • Issues with access to care boils down to actual access to care.

With no vaccine available, and a pandemic impacting everyone indiscriminately – from Celebrity Tom Hanks to Taxi Driver Hank Thomas – we suddenly understand that, when push comes to shove, it doesn’t matter who is paying for your healthcare, so much as whether healthcare itself is available.   Perhaps this will help us appreciate that only health care is health care, you can’t cure anything with the card in your pocket, and ultimately healthcare is expensive because health care is expensive.  It is tragic that it took something this extreme to open eyes and help people understand that on a debate stage we can pretend “health insurance” is healthcare… but when we are sick, only health care is healthcare.

“Incur”-aging a Review of the Term “Incurred”

On March 12, 2020

By: Kevin Brady, Esq.

The first time I read a Plan Document at The Phia Group, I saw a word that I am ashamed to admit, I did not quite understand. A short word, an odd word, but an important one nonetheless. The term “Incurred” can be found over and over in most Plan Documents and stop-loss policies. Little did I know, this term would come up, over and over again as I continued to review these documents.

With some variation in the language, the typical definition of the term establishes that claims are incurred on the date with which a service, supply, or treatment is rendered to a participant. Although this seems to be the standard, some Plans and policies provide that a claim is not incurred until it is submitted to the Plan or sometimes a claim may not be considered incurred until the Plan has issued payment on the claim.

An important consideration for Plan Administrators is that the Plan’s definition of this term should not conflict with the stop loss policy. When the Plan and the policy have conflicting definitions, it may give rise to a number of reimbursement issues. For example, a conflicting definition could implicate issues with stop loss notice requirements; if the Plan is confused about when the clock starts for timely notice of a claim, the Plan may inadvertently fail to provide notice of an otherwise reimbursable claim. Further, confusion on the date with which a claim was incurred could cause a claim to fall completely outside of the policy period unbeknownst to the Plan Administrator.

Another common issue arises when the definition fails to describe how the Plan will treat ongoing courses of treatment. Will the claim be considered incurred on the date when the participant initially sought treatment? Or will each individual treatment or service be considered separately? The Plan should clearly outline these issues to avoid confusion when administering claims. Even if a Plan does describe the impact of ongoing treatment, it must also consult with the carrier to determine if their application is consistent with the carrier’s and make the necessary modifications to ensure there are no gaps between the two documents.

While it may seem very simple, failing to recognize this language gap could ultimately be the difference between reimbursement and denial on an otherwise reimbursable claim.

Plan Administrators should review the definitions in both the Plan and their policy to ensure that a gap such as this one does not preclude the Plan from reimbursement. Even better, send your Plan Document and stop-loss policy to PgcReferral@phiagroup.com and we will perform a detailed analysis of the gaps between the Plan and the Policy.

Special Rules Apply for Military Treatment Facilities

On February 27, 2020

By: Nick Bonds, Esq.

Any time a group health plan has to deal with a unique type of provider, they start playing by a different set of rules. Today we focus on one provider in particular: the Military Treatment Facility (“MTF”), and the powerful tools they have at their disposal to seek payments from plans.

Modern efforts by the U.S. government to recoup military spending on medical care date back at least to World War II. At that time, the U.S. Department of Defense (“DoD”) (then the War Office) was primarily focused on recovering money spent caring for servicemembers injured by the tortious acts of third parties – essentially subrogating against private parties that injured their soldiers. Over time, federal courts determined that the DoD did not have the authority to pursue this type of recovery without legislation sanctioning a cause of action. Eventually, Congress obliged, creating the Federal Medical Care Recovery Act (“FMCRA”), which created a federal reimbursement and subrogation right against liable third parties.

This legislation evolved as military health care programs grew more complex. With the development of programs like the Civilian Health and Medical Program of the Uniformed Services (“CHAMPUS”) and then Tricare, as well as the introduction of the U.S. Department of Veterans Affairs (“VA”), and of course the expansion of the Military Health System (“MHS”) itself, a need became apparent for a mechanism by which these programs could recover medical care costs from workers’ compensation plans, automobile insurance coverage, and eventually private health insurers and self-funded health plans.

10 U.S.C. § 1095, which established the Third Party Collection Program and allows the DoD to collect from health insurance plans the health care costs incurred on behalf of insured military retirees and their dependents. The statute allows MTFs to collect from third-party payers (e.g., insurance carriers, medical services, or health plans the reasonable costs of care incurred at a medical treatment facility to the extent the insurer would pay if the services were provided at a civilian hospital.  This means that a third-party payer (e.g., a self-funded plan) could not deny claims from a MTF simply based on a “Government Facilities” exclusion.

Most importantly however, as mentioned above, an MTF would not be bound by a self-funded health plan’s timely filing deadlines. Claims brought by a provider under 10 U.S.C. § 1095 are consider considered indebtedness to the United States government; which are only time-barred after six years (see 28 U.S. Code § 2415). This means that an MTF can bring a claim past not only the self-funded plan’s filing deadline, but well beyond the deadline for the plan’s stop-loss policy. This could easily lead to a situation where a Plan Sponsor finds themselves obligated to pay claims to a military hospital with little to no hope of being reimbursed by their carrier.

This fact pattern may sound familiar to plans that have had their claim denial overturned by an independent review organization (“IRO”). Under the Affordable Care Act (“ACA”), self-funded plans must cover these overturned claims, but the process of appealing and overturning these claims pushes them well beyond the incurral or payment period mandated by the applicable stop-loss policy. Similar to the situation with MTFs, plans find themselves statutorily obligated to pay claims that would typically be denied by the stop-loss carrier. Thankfully, a number of stop-loss carriers provider riders their policies allowing such overturned claim denials to be considered “covered,” and therefore reimbursable. This type of rider may come at a premium, but it can be invaluable to a plan that finds itself saddled with exception high, exceptionally tardy claims by an IRO.

Plans that know they have a participant population that is likely to seek treatment from a military hospital need to be aware of 10 U.S.C. § 1095 and the difficult position it can put them in. Any time a plan is dealing with unique providers (e.g., MTFs, VA providers, critical access hospitals) special rules may come in to play that can shake up the standard playing field. The Phia Group is here to help plans understand which rules they need to play by.

EMPLOYERS BEWARE: Handling Employee Absences Resulting from Coronavirus Quarantine

On February 19, 2020

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.

New Insight on Provider Surprise Billing

On February 17, 2020

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.

A Simple Mistake with Big Consequences: Is Your HDHP Actually HSA-Qualified?

On February 5, 2020

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.

 

More Thoughts on The Cigna Racketeering Case

On January 28, 2020

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!