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:
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.
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.
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.
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.
I really enjoy the quote, attributed to Haruki Murakami, that “Pain is inevitable. Suffering is optional.” This really hits home for me for a few reasons, personal and professional, but for our purposes – let’s consider how it relates to the health benefits industry and healthcare as a whole.
Anyone paying attention to the media and political debates will no doubt make note of the constant rhetoric regarding healthcare, and more to-the-point, the “cost” of healthcare. I’ve (here and elsewhere) discussed ad-nauseam my position that health “care” and health “insurance” are not the same. That insurance is a means by which you pay for care, and is not care itself. That by addressing solely the cost of insurance, and not the cost of care, you build a home on a rotten foundation. So, you can likely imagine some of the “ad-nauseam” I feel in my stomach when I hear the candidates talking on and on about how they’ll “fix” the problem of rising healthcare costs by punishing insurance carriers and making health “insurance” affordable (including Medicare-for-All).
The issue is that, ultimately, whether I pay via cash, check or credit… and whether I pay out of my own bank account, my wife’s account, or my parent’s account… at the end of the day, a beer at Gillette Stadium still costs more than a beer from the hole-in-the-wall pub, and if I keep buying beer from (and thereby encouraging the up-charging by) the stadium, prices will increase and whomever is paying (and in whatever form they are paying) will be drained, and no longer be able to pay for much longer. In other words, making insurance affordable (or free) without addressing the actual cost itself is simply passing the buck.
So, this brings me to the quote: “Pain is inevitable. Suffering is optional.”
Pain – the pain we feel as we are forced to deal with a costly, yet necessary, thing … healthcare. As technologies improve, research expands, and miracles take place every day, I absolutely understand that with the joys of modern medicine, come too the pain of cost. We must identify ways to reward the innovators, the care takers, the providers of life saving care.
Yet, we – as not only an industry, but as a nation – also assume that with this inevitable pain, so too must come the suffering. Suffering in the form of bankruptcy for hard working Americans and their families. Suffering in the form of unaffordable care, patients being turned away by providers, and steadily rising out of pocket expenses.
I do not believe that this suffering needs to be inevitable. If instead we accept the inevitability of the “pain” inherent in healthcare, and the costs of providing healthcare, but instead identify innovative ways to address those costs, then we can avoid the suffering. Our own health plan, for instance, rewards providers that identify and implement ways to provide the best care, for the least cost. Our plan rewards participants who utilize such providers as well. We educate our plan participants regarding how, unlike in many other aspects of life, in healthcare you do NOT “get” what you “pay for.” That fancy labels, advertisements, and price tags do not equate to better care. We teach our participants how to leverage not only “price transparency,” but also quality measurements to identify the “best of the best” when seeking care – providers that perform as well or better than the rest, for the lowest cost. Rather than accept the “inevitability” of suffering, we embrace the pain – we endure the costs, the time, the resources necessary to actually care, and make ourselves educated consumers of healthcare.
The result? Plan participants – employees that have been on the plan for five or more years – will, beginning in 2020, not make any contribution payment to our plan. That’s right; their “premium” is zero dollars. The cost of their enrollment is covered, 100%, by the plan sponsor. The plan sponsor, meanwhile, can afford to do this thanks to efforts it has made, as well as efforts made by its plan participants, to keep the costs down. Indeed, a self-funded employer like us can make a choice – either assume that the suffering is inevitable, and pass the cost onto the plan members (incurring the wrath of your own employees and politicians alike), or, see that the suffering is optional, and nip it in the bud. We have identified ways to better deal with the inevitable pain, thereby minimizing the suffering endured by our plan participants.
It can be done, and we did it. You can too, but the first step is accepting that some things are inevitable, and others are not. Assigning inevitability to something that is not in fact inevitable is a form of laziness and blame shifting; and the time has come to stop that behavior, accept responsibility, do the painful work necessary to change things, and recognize that – no pain, no gain.
By: Nick Bonds, Esq.
With Presidential impeachment eating up the above-the-fold coverage pretty much universally, it is important to remember that Congress has other pressing issues to attend to. While a number of Democratic candidates are worried their mandatory attendance at the Senate trial will eat up valuable campaign time on the ground in the early primary states, the rest of Congress is still trying to keep the country running.
For instance, while Democrats and Republicans have an “agreement in principle” on a stopgap appropriations deal to fund the government through the end of the fiscal year, the spending package still needs to be finalized an passed before December 20 to avoid another looming shutdown. Meanwhile, the House Ways and Means Committee is working to ratify the United States-Mexico-Canada Agreement (USMCA), the Trump Administration’s replacement for NAFTA. Both of these urgent matters of business appear to have bipartisan support, but Congress is certainly feeling the pressure as this week gets underway.
The major sticking point in the USMCA negotiations appears to be the debate around the trade deal’s prescription drug provisions. The pharmaceutical lobby has long been pushing for prescription drug protections in trade deals – remember the TPP – but this time around the White House’s primary objective appears to be lowering drug prices. A concession to strike protections for biologics from the trade agreement appears to have clinched Democratic support, who opposed the deal’s 10 years of regulatory data protection for biologics innovations. Democrats argued that the biologics protections would increase drug prices in the U.S. and delay development of cheaper biosimilar drugs.
While the USMCA appears on track for ratification, Speaker Pelosi’s prize fight of the moment is her drug pricing bill – which passed the House along party lines last Thursday. The bill, named for late Representative Elijah Cummings, aims to expand Medicare, reign in drug prices, and allow the HHS Secretary to negotiate prices of between 50 and 250 prescription drugs (including insulin). President Trump appears poised to veto the Elijah Cummings Lower Drug Costs Now Act, while the Senate is debating a more moderate proposal – the Prescription Drug Pricing Reduction Act (PDPRA). The PDPRA would add consumer protections to cap out-of-pocket (OOP) prescription drug spending, and take measures to redesign Medicare Part D and reign in drug prices.
Congress has a lot of irons in the fire this week. We shall see what they can hammer out.
Starting in 2020, Washington’s new law aimed at putting an end to a particular form of balance billing, known as “surprise” billing, will go into effect. This includes situations where a patient has no reasonable opportunity to make an informed choice regarding their utilization of in-network versus out-of-network providers, for example in the case of emergency services or non-emergency surgical or ancillary services which are provided by an out-of-network provider within an in-network facility. In these cases, the patient has no way of choosing what providers to utilize, or may not know (and would have no reason to think to ask) that they could be treated by an out-of-network provider while visiting an in-network hospital.
Washington’s law mirrors the approach we have seen in several other states – it takes the patient out of the equation entirely by prohibiting the provider from pursuing any balances from them, and leaves the provider and payer to sort out the issue of any remaining balances.
In resolving outstanding balances, the provider and payer must come to a “commercially reasonable” amount based on payments for similar services in the same geographic area, and in this regard the state actually provides a data set for the parties to reference. If the parties can’t come to an agreement, either can request arbitration, and the arbitrator will choose one of the parties’ last proposed payment, encouraging the parties to submit reasonable amounts (for fear of having to defer to the other party’s offer).
Importantly, the law does not (and cannot, because of federal preemption) apply to private, self-funded plans which are governed by ERISA. However, such plans can opt-in to the law via annual notification to the state. These plans should not expect to enjoy the benefits of the law’s balance billing prohibitions if they choose not to opt-in, and reference to the state’s claims database, available on the Washington Department of insurance website, should help them in determining whether it makes sense to do so.
The full law can be found at http://lawfilesext.leg.wa.gov/biennium/2019-20/Pdf/Bills/Session%20Laws/House/1065-S2.SL.pdf, and a useful summary is available at https://www.insurance.wa.gov/sites/default/files/documents/summary-of-2019-surprise-billing-law.pdf.
By: Brady Bizarro, Esq.
On Friday, November 15th, the Trump administration released two long-expected rules: one final rule on hospital price transparency and one proposed rule on “transparency in coverage.” The final rule on hospital pricing is set to go into effect on January 1, 2021. The proposed rule is currently in the notice and comment period in which the Centers for Medicare and Medicaid Services (“CMS”) is accepting comments from interested parties. Both rules are meant to deliver on a promise made by the administration; that consumers would receive “A+ healthcare transparency.” For a variety of reasons, however, the long-term fate of these rules is in question.
Currently, hospitals must post their “list prices” online, but those prices do not represent what consumers are likely to pay for services. The administration wants to force hospitals to publish negotiated rates; meaning, the rates that payers actually pay providers for services. It had hoped to implement its hospital pricing rule sooner, but hospitals and provider organizations insisted that they would need more time to prepare to implement the rule. The rule requires hospitals to publish their standard charges online in a machine-readable format. Specifically, hospitals must come up with at least 300 “shoppable” services, and they must disclose the rates they negotiate with payers. This last point is the source of much controversy and of a legal battle. Hospitals claims that forcing them to publish their secretive negotiated rates will increase prices and that the federal government has no authority to compel them to make this disclosure.
Under the “transparency in coverage” proposed rule, all health plans (including employer-sponsored plans) would be required to disclose price and cost-sharing information to plan participants ahead of time. CMS will require that most insurers, including self-funded employers, provide instant, online access to plan participants detailing their estimated out-of-pocket costs. In other words, insurers would have to provide an explanation of benefits (“EOB”) upfront. According to CMS, this will incentivize patients to shop around for the best deal before they receive treatment for non-emergency medical services. Currently, the government is soliciting ideas about how to best deliver this information to consumers (i.e. through an app) and how to include quality metrics in the data.
The inevitable legal challenges to the final rule on hospital price transparency could sink the administration’s reform efforts. Recall that back in July, a federal judge blocked the Trump administration from requiring pharmaceutical companies to disclose drug prices in television ads. The legal arguments in that case are applicable here. Big Pharma successfully argued that the administration lacked the regulatory power to compel these companies to disclose prices and that the rule violated the companies’ First Amendment rights to free speech. Hospital systems are gearing up for a fight involving these same arguments. Armed with a federal court decision on a similar rule, the prospect of victory for the administration is relatively bleak. If this rule is blocked, it will further signal the need for congressional action in reigning in healthcare costs.
The Democratic candidate known for her multitude of plans and granular policy detail, has officially unveiled her Medicare for All plan. After a series of sharp jabs on the last Democratic debate stage from several of Senator Warren’s peers (from Mayor Buttigieg in particular), the Senator’s campaign was quick to announce that their plan was in the works.
To be fair, Senator Warren had been somewhat cagey in her responses. When asked point blank during the debates whether her plan would raise taxes on the middle class, she remained adamant that her plan would ultimately rein in costs – an echo of Senator Sanders’ defense of his own Medicare for All plan. On stage, Senator Warren made the promise, “I will not sign a bill into law that does not lower costs for middle-class families.” Now that Senator Warren has released some details, we can see that through some careful if optimistic finagling, the Warren Plan does indeed appear to deliver on that promise, while simultaneously distinguishing itself from Sanders’ plan.
Senator Warren’s plan is inarguably expensive, costing more than $30 trillion over a decade, with roughly two-thirds of that composed of new government spending. Her plan aims to cover this cost with a combination of employer contributions, taxes on large corporations and financial firms, closing tax loopholes (that old chestnut), and wealth taxes on individuals earning more than $50 million per year.
Mayor Buttigieg’s “Medicare-For-All-Who-Want-It” plan takes a different approach. While the Warren attempt to control health care spending focuses primarily on paying less money to providers, the Buttigieg plan takes aim at the other side of the equation: lowering medical prices. Mayor Buttigieg’s plan would implement market-based price caps for out of network providers. The purported cost of this plan does look more appealing: $1.5 trillion over 10 years, largely funded through rolling back the corporate taxes slashed by the Tax Cuts and Jobs Act of 2017.
The Warren campaign is built on its calls for sweeping systemic change, and the Warren Medicare for All plan reflects that aspirational ethos. While the Warren Plan may be difficult to pay for, it stands as a comprehensive overhaul of the American health care system. The Buttigieg campaign takes a less daring approach, and essentially props up the system as it stands now. Senator Warren’s riposte to the Mayor’s attacks starkly underlined her view that his proposal fails to go far enough, calling the Buttigieg plan “Medicare for All who can afford it."
Universal coverage is a noble goal, but ultimately the voters will decide whose path they think will lead us there. With both these candidates back on stage for the next round of Democratic debates, expect the duel over the future of our health care system to remain front and center.
By: Philip Qualo, J.D.
For employers who sponsor calendar year self-funded group health plans, the Fall season can be a very hectic time of year. This is usually the time of year that many employer plan sponsors begin reviewing their benefits in the context of the evolving needs of their workforce, and of course, plan costs. Based on my own experience in preparing The Phia Group health plan for the 2020 plan year, I have compiled several helpful tips for employer plan sponsors to keep in mind as they review their group health plans for the new plan year.
Know Your Workforce
Although U.S. job growth has been consistently strong in recent years, a low unemployment rate indicates there are more jobs than there are job seekers. Because of the limited pool of job seekers, and increasingly high quit rates, employers are reviewing their compensation packages, and more importantly, their benefit offerings, to assess what advantage they may have or need to attract and retain top talent. As such, employer plan sponsors should take the time to survey their workforce demographics and consider whether current benefit options are consistent with the needs of their current employees as well as future ones they seek to attract. For example, an aging or younger workforce may mean certain benefits are more or less important today than then they were a few years ago.
Employer plan sponsors should take the time to identify and analyze claim expenditures and benefit utilization for the current, and even prior, plan years. This allows employer plan sponsors to assess the financial health of their group health plans and identify benefits that are particularly costly or heavily utilized. By being proactive and identifying costly patterns, employer plan sponsors are empowered with the tools necessary to explore permissible cost-effective plan design options and cost-containment incentives to address high cost plan expenditures in the upcoming plan year.
Federal rules applicable to group health plans are constantly changing, whether it is due to new legislation or Court decisions establishing new precedent. Thus, employer plan sponsors should take the time to review their benefit offerings, Plan Documents, and/or Summary Plan Descriptions to ensure their group health plans are still compliant with the most current regulatory landscape. Failure to maintain or update benefits, Plan Documents and/or Summary Plan Descriptions in compliance with federal laws may result in costly penalties.
Internal Revenue Code (IRC) Section 105(h) prohibits self-funded group health plans from discriminating in favor of “highly compensated individuals” (HCIs) and against non-HCIs as to eligibility to participate and benefits available under the plan. If an employer’s group health plan treats all of its employees the same for purposes of health plan coverage (i.e., eligibility, contributions, and benefits are the same for all employees), the risk of violating Section 105(h) nondiscrimination rules is low.
For employer sponsored group health plans that vary eligibility and benefits among distinct classes of employees, Section 105(h) nondiscrimination testing should be conducted at least annually, preferably before the start of each plan year. A self-funded health plan cannot correct a failed discrimination test by making corrective distributions after the end of a plan year. If a self-funded health plan fails nondiscrimination testing, HCIs will be taxed on any excess reimbursements from the plan. Thus, depending on the plan’s design, an employer may wish to monitor group health plan compliance with Section 105(h) rules throughout the plan year to avoid adverse tax consequences for HCIs.
Employer plan sponsors that decide to make changes to their group health plan for a new plan year should make sure any relevant changes to the Plan Document are clearly communicated to the applicable stop-loss carrier. It is also advisable for all plan sponsors to review the content of their Plan Documents against the applicable stop-loss policy to identify and resolve potential gaps in coverage. Failure to communicate relevant health plan changes to the carrier or identify potential gaps between the Plan Document and the stop-loss policy may result in significant issues with stop-loss reimbursement in the new plan year.