By: Andrew Silverio, Esq.
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.
By: Nick Bonds, Esq.
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.
By: Ron E. Peck, Esq.
As the 2020 Presidential Election draws closer, the topic of healthcare continues to dominate the airwaves. Be it media or debate, this is one of the (if not the) issue about which everyone is talking; but pay close attention and you’ll notice they aren’t all speaking the same language.
Access vs. Care vs. Insurance
One word everyone can agree upon is “affordability.” The issue, however, is that depending upon whom you ask, what it is that ought to be “affordable” differs. Some people throw the term “access” around, while others seek affordable “care,” whilst still others focus (candidly) on affordable insurance.
Interestingly, for many, the term they use (access versus healthcare) matters little, as – once their position is better defined – a shrewd listener will note that the goal is ultimately the same; make insurance cheaper. They seem to believe that insurance is healthcare, and cheaper insurance is thereby cheaper healthcare. Further, they believe that the only “cost” of healthcare, incurred by an insured person is their premium, co-pay, coinsurance, and deductible.
This, then, is one misconception that continues to dominate political, regulatory, and economic discourse; that by attacking the cost of insurance for the general populace (i.e. premiums/contributions, co-pays, coinsurance, and deductibles), you somehow fix the problem of limited access and/or the high cost of healthcare.
Health Insurance is Not Healthcare
I’ve written in the past, and continue to argue today, that health insurance is not healthcare. Health insurance is one means by which the risk of payment for healthcare is shifted from the consumer of healthcare to a third-party payer. Changing who pays for healthcare doesn’t (on its own) address how much the healthcare costs. For instance, before you argue that Congress should establish a funding mechanism to support the “cost of caring” for those with significant medical needs, ask first what it means to pay for care. Are you referring to the cost of insurance, or the cost of the “actual” health care for which insurance pays?
Some might argue, however, that when a “new” payer is designated, (be it insurance, a self-funded plan, or the government), if they are large enough and possess enough clout, they can strongarm the provider into accepting lower prices for care – thereby reducing the actual cost of care. Thus, while making insurance more affordable doesn’t in and of itself reduce the cost of care, by providing more lives (and this negotiation power) to the payer, those payers in turn are provided with more “power” to force providers into accepting lower prices. Indeed, a single-payer would hold all the cards, and thus name their own price.
In a vacuum it makes sense, and if we were purchasing potatoes or tires it may work (in a truly free-market environment), however, in healthcare some features apply that are unique to this industry.
A Non-Market Market
In any other market, a vendor of goods or services can set any price for those goods or services. Supply, demand, and competition will then force the vendor to increase or reduce their price or fail. This allows the “free market” to naturally set prices at a level both the seller and buyer can live with. In healthcare, however, providers leverage things like technology, reputation, rankings, and sponsorships to compete for “customers” (a/k/a patients), rather than the price. Providers compete for these other things; if and when price is a matter over which there is competition between vendors (providers), it’s a competition to see who can charge the most. Indeed, one of the big pushbacks against transparent pricing in healthcare is that some providers will see that other providers “get away” with charging higher prices for the same services … and will increase their rates to match. Imagine if that same argument applied to every other industry; that the cost of bananas couldn’t be transparent, because grocers will compete to raise prices faster than the competition. Welcome to a world where the consumer has no skin in the game, and no price-based incentive to pick the lower cost options exists.
In healthcare, where patients don’t know, or (they think) pay the price of healthcare (at the time the care is consumed), and the consumer doesn’t appreciate the impact of higher healthcare prices on insurance costs, providers are able to freely raise prices without the negative repercussions vendors in other industries would immediately suffer. Additionally, even if patients know the price, if they (at least in their mind) don’t think they are the ones paying the price, then higher prices will – at best – not dissuade them from consuming care, and – at worst – will steer them away from reasonably priced care to higher cost providers, thanks to an (inaccurate) assumption that higher price equates to higher quality.
At the same time, contract law states that a customer who agrees to pay a certain price for a service or product has entered into a contract with the vendor. This preemptive agreement between the customer and vendor, regarding what will be paid, and what will be received by the customer, is titled a “meeting of the minds.” If the customer later fails to pay the amount to which they’d previously agreed, this would be deemed a breach of contract. Even if objectively, one could argue the agreed upon price is excessive, assuming the customer had the requisite capacity to enter into such a deal, the contract is binding. If, however, someone receives a good or service but there was no meeting of the minds (agreement about what would be provided, and a specific price for said goods or services), the customer will be forced to pay an objectively reasonable price – determined by an objective third party, using objective pricing parameters – and NOT whatever price the vendor chooses to collect. This concept, called Quantum Meruit, ensures vendors are adequately compensated based upon objectively reasonable parameters, and customers are not unjustly enriched (don’t “get something for nothing”) but also aren’t forced to pay a price they never agreed to (and which is excessive by all reasonable, objective measurements).
In healthcare, however, rarely can we say there is truly a meeting of the minds. It is rare indeed to see a provider (the vendor) and patient (the consumer) agree upon a price prior to the provision of services. Yet, despite this, Quantum Meruit – applicable to other commercial exchanges – has no place in healthcare, and rather, the provider is allowed to balance bill the patient whatever amount it wants – usually the amount that exists between the provider’s “charge master” price, and what it already received from the applicable carrier or benefit plan. Note that the only prohibition on this billing practice is the prior existence of a contract between a payer and the provider, by whose terms the provider agrees to accept the payer’s payment as payment in full. This agreement, many argue, is the greatest value a network offers.
Given that the law protects a provider’s right to charge whatever they wish – with no limits based in reasonableness, meeting of the minds, or Quantum Meruit – and limited only by pre-negotiated contracts, payers generally negotiate from a weak position.
As such, simply ensuring everyone has insurance will not drastically reduce the cost of healthcare itself. Further, people – whether they are insured or not – will pay the cost when healthcare is too expensive. Be it balance bills for the uninsured, or rising premiums and deductibles for the insured – the money needs to come from somewhere.
Compounding the issue further is that fact that Americans generally suffer from a lack of long-term vision. We are, as a society, driven by a need for instant gratification. People use credit cards to buy things now, that they can’t afford later. People purchase homes and take out mortgages now, that they can’t afford later. Likewise, people obtain healthcare now that they can’t afford later. Make no mistake; even those with insurance pay the cost later, in the form of higher premiums, co-pays, deductibles, and co-insurance. Therein lies the rub – people are quick to target out of pocket expenses at the time care is received, and the cost of insurance in general, but they do so without asking why insurance is expensive or addressing that root cause.
Until people understand that – with or without insurance – patients will ultimately be responsible for the actual cost of care, then the issue will not be resolved. In other words, focusing on the rising out of pocket expenses, such as premiums, co-pays, and deductibles – without also focusing on why these expenses are increasing – addresses a symptom without diagnosing the disease.
What Does This Mean for Us?
Many candidates and their supporters are proponents of the so-called “Medicare for All” plan, yet even many who support those candidates are beginning to hesitate, worrying that under Medicare payment rates (forced down providers’ throats by a single-payer monopoly), some hospitals struggling to stay open might close. Here, then, we see the opposite issue – ushered in when a monopoly is in place. A single-payer with too much power can force opposition into accepting unduly low, unfair rates.
Is there a happy medium? Some have argued that a so-called “public option” may be one such “middle ground,” but this idea cannot live in harmony with private benefits for long … resulting in the demise of private plans, and eventual monopoly that is a single-payer, and which (as already discussed) most agree needs to be avoided.
Consider as “Exhibit A” the State of Washington. Washington is set to become the first state to enter the private health insurance market with a so-called “public option,” at rates supporters say will be 10% cheaper than comparable private insurance. Almost as if the lawmakers read my article above (before I even wrote it), they claim these savings will be achieved thanks to a cap on rates paid to providers.
Without going into too much detail regarding the pricing model (spoiler alert – it’s a percentage of Medicare), if this public option is indeed available to all residents, and if they can “force” providers to accept these payments as payment in full (thereby preventing balance billing), why would anyone sign up for a private plan? If, then, all private plan members are steered by sheer common sense to this public option, private plans will cease to exist and – in this way – a single-payer emerges from the exchange.
It was this threat that caused a public option to be removed from the proposed PPACA legislation, but now it’s back, at the State level as well as in proposals presented by Democratic candidates for the Presidency.
In the end, unless private plans and providers can achieve a meeting of the minds … and make healthcare affordable long term … this may be the future sooner than we think.