By: Chris Aguiar, Esq.

It always baffles me when sides whose interests should be very well aligned can’t seem to get on the same page.  The Right and the Left blame each other for the problems in America.  Payers chastise providers for charging too much while providers point the finger back at payers for paying too little. The reality is, if we all took a seat at the table together in the spirit cooperation and compromise, we could probably figure out something that worked for everyone.

In today’s blog installment, I’m looking at the relationship between stop loss carriers and benefit plans.  Now, talk to any of us lawyers at The Phia Group, and we could talk all day about horror stories, as far as subrogation is concerned, its comes up in the same way almost every time.  Now, it doesn’t happen often – but every once in a while I’ll  come across a plan that doesn’t want to comply with its stop loss contracts and/or obligations.  It’s important that everyone realizes that we need each other to survive.  Those plans who perhaps don’t have the cash flow or population to sustain large losses especially must consider the importance of stop loss to the health of their self-funded plan.  And let’s face it, if companies didn’t make money offering a stop loss product, it wouldn’t be available in the marketplace.

The truth is, we’re on the same team.  If we can’t get on the same page, how can we expect state regulators to see the value in what self-funding brings to the benefit plan table?

By: Kelly Dempsey, Esq.

(No, this isn’t about spiders.)

The date was somewhere around August 25, 1999. The location was my 10th grade biology class. I remember taking in the scenery of a new classroom and looking at all the pictures and quotes my teacher had up on the walls. One in particular caught my eye:

“I know you think you understand what you thought I said, but I’m not sure you realize that what you heard is not what I meant.”

Once your head stops spinning, we can continue…

I’ve since learned this quote is attributed to the former head of the Federal Reserve Board, Alan Greenspan.  The context of this quote is still foreign to me, but I believe it can be applied to just about anything – so let’s apply it to plan documents.  

In general there are several entities involved in the process of administering an ERISA self-funded medical plan document, but ultimately the plan sponsor is responsible for ensuring the terms of the plan document meet the needs of the plan and its members. The plan administrator then has the fiduciary duty to administer the plan in accordance with the terms of the plan document. So when is the last time that you, the plan sponsor, have read the plan document cover to cover?  

Plan documents have to be reviewed and revised for any number of reasons, including regulatory changes – but sometimes plan documents are changed when the plan moves to a different claims administrator (i.e., hires a new TPA to administer claims, or moves from an ASO to a TPA or vice versa). The “rules” each claims administrator sets related to the plan document’s format may vary. Some TPAs will administer the document as-is. Some TPAs prefer to use their own plan document template, which the plan sponsor can either adopt from scratch or conform its existing benefits to.

I’ve written about “gap traps” before, and while this isn’t a really one of those as we typically use the term (which is most often relevant to gaps between a plan document and a stop loss policy), a type of gap arises if a restated document doesn’t mirror the prior plan document. For example, the prior plan document had an illegal acts exclusion that applies for any act that carries with it a potential prison sentence of one year. The restated plan document, however, doesn’t include this specific prison sentence limitation, which means the plan essentially will have to exclude more claims in order to comply with the terms of the plan document (such as, for instance, a DWI, which does not carry with it a sentence of up to one year, but is an illegal act!). While this would comport with the terms of the plan document, it is something for which plan members – and even the plan administrator – may not be prepared.

Another example is a situation where the prior plan contained a medical tourism program that includes many non-U.S. locations, so the plan did not include a foreign travel exclusion. When the two plan documents were “merged” such that the existing document and new format are combined, the new plan document accidentally contained both an international medical tourism program as well as a new exclusion for non-U.S. claims (because foreign travel exclusions are still fairly common). Needless to say, that type of contradiction can cause a slew of problems (including a potential gap with the stop loss policy).

The addition of a new exclusion, or even apparently minor verbiage changes within an existing exclusion (or definition, or benefit, or just about anything else, for that matter), can seem very insignificant, but has the potential for dire consequences if the intent of the plan is not reflected as clearly as possible.   

So, a few questions for employers, TPAs, consultants, brokers, and anyone else involved in plan document drafting:

•    Does the plan document actually say what the plan sponsor wants it to say?
•    Does it clearly outline what is covered?
•    Do the exclusions align with what the plan wants to be excluded?
•    If a plan document has been recently restated, have you confirmed that the terms of the new plan document are the same as the prior plan document?

It’s always best to triple-check these types of things.  Happy reading!

By: Brady Bizarro, Esq.

The latest news in the repeal and replace saga is that congressional Republicans are pushing to get a bill to the Senate by the end of this month. The ambitious timeline means that lawmakers and independent analysts will have very little time to review the components of the bill. The lack of transparency is already causing problems within the Republican Party itself. Yet, parts of the bill have leaked, and there are some provisions which will prove controversial across the political spectrum; specifically those that affect employer-sponsored health insurance.

The new plan, for which President Trump has signaled support, would offer aged-based tax credits that are paid for by taxing employer-sponsored health insurance plans. Employer groups across the country are already signaling their opposition to this idea, which is essentially a new version of the Cadillac Tax which is part of the Affordable Care Act and was delayed until 2020.

Why do House Republicans wants to tax employers? The truth is that Republicans want to keep as many people covered by health insurance as possible, and that means subsidizing care. Lawmakers have identified taxing employer-sponsored plans as one of the only feasible ways to raise enough revenue to pay for these tax credits.

This is unwelcome news for the self-insured industry because if the replacement bill also eliminates the coverage mandates and essential health benefits, we could see more movement from employer-sponsored coverage to individual plans, especially among younger and healthier workers. If the government gives workers tax credits to buy individual coverage, and that coverage can be very skimpy and cheap, then healthy people will be tempted to buy individual coverage outside of their employer plan. All the more reason for employers to transition to self-funding to be able to offer quality care and competitive prices to keep young, healthy workers on their plans.

By Zack Pace, Senior Vice President, CBIZ, Inc., Employee Benefit News (Full text) (EBN)

Self-funded health plans don’t have health insurers, only health plan administrators. The knowledge that their employers are paying the claims of the plans dramatically changes employees entire outlook on health benefits and total compensation.


For example, a friend said:
• “When I tell people at work that [our employer] is paying all our claims with cash, people look at me like some wild conspiracy theorist. But the evidence is all there — they want us to be cost-conscious: the health fund incentives, the biometric screenings, the surveys. It’s just odd that [the plan being self-funded] is not discussed openly. Both sides, it would seem, would benefit from information sharing here.”
A human resources executive shared this comment:
• “This is such a good point! I am always surprised when the “average worker” does not know if their plan is self- funded or the impact that has. When I share with them why it matters, you see the lights come on.”
The Majority of Workers are Covered by Self-funded Health Plans
As benefits professionals, we know that most Americans receiving health benefits through group health plans are covered by a self-funded plan. Per the 2015 Kaiser Family Foundation and Health Research & Educational Trust Employer Health
Benefits Annual Survey:
• 63% of all covered workers are covered by a self-funded plan
• 83% of covered workers employed by a firm with 200 or more workers are covered by a self-funded plan
However, are those of us sponsoring self-funded plans effectively communicating to our employees that the plan is self-funded and explaining why that matters?
One of the strongest headwinds in communicating this point is our society’s habit of calling health plan administrators “health insurers.” Even I’m guilty of this from time to time. Thus, employees covered by self-funded plans are constantly hearing the terms “health insurance company” and “health insurer.”

Why are the terms health insurance company and health insurer so pervasive?
1. Many health insurers in the individual and small-group market (e.g., Aetna, Anthem, CIGNA, UnitedHealthcare) also offer claims administration and network services to self-funded medical plans. We tend to associate these brands and their logos with health insurance companies.
2. Policymakers and the media often don’t distinguish in their communications between an insured health plan and a self-funded plan. For example, have you heard a presidential candidate in this election cycle cite that for most American workers, the employer, not an insurance company, is paying the health claims? I haven’t.
So how can an employer sponsoring a self-funded health plan effectively communicate to its employees that the plan is self-funded and explain why that’s important?
1. First, eliminate the terms health insurance company and health insurer from the employee communication materials and strive to eliminate the terms from the company vocabulary.
2. Next, explain the basics of how the self-funded plan works. For example, communicate that the network secures discounts from physicians and hospitals, the health plan administrator adjudicates claims, and the care-management nurses help coordinate and improve the quality of care. Underscore that the employer is paying all of the claims, except, generally, for those above a certain catastrophic level.
3. Then, explain why employee stewardship of the health plan financially benefits all parties. For example, point out that total compensation consists of cash wages plus benefits compensation. Emphasize that increases to benefits compensation generally reduce increases to cash wages. As a visual tool, use Slide 4 of the 2015 Kaiser Family Foundation and HRET Employer Health Benefits Annual Survey’s Chart Pack. The graph demonstrates that since 1999, health plan costs have increased 203%, and cash earnings have increased 56%. You could also share your own history of health plan increases vs. cash compensation increases. Of course, this argument falls apart quickly if a company treats cash compensation and benefits compensation as uncorrelated budget silos.
Once employees begin to understand why smaller increases in health plan costs will raise cash compensation levels, ask for their help. For example:
1. Ask for their ideas and feedback on how to improve workplace health.
2. Ask them to support the wellness initiatives you are investing in and to provide ideas to improve and expand those programs.
3. Ask them to take the phone call from the health plan’s care-management nurse.
Finally, consider developing an incentive plan that rewards employees if the plan’s performance runs better than expected (ask your ERISA attorney and benefits consultant about the permitted incentives).