By: Jon Jablon, Esq.
We hear a lot of chatter in the self-funded industry about “plan mirroring.” The idea is that a stop-loss carrier will adopt the same language as what is in the SPD, in effect “mirroring” the language, and that gets rid of what we at Phia like to call “hard gaps,” where the plan and carrier are working off different language, leading to situations where the plan must pay claims but the carrier may deny them. The point of mirroring the SPD’s language is so the plan never needs to worry about those kinds of gaps.
But there are other kinds of gaps, too. Gaps tend to arise when different entities are interpreting the same language, as well (we call those “soft gaps”) – and it is crucial to keep in mind that a policy that mirrors the plan’s terms is not the same as the carrier adopting the plan’s interpretation of those terms.
Let’s talk about an example. We have mentioned this particular situation numerous times; it’s not because we’re too lazy to think of new examples, but because it keeps on happening! The SPD excludes any benefits paid for services performed by a family member. A plan member has a great uncle who is a surgeon, and elects to have him perform the surgery partially because of the great price he has offered, and partially because he knows and trusts him. As far as the plan member is concerned, this is a win-win. The claim is sent to the health plan, and the Plan Administrator uses its discretion to determine that “family member” does not include someone as attenuated as a great uncle (since the Plan Administrator interprets that term “family member” to refer to the immediate family), so the plan pays the claim, and expects that the carrier will agree, since the policy “mirrors” the plan.
Well, you can guess what happens next.
The claim goes to the stop-loss carrier, and the carrier denies the claim because its interpretation of “family member” is broader than the Plan Administrator’s interpretation, indeed including great uncle within the class of “family members.” The carrier denies the claim. The plan is both confused and angry, and thus begins a protracted fight between the plan/TPA/broker and the stop-loss carrier, caused by the carrier’s overly-salesy and idealistic explanation to the plan, TPA, and broker what mirroring actually entails.
In short, plan mirroring entails using the same language, but it does not necessarily entail thinking the same things. The carrier adopted the same exclusion that the plan uses, but the carrier cannot control how the plan interprets that exclusion, nor can the plan be underwritten based on what interpretations of the plan language the Plan Administrator could conceivably make in the future. The carrier, after all, is not a psychic – and because of that, it is the carrier’s responsibility to make absolutely sure the health plan understands what “mirroring” really entails, and what it doesn’t entail. The concept of plan mirroring in a stop-loss policy is not quite as straightforward and magical as it seems. It is certainly useful to minimize the gaps in the language used, but it’s not a panacea.
This applies just as clearly, if not more so, in the level-funded arena, where level-funded plans expect to have their expenses capped based on a guarantee that the carrier will cover all their claims above the aggregate deductible. When there is a difference in interpretation that leads to a denial, the plan is left holding the bill, and often has no idea why – especially when level-funded plans are marketed essentially as programs that mimic fully-insured policies. The important difference is that in a fully-insured policy, the plan sponsor pays its monthly premium and there is no possibility of being on the hook for claims – whereas in a level-funded program, the plan sponsor can lose its expected reimbursement if the stop-loss carrier doesn’t agree with the Plan Administrator’s discretionary decision.
Plan mirroring provisions are sometimes marketed to make a stop-loss policy airtight for the plan, but don’t be fooled by the hype: there is always still the potential for a gap somewhere along the way. Make sure you read and understand your contracts and policies before you sign, and if possible, have them reviewed by an expert!
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.
By: Jon Jablon, Esq.
You may have heard about our new Phia Certification program, through which The Phia Group requires all employees to be “certified” to the company’s satisfaction. Certification is obtained by watching, reading, and listening to a series of training materials and then taking a series of tests to confirm the employee’s understanding of our industry and all aspects of The Phia Group’s operations.
One particularly noteworthy question is:
Which of the following is the most accurate?
As you may have surmised, the answer is option B, which is essentially an “all of the above” type of answer. This is especially noteworthy because we find that folks in our industry often think of “gaps” as occurring only between the plan document and stop-loss policy, while in practice there are lots of other gaps that can cause lots of unforeseen problems for health plans.
A perfect example – and one that we deal with quite frequently – is when there is a gap between the plan document and a network contract. This can be one the most problematic of all gaps, since it can come out of nowhere. The issue arises like this:
A plan incurs an in-network claim, billed at $50,000. The SPD provides the plan the responsibility to audit all claims, and an audit reveals that the appropriate payable rate (the plan’s U&C rate) for this claim is $30,000. Meanwhile, the network contract provides a 10% discount off billed charges for this particular claim – resulting in the plan paying $30,000 based on the SPD, but owing $45,000 as the network rate. This is a very common scenario and not one that can be solved quite so easily; even if the plan says “oh right – the network contract! We’ll pay the network rate to avoid a fight with the network,” the dilemma may not be over, since stop-loss presumably has underwritten coverage based on the assumption that the plan’s U&C rate will be paid, resulting in stop-loss possibly denying the $15,000 paid in excess of the plan’s U&C rate. Even though there’s a network contract and the plan may have no choice but to pay it, there’s always the chance that the stop-loss policy will define its payment on other terms.
Moral of the story? Gaps in coverage can arise between the plan document and any other document – including network contracts, ASAs, stop-loss policies, employee handbooks, PBM agreements, vendor agreements, and more. Check your contracts, and make sure your SPD aligns with all of them! (Email PGCReferral@phiagroup.com to learn more.)
By: Jen McCormick, Esq.
We frequently talk about the various types of gaps in coverage – gaps between the plan document and the stop loss policy, the network agreement and even the employer handbook. The mission for gap-less coverage should not stop there however. Recently, we have seen situations where employers have gaps in between their documented practices and their payroll practices. For example, an employer may allow continuation of coverage after a leave of absence for up to 3 months. The problem, however, is that the employer’s payroll system does not allow for manual adjustments and coverage must end after a specified (i.e. two week period). This creates an issue as an employee is paying for coverage but is not eligible for that coverage under any plan materials. As a result, employers should not only double check that their plan materials are in sync but that their plan practices (i.e. payroll and otherwise) are aligned with those materials.
By: Jen McCormick, Esq.
As many states (and cities) are starting to beginning to enact paid sick and/or leave time regulations, employers will need to understand the impact and implications. The regulations vary by state (and city), but require eligible employers to grant certain employees paid sick time. Various regulations are in effect already, and some are yet to become effect. Regardless of the effective date of these regulations, it’s clear that employers will need to make changes and consider how the regulations will impact their employer handbooks, plan documents (i.e. continuation of coverage) and stop loss. Now is the time to get the ball rolling in reviewing these materials so employers can be prepared.
By: Ron E. Peck, Esq.
Our industry (that being the self funded health benefits industry) is primarily a web-work of relationships. Unlike a large, traditional health insurance carrier, where all functions are located under one roof, in our industry key pieces of the greater whole are comprised of various independent entities.
The funding comes from a sponsor – usually an employer. Sometimes, these employer “groups” gather to form a captive, MEWA, association health plan, or other collective funding mechanism. Next, they select someone to process claims and perform other administrative tasks. Usually this is a carrier providing administrative services only (ASO) or a third party administrator (TPA). Next, these plans – more often than not – require some sort of financial insurance to protect them from catastrophic claims, securing for themselves a specific type of reinsurance customized to fit this role, a.k.a. stop-loss. Add to this list of entities a broker/advisor, who helps the sponsor “check all the boxes,” as well as ensure a complete and successful implementation (as well as plan management), vendors (who offer any number of cost containment services and other plan necessities), networks with providers (from direct contracts to PPOs), and a pharmacy benefit manager (PBM). I’m sure I’ve missed a few other players, but – hopefully – you start to see how a so called “plan” is not a single being, but rather, a collection of beings coordinating with each other. If one player drops the ball, the whole thing unravels.
I recently posted on LinkedIn a hypothetical, wherein a CEO loves the idea of medical tourism, railroads it through and has it added to their self-funded health plan; their broker and TPA pick a medical tourism vendor, and a few weeks later, a plan member is in Costa Rica for a costly procedure. The total cost of the procedure hits (and exceeds) the benefit plan's stop loss insurance specific deductible. Despite that, the total cost is still way less than if the procedure had taken place domestically (even after applying the plan's network discount). Yet, stop loss denies the claim for reimbursement, citing the fact that the plan document excludes coverage for treatment received outside the United States. Now the plan (through its TPA) has paid the vendor's fees, paid for claims that are technically excluded by the plan document, and is without stop-loss reimbursement.
The responses have been many, various, and generally spot-on (as well as – in some cases – entertaining). Yet, it exposes a few issues and “gaps” in the web-work I described above. The employer, TPA, and broker are excited to adopt a program that will save them money. By extension, the stop loss carrier will save money. In my example, the stop loss carrier did indeed save money, compared to what it would have cost (and they would have paid) domestically. Yet, because the plan document wasn’t updated and the carrier wasn’t informed, the stop loss carrier isn’t “required” to reimburse. Today, few carriers will reimburse when not required to do so. There are some that, in recognition of the plan’s efforts to contain costs, would cover the loss – but most would not.
This is just one example of the issues we’re seeing today due to the “web-work” nature of our industry. Like organs in a human body, all the pieces need to communicate and coordinate.
It has also come to our attention that there is a growing trend whereby brokers and plan sponsors seek to use their own stop-loss rather than a “preferred” carrier selected by the TPA. TPA’s, in turn, are worried that if the plan utilizes a carrier the TPA has not vetted, and something goes wrong, that TPA may be blamed for a conflict they had no hand in creating. Rather than push back against this trend, however, and thusly lose business opportunities, we believe – AGAIN – the key to success is communication and preemptive coordination. Explain the concerns, put them in writing, and have the party placing the insurance agree not to hold the TPA at fault for issues they had no hand in creating. This will then allow a trend – that frankly can be quite good for the industry (that is, allowing plan sponsors to customize their plan to meet their needs, including who provides the stop-loss) – to thrive without threatening the TPA.
These are only two examples, but hopefully it’s now clearer to you why we must discuss these issues ahead of time, ensure all written documents align, and we coordinate before an issue arises.
By: Ron Peck, Esq.
I am a firm believer in self funding. I believe that, when done well and properly, no other type of health plan can compare to a self funded plan. I also believe that most well formed self funded plans need stop loss insurance. That’s why it makes me so sad to see infighting between self funded plans and their stop loss carriers. They are on the same side; they should be allies! Yet, too often I see a plan pay claims in accordance with one set of rules, and then stop loss re-prices the plan’s submission for reimbursement using a different set of rules. Sometimes this is based on differing verbiage in the plan document versus the stop loss policy. Sometimes this is based on differing interpretations of the same verbiage. Sometimes there is no real basis for the conflict at all. Too often it feels like the carrier is trying to deliver a heavy handed form of tough love: “If you won’t take action to contain costs, I’m going to do it for you. It hurts me worse than it hurts you; you’ll thank me later.” Other times it feels like a short term maneuver to cut costs, even if it means losing business long term. Indeed, when I describe some of the positions some stop loss carriers take when dealing harshly with their plan clients, the reaction is that those carriers are being foolish – and they will certainly lose their clients… and yet… they do continue to write new business and are maintaining a client base. This tells us that, by offering a very low rate, they attract clients. This also tells me that those clients (and their broker/advisors) aren’t investigating the carrier’s track record. This, in turn, makes me just as sad as the fighting. Why? It breaks my heart that those stop loss carriers who go above and beyond to work with their plan clients, find ways to reimburse, and collaborate with us all are not receiving the due credit they deserve. In fact, sometimes the “premium” they charge for their white glove service ends up knocking them out of the running when they are up against a bargain basement carrier. Trust me – the savings on premium will never equal the loss you suffer the first time a carrier denies your claim for reimbursement because they “say” you overpaid.
The moral of the story is this – First, don’t pick a carrier based solely on the premium. You get what you pay for. Second, review the stop loss policy, network contract, administrative service agreement, employer handbook, and plan document side-by-side-by-side. Identify areas where they require the same entity or entities to do different things; things that can’t coexist. Third, talk through conflicts and potential conflicts BEFORE there is a claim, and agree how they will be handled if they occur. Fourth, carriers should incentivize plans to engage in cost saving procedures before claims are incurred – not punish them for failing to do so after the fact. Both plans and carriers need to recognize that while it may be easier to beg forgiveness rather than ask permission, it rarely works out well for anyone.