A House Divided
By: Ron E. Peck, Esq.
In the world of self-funding, everyone plays a role. The broker advises, the employer customizes their plan and funds it, the claims administrator (TPA, ASO, etc.) processes claims, and stop-loss provides financial insurance. When the lines get blurred or we start asking people to do the jobs of others, we either create new opportunities or destroy the foundation. It all depends upon whom we’re asking, what we’re asking them to do, and whether they are stepping on any other toes when so doing it.
Consider, for instance, when a benefit plan asks its stop-loss carrier whether they should or shouldn’t pay a claim. Stop-loss is not health insurance. It is a form of financial reinsurance. Health insurance receives medical bills, processes the claims, and pays medical service providers for care rendered to insured individual patients. Stop-loss allows others to handle the “health insuring,” and instead provides protection to such health benefit plans against debts – incurred by those benefit plans – when payable claims exceed a deductible. They despise it when a plan asks them whether the plan should pay or deny a claim. They don’t want to be the fiduciary, or deemed responsible for wrong payment decisions. They aren’t paid to make such decisions, or incur such exposure. As such, most stop-loss carriers have traditionally told the plan that they (the carrier) cannot make the call, and that the plan will have to comply to the best of their ability with the plan document. That, when the claim is submitted for reimbursement to the carrier, only then will they judge the payability.
The problem? Some carriers want to have their cake and eat it too. They won’t tell the plan what to pay and what to deny, but they will happily criticize the plan’s decisions after the fact. Again – let me stress that I’m talking about a minority of carriers. These very few can ruin the reputation of an entire industry, however, and that is why it is so important to address this growing problem.
With increasing frequency – a lack of communication or presence of conflicting interpretation is resulting in stop-loss and benefit plans disagreeing regarding what is payable, how much is payable, and thus – what is covered by stop-loss. Even more tragically, the growing number of disputes between plans and stop-loss carriers is leading to an increased number of claims paid by benefit plan sponsors that are not reimbursed by stop-loss, resulting in employers enduring negative experiences with self-funding, financial ruin, and legislative scrutiny.
For instance, a plan document may define the maximum payable rate as “usual and customary,” and define that as being a number calculated by reviewing what most payers pay. The plan takes that to mean “private payers,” while stop-loss includes Medicare as a “payer” when calculating the payable rate. Or, perhaps the plan applies usual and customary only to out of network claims – choosing to pay per a PPO network contract whenever possible, but stop-loss interprets the term “maximum payable” to apply to all claims – in and out of network; arguing further that the plan document controls the plan, and stop-loss only insures the plan.
The number of claims I’ve seen independently audited by the carrier, resulting in the carrier chopping away at the amount paid by the plan – in an effort to define what they feel is the “payable” amount – and the resultant conflicts will not benefit the industry. When a self-funded employer who sponsors a self-funded plan, also uses a PPO (to avoid balance billing of their members), and that plan pays $100,000 in “discounted claims” … they expect stop-loss to pay everything paid beyond the $60,000 deductible; a refund of $40,000. It is, after all, why they pay for stop-loss, and is something they depend upon to self-fund. Imagine, then, when the carrier “reprices” the $100,000 using Medicare, and decides no more than $10,000 should have been paid… well short of the $60,000 deductible. They may even go so far as to “advise” the plan to ask the provider to refund $90,000 to the plan.
This employer will point a finger at their broker, their TPA, and stop-loss. Taking the carrier’s advice to heart, and challenging the outrageous provider bills and/or PPO terms is the last thing they are going to do. The sooner we realize this form of “tough love” doesn’t work, and ultimately only provides fuel for politician’s anti-self-funding rhetoric, the better.
To address this issue, it behooves both the plan (and its TPA) and stop-loss to examine the plan in its entirety during the underwriting process. What do I mean by “entirety?” The plan document is not enough. A plan is more than an “SPD.” It is also the network contracts, employee handbooks, and any other document or obligation that dictates how the plan will actually be administered. Only by laying all of those cards on the table ahead of time and agreeing collectively how the plan will be administered in all such circumstances can disputes like the ones I described be addressed before real money is at stake.