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The More You Know, the More You Save: How Transparency in Health Care Can Help Empower Patients and Plans

On December 5, 2019

By: Kevin Brady, Esq.

On November 15, 2019, the Department of Health and Human Services, along with the Department of the Treasury, and the Department of Labor, issued proposed rules related to "Transparency in Coverage." These proposed rules come fresh off the heels of the executive order issued by President Trump in June of this year calling for increased transparency in the cost of health care, and the cost of coverage.

As made clear by the title of the proposed rules, the goal of the executive order, and the resulting proposed rules, is to make the cost of health care transparent for patients. Generally speaking, the proposed rules will require group health plans to make certain disclosures to plan members about the possible cost-sharing liability for the member, accumulated amounts (amounts paid by the member toward deductibles and out of pocket max), negotiated rates (payments by the plan to in-network providers for certain services) among other required disclosures.

The proposed rules impose disclosure requirements on group health plans and hopefully, these disclosures will help to avail the potential costs of coverage to its plan members. In practice, these required disclosures should empower self-funded group health plans. Self-funded plans are organized to pay for the health care expenses of their employees; they’re not organized to profit off of the employee premiums and therefore should benefit from increased transparency when it comes to pricing. While the long-term impact of the proposed rules cannot yet be determined, it is possible that network discounts may become more meaningful and group health plans may have more flexibility in terms of steering their plan members to more cost-effective providers. Regardless of the direct impact on group health plans, plan members will be empowered as a result of the rules.

Transparency in health care pricing is long overdue. Imagine going to a new restaurant and ordering an apple pie (an apple pie a day keeps the doctor away… do I have that right?), you don’t see the price on the menu but hey, how expensive can it be right? So you get the pie, you eat the whole thing and the next thing you know, the bill comes. You’re shocked to see that its $100.00. Would you have ordered the pie if you knew the cost? Or would you have gone to the diner across the street that sells an apple pie – that may taste even better - for a fraction of the cost? Without transparency in health care pricing, patients incur claims (eat pies) without regard to the overall (billed charges) or individual (cost of the service after cost-sharing) costs of that service. This is untenable.

In almost every other area of our lives as consumers, we are provided with the cost of a product or service before we purchase or use it; we then have the ability to utilize widely available, and easily accessible, data (thanks google) to compare those prices with other potential vendors or business and eventually ensure that the cost is reasonable, and in-line with our expectations before we make the purchase. This same access to information should be available to consumers of healthcare as well.

It is our hope that the proposed rules for transparency will not only avail the cost of health care to patients, but that a shift in the mindset of those patients to be more responsible consumers will result as well. This shift should not only benefit the patients themselves, but ultimately should help to curb the costs for their health plans as well.  Eventually, as the cost of health care becomes more widely available (and just as importantly, digestible) for patients, the days of uninformed and frankly uninterested plan participants may be coming to an end. A great example of the power of information, and specifically, looking at health care through the lens of a consumer can be found right here at Phia.

Here, plan participants are encouraged to be informed consumers when it comes to health care. Transparency (between the Plan and its members) about the costs of coverage, and how active participation by members will ultimately benefit each covered individual, has helped the Phia Group avoid some of the major financial setbacks that commonly befall group health plans who do not otherwise encourage informed decision-making when it comes to health care.

Year after year, our personal costs (premiums and cost-sharing) remain incredibly low, while our benefit offerings continue to improve. This would not be possible if we (the members) did not approach health care as consumers. By encouraging participants to be informed- when it comes to the treatment options, proactive- when considering providers and their associated costs, diligent- when reviewing personal medical bills for errors and erroneous charges, and engaged- when it comes to our overall health, Phia has been able to effectively contain health care costs despite the lack of total transparency.

While the long-term impact of the proposed rules is yet to be seen, any change to the current system that increases transparency and encourages individuals to be responsible consumers of health care should help curb the rising costs in our health care system and the way in which we all participate in it.

New Transparency Rules Released, But Will They Last?

On December 2, 2019

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.

RBP: Why Litigate?

On November 22, 2019

By: Jon Jablon, Esq.

For those of you who have a player in the reference-based pricing game, you know that circumstances can arise when things don't go as planned. There are some providers, for instance, that are so dead-set on penalizing RBP plans and their members that they will accept nothing short of the full billed charge. As we all know, though, nobody gets paid full billed charges, and it's wildly unreasonable for anyone to expect that. But what is the end game, then, when a provider makes unreasonable demands and refuses to settle?

One option that's becoming increasingly popular is litigation – in other words, proactively suing a hospital, to help protect the patient. The suit needs to be filed by the patient, since the patient is the one to whom the balance “belongs” and therefore only the patient has standing to sue, but health plans and TPAs often provide assistance to patients with this endeavor, for obvious reasons.

Proactive litigation, or even just the threat, can serve a couple of important functions: it can compel a settlement when none was previously available; it can force the provider to publicize (and try to justify) its charge data; it can incentivize the provider to accept the Plan's payment or settle at a reasonable rate; or it can even lead to the formation of a direct contract that's acceptable to the Plan.

Now, please don't leave this blog post thinking that every claim should be proactively litigated. Litigating a small claim can actually lead to spending more on attorney's fees and costs than the full balance amount. We at The Phia Group have taken drastic steps to help with this dilemma, though; our patient Defender service is intended to give TPAs, employers, and plan members a sense of security with respect to their RBP plans, with the knowledge that the member has an attorney ready and waiting to go to bat when they need it. Most importantly, this attorney is pre-paid at no cost to the member, for a small, budgetable PEPM fee paid by plans or their TPAs.

Reference-based pricing is a tricky business, but there are programs that are designed to make it more manageable. Patient Defender is one of them. Have you found others? Tell us about them! We want to hear your stories.

Empowering Plans: P72 – The Young & The Restless

On November 21, 2019

Adam Russo and Brady Bizarro sit down with Craig Clemente, Chief Operations Officer at Specialty Care Management and outgoing Chairman of the SIIA Future Leaders Committee, to discuss the future of the committee and the many ways they intend on engaging the younger generation. Make sure you tune in to find out what SIIA has in store for 2020 and beyond.

Click here to check out the podcast!  (Make sure you subscribe to our YouTube and iTunes Channels!)

Theories v. Practicality: The Simplest Answer is Often the Best!

On November 18, 2019

By: Chris Aguiar, Esq.

I recently spent a few days in DC with some of my colleagues, subrogation attorneys from all over the country. As is typical in conferences, we spent several hours a day putting our heads together, learning and educating, as well as coming up with strategies to combat some of the more recent efforts to find new ways to challenge the third-party recovery rights of benefit plans. Any time 50 lawyers get together in a room debating the same topic, things can get interesting, to say the least. It’s always fascinating to see how things that seem so clear can be all but.

ERISA 502(a)(3), the provision that provides a plan fiduciary with the right to obtain “appropriate equitable relief” has been provided by Congress as an “exclusive remedy”. I have historically interpreted that to mean that a self-funded plan governed by ERISA is limited as to the type of action it can take against a plan participant that refuses to cooperate with their reimbursement obligation. The “exclusive remedy” provided by ERISA is equitable relief.  Quite simply, equitable relief typically means that a benefit plan can only recover the money that the plan participant recovered, specifically (or any asset purchased with it). If the Plan cannot locate that specific pot of money or trace it to an asset, it is not entitled to any other of the participant’s money. My interpretation has always been that a Plan will not be able to seek legal relief (i.e. a breach of contract). It appears some of my colleagues still believe legal relief may be possible. Regardless of where you fall on that debate – there are practical considerations that I think are important to remember and will put the plan in the best possible position to recover.

Consider this hypothetical:

Imagine for a moment that Bob Participant, upon getting a $100,000.00 settlement related to injuries he sustained in an accident, which were paid by his benefit plan, loses the money. While gleefully skipping down Main Street to deposit the money in the bank, Bob fails to realize his shoes are untied, trips, and drops the briefcase of money on the floor causing it to open. At that exact moment, an unseasonably strong gust of wind grabs hold of the money and quickly moves it to the nearby raging river, which just so happens to be infested with money thirsty piranhas who voraciously devour every last dollar…

While this hypothetical seems like the stuff of fantasy novels, let’s bring back a modicum of reality … how many “Bobs” in America would have sufficient money or assets to satisfy a judgment rendered by a court in favor of a benefit plan that sues a participant for a breach of contract when that participant fails to comply with the terms of the benefit plan and reimburse the settlement funds? Wouldn’t the Plan have been in a better position to get its money back had it been in front of the money rather than having to chase it down the street?

Whether you believe that a breach of contract action against a plan participant is allowed despite the exclusive remedy granted by ERISA, equity, it’s always better to be able to prevent the money from being put at risk. If the Plan is in a position where it must consider the viability of a breach of contract claim – its already in trouble because the likelihood of a participant having $100,000.00 after losing that amount on the fantastic voyage he took down Main Street on his way to the bank is very unlikely. 

One thing is for certain, while the debate regarding the viability of breach of contract claim in an ERISA matter apparently is still alive, few can debate that enforcing your equitable rights and preventing the money from being in danger is the most likely path to success in a third party recovery situation.

Warren and Buttigieg Cross Swords Over Health Care

On November 15, 2019

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.

Faces of Phia: Episode 19 – Shauna Makes a Comeback

On November 15, 2019

Join Adam Russo and Ron Peck as they interview Shauna Mackey, The Phia Group’s Associate General Counsel. Shauna is back in New England after moving to London, and was fortunate to have had private health insurance through her husband’s company, as opposed to utilizing the public healthcare offered to all residents in England. Tune in to learn more about Shauna and her experience with both public and private healthcare throughout her pregnancy and delivery.

Click here to check out the podcast!  (Make sure you subscribe to our YouTube and iTunes Channels!)

Plan Language, Rx, and Lawsuits to Watch (and File): Innovation for a Changing Industry

On November 13, 2019

In the face of evolving pricing models, ever-increasing drug costs, difficulties in administering claims, and increased regulatory burdens, the players in the self-funding industry need change. Not just any change, though; creative change that promotes cost-containment and makes life easier for those who support health benefit plans in one way or another.

Join The Phia Group’s legal team as they discuss innovative programs to manage vendor fees, balance-bill litigation, Rx manufacturer assistance, and other ideas being proposed by players in the industry. Join us to assure you are able to manage new regulatory frameworks and keep up with the industry’s progress.

Click Here to View Our Full Webinar on YouTube

Click Here to Download Webinar Slides Only

An Objective Analysis and Response to Elizabeth Warren’s “Ending the Stranglehold of Health Care Costs on American Families”

On November 7, 2019

By: Ron E. Peck, Esq.

Below I will parse out some of the statements made by Senator Elizabeth Warren in her recent policy paper, titled “Ending the Stranglehold of Health Care Costs on American Families.”  Note that my attempt in so doing is to provide a response to some of the comments made by Ms. Warren, based upon my own experiences, observations, and understanding of health care and health insurance; without discussing any of my own political attitudes or personal biases.  This is not meant to be a reflection of my own, or The Phia Group’s, attitude or position as it relates to Ms. Warren or her candidacy for President of the United States.

In her statement, Ms. Warren begins with, “In 2007 … my … research … found that the number one reason families were going broke was health care – and three-quarters of those who declared bankruptcy after an illness were people who already had health insurance … between 2013 and 2016, the number one reason families went broke was still because of health care – even though 91.2% of Americans had health insurance in 2016.”

I note immediately the interchanging use of the terms “health care” and “health insurance,” as if they are the same.  Note they are not.   As I have in the past1 I want to address up front that health insurance and health care are not the same.2  Health care is literally care for your health.  Medicine, therapy, examinations, tests, etc.  Health care is provided by health care providers.  Providers of health care, or “providers,” are doctors, nurses, therapists, specialists, and other care givers, as well as the facilities where said care is often obtained (professional offices, hospitals, clinics, etc.).

Health insurance is a means by which we pay for health care.  It is not health care itself.

If you have home owner’s insurance, and a hurricane blows your house to the ground, you don’t move into your insurance policy (cozy).  Instead, insurance pays you an amount deemed to be the fair value of the loss (i.e. the value of the home lost, the cost to repair your home, or the price to buy a new home, as the case may be).  In any case, the insurance is not a home – it is a means by which you pay for a home.

Likewise, health insurance is not health care; it is a means by which you pay for health care.  In my example, if it would cost $100,000 to have a licensed contractor repair the home back to a pre-hurricane state, insurance will likely pay you $100,000.  If you “choose” to have a world-famous architect fly in from Venice, to build a new home – at a cost of $900,000 … you have every right to do so, but insurance isn’t obligated to pay that bill.  They will still pay the $100,000, and the other $800,000 will be on you, the homeowner.

Likewise, imagine I have a $30,000 Camry.  I total the $30,000 Camry in a collision.  Auto insurance pays me $30,000; fair compensation for the loss.  If I buy a $15,000 Yaris, I pocket the other $15,000.  If I buy a $60,000 Lexus, I pay the other $30,000 out of pocket.  Most people understand that this is how insurance works.  All insurance, except health insurance.

If I receive an appendectomy, as with the home and car, you’d think that insurance should pay the fair value for the service.  If I choose to travel to a world renown clinic in Beverly Hills, and they bill three-times the “fair price,” most people seem to feel that, unlike with home and auto insurance, health insurance should cover that price.

In addition to “how much” a plan or insurance carrier pays, when a service is otherwise covered, we must also consider claims that are excluded outright.  In such instances, how much the provider charges is irrelevant, regardless of how reasonable the fee may be.  This is because the claims are excluded for reasons other than price.  How many of the unpaid medical bills about which Ms. Warren is speaking, when she talks about medical debt, are actually services few – if any – private health plans cover, and Medicare would likewise certainly exclude?  Cosmetic procedures, experimental treatment not approved by the FDA, etc.  These are examples of medical debts a patient will incur, due to a lack of coverage, that Medicare-for-All would not address.  It’s notable that Ms. Warren does not discuss the schedule of benefits that would apply to her plan.  If Medicare-for-All would maintain the current list of covered benefits, payable by Medicare as it is constituted today, many treatments that are covered by private plans (in whole or part) would be excluded in its entirety.

Thus, when Elizabeth Warren states that: “… the number one reason families were going broke was health care – and three-quarters of those who declared bankruptcy after an illness were people who already had health insurance …” the knee jerk reaction is to assume that the insurance is worthless.  This is certainly possible, but Elizabeth Warren should also consider whether insurance is already paying fair amounts for services rendered, and whether the excess amounts – billed to the patients that are subsequently filing bankruptcy – might just be excessive and unreasonable, or something for which no plan (or Medicare) should pay?

Elizabeth Warren almost contemplates this, where she accurately states that, “Families are getting crushed by health costs …”  This would be accurate, if health costs include not only co-pays, deductibles, co-insurance and premiums… but also excessive hospital bills, drug costs, and provider charges.  The issue, however, is that she seems to equate “health costs” with “insurance costs.”  This attitude reveals itself when she states, “87 million.  That’s how many American adults in 2018 were uninsured or ‘underinsured’ – meaning either they have no insurance, or their so-called health insurance is like a car with the engine missing … inadequate health coverage is crushing the finances and ruining the lives of tens of millions of American families.”

I will freely admit that some health insurance carriers and policies are woefully inadequate.  I will freely admit that many people are paying for one thing and getting something else.  I will freely admit that many are bamboozled into securing inadequate coverage – a ticking time bomb, to be sure.   I will note, however, that insurance isn’t the only driver (and perhaps isn’t even the primary driver) fueling the extreme health care costs, and resultant debt.

Health care is expensive because health care is expensive.

Running with Ms. Warren’s metaphor of an automobile, I fear she is mistaken in her analogy.  Insurance is not a car.  Insurance is a means by which you pay for a car.  Inadequate insurance would pay for a bicycle, when you have an 80-mile commute down an interstate.  Adequate insurance will pay for a car that can get you from point A to point B, promptly and safely.  Ms. Warren and so many Americans feel that adequate insurance “should” pay for a private jet, and when they do pay for said jet, are shocked when premiums increase.

Imagine if a law was passed that required auto insurance to pay for fuel, wiper fluid, and oil changes.  Seeing an opportunity to dip into these newly accessible deep pockets, providers of gas, wiper fluid, and motor oil, raise the rates from a price that was set when money-conscious consumers with limited resources were forced to shop around and compare vendors (i.e. $3 a gallon), to $300 a gallon.  Further, these vendors stop advertising their prices.  Consumers – now that “someone else is paying” – ignore the higher prices and lack of transparency, opting to shop at the closest vendor regardless of cost (convenience trumps price, now that price no longer matters).  This is naturally what happens when the consumer is no longer the payer; it’s easy to spend someone else’s money.

The problem, however, is that insurance money is NOT someone else’s money.  It’s our money, pooled and set aside, to pay for our later expenses.  When the auto insurance carrier is forced to pay for $300 gas fill-ups, $5,000 oil changes, and the like … premiums will skyrocket; and, eventually, deductibles will appear and grow, as the carrier scrambles to slow the rate with which premiums are increasing.

If you want insurance costs to decrease, the cost of the “thing” for which insurance is paying must decrease as well.  The premium on my Ferrari’s insurance is more than the premium on my Camry’s insurance.

Ms. Warren goes on to state that, “No for-profit insurance company should be able to stop anyone from seeing the expert or getting the treatment they need.”  I agree.  I also do not believe any insurance carrier can dictate which provider you can visit.  They can adjust their payment, or refuse payment entirely, but the choice regarding with whom you treat remains with you.  Just as my auto insurance carrier can’t stop me from buying a $60,000 Lexus after I total my $30,000 Camry.  Yes, my insurance can limit their payment to $30,000 … but if I choose to buy a more costly vehicle, and expose myself to an out of pocket expense, that needs to be part of the decision-making process.

Most revealing, later in the document, Ms. Warren contradicts herself. “Let’s be clear,” Ms. Warren remarks, “America’s medical professionals are among the best in the world. Health care in America is world-class. Medicare for All isn’t about changing any of that. It’s about fixing what is broken – how we pay for that care.”  Ms. Warren then – almost as if she were responding to herself – later says that “As a group of health economists famously wrote, ‘It’s the prices, stupid’.”

This leads an objective observer like me to ask, is the problem “how we pay for care” … or … is it “the prices, stupid”?

I fear the only explanation is that Ms. Warren mistakenly believes that insurance carriers somehow set the prices for medical services; that the insurance – and not the hospital – drafts the chargemaster.  How else could we explain this glaring inconsistency?

Ms. Warren further states that, “Today, for example, insurers can charge dramatically different prices for the exact same service based on where the service was performed.”  As stated above, this can only make sense if Ms. Warren thinks insurance – not providers – set the prices for health care.

This comment jumped out at me, of course, because I know that insurance doesn't charge people for medical services or set the prices - providers do.   Yes, the insurance may have a hand in negotiating a discount, but the provider can nullify said discount by raising the price.  I then further noticed that this specific comment includes a link (a cite) to an article supposedly supporting the statement.  The article, however, is titled: "Hospitals Chafe Under a Medicare Rule That Reduces Payments to Far-Flung Clinics," and its primary subject matter relates to providers that cannot function while serving Medicare patients; that Medicare as a payer represents a major problem for the very rural clinics Ms. Warren says she wants to support.  This article explains that hospitals, not insurance, charge different amounts for the same service ... based on location, identity of the payer, etc., but it appears not to prove Elizabeth Warren's point (to which the article was attached).

Ms. Warren goes on to state that, “In 2017 alone, health industry players whose profiteering would end under Medicare for All unleashed more than 2,500 lobbyists on Washington.  Washington hears plenty from the giant health insurance and giant drug industries.”

I cannot tell whether Ms. Warren intentionally ignores, or simply forgot to mention, that the largest, most powerful lobbyists in the health care industry represent providers of health care (hospitals and drug manufacturers) – NOT the entities that pay for said care (insurance).  Specifically, the Pharmaceutical Research & Manufacturers of America spent $25.84 million, the American Hospital Association spent $22.06 million, and the American Medical Association spent $21.53 million on lobbying in 2017.3  Only Blue-Cross/Blue-Shield came close in spending to these individual entities ($24.33 million), though the combined force of the provider lobbyists well outweighed the spending by the payer community in totality.

All of this being said, I believe that, despite the time initially spent targeting insurance, once a reader reaches the later pages of the proposal, Ms. Warren reveals that the source of payment (insurance, Medicare, etc.) has less to do with the rising cost of health care than the actual cost of health care itself.

It is here that she drops the following bombshell, “Medicare for All will sharply reduce administrative spending and reimburse physicians and other non-hospital providers at current Medicare rates.  Medicare for All will sharply reduce administrative spending and reimburse hospitals at an average of 110% of current Medicare rates, with appropriate adjustments for rural hospitals, teaching hospitals, and other care providers with challenging cost structures … my plan allows for adjustments above the 110% average rate for certain hospitals, like rural and teaching hospitals, and below this amount for hospitals that are already doing fine with current Medicare rates.”

Presently, many private health benefit plans are attempting to disentangle themselves from contractual arrangements with providers by which providers are contractually empowered to increase prices without justification, so long as those prices are discounted.  These agreements center around (and their value is based upon) two forms of consideration to the payer – a discount, and an agreement not to balance bill the patient if the negotiated payment is made by the payer in full, and in a prompt fashion.  Discounts, however, are notoriously unreliable when no controls are placed on the prices against which they are applied.

The benefit plans seeking to shed the discount-based methodology are, in many cases, instead adopting a “Medicare-based,” “reference-based pricing,” or “reference-based reimbursement” pricing methodology.  These payers are paying providers utilizing Medicare payment rates, more-or-less ignoring the provider’s actual charges.  If Medicare would pay $10,000 for a service, the payer uses that $10,000 as a baseline regardless of whether the actual provider is billing $10,000, $50,000, or $100,000.

In other words, with traditional “network” plans, discounts are applied to the charges, making the billed amount relevant.  Reference-based prices (“RBP”) are based upon the actual services rendered, making the billed amount irrelevant.

Ms. Warren wants to apply a universal RBP methodology.  This isn’t a terrible idea; however, providers will say they cannot stay afloat in such a scenario.  Private payers using an RBP model currently represent a very small percent of all payers. Those RBP payers are in most cases offering 140%, 180%, and often more than 200% of what Medicare pays.  Despite this payment (far more generous than the 110% offered by Ms. Warren), the billing providers refuse this payment, balance bill the patient, and – when confronted – advise that they cannot accept 200% Medicare from even this small subset of the private payer market; as they need to cover the losses they suffer at the hands of Medicare.

I question why these same providers have not responded to Ms. Warren’s proposal – that ALL payments be based on Medicare +10% – with the same outrage they demonstrate when a struggling self-funded employee plan offers them 200% of Medicare.

Furthermore, I am curious to know how Ms. Warren proposes prices will be set for services Medicare currently doesn’t cover?  Many private health plans generously cover medical care that Medicare excludes.  Additionally, many forms of care (such as pediatric care) are generally not covered by Medicare.

Moving on, Ms. Warren states that she will, “… appoint aggressive antitrust enforcers,” “… crack[ing] down on anti-competitive mergers that lead to worse outcomes and higher costs,” and that “… more competition between providers creates incentives to improve care.”

This seems like a very odd approach from someone who is also promoting the elimination of private insurance carriers and health benefit plans, and the creation of a single payer (a monopsony).  If indeed, as Ms. Warren says, “competition between providers creates incentives to improve” should we not foster competition between payers, to improve the payer community as well?

Finally, and perhaps most disconcertingly, it appears Ms. Warren does not understand what self-funded health coverage is, or how it works.

Indeed, she later explains that – to pay for her program – employers will, “… calculate their new Employer Medicare Contribution,” by determining, “… what they (the employer) spent on health care over the last few years and divide that by the number of employees of the company in those years to arrive at an average health care cost per employee at the company.”

This would treat employers fairly if they all paid a fixed premium to a carrier, however, this is not the case.  If a self-funded employer with 60 employees has one employee endure a premature birth, costing the plan (the employer and employees) $300,000, that $300,000 divided by the 60 employees is $5,000 per person.  If the same employer has 600 employees, that per-person spend drops to $500 per person.  By identifying and applying a per-person fee, based upon prior spending divided by the population count, we punish smaller self-funded employers that generously paid for costly care on behalf of their employees and their families.

Ignoring self-funded health plans is a big, gaping, unforgivable hole in this policy.  This is because ignoring self-funded plans means ignoring almost 50 million Americans. 

Half of all Americans receive their coverage through their employer4 and of those people, 61% of people are participating in a self-funded plan.5  This means that, for more than half the people receiving health benefits through employment – which represents half of all insured Americans – their plan is self-funded.

Ms. Warren remarked that, “No for-profit insurance company should be able to stop anyone from seeing the expert or getting the treatment they need.”  She also states (incorrectly) that, “… doctors, hospitals, and care providers send the bill – to a collection of private insurance companies who make billions off denying people care...” and that “… powerful health insurance and drug companies [that] make billions of dollars off the current bloated, inadequate system...”

Self-funded health plans (representing more than 61% of people with employment-based coverage, a group that represents half of all covered Americans) receive benefits through a program that is not a “for profit insurance company.”  Despite her assertion that medical bills are sent to (and denied by) “a collection of private insurance companies who make billions off denying people care,” 61% of people with employment based coverage have their bills sent to a plan that – if it denies a claim – keeps the money in a trust fund established solely to pay for medical expenses; lining no one’s pocket except – perhaps – the employees and middle-class American families that fund the plan with contributions.  In fact, Federal Law places a fiduciary duty upon the plan administrators to stringently manage those assets, on behalf of the employees funding the account, and to avoid paying for claims that are not absolutely covered by the terms of the plan.  

Furthermore, focusing on claim denials is not advisable for someone promoting Medicare-for-All as a solution.  This is because, amongst payers, “Medicare most frequently denied claims, at 4.92 percent of the time; followed by Aetna, with a denial rate of 1.5 percent; United Healthcare, 1.18 percent; and Cigna, 0.54 percent.”6  Looking at this data, if reducing denials is our goal, then removing people from Medicare would be the most effective solution.

Unless and until a Medicare for All policy such as this stops demonizing one segment of the industry (insurance), addresses all of the issues (including prices set by providers), and acknowledges the huge segment of people that do not access insurance – but rather – enjoy robust coverage via a not-for-profit self-funded health plan, I cannot support such a position.

Additionally, my final remark is to note that even if the cost cutting measures presented in Elizabeth Warren’s proposal were feasible (forcing providers to accept 110% of Medicare rates, eliminate health system mergers, etc.), I fail to see how or why a single payer (Medicare-for-All) is necessary?  Assuming these cost-cutting measures work as Ms. Warren proposes, if implemented, I imagine they would allow private insurance carriers and health plans to reduce the amount they must collect from policy holders and participants.  In other words, why not try to address the cost of health care before eliminating how we presently pay for health care?  Why change “how we pay” for health care when, frankly, it appears that the issue is not about the “how” we pay, and rather, is about the “how much” we pay?

Or, as a distinguished Senator put it: “It’s the prices, stupid.”








Happy (Almost) New Plan Year!

On November 6, 2019

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.   

Nondiscrimination Testing

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.