By: David Ostrowsky
In 2008, under the George W. Bush administration, the Mental Health Parity and Addiction Equity Act (MHPAEA) was enacted to ensure that health insurance plans did not impose more restrictive limitations on mental health and substance use disorder (MH/SUD) benefits – assuming they were initially covered – than those imposed on medical and surgical (M/S) benefits. More specifically, health insurers were forbidden from applying limitations such as prior authorizations, unreasonably high copays, or visit restrictions to mental health/substance use disorder treatments when medical/surgical treatments did not have such imposing constraints.
The 2008 law was hailed as a great advancement for the millions of Americans long struggling to afford adequate treatment for their respective mental health and substance use disorders. However, in the ensuing years, many insurers found ways to skirt around the legislation without incurring devastating financial ramifications; subsequently, this vulnerable segment of the population was deprived of many protections that the MHPAEA was ostensibly created to provide. Subsequently, in 2021 the Department of Labor (DOL) passed the Consolidated Appropriations Act, 2021 (CAA), which further required health plans to meticulously document their compliance with nonquantitative treatment limitation (NQTL) requirements under the MHPAEA by completing an NQTL comparative analysis. Essentially, health plans and issuers are required to prepare a comparative analysis of how NQTLs are applied to their respective MH/SUD benefits and M/S benefits to ensure parity. But even the DOL’s concerted efforts to enforce consistent standards earlier this decade were not deemed fully sufficient.
And so, this past New Year’s Day, new MHPAEA rules went into effect in order to bolster parity between MH/SUD and M/S benefits. For plan sponsors charged with guaranteeing that mental health parity is embedded into their plans, the bar has been raised. The stewards of health plans need to be even more mindful of working closely with their TPAs, PBMs, network administrators and other service providers to thoroughly execute NQTL comparative analysis reports that comply with the more stringent DOL standards that are now in place, some of which have already taken effect while others will not go into effect until January 1, 2026. Here are some specific considerations that would be prudent for plan sponsors to bear in mind throughout the balance of the year:
Though it remains to be seen whether some of the provisions of the new mental health parity rules such as the novel “meaningful benefits” standard and mandates for addressing “material differences” between a plan’s MH/SUD and M/S benefits will be challenged in court, plan sponsors will still need to conduct NQTL comparative analysis reports – and have those results readily available – for the foreseeable future. As such, it is paramount for plan sponsors who have not yet hired an NQTL comparative analysis report vendor to do so sooner rather than later.
Phone: 781-535-5600 | www.phiagroup.com
The Book of Russo:
We have all seen the same reports – Large health insurance carriers suffering record losses in 2024, with no relief in sight. In a panic, rates are multiplied to stop the bleeding. Employers, feeling powerless, are led to believe that they either need to acquiesce to these skyrocketing rates (and reduced coverage), or cease providing health benefits to their valued staff and families. A toxic combination of ignorance, laziness, and risk aversion leads to a very limited set of options being presented; cookie cutter solutions and a choice of columns A, B, or C – none of them good. If this isn't a time to self-fund, I don’t know what is!
“Sure, Adam…” you’re likely saying to yourself. “Easy for you to say. When you and your team live and breathe this stuff – in the capital of quality healthcare no less – it’s easy to maintain a high quality, low cost health plan. What about the rest of us?” I get it, and I promise that we can all elevate our plans. Customization, data analysis, partnerships and effort are the key ingredients to empower your plan and your people to lower costs while increasing quality. Is anything more important than your employees and their families? At The Phia Group, we’ve always believed in leading by example. Nearly two decades ago, we told the industry that self-funding health benefits shouldn’t be reserved for only large employer groups. We said that a small group of dedicated, informed health care consumers could self-fund sucessfully. We proved it with a plan (our plan) that – at the time – covered fewer than twenty people. As our costs dropped and benefits improved (in direct opposition to the national health insurance trends), people said it couldn’t be replicated because our members were too young and healthy. We matured. People said it couldn’t be replicated because we were too centralized in one location, Boston, where health care and awareness is unrivaled. We expanded to every State in the nation. People said it couldn’t be replicated because we were (ironically) too small. We multiplied our enrollees by more than ten-fold. People said it couldn’t be replicated because our staff are too well informed regarding benefits and cost containment. We taught clients and their many diverse plans to do the same thing. The time for excuses is over. With some knowledge, innovation, and elbow grease, we can bend the curve. That is why we exist - it is our sole mission to ensure all Americans have access to low cost and high-quality care. This isn't a fantasy. It's a reality for our “Phia family” and many of our closest partners and client’s plans. Nobody enjoys less member abrasion, the highest discounts, and net savings with quality facilities than us and those like us that are willing to ask the questions, and do the work. Combine that with best-in-class plan design and compliance, and you’ve got a team of passionate all-stars excited to bring you along for the journey. Oh, I forgot to say that in the world of subrogation, we recover the most (by far) compared to our competition. Yeah; that “Passion for Subro” still burns. Ensuring the right parties pay the right amount in the right order for the best results? Phew. That’s what gets me up in the morning. We have been your trusted industry partner for 25 years by focusing on your needs and taking care of you (and our!!!) employees. It's a simple formula that too few follow. Let’s change that! I'm proud to be the CEO and co-founder of Phia. Come and find out why. Happy reading!
Service Focuses of the Quarter Phia Fit to Print From the Blogosphere Webinars Podcasts The Phia Group’s 2025 Charity Employee of the Quarter Phia News
Service Focus of the Quarter: PACE
The Phia Group's Plan Appointed Claim Evaluator (PACE) service is revolutionizing how self-funded health plans manage final-level internal appeals. PACE alleviates the administrative burden and fiduciary risks traditionally borne by plan administrators and their TPAs; PACE ensures that second-level appeals are processed in strict accordance with plan terms, while also providing a robust layer of protection against fiduciary breaches. Whether your plan uses traditional PPO networks, reference-based pricing, or other unique designs, PACE seamlessly integrates to promote compliance and streamline decision-making. With The Phia Group’s legal expertise and clinical resources, PACE delivers peace of mind by handling complex appeals and mitigating exposure to costly external reviews or lawsuits.
What sets PACE apart is its proactive approach. From reviewing plan documents for compliance to coordinating with IROs, PACE ensures optimal outcomes at every step. Through PACE, plans and TPAs can focus on their core operations while reducing risks and costs associated with complex appeals handling.
PACE not only protects plans, but also enhances their operational effectiveness, making the service an indispensable resource in today’s challenging benefits landscape.
Enhancement of the Quarter: John Blaney
This quarter, The Phia Group celebrates a pivotal enhancement to its leadership team with the promotion of John Blaney to Executive Vice President of Transformation and Recovery Services.
With decades of experience in healthcare cost-containment, John is now spearheading (and taking a deep dive into) all recovery functions, including subrogation, overpayment, and other cost-saving opportunities. His leadership has already driven significant advancements in automation and process optimization, ensuring that The Phia Group continues to deliver unmatched recovery results for its clients; by leveraging cutting-edge technology and innovative strategies, John is positioning the company to further elevate its industry-leading services.
John’s promotion represents more than just a title change – it’s a transformative shift in how The Phia Group approaches recovery and cost-containment as a whole. Under his guidance, Phia’s recovery departments are streamlining operations and identifying new opportunities to enhance client outcomes.
This leadership enhancement underscores The Phia Group’s commitment to staying at the forefront of healthcare cost-containment, empowering plans to achieve greater savings and operational efficiency.
Phia Case Study: Paying Second-to-None
It seems like every other week that someone discusses with our consulting team the ability to “coordinate” benefits with Medicare even when a participant has not enrolled in Medicare.
The short answer? Can’t be done. It ends up being either – or both, generally – a violation of the Medicare Secondary Payer Act, or age discrimination. Coordination can only be performed if there are multiple payers; when the plan is the only payer, there can be no coordination, and so in practice the plan would be systematically subtracting 100% of Medicare from plan benefits for individuals over 65.
Recently, a broker inquired about an audit that had been in progress for quite some time but had expanded in scope since its inception. The Department of Health and Human Services had some questions regarding Medicare coordination, and the broker ran the language by us, under the impression it was fully compliant. We informed the broker, TPA, and group of the issue, and they promptly fixed it, and presented the fix to HHS as a good faith effort to ensure compliance.
This change did not affect the plan’s past language (though, very luckily, the plan had never actually had occasion to apply this provision!), but the auditor looked upon it favorably and it appears the plan has avoided any formal enforcement action. But the close call is a good reminder: a provision that “coordinates” with Medicare, when Medicare isn’t actually a payer, risks violating federal law.
Fiduciary Burden of the Quarter: Aligning Written and Operational Processes
In the course of performing NQTL comparative analyses for self-funded groups, The Phia Group’s team often comes across situations where the SPD says one thing – like requiring pre-cert for all substance use disorder treatment – but the UM vendor’s processes don’t actually enforce it. On the surface, that might seem like a harmless (or even helpful) disconnect. After all, not enforcing this type of overly broad requirement can alleviate parity concerns in practice.
But here’s the problem: even if not enforced, the written requirement is still there. The DOL has been clear that this NQTL in plan documents, regardless of how it’s applied, can constitute a parity violation. In other words, “don’t worry, we don’t enforce it!” isn’t a valid defense, since the SPD says the plan can enforce it.
It’s a good idea to do a periodic check-in with vendors to make sure what they’re doing actually matches what the SPD says they’re doing. Catching these mismatches early isn’t just about compliance; it’s about protecting the plan and its fiduciaries from risk that’s avoidable with a little bit of coordination.
Webinars:
• On February 12, 2025, The Phia Group presented “The Future of Healthcare Under Trump 2.0,” in which we discussed President Donald Trump’s flurry of executive orders.
• On January 21, 2025, The Phia Group presented “Fiduciary Challenges and Risk Exposure Growing for Plans in 2025 – What to Know, What to Do,” in which we discussed potential changes that may be afoot in the new year – and ways that you can be best prepared.
Be sure to check out all of our past webinars!
Podcasts:
Empowering Plans
• On March 13, 2025, The Phia Group presented “Unpacking Weight Loss Drugs,” in which our hosts, Corey Crigger and Kendall Jackson, discussed the hot button topic of weight loss drugs.
• On March 13, 2025, The Phia Group presented “Error 304: Good Faith Negotiation Not Found,” in which our hosts, Brian O’Hara and Jon Jablon, discussed real-life examples of AI-driven responses in the No Surprises Act’s Open Negotiations process that range from nonsensical to outright misleading, where negotiating with AI is like trying to haggle with a toaster.
• On February 27, 2025, The Phia Group presented “Lewandowski v. Johnson & Johnson – Big win or warning?,” in which our hosts, Brady Bizzaro and Cindy Merrell, discussed the details of the Lewandowski v. Johnson & Johnson case.
• On February 13, 2025, The Phia Group presented “Network Adequacy Under MHPAEA,” in which our hosts, Kelly Dempsey and Bryan Dunton, dove into the results of the 2024 MHPAEA Report to Congress.
• On January 30, 2025, The Phia Group presented “Mental Health Parity: New Year, New Rules, New Lawsuits,” in which our hosts, Jen McCormick and Nick Bonds, discussed the ERIC v. HHS lawsuit in which an industry advocate challenged the federal regulators’ new Final Rules enforcing the MHPAEA and mental health parity rules.
• On January 16, 2025, The Phia Group presented “2025 Healthcare Hot Takes,” in which our hosts, Ron Peck and Corey Crigger, delved into their bold predictions of what we will be talking about in 2025.
• On January 2, 2025, The Phia Group presented “The Evolution of the Birth Control Benefits Mandate,” in which our hosts, Kendall Jackson and Brian O’Hara, discussed the Biden administration’s decision to withdraw proposed rules that would have expanded the birth control benefits mandate.
Be sure to check out all of our latest podcasts!
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Phia Fit to Print:
• BenefitsPro – Beyond the recipients: How Medicaid cuts could change health care forever – March 2025
• Newsweek – Map Shows States With the Worst Health Care – February, 2025
• The Self-Insurer – Navigating In The New Age Of Cybersecurity Threats – February 2025
• ABC 4 News – SC ranks near the bottom of new healthcare cost to quality index: Phia Group – February, 2025
• BenefitsPro – GLP-1s: The pros, cons, and my personal weight loss journey – February 2025
• Worklife – WorkLife Research: How today’s HR pros match job seekers with open roles – January, 2025
• The Self-Insurer – The Obesity Epidemic is Forcing New Health Plan Coverage Decisions – January 2025 Back to top ^
From the Blogoshpere:
• RBP vs. PPO Plans. Learn the ins and outs of RBP and PPO plans.
• Journavx: Is Relief on the Way? Every year, tens of millions of opioid prescriptions are written for Americans experiencing searing pain.
• House Republicans’ Proposal Related to HSA-Qualified HDHPs. The vast number of new proposals related to reducing government spending is unsurprising.
• Why Wesco v. BCBSM Matters (A Lot). Was it a standard administrative cost or a true “phantom tax” allegedly stifling competition?
• No Extension for HDHPs and Telehealth. 2025 has arrived with no extension to the telehealth services safe harbor for high deductible health plans that are HSA-qualified.
To stay up to date on other industry news, please visit our blog.
The Phia Group's 2025 Charity
At The Phia Group, we value our community and everyone in it. As we grow and shape our company, we hope to do the same for the people around us.
The Phia Group's 2025 charity is the Boys & Girls Club of Metro South.
The mission of The Boys & Girls Club is to nurture strong minds, healthy bodies, and community spirit through youth-driven quality programming in a safe and fun environment.
The Boys & Girls Club of Metro South (BGCMS) was founded in 1990 to create a positive place for the youth of Brockton, Massachusetts. It immediately met a need in the community; in the first year alone, 500 youths, ages 8 to 18, signed up as club members. In the 30-plus years since then, the club has expanded its scope exponentially by offering a mix of Boys & Girls Clubs of America (BGCA) nationally developed programs and activities unique to this club.
Since their founding, more than 20,000 youths have been welcomed through their doors. Currently, they serve more than 1,000 boys and girls ages 5-18 annually through the academic year and summertime programs.
Youth of the Year
Each year, The Boys & Girls Clubs of America (BGCA) holds a nationwide competition to award the most prestigious honor a teenager can receive as a member of their local Boys & Girls Club. Each Club across the country selects and honors one member who goes on to compete in statewide and regional Youth of the Year competitions, and then annually one exceptional nominee is selected to be BGCA's National Youth of the Year, serving as an ambassador for all Boys & Girls Club youth across America as well as a voice for all of our nation’s young people. The winner was awarded a $5,000 scholarship & a laptop, courtesy of Phia!
Wizard of Oz: The Play
The Phia Group invited 30 children from The Boys & Girls Clubs of Metro South to watch Wizard of Oz at the Inly School. They were accompanied by a large number of Phia employees and had a blast watching Adam and the cast put on a phenomenal show!
Phia News:
Phia Turns 25!
On Monday, February 10, 2025, we celebrated our 25th birthday. We started off the celebration with a party in the office, followed by a fun day of bowling, and ending the day at Trillium Brewery. We look forward to the next 25 years!
How Many M&M's
Phia held its annual M&M Counting Contest. The Phia Family made some great guesses, but there was one person who came particularly close to guessing the exact number. Congratulations to Mitch Hilbert on guessing 1,157 M&Ms. This was a good guess, as we had 1,166 M&Ms in the jar!
Candy Heart Contest
As is tradition, Phia held its annual Candy Heart Contest. The Phia Family made some great guesses, but there was one person who came particularly close to guessing the exact number. Congratulations to Kelvin Chun on guessing 485 pieces of candy hearts. This was a very close guess, as we had 486 pieces of candy hearts in the jar!
Kentucky Hiring Event
The Phia family is growing! We hosted a hiring event at our Louisville, KY, office in February, and had an amazing turnout. The office was buzzing with candidates and we had a huge number of positions filled due to this event’s success.
Get to Know Our Employee of the Quarter: Irene Yalch
Being named Employee of the Quarter is an achievement that is for Phia employees who truly go above and beyond their responsibilities. This person must not only transcend their established job description but also demonstrate such unparalleled dedication and passion to The Phia Group and its employees that it cannot go without recognition.
The Phia Explore team unanimously agrees that there is no one more deserving than Irene Yalch to be recognized as The Phia Group’s Employee of the Quarter for Q1 of 2025.
Congratulations, Irene, and thank you for your ongoing and future contributions.
Phia Attending the SIIA National Conference
Several of Phia’s industry experts will attend SIIA’s 2025 National Conference in Phoenix, Arizona, from October 12th – 14th. If you are interested in attending or learning more about SIIA’s National Conference, visit their website: https://www.siia.org/i4a/calendar/?pageid=7767&showTitle=1
Job Opportunities:
• Sr. Claim Recovery Specialist
• Claims Specialist
• Reimbursement Specialist
• Accounting Assistant
• Software Engineer
• Sr. IT Administrator
• Automation Data Engineer
• Project Coordinator
See the latest job opportunities, here: https://www.phiagroup.com/About-Us/Careers
Promotions
• Olesya Avramenko has been promoted to Team Lead, PGC
• Mattie Bean has been promoted to Vice President, Recovery Services
• Hillary Burmester has been promoted to Training and Auditing Specialist
• Samantha Canestraro has been promoted to Training and Auditing Specialist (March 2025)
• Nicole Capozzoli has been promoted to Team Lead, Case Investigation
• Amanda DeRosa has been promoted to Sr. Manager, Recovery Services • Hemant Dua has been promoted to Chief Technology Officer (CTO)
• Bryan Dunton has been promoted to Health Benefit Plan Consulting Attorney III
• Rebekah Dye has been promoted to Vice President, Subrogation Efficiency
• Brittany Farr has been promoted to Training and Auditing Specialist
• Kaitlyn Fedele has been promoted to KP Administrator
• Ethan Forrest has been promoted to Team Lead, Recovery Services
• Trina Garcia has been promoted to Health Benefit Plan Consultant, Process Improvement
• John Gresh has been promoted to Sr. Attorney, Provider Relations
• Jeff Hanna has been promoted to Team Lead, Accounting
• Mitch Hilbert has been promoted to Manager, Provider Relations
• Lisa Hill has been promoted to Director, Recovery Services
• Sarah Hobbs has been promoted to Senior Subrogation Service Onboarding & Support Specialist
• Alex Houle has been promoted to Asst. Vice President, Provider Relations
• Kendall Jackson has been promoted to Health Benefit Plan Consulting Attorney II
• Rose Jardim has been promoted to Director, Accounting Administration
• Jamie Johnson has been promoted to Sr. Manager, Recovery Services
• Amy-Jo Justice-Isaacs has been promoted to Team Lead, Recovery Services
• LaTrisha Keierleber has been promoted to Team Lead, HBPC & QAS
• Emily Kewer has been promoted to Team Lead, Recovery Services
• Caitlin Lankston has been promoted to Sr. Data Scientist (Transfer to IT)
• Vanessa Leurini has been promoted to Claim Recovery Specialist
• Kate MacDonald has been promoted to Health Benefit Plan Consultant III
• Krishna Malyala has been promoted to Data Architect (Transfer to IT)
• Zack McLaren has been promoted to Team Lead, Recovery Services
• Ashley McSweeney has been promoted to Team Lead, Provider Relations
• Larry Moffett has been promoted to Sr. Reimbursement Analyst
• Michelle Moyal has been promoted to Team Lead, HBPC & QAS
• Angela Norris has been promoted to Team Lead, Provider Relations
• Naveen Omkar has been promoted to Manager, Infrastructure
• Elizabeth Pels has been promoted to Sr. Manager, Recovery Service Onboarding & Support
• Ania Russo has been promoted to Sr. Manager, Training Development & Coordination
• Jackie Ryan has been promoted to Accounting Administrator II
• Kerri Sherman has been promoted to Sr. Reimbursement & Business Analyst
• Stephanie Smith has been promoted to Health Benefit Plan Consultant I
• Lindsay Stewart has been promoted to Case Analyst
• Alex Stoner has been promoted to KP Recovery Specialist
• Giuliano Stracco has been promoted to Sr. Data Quality Analyst
• Ashley Turco has been promoted to Director, Infrastructure & IT Security
• Saheed Yussuff has been promoted to Staff Accounting II
New Hires
• Amy Smith was hired as an HM First Party Claim Recovery Specialist
• Mandy Deese was hired as a Mass Tort - Claim Recovery Specialist
• Justin Stafford was hired as a Sr. Data Analyst
• Allyssa Pogue was hired as a Health Benefit Plan Consultant
• Rhys Cundiff was hired as a Subrogation Attorney
• Sydney Sumner was hired as a Case Investigator
• Karlee Castorena was hired as a Sr. Claim Recovery Specialist
• Stewart Miller was hired as a Subrogation Attorney
• Cassidy Osbourne was hired as a Sr. Claim Recovery Specialist
• John Gullett was hired as a Subrogation Attorney
• Ronnie Lytle, Jr. was hired as a Sr. Claim Recovery Specialist
• Eric Belmonte was hired as a Sr. Claim Recovery Specialist
• Naga Vivekanandan was hired as a Health Benefit Plan Consulting Attorney
• Harsh Neelathi was hired as a Software Engineer
• Ivy McGehee was hired as a Sr. Claim Recovery Specialist
• Katie Corrigan was hired as an AR Specialist
• Autumn Boone was hired as a Health Benefit Plan Consultant
• Stephanie Burgraff was hired as a Claims Specialist
• Patricia Smart was hired as a Sr. Contested Claim Recovery Specialist
• Matt Jelacic was hired as a Sr. Contested Claim Recovery Specialist
• Robert Balchunas was hired as a Configuration Specialist
• Tyler Hammons was hired as a Sr. Contested Claim Recovery Specialist
• Leslie Decker was hired as a Sr. Contested Claim Recovery Specialist
• Jennifer Rose was hired as a Third Party Recovery Specialist
• Gracie Beck was hired as a Notice Specialist
• Blake Drake was hired as a Sr. Contested Claim Recovery Specialist
• Chelsea Mullis was hired as a Claims Specialist
• Courtney Justice Isaacs was hired as a Sr. Contested Claim Recovery Specialist
• John Shouse was hired as a Sr. Contested Claim Recovery Specialist
The Phia Group Reaffirms Commitment to Diversity & Inclusion At The Phia Group, our commitment to fostering, cultivating, and preserving a culture of diversity and inclusion has not wavered from the moment we opened our doors 20 years ago. We realized early on that our human capital is our most valuable asset, and fundamental to our success. The collective sum of individual differences, life experiences, knowledge, inventiveness, innovation, self-expression, unique capabilities, and talent that our employees invest in their work, represents a significant part of not only our culture, but also our company’s reputation and achievements.
We embrace and encourage our employees’ differences, including but not limited to age, color, ethnicity, family or marital status, gender identity or expression, national origin, physical and mental ability or challenges, race, religion, sexual orientation, socio-economic status, veteran status, and other characteristics that make our employees unique.
The Phia Group’s diversity initiatives are applicable to all of our practices and policies, including recruitment and selection, compensation and benefits, professional development and training, promotions, social and recreational programs, and the ongoing development of a work environment built on the premise of diversity equality.
We recognize that the success of our company is a direct reflection of each team member’s drive, creativity, diversity, and willingness to exercise initiative. With this in mind, we always seek to attract and develop candidates who share our passion for the healthcare industry and our commitment to diversity and inclusion. Back to top ^
By: Kendall Jackson
The high costs associated with prescription drugs consistently provoke conversation in the self-funded healthcare industry. Not only is it an issue that most health plans encounter, but it is also a concern that trickles down to the member-level. Whether you’ve personally experienced the effects of high-cost drugs, or they have impacted a close family member, we can all empathize with the stress of having to pay for an expensive prescription.
In an effort to minimize these concerns, President Trump issued an executive order (EO) titled “Lowering Drug Prices by Once Again Putting Americans First.” One goal of this EO is to modify the Inflation Reduction Act that was originally signed into law by the Biden Administration in 2022. The Inflation Reduction Act included the Medicare Prescription Drug Negotiation Program, which aimed to reduce drug prices for Medicare beneficiaries. President Trump’s EO seeks to modify this program to improve transparency and minimize the negative impact of high-cost prescription drugs.
Beyond Medicare, the EO questions the current role of middlemen in the pharmaceutical industry and instructs several entities to provide recommendations of how to best “promote a more competitive, efficient, transparent, and resilient pharmaceutical value chain that delivers lower drug prices for Americans.” These recommendations, and any potential rulemaking that may stem from them, could have a significant impact on the self-funded industry. Currently, there are six pharmacy benefit managers (PBMs) that dominate the market, with three of them holding the majority of the market share. The vertical and horizontal consolidation of the market has stifled the marketplace, given the disproportionate amount of power these PBMs wield in comparison to smaller, independent entities. Since these large PBMs are integrated with suppliers and operate their own pharmacies, they are incentivized to utilize affiliated pharmacies to generate higher profits. Furthermore, the major PBMs often retain a portion of rebates, which can lead to higher costs for health plans and plan participants.
Only a few years ago, the Federal Trade Commission (FTC) launched an inquiry into the business practices of PBMs. The FTC found that the PBMs paid their own pharmacies significantly more for commonly prescribed drugs that were otherwise available for lower costs at rival pharmacies. Additionally, the FTC noted that between 2013 and 2022, 10% of rural, independent retail pharmacies closed their doors, demonstrating how the major PBMs’ control of the market can negatively impact smaller players.
With this data from the FTC and the general desire for PBM reform within the industry, the EO is a step in the right direction. It will be interesting to see how the tasks imposed on Secretary of Health and Human Services Robert F. Kennedy Jr. and other federal entities by this EO play out over the coming months. Any rule-making that may spring from their guidance and recommendations that limit the major PBMs’ control of the market would likely have a positive outcome that broadly benefits the industry, whether that be assisting smaller pharmacies in the market or lowering costs for health plans and plan participants.
Our consulting team has received numerous questions in Q1 2025 about employers considering self-funding their health plans. Join Attorneys Jennifer McCormick and Kelly Dempsey as they go through what the driving factors are behind employers considering self-funding, the pros and cons of self-funding, and some of the major differences employers will encounter. If you’re considering taking the leap, take a listen first!
Click here to check out the podcast! (Make sure you subscribe to our YouTube and Apple Podcasts Channels!)
Without question, artificial intelligence beholds many downright frightening risks when implemented in the healthcare field. Without proper oversight, AI could have the final say in depriving a patient of a necessary procedure or steering them towards a suboptimal physician. Or the still nascent technology, if unchecked, could account for a HIPAA breach with the slapdash handling of PHI. Yet, that being said, AI is undoubtedly here to stay and as far as the healthcare industry is concerned, this technological revolution is brimming with astonishing potential, as evidenced by the recent development of AI expediting the repurposing of existing drugs for treatment of rare diseases.
No the process of repurposing already FDA approved drugs for new conditions such as rare and aggressive cancers, fatal inflammatory disorders and complex neurological conditions is not new. However, the application of A/I fueled Machine Learning to speed up the process is nothing short of groundbreaking and could very well have a profound impact on the tens of millions of Americans who suffer from a rare disease, which is defined by The National Institutes of Health as one which affects fewer than 200,000 people in the United States.
When speaking to the New York Times earlier this spring, Donald C. Lo, the former head of therapeutic development at the National Center for Advancing Translational Sciences and a scientific lead at Remedi4All, a group focused on drug repurposing, explained that there is a “treasure trove of medicine that could be used for so many other diseases. We just didn’t have a systematic way of looking at it. It’s essentially almost silly not to try this, because these drugs are already approved. You can already buy them at the pharmacy.”
Though hundreds of millions around the globe may be grappling with a terrifying, truly life-jeopardizing “rare disease,” the inconvenient truth is that over 90 percent of rare diseases currently have no approved treatments, largely because titans of the pharmaceutical industry are reluctant to invest significant resources towards the discovery of a treatment that, in all likelihood, will only be utilized by a relatively miniscule portion of the population.
So if humans are unable to take full advantage of the potential of drug repurposing, the robots may be able to – more specifically, a splashy new AI model that goes by the name of TxGNN, the first one developed with the express purpose of identifying drugs for extremely rare diseases for which there are no known treatments. Thus far, TxGNN, overseen by scientists at Harvard Medical School, has identified drug candidates from current medicines for well over 17,000 diseases – a staggering total that stands as the largest number of diseases any one particular AI model has thus far been responsible for. To their credit, the Harvard researchers have made TxGNN available at no cost while encouraging clinicians and scientists to apply it in their pursuit of finding new therapies.
“With this tool we aim to identify new therapies across the disease spectrum but when it comes to rare, ultrarare, and neglected conditions, we foresee this model could help close, or at least narrow, a gap that creates serious health disparities,” noted lead researcher Marinka Zitnik, assistant professor of biomedical informatics in the Blavatnik Institute at Harvard Medical School, on the HMS official website back in September. “This is precisely where we see the promise of AI in reducing the global disease burden, in finding new uses for existing drugs, which is also a faster and more cost-effective way to develop therapies than designing new drugs from scratch.”
By pinpointing drug candidates from approximately 8,000 medicines (both FDA-approved medicines and experimental ones currently in clinical trials) for 17,080 diseases, TxGNN was close to 50 percent more accurate, on average, at identifying drug candidates when compared to other industry-leading AI models for drug repurposing. According to Harvard Medical School, TxGNN, which has two central features, one for identifying treatment candidates along with possible side effects and another one detailing the reasoning behind the decision, was also 35 percent more accurate in predicting what drugs would have contraindications (particular situations in which a medication, procedure, or surgery should be avoided because it could potentially harm the patient.)
The extent to which TxGNN and other similarly next generation AI models for drug repurposing has a transformative impact on the industry remains to be seen. On the surface, repurposing already approved drugs represents an intriguing way to generate new treatments because the technique relies on medicines that have already been studied, have well-comprehended safety profiles, and have been through the regulatory approval process. Viewed through a different lens, should this gargantuan development come to fruition, it will be interesting to see if there could be progress made in lessening social health disparities as countless more socioeconomically disadvantaged patients could have access to specialized drugs that would otherwise be financially prohibitive.
By: Brady Bizarro, Esq.
As the self-insurance industry braces for potential changes under President Trump’s administration, one issue looms large: impending tariffs on pharmaceutical drugs. These proposed tariffs, aimed at boosting domestic manufacturing, could ripple through the healthcare ecosystem, affecting employers sponsoring self-funded health plans, third-party administrators (TPAs), stop-loss carriers, brokers, and vendors. For an industry built on balancing cost control with quality care, understanding these impacts and preparing strategically is critical. More importantly, as we navigate these changes, we must remain steadfast in our commitment to ensuring that our members get access to quality, affordable prescription drugs. President Trump has signaled plans to impose “major” tariffs on pharmaceutical imports, with the goal of incentivizing drug companies to relocate manufacturing to the U.S. While pharmaceuticals were initially exempt from his recent reciprocal tariffs, which included a baseline 10% on most imports and higher rates for countries like China and the European Union (EU), the administration has made it clear that drug-specific tariffs are on the horizon. These could range from 20% to 25% or higher, targeting the global supply chain that delivers roughly $213 billion in medicines to the U.S. annually. For self-funded health plans, the implications are multifaceted. First, most obviously, tariffs could increase the price of imported drugs, particularly generics, which make up about 90% of U.S. prescriptions. Countries like India, which supply nearly half of America’s generics, may pass these costs on, raising expenses for plan sponsors and members. Even drugs manufactured domestically could see price hikes if they rely on imported active pharmaceutical ingredients (APIs), with China and India dominating this market. In addition, the threat of tariffs has already prompted some companies to stockpile drugs or shift to air transport, signaling potential shortages. For self-funded plans, shortages could limit access to critical medications, complicating care management and increasing reliance on costlier alternatives. There will be other impacts as well. Higher drug prices would likely translate to increased premiums for employers and higher out-of-pocket costs for employees. For TPAs and brokers, this could mean tougher negotiations with plan sponsors seeking to maintain affordability without sacrificing coverage. Rising drug costs and potential specialty medication shortages could elevate claims volatility, prompting stop-loss carriers to adjust premiums or tighten underwriting criteria. This could squeeze smaller employers, who rely on stop-loss coverage to manage catastrophic claims. Pharmacy benefit managers (PBMs) and other vendors may face margin pressures if tariffs shrink their negotiating leverage with manufacturers. This could lead to revised contracts or service models, affecting the broader self-insurance ecosystem. These challenges underscore a broader truth: when healthcare costs rise, it’s not just balance sheets that suffer - it’s the hard-working Americans who rely on these plans for their families’ well-being. A tariff-driven price hike could mean a factory worker in Ohio skips a refill to cover rent, or a teacher in Texas delays treatment to afford school supplies for her kids. Our industry has a responsibility to mitigate these impacts, ensuring that access to life-saving medications remains within reach for all. While the full scope of the tariffs remains uncertain, proactive measures can help self-funded health plan stakeholders navigate this landscape and uphold affordability. TPAs and brokers can leverage predictive analytics to model tariff-related cost increases. By analyzing drug utilization trends and identifying high-cost therapies, stakeholders can advise employers on budget adjustments or benefit design tweaks, such as tiered formularies, to cushion the blow. Similarly, vendors and PBMs can explore relationships with domestic manufacturers or alternative international suppliers less exposed to tariffs. While shifting production entirely to the U.S. may take years (industry estimates suggest 5-10 years and $2 billion per facility), diversifying now can reduce reliance on vulnerable markets like China or India, stabilizing supply for plan members. Brokers and TPAs play a pivotal role in educating employers and members about potential changes. Providing information about generic drug options, therapeutic alternatives, or patient assistance programs can help members stretch their dollars. This not only mitigates cost increases but also reinforces our shared goal of providing plan members with access to the care they need without financial strain. Finally, the self-insurance industry has a powerful voice. We should collaborate with our industry representatives (the Self-Insurance Institute of America (SIIA)) to advocate for phased tariff implementation or exemptions for essential, lifesaving drugs. Highlighting the human toll - how tariffs could limit access for low-income workers or rural communities - can shape policy to prioritize patient outcomes over short-term trade goals.`
By: David Ostrowsky For over a quarter century, The Phia Group has championed a broad spectrum of cost containment initiatives to empower health plans and ultimately, their respective participants. The Phia Group believes that its latest endeavor—Care Empowered Pricing (CEP)—may be its most robust cost containment program yet. At its core, CEP is engineered to, quite simply, save plans money and as you can see below, there are a number of ways our revolutionary offering does so. Firstly, in terms of program ownership, unlike traditional reference-based pricing (RBP) plans, in which the RBP vendor owns the program in a black box and the TPA or health plan is merely the claims administrator, CEP enables the TPA/health plan to manage the program so that it reflects their unique brand and mission. Generally speaking, many RBP vendors prioritize selling as many services as possible in a short amount of time to maximize revenue. At the same time, they utilize pricing methodologies that are meant to exaggerate savings (of which they receive a percent as their fee), without considering the likely subsequent provider backlash (coming in the form of balance billing, access denial, etc.). This overaggressive, and quite frankly, reckless approach, often leads to many RBP vendors getting acquired by competitors or even going out of business before open matters are fully resolved. Ultimately, it’s the plans that suffer most as they are saddled with a high volume of unresolved claims, the management of which can be very expensive. In contrast, with CEP, Phia collaborates with the TPA/health plan to develop a long-term strategy customized to the specific geographic area, which will produce incremental and ultimately substantial and sustainable savings. Even if an RBP vendor is able to manage the onrush of new clients and stay in business, it is very common that once they hit their sales targets, there is a steep decline in customer service offered, leaving many plan participants/employees frustrated when experiencing lengthy delays, hassling with resultant balance bills, losing access to providers, and ultimately feeling inclined to leave their employers. With CEP, backed by a fully staffed and experienced team utilizing proprietary software for claim resolution—not to mention the additional safety net of independent legal representation—a company’s ability to retain employees is never in jeopardy because of this dynamic. In short, no claims fall through the cracks. Because CEP is more than a simple claims pricing methodology, but instead an ecosystem of cost containment services, plans benefit from—among other features—more optimal plan design. Whereas traditional RBP programs are often bereft of comprehensive compliance reviews, CEP incorporates innovative, industry-leading plan language into its program. A failure to ensure that the applicable plan document mirrors and supports the pricing methodology is often a pitfall leading to a plan’s demise. As many RBP vendors are so intent on reducing claim costs, the ever-evolving legal and regulatory landscape can become an afterthought; such oversight can have grave financial implications with subsequent costly litigation and claim reconciliation in the years ahead. Conversely, Phia’s team of seasoned compliance experts can ensure that your plan design stays compliant with the latest developments in the healthcare law industry, as well as align with the methodologies to be applied, safeguarding you against potentially devastating financial penalties. Lastly, it bears mentioning that the majority of RBP vendors use one system for all their clients and thus have the power to decide which providers are preferable based on their own reasons and relationships. Accordingly, such vendors have at their disposal one dimensional cost/quality provider data that is often outdated. In comparison, with CEP, Phia ensures the TPA or health plan has all-encompassing provider data that in turn is accessible to members seeking to find the most suitable providers for their needs. The goal is to transform every participant into an educated and informed healthcare consumer—balancing costs and quality—and obtaining the best care, for the most appropriate price. True to its name, Care Empowered Pricing, with its nuanced approach toward customizing rates with plan terms, direct contracts, and provider profiles, genuinely epitomizes compassion for plan participants and their families. And there is no feature more emblematic of that sentiment than the service’s unparalleled ability to save money.
Steven Spielberg’s 2001 summer blockbuster A.I. Artificial Intelligence may not have been the director’s most highly acclaimed film, but it may very well have been his most prescient work. Here we are, nearly a quarter century later, and A.I. continues to be all the rage in nearly every facet of society, including, yes, healthcare. The potential breakthroughs for enhancing patient outcomes are breathtaking, truly resembling features of a sci-fi flick. However, as we’ve painfully realized over the past couple years, the robots can’t be trusted to do everything – especially when patients’ information (and lives?) are at risk. Indeed, there continue to be considerable ethical concerns such as algorithmic bias and data privacy violations when A.I. meets healthcare. Undoubtedly, A.I.’s influence on healthcare is a loaded, multifaceted topic. Click Here to View Our Full Webinar To obtain a copy of our webinar slides, please reach out to [email protected].
ERISA gives plan sponsors great power and great responsibility. On this week’s podcast, attorneys Ron Peck and Nick Bonds get back to ERISA fundamentals to talk about how to really embrace fiduciary status and properly exercise discretionary authority.
By: Nicholas Bonds, Esq.
The second Trump administration has not been shy about taking steps to shake up U.S. health policy. There has been a flurry of executive orders on a range of healthcare topics, including stepping up enforcement of price transparency rules; a push to expand coverage for and lower the out-of-pocket costs for in vitro fertilization; and taking steps to redefine sex-based discrimination in federal policy and to discourage treatments for gender dysphoria. Even so, the executive action poised to have the broadest impact on health policy may just be the sweeping changes being made to the Department of Health and Human Services (HHS).
Within moments of Robert F. Kennedy being sworn in as the 26th HHS Secretary, President Trump signed another executive order establishing the Make America Healthy Again (MAHA) Commission. The MAHA Commission will be chaired by Secretary Kennedy, with other cabinet-level officials and their designees filling out the rest of the roster. The MAHA Commission is tasked with investigating “the growing health crisis in America,” with a primary focus on lowering the rates of chronic diseases, particularly in children.
In his role as head of HHS, one of the first changes Secretary Kennedy made was to revoke the more than fifty-year-old policy at HHS captured in a notice called the Richardson waiver. This was effectively a 1971 HHS policy that instructed the department to request and consider public commentary through notice-and-comment procedures for not just formal rulemaking, but also when making changes that apply to agency management and personnel, public property, loans, grants, benefits, or contracts. By rescinding the Richardson waiver, Secretary Kennedy has significantly reshaped how HHS operates, effectively removing a significant portion of public oversight and bolstering the White House’s ability to directly control health policy.
Meanwhile, Secretary Kennedy has followed the Trump administration orders to reduce staff at HHS by cutting tens of thousands of employees, and to cut their spending on contracts by 35%. This includes significant staff reductions at other federal agencies underneath the HHS umbrella, including the Centers for Disease Control and Prevention (CDC), Centers for Medicare & Medicaid Services (CMS), Food and Drug Administration (FDA), and National Institutes of Health (NIH). Other agencies are being absorbed into HHS and consolidated into a new entity called the Administration for a Healthy America (AHA).
The argument for these cuts and restructuring has been to streamline the agencies tasked with protecting and enhancing public health, and to make them more effective and efficient. Even staunch critics of the Trump administration and this bevy of changes can concede that HHS could work better, but the magnitude of these changes is starting to have industry stakeholders concerned. The Pharmaceutical Research and Manufacturers of America (PhRMA) has begun raising questions about the FDA’s ability to regulate and approve medical devices, prescription drugs, and vaccines. And Wall Street analysts have begun openly questioning the direction HHS is heading down, pointing to an uptick in measles cases and an increase in vaccine skepticism.
It is far too early to gauge what effect the full scope of changes at HHS will actually have on public health in the U.S. Hopefully, even with fewer staff and reduced budget, the reorganized HHS can deliver on its lofty MAHA ambitions. We at Phia will be watching closely to monitor how these ongoing developments at HHS may impact self-funded plans.
On this episode of the Empowering Plans podcast, attorneys Corey Crigger and Kendall Jackson discuss the hot button topic of weight loss drugs. Tune in to learn more about the latest advances in this space and the various coverage and exclusion options plans may pursue.
By: Bryan M. Dunton, Esq.
Unknown to many of us, celebrities suffer from mental health and substance use disorders just like anyone else. Recently, country music megastar Luke Combs openly discussed his struggles with obsessive compulsive disorder (OCD). Combs hopes that his discussion of the topic will reduce stigma that often comes with a mental health diagnosis. Taylor Swift has previously discussed her own struggles with an eating disorder for similar reasons. Before Robert Downey Jr. became Iron Man on the big screen, he suffered from substance use disorders for years before seeking treatment, ultimately becoming sober and remaining so to this day.
Barriers to mental health and substance use disorder treatment have existed in some form or another for quite some time, in part because of the aforementioned stigma. When Congress signed the Mental Health Parity Act (MHPA) 29 years ago, it was the first significant step towards addressing some of these roadblocks to care. The Mental Health Parity and Addiction Equity Act (MHPAEA) built upon the MHPA by prohibiting group health plans from imposing more restrictive non-quantitative treatment limitations (NQTLs) – non-numerical limits – on mental health or substance use disorder (MH/SUD) benefits compared to those placed on similar medical/surgical (M/S) benefits. The government’s reaffirmation that individuals need access to MH/SUD care has subsequently impacted benefit offerings.
The most important change, however, came only a few years ago when Congress signed the Consolidated Appropriations Act, 2021. This Act amended the MHPAEA to require NQTL testing that includes a comparative analysis for review of plan design, underlying plan and vendor policies and procedures, and de-identified aggregate claims data. For the first time, group health plans and their vendors were required to prove out their parity status.
In the four years since, we have seen this testing requirement trigger significant changes to how the self-funded health insurance industry perceives MH/SUD benefits. No longer an afterthought, MH/SUD benefits are often at the forefront of plan administrators’ minds when they make changes to plan design, attempting to avoid parity concerns.
So, how has this materially impacted people receiving benefits for MH/SUD conditions? Anecdotally, we have seen a significant focus on plan design changes to eliminate longstanding MH/SUD limitations that are more stringent than M/S limitations, particularly when plans have been unable to objectively justify their continued existence. For the past several years, we have received additional insight from the MHPAEA Reports to Congress that regulators submit annually. For example, we have seen exclusions relating to nutritional counseling, a core component of treatment for eating disorders, have been removed from 602 group health plans, impacting approximately 1.2 million plan participants. Additionally, the removal of exclusions of applied behavior analysis (ABA) therapy for the treatment of autism spectrum disorder (ASD) from many group health plans has increased access to this critical treatment for millions of plan participants over the last several years. This increased access to care helps children get the habilitative services they need, allowing parents to breathe a sigh of relief.
Health plans have also expanded access to medication-assisted treatment (MAT) and opioid treatment programs since enforcement efforts began in 2021. This development is critical since approximately 8.9 million people misused opioids in 2023 alone. Treatment and intervention for opioid use disorder can provide necessary help for an individual and help prevent the vicious cycle of abuse from inflicting further torment on their respective families.
Another benefit of heightened parity in benefits design is that it reduces individual out-of-pocket spending as better MH/SUD benefits are being offered in-network. Group health plans are often also supplementing their networks with telemedicine for MH/SUD treatment to ensure there is robust access to care for the individuals who need it most.
Improving access to MH/SUD benefits also broadly improves the health and productivity of the country’s workforce. Prior to NQTL testing being required, the World Health Organization (WHO) released results of a study showing that every dollar invested in mental health saved four dollars due to improved worker productivity. National Institute of Health (NIH) research notes that the improvement in access to care continues to reduce workplace absenteeism and presenteeism. Maintaining a happy and healthy workforce is not just good for the individual; it is good for employers, too.
If you or someone you care about has ever lived with a mental health condition, or struggled with a substance use disorder, you know exactly how challenging it can be to feel like it is acceptable to seek treatment, let alone find the right provider for you. The good news is that there are more evidence-based treatment options available now than ever before. The MHPAEA, and its NQTL testing requirements, are important to ensure that services are made available and affordable for individuals when they need them the most. Just like celebrities openly discussing their personal mental health and substance use diagnoses, laws like the MHPAEA are helping to break down these barriers to care so everyday people can live normal, productive, and happy lives.
By: Kate MacDonald
Chances are that cancer has touched the lives of nearly every American. Maybe it’s a suspicious mole that turns out to be a carcinoma, an old high school friend’s social media post raising awareness of the need for mammograms after a scare, or a grandparent who battled lung cancer after years of smoking. As the years go by, studies show that the frequency is increasing. The National Cancer Institute estimated that last year alone, more than two million Americans were diagnosed with a form of cancer, and 600,000 lost their fight. This can be compared to a diagnosis rate of 1.9 million in 2022. Statistics show that the most common types of cancer remain breast, prostate and lung cancer, but one stands out above the rest as having the lowest survival rate.
Tragically, pancreatic cancer has a reputation for being one of the deadliest forms of cancer – it has a notably low survival rate, as it is often not caught until the later stages, and it is a fast-spreading disease. Fewer than 13 percent of individuals live for more than five years after diagnosis. There is also no go-to screening process that has been developed specifically for this form of cancer, which can make detection harder.
But there may be some hope on the horizon for the future, as there is an ongoing clinical trial involving personalized mRNA vaccines treating pancreatic cancer, currently in the first phase. This trial, following an initial 2023 trial, followed sixteen individuals with operable pancreatic cancer, a rare situation, as pancreatic tumors are often inoperable (particularly without chemotherapy, radiation, and immunotherapies). The trial participants had their tumors removed, and then genetic materials were used to design personalized mRNA vaccines to train the individuals’ immune systems to attack the cancer cells.
Half of the participants responded to the vaccine – half did not. For those with a positive response, the team believes 20 percent of the cancer-fighting T cells would survive for decades and fend off cancer’s return. The next phases of the trials would explore what this may mean for extending a person’s life expectancy.
This is also not the only team working on a pancreatic cancer vaccine – there is a team of scientists at The University of Texas MD Anderson Cancer Center working on a non-personalized, off-the-shelf mRNA immunization, which would have a common target for all pancreatic tumors based on a common mutation, called KRAS.
It comes as no surprise that fighting pancreatic cancer can be both emotionally and financially fraught. According to the National Cancer Institute, when caught in an early stage, pancreatic cancer can set a patient back between $30,000 and $100,000. On the other hand, fighting advanced-stage pancreatic cancer tends to run from nearly $62,000 to upwards of $135,000 for life-saving treatments, procedures, and medications. Of course, this cost can vary further depending on severity, duration of treatment, geographic location, insurance coverage, and other factors.
MRNA vaccines are also being looked at as a method of treatment for melanoma, colorectal cancer, and solid tumors. The melanoma vaccine is being spearheaded by Merck and Moderna and came to fruition after lessons learned by the COVID-19 clinical trials. The colorectal cancer vaccine is also still in early stages and is based on targeting the KRAS mutation; early results show promise, according to a study led by researchers at Memorial Sloan Ketting Cancer Center.
A vaccine that has the potential to one day make its way onto the schedule could have a real impact on tens of thousands of Americans’ lives. Not only would this be a gamechanger in terms of access to quality healthcare, but it could also mean real relief for what may have otherwise been a devastating financial burden.
While cancer vaccines, thankfully, have been in the medical zeitgeist for the past couple of decades (more recently regarding human papillomavirus infections), future developments in this field may provide help on multiple levels for Americans across the country.
Artificial intelligence may be changing the trajectory of the self-funded industry – but can it negotiate? In this episode of The Phia Group’s Empowering Plans podcast, attorneys Brian O’Hara and Jon Jablon break down real-life examples of AI-driven responses in the No Surprises Act’s Open Negotiations process that range from nonsensical to outright misleading, where negotiating with AI is like trying to haggle with a toaster. From missing claim numbers to automated counteroffers that make no sense, Brian and Jon discuss whether AI is making negotiations easier, or defeating the purpose of the statutory process to begin with. Tune in for an honest discussion of the pitfalls of AI in No Surprises Act negotiations. Click here to check out the podcast! (Make sure you subscribe to our YouTube and Apple Podcasts Channels!)
A preferred provider organization, known colloquially as a “PPO,” is a network of contracted – or preferred – providers who offer care at a minimal out-of-pocket cost compared to rates offered by out-of-network providers. A PPO plan is a very popular type of health insurance in which the insurance plan pays its network of preferred providers a set fee to provide certain healthcare services, enabling plan participants to pay a reduced copay or coinsurance when they receive care within said network. Patients can still see providers out of their preferred network, but they will likely be subject to a higher cost-sharing amount and have to satisfy a separate out-of-network deductible.
In contrast to PPO arrangements in which select providers charge members for medical services at established rates as set forth in their contracts and conventional reimbursement methods are grounded in the plan’s administrative system, reference-based pricing (aka “RBP”) plans are based on a healthcare reimbursement methodology that relies on a benchmark (typically Medicare rates) to negotiate lower prices from healthcare providers. Generally speaking, RBP plans will pay claims based on a “maximum allowed charge,” which traditionally equates to a percentage above what Medicare pays the provider for the same service.
Self-funded employers, in particular, have been increasingly inclined to incorporate reference-based pricing as part of their health plan coverage (sometimes as an option alongside PPO plans) as the model provides them with heightened autonomy in deciding what they will pay and can help them avoid unnecessary procedural costs. In other words, RBP plans, grounded in an objective, data-based methodology and reliant on proprietary software, can act as a safeguard against providers arbitrarily charging sky-high rates, resulting in upcharges that can grossly surpass what Medicare expends for the very same services. With RBP plans, healthcare facilities may still charge unreasonably high prices under the guise of convoluted cost structures and hidden fees but the reimbursement amount isn’t tethered to the charges. Furthermore, reference-based pricing doesn’t just benefit plan participants who pay lower plan contributions but also stop-loss carriers who have fewer claims that reach the specific or aggregate deductible, as the plan’s payment levels are lower. However, it should be noted that the RBP approach does still pose a significant financial risk to patients, who could unexpectedly get balance billed if the established reference price falls far below what the actual provider charges – even though the No Surprises Act (NSA) does prevent certain claims from being balance billed.
Aside from the potential drawback of unforeseen balance billing, RBP plans do present other obstacles for self-funded groups. There are, in fact, some RBP programs that will only reimburse a limited network of providers who have consented to RBP rates, which can make it difficult for employees to access proper care for their needs. Additionally, adoption of RBP plans can create a serious administrative burden as establishing and maintaining accurate benchmarks and managing contracts with provider networks can be quite time consuming.
That being said, RBP plans represent a viable alternative to the scarce price transparency inherent in PPO plans, which leaves many patients saddled with devastating bills after insurance has paid its portion for a service and unaware that there could have been a far more affordable option. In many cases, under PPO plans, the cost of the claim can be marked up to account for administrative managerial expenses and add-on premiums. Furthermore, it is often the case that different healthcare facilities charge wildly different prices for the very same services. (This is a trend that is particularly applicable to maternity services, which tend to be on the more expensive end.) When a self-funded health plan is encumbered by an unexpectedly high out-of-network cost, it is not just employees who are burdened but also employers who find themselves struggling to effectively budget for healthcare expenditures that could have a profound impact on their bottom line.
In addition to reaping potentially significant financial benefits, participants on RBP plans are often able to enjoy greater agency over their healthcare due to the inherent flexibility of the plans. RBP plans allow patients to maneuver around restrictive networks so if they deem that a particular provider is capable of performing higher quality work, there is no need to question whether or not the service would be covered. Conversely, PPO plans often require services to be performed within their respective networks to guarantee coverage. Thus, most patients on PPO plans are unable to analyze empirically-backed information delineating pricing options and quality metrics – concerning both providers and facilities – in order to make enlightened decisions about their healthcare.
Of course, neither RBP nor PPO plans are without their drawbacks and ultimately, it behooves a self-funded group to decide which approach most appropriately aligns with its employee population, total claims spend, and other financial factors.