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Resolution to Become an Educated Consumer of Healthcare

On January 14, 2021

By: Bryan M. Dunton

Many people use the beginning of a new year as a reason to better themselves physically and emotionally, often setting goals for themselves in the process. After the pandemic of 2020 altering everyone’s plans, there’s sure to be a renewed dedication to personal goals this year. When deciding what types of personal goals to accomplish, it is important to ask yourself why these specific things are so important to you. Why do you want this change? How will it help you emotionally or physically? What’s stopping you from achieving it and how can you move beyond those obstacles?

Year after year, one of the most prominent goals is to be healthier. Two Years Ago, for example, 28% of people resolved to lose weight, 54% wanted to eat healthier, and 59% wanted to exercise more. Certainly, these are great goals to set for yourself, especially in the wake of 2020, when many people were locked down in their homes for extended periods of time and many of our favorite activities were closed. Some employers have taken a very proactive approach in encouraging their employees to be active despite the conditions created by the pandemic. Over the summer and early fall of 2020, Phia Group employees participated in a three-month long virtual race from our Canton, MA headquarters to Progressive Field (CEO Adam Russo is a huge Cleveland sports fan) as a way to get teammates moving and have some cross-department fun while many worked remotely.

Employers can make a positive difference in the health and wellness of their employees by providing the tools to become educated consumers of healthcare. Here at the Phia Group, we encourage employees to be healthy and provide them with the information and tools to do so. This includes both mental wellness as well as physical health through services such as direct primary care. We believe in educating employees about being proactive in self-care and how it factors into cost-containment for their own health expenses and that of the health plan itself. Phia often holds informational meetings for employees to discuss existing and new services being offered to maximize our opportunities for quality care at an affordable price. We have found that providing that targeted education and promoting the atmosphere of being consumers of healthcare, has led to significant cost savings for the plan.

While resolving to lose weight, eat healthier, and exercise more are important goals in the effort to having a healthy new year, we should also resolve to be educated about out health and healthcare and in so doing become consumers in the healthcare industry.

As always, we are happy to discuss these and the multiple other programs we use to contain costs with any employer who seeks to introduce similar methods to their health plans.

With an eye towards the new year, there is a strong desire for most of us that it will be different than how 2020 turned out. We hope that you take time to set some achievable goals for your own personal health and self-care this year. Here’s to 2021!

Addition By Division

On January 11, 2021

By: Jon Jablon, Esq.

Business is complicated, and a recent consulting inquiry from a client recently reminded me just how complicated it can be, especially when health plans are involved. In the course of a given health plan’s lifespan, there is the potential for numerous different things to happen, and one such possibility is called a “spinoff”, which is the term used when one benefit plan is split into more than one benefit plan.

When a health plan “spins off” into two health plans, neither plan is considered an “original” or “existing” plan, but each plan effectively becomes a brand new plan. Effecting a spinoff can be beneficial if an employer wants to treat classes of employees differently, which often becomes relevant as the employer expands its business, enters new sectors or new industries, widens its employee base, or otherwise changes its needs or mindset. If one section of a company grows much faster than another, for instance, it could be a good idea to separate the two into different companies, and different corporate structures could be used for different purposes and to achieve different results. A health plan being “spun off” into two (or more) plans can help insulate the assets of one plan from the other, which can be useful for stop-loss purposes (for instance to have different plans underwritten differently) or for funding purposes.

Since health plans have assets, in the form of money paid in by employees and the plan sponsor and paid out in benefits, there must be a way to allocate those plan assets accordingly. It may be intuitive to think “well, if individuals paid into Plan A while they were members of Plan A, then that money belongs to Plan A, and the new Plan B will start fresh”, that is not the approach the regulators have taken. If some employees moved from Plan A to the brand new Plan B but assets did not get transferred from the old plan to the new plan, then the new plan would have no assets, and could not pay claims!

To account for this, the applicable regulations tend to require the plans to allocate Plan A’s assets to Plan B based proportionately upon the plan assets attributable to their membership. If you think that sounds complicated, don’t forget that Plan A’s pool of assets is far from static; Plan A constantly gains and spends money, and attributing every dollar to an individual can be extremely complex (and it can even change day-to-day). In classic DOL and IRS fashion, plans are given the instruction to make “reasonable actuarial assumptions” to calculate these things – which does not really help explain much at all. It’s the same as when the regulators tell health plans to use a “good faith, reasonable interpretation” of the guidance they publish; in a way, it allows plans to have a safety net as long as they exercised good faith, but I for one would much rather have some actual guidance. Maybe even a calculator with specific fields, like for Minimum Value calculations!

Employers sometimes view health plans as a handicap to achieving more efficient corporate structures, or they worry that their health plans will suffer as a result of certain factors that are apparently beyond their control. This “spinoff” is one example of a tool that is within an employer’s control; in fact, employers are given a very wide latitude to structure their health plan (or plans) as they see fit, and with a little creativity and a lot of math, that latitude can be used to an employer’s advantage.

Choose Your Own Adventure: President Biden’s Healthcare Agenda

On January 5, 2021

By: Nick Bonds, Esq.

Does anyone else have fond memories of the choose your own adventure genre? “To explore the lab, turn to page 34!” Remember those? My favorite were the Goosebumps stories. I distinctly remember a story where I survived, but was transfigured into a German Shepherd. Thinking back, I probably wouldn’t have minded. I made a point of going through the first read without knowing any of the possible outcomes. After that though, I would inevitably flip back and forth through the book to see every possible outcome from every possible decision tree. In that spirit, let’s take a look at the possible outcomes President Biden’s healthcare agenda will face, come January 20.

The big turning point for his potential endings will be this Tuesday, with the runoff election for two Senate seats in the Georgia. Control of the Senate hinges on whether those seats remain in Republican control, and control of the Senate will largely dictate the possible avenues that remain open to the Biden Administration. During his campaign, the president-elect espoused a vision of building on the Affordable Care Act. He took care to steer clear of going so far as to embrace Medicare for all, and by comparison his approach looks far less radical. Rather than creating a single payer system, among other things, Bidencare would add a public option that could theoretically bring coverage to millions more Americans and perhaps lower premiums for those who already have coverage. If passed, the big shake ups would come from large insurers having to compete with a large, Medicare-like payer. That’s a big “if” though – without a Democratically controlled Senate there’s almost no chance the Biden plan would make it past the Grim Reaper of Capitol Hill.  

So if Democrats don’t win both of the Peach State’s Senate seats this week Bidencare may be dead on arrival. Even with both seats the Senate would still be split 50-50. In which case Kamala Harris might find herself one of the busiest vice presidents in recent memory, taking charge in the Senate chamber as the perennial tiebreaker – a muscle Joe Biden never had the opportunity to flex during his time as Veep.  

But the story won’t simply end there. We simply turn in our books to the executive authority ending. The Biden administration would still have the authority to make a number of changes without the help of Congress. Given the state of the pandemic (the U.K. is locking down again as we speak), President Biden could invoke emergency powers to provide greater subsidies, extended open enrollment periods, and reinstate marketing and outreach funds for purchasing plans on the Exchange. The President would also likely renew the declarations of COVID-19 as both a national emergency and a public health emergency, granting his fledgling administration with greater flexibility under federal regulations.

We would also likely see the United States walk back its withdrawal from the World Health Organization, reinstate COVID-19 briefings with scientists and health experts front and center, and push for a more comprehensive program to test, track, and vaccinate the public against the virus. Through executive actions, President Biden would also be able to simply reverse a number of actions taken by President Trump. He could reinstate limitations on short-term plans, lift limits on reproductive health programs, or revise regulations allowing more employers to refuse to cover contraceptives. He may also re-tighten limitations on when association health plans may be considered single-employer plans, and would likely revise the recent Section 1557 regulations.

What I know for certain is that we can expect the Biden administration to unveil big developments in the healthcare narrative over the coming months. As for which page we flip to next? That’s up for Georgia to decide.

I Hate Surprises!

On December 22, 2020

By: Ron E. Peck

As a member of the health benefits community, I – like many of you – have heard about the proposed “No Surprises Act.”  Many representatives of our health insurance and benefits community have reached out to me asking whether this “new law” will make balance billing “illegal,” and thus enable plans to leave their networks behind and pay claims solely based upon a Reference Based Pricing (“RBP”) methodology.

Before we dive into what the No Surprises Act is (and isn’t), let’s first – as of the time this missive is being drafted – recognize that it is presently “a bipartisan, bicameral deal in principle.”1   The “Committee leaders” are on record as having said that they “… look forward to continuing to work together to finalize and attach this important new patient protection to the end-of-year funding package,” and that they are “… hopeful this legislation will be signed into law…”  Despite Congress’ vote to pass the bill, which includes the No Surprises Act, unless and until it is signed into law by the President, it isn’t a law of the land (yet).

A wise person plans for anything and everything, however, so let’s proceed under the assumption that this “deal” will in fact become law.  The question (then) is whether, as mentioned above, the No Surprises Act outlaws balance billing.  The answer is no; not even close.

The name of the proposed law is literally the no “surprises” act, and the above mentioned Committee leaders specifically state that, “Patients should not be penalized with these outrageous bills simply because they were rushed to an out-of-network hospital or unknowingly treated by an out-of-network provider at an in-network facility.”  

This proposal relates solely to “surprise” balance bills.  

One trend, seen from both government and media, is to confuse the term “balance billing” with the more specific term, “surprise” balance billing.  In a nutshell, every brown squirrel is a squirrel, but not every squirrel is a brown squirrel.  Similarly, every surprise balance bill is a balance bill, but not every balance bill is a surprise balance bill.  
 
A surprise balance bill is an amount submitted to a patient for payment that represents the difference between what a health plan paid, and the amount a provider charged for out of network (“OON”) services, provided in response to an emergency, where the patient didn’t choose the provider (nor did they have the ability to choose).  Alternatively, a surprise balance bill is an amount submitted to a patient for payment that represents the difference between what a health plan paid, and the amount an OON provider charged when the patient treated at an “in network” (“IN”) facility, but a specific healthcare professional at the facility – that provided services to the patient – is independently OON.
 
When a plan pays a usual and customary or “RBP” rate (often a percent of Medicare, or some other objective pricing metric) to a non-contracted provider, and the provider subsequently seeks payment from the patient of an amount that is in excess of the maximum allowable amount paid by the plan, this is balance billing.  If the scenario doesn’t fit into the one of the two definitions explained above, then that balance bill is not a surprise balance bill, and – for the time being – the “No Surprises Act” is moot.  

Further complicating the situation, most RBP plans do not utilize any network at all.  This in turn nullifies one, if not both, of the scenarios that give rise to a “surprise” balance bill.  

Specifically, when there is no network, a patient cannot find themselves in a situation where they visit an IN facility, only to have an OON provider provide services.  This is because there are no IN facilities at all.

Further, depending upon how lawmakers interpret the interplay between the proposed rules and emergency services, it may be that an RBP plan will not benefit from protections afforded to patients in response to “emergency” situations either.  Recall that the rule, and definition of surprise balance billing, envisions a scenario where a patient is whisked away to an OON provider in an emergency situation.  The theory is that the patient “would have chosen” an IN provider had they had the chance.  Yet, with an RBP plan that has no network at all, the patient could not have chosen an IN facility – emergency or not.  In other words, with an RBP plan that has no network at all, the fact that the need was urgent (an emergency) has no impact on whether the patient is treated at an OON facility.

Benefit plans that do utilize networks should pay close attention because this proposal will impact them.  Additionally, despite the above, even RBP plans and plans that don’t use a network should also pay attention – not because the proposal will impact them (it won’t), but because the way with which the rule addresses surprise balance bills may be a glimpse into the future, and a hint as to how lawmakers would seek to deal with all balance bills – not just surprise balance bills.

With this in mind, one item that should cause payers to tremble is the fact that, in direct opposition to the philosophy underpinning RBP, the “No Surprise Act” does not reference any objective payment standard.  In other words, there is no universally agreed upon standard the parties can use in determining a fair payment.

The initial hope is that payers and providers will try to resolve payment disputes on their own.  This initial “step” in the process, heralded as a novel step forward, does nothing more than document what most payers are already trying to do and have been trying to do for some time.  When a patient is balance billed, a benefit plan rarely ignores their plight, and already seeks to resolve the matter with the provider – despite the plan not “technically” having an obligation to pay anything more.

Herein lies my concern – when the provider has a right to pursue payment from a patient (balance bill), and a payer has a right to cap what they will pay, both parties have something the other wants.  The provider wants to be paid promptly, by the plan (whose pockets are far deeper than the patient’s).  The provider recognizes that they aren’t guaranteed payment from the patient, and thus they are incentivized to work with the plan – applying the old adage that “a bird in the hand is worth two in the bush.”  The plan, meanwhile, wants to protect their plan member from balance billing.  Thus, even though they have paid all they are required to pay, the plan is compelled to pay more to protect the plan member.  As a result, as mentioned above, both parties have something the other wants, and have a reason to negotiate in good faith.

In a new world, where the plan will be required to pay more – either a smaller amount proposed by the plan, a larger amount proposed by the provider, or some negotiated amount in between – the “threat” of the plan walking away without paying anything additional (a right the plan presently has) is stripped away, giving the provider more negotiation power and the plan less power than is presently the case.  For this reason, the proposed rule hurts rather than helps negotiation efforts.

How could this be allowed to happen?  As one reviews the proposed rule, one realizes that certain assumptions are in play.  First, that benefit plans universally underpay claims when they are OON.  Second, that benefit plans will never negotiate or pay anything additional when a participant is balance billed.  As such, a law is required that will scrutinize what the plan paid and will force the plan to pay more.

For plans that already pay an objectively fair amount for OON claims, and already engage in good faith negotiations to protect patients from balance bills, these assumptions should be offensive, and the resultant rule should horrify.

Further worrisome is the so-called arbitration that ensues if a negotiation fails.  The style of arbitration is “baseball arbitration;” a process where the arbiter is stripped of their power to steer the parties toward a middle ground and is instead forced to pick one of two amounts – one proposed by each party.  As a result, benefit plans are cautioned against offering a too-small amount (including nothing additional), even if it seems fair to them, for fear of offending the arbiter and losing before they even begin.  Of course, the counterpoint to that is that one does not negotiate against themselves.  Many will not want to offer a too high amount, for fear that they will call their original payment (and logic behind the payment) into question, as well as embolden providers to increase their rates in response.

This, then, leads to another concern.  If payers will be forced to pay “something” additional, why should providers avoid increasing their rates?  

All involved in this proposal explicitly agree that this process is more favorable to providers.  It’s why they supposedly added so-called “guardrails” to help ensure that the arbitration process is not abused.  

First, payers and providers must engage in 30 days of negotiations, prior to requesting arbitration within 48 hours of the final day’s passage.  This supposed guardrail only benefits providers.  Presently, “pre-rule,” plans that have paid the maximum amount according to their controlling document seek only to negotiate to protect their plan member from balance billing.  They, until now, gained nothing from paying more.  Providers, on the other hand, are seeking financial gain.  Prior to this rule, the threat that the plan could walk away, and the provider could be forced to pursue the patient – and likely get nothing additional – was an incentive to negotiate in good faith.  Now, with the arbitration “light” shining at the end of the 30 day “tunnel,” providers will demand 100% of billed charges, refuse to negotiate, and simply await arbitration – knowing that they will either be rewarded with between a little more and a lot more payment from the plan.  At best, they can assert a right to 100% of billed charges and win that amount in arbitration.  At worst, they will get an amount the plan proposes (which is still more than the plan’s original payment – and thus more than the provider could potentially expect to get – should negotiations fail – pre-rule change).  In other words, in a world where payers will be forced to pay more, and providers are not punished for charging excessive amounts, there is no downside to charging more, ignoring negotiations, and waiting for arbitration.

A rule that some say will prevent the overuse of the arbitration process is that the losing party will be responsible for paying the administrative costs of arbitration.   Of course, those in our industry recognize that – for the reasons explained above – even if the provider loses (and is forced to pay the costs of arbitration) the additional payment from the plan of the lesser amount presented by the plan plus the already marked up rates initially paid by the plan, will outweigh the occasional loss and corresponding administrative costs.  

Arbitrators, meanwhile, have the flexibility to consider a range of factors, but unfortunately – none of those factors are objective.  They will be forced to limit their examination to only factors raised by the parties, and – significantly – not what the provider usually accepts from other payers.  Additionally, the arbitrator is not supposed to review the billed charges (the chargemaster rate), but – assuming the provider is seeking payment of their charges in full via arbitration – that limitation is irrelevant.

Optional factors that an arbitrator could consider include, among others, the level of training or experience of the provider or facility, quality and outcomes measurements of the provider or facility, market share held by the out-of-network health care provider or facility, or by the plan in the geographic region, patient acuity and complexity of services provided, and teaching status, case mix, and scope of services of the facility.  We question whether the payer will have an opportunity to challenge these metrics, or – as it appears to be presented – whether this is simply an open invitation for the provider to justify their demands.

Additional factors that the arbitrator may consider, and which are both beneficial to payers as well as uniquely worrisome, are any good faith efforts by the provider to join the plan’s network, past contracted rates, and the median in-network rate paid by the plan.  

On the positive side, this will hopefully prevent the billed charges from being deemed the “starting point” or misrepresented as what is “usually paid” by benefit plans.  Generally speaking, States that have implemented regulations limiting surprise balance bills that take such median rates into consideration generally see smaller amounts being paid than in States that do not take median rates into consideration.

On the flip side, knowing this information may be used against them in the future, will providers seek to contract for more with networks, to avoid creating a lower floor should they be forced to fight for OON payments at a later date?  As for plans that do not even have a network, such as an RBP plan, how will these metrics apply to them?

This focus on networks, as well as in and out of network status, is a red herring.  No payer should be forced to pay an abusive amount because they did or didn’t lock themselves into a contract at some earlier date, or with someone else.  Each service provided by a provider should entitle that provider to fair compensation.  If, four years prior, I agreed to pay $100,000 for an automobile that had a sticker price of $30,000, that mistake should not doom me to a lifetime of overpayments.  If I paid $100,000 for a car worth $30,000, my wife shouldn’t be forced to do the same when she is purchasing a car.  We should be allowed to pay a fair price for the service we are purchasing – in a vacuum and based solely on the value of that service, and that service alone.

“As we have stated many times before, the AMA strongly supports protecting patients from the financial impact of unanticipated medical bills that arise when patients reasonably believe that the care they received would be covered by their health insurer, but it was not because their insurer did not have an adequate network of contracted physicians to meet their needs,” AMA Executive Vice President and CEO James L. Madara, MD, wrote in a letter to congressional leaders.2

This statement from the American Medical Association’s leadership exposes two worrisome philosophies.  First, that it is reasonable and appropriate to expect benefit plans to agree, via contract, to pay a provider whatever that provider wants – regardless of how excessive or abusive those prices may be.  Second, that benefit plans should be forced to create and expand networks until they have no bargaining power and thus cannot exercise any cost controls whatsoever.  I would ask Mr. Madara what he believes constitutes an “adequate” network.  25% of providers?  50%?  100% of providers?  As that network grows, in-network status loses its exclusivity, and steerage of plan participants is spread, thinning the number of patients visiting each provider and lessening the value of in-network status for the providers.  This in turn justifies the providers demanding more payment, and lesser discounts.  

This philosophy, shared by the AMA and providers alike, exposes a baseline assumption that has become prevalent in our nation, and serves as a foundation for a flawed system.  No other type of insurance is “forced” to contract with providers.  Whether it be homeowner’s insurance, auto insurance, or any other form of insurance – insurance pays the fair value of the loss, and the objectively reasonable cost of repair or replacement.  Yet, here we see the American Medical Association’s leadership stating that benefit plans should be punished for not contracting with providers, before a service is even provided, and failing to agree to pay whatever the provider chooses to charge when the time comes.  Imagine if your auto insurance carrier was forced to contract with every auto manufacturer, agreeing to pay whatever the car maker charges at the time an insured needs a new car, without knowing what those prices will look like at the time the contract is signed.  Imagine how automobile manufacturers could and would abuse that one-sided deal, and what that would subsequently do to your premiums.  

The bottom line?  With this new rule, providers are not punished for failing to contract with payers.  Payers are punished for not contracting with providers.  This puts all of the negotiation power in the hands of the provider.  They know they can leave the “networking table” without a deal and collect their lump of flesh later.  The payer, however, now is desperate to get a contract signed – and will sign a deal, no matter how abusive – to avoid the punishments they will suffer when they dare to allow a provider to be OON.

Before this review can be concluded, it is important to recognize that this assessment has been mostly negative.  Hopefully you will forgive the author his gloomy tone.  Many people see that surprise balance billing is being identified as an issue – and that, in and of itself, is a good thing.  Unfortunately, the approach presented by the No Surprises Act minimizes the importance of examining objective metrics, is over reliant upon networks, and ignores amounts providers accept as “payment in full” from other payers – including Medicare and Medicaid, as well as actual cost to charge ratios.  Rather than drill down to the question of what constitutes “fair” compensation, the process will instead ask what constitutes the “most common” compensation.   Looking at the current state of the healthcare industry, one would be justified in expressing concern over future dependence upon past “averages.”  

Hopefully arbitration won’t take place in a vacuum, despite the analysis above.  Furthermore, there are other reasons for optimism.  Much of the proposal depends upon future rulemaking.  There is an opportunity to further define how the rule will be applied through the regulatory process.  Stakeholders are encouraged to analyze the rule, contemplate how it will impact them, and propose solutions to shift the end result to a more equitable conclusion.  This is not the end, but rather a foot in the door.  

Consider also the inclusion of air ambulance claims.  For too long this subset of healthcare has been allowed to operate without limitation and gotten away with unfettered billing practices.  By being included in this proposal, we are turning the corner and taking one step in the right direction.

Lastly, while the rule isn’t perfect, it does also require providers to exercise a new level of transparency – notifying patients when they may be treated by an out of network provider, and requiring the use of a waiver that is (hopefully) more robust than the traditional intake forms signed by patients today.

Thus, in closing, while the No Surprises Act is far from perfect, there exists an opportunity to adjust it through the regulatory process and it shines a light on some issues that have been hidden for too long.

1. https://www.help.senate.gov/chair/newsroom/press/congressional-committee-leaders-announce-surprise-billing-agreement

2. https://www.ama-assn.org/delivering-care/patient-support-advocacy/proposed-no-surprises-act-favors-commercial-health-plans

FFCRA Leave Entitlements Set to Expire December 31, 2020

On December 16, 2020

By: Kevin Brady
 

In March of this year, the President signed the Families First Coronavirus Response Act (FFCRA) into law. The FFCRA represents the first major legislative response to the COVID-19 pandemic. In an effort to reduce the spread of COVID-19 and to protect the financial interests of those employees and families who are impacted by the COVID-19 pandemic, the FFCRA provides new and expanded leave entitlements under the Expanded Family and Medical Leave Act (EFMLA) and the Emergency Paid Sick Leave Act (EPSLA).
 

The EFMLA provides additional leave entitlements to employees who must take time off because they are unable to work (or telework) due to a need to care for a child in the event that the child’s school or place of child care has been closed or is unavailable due to the COVID-19 pandemic. Additionally, the Emergency Paid Sick Leave Act (EPSLA) requires employers to provide paid sick leave (up to 80 hours) to employees who are unable to work (or telework) for any of the following reasons:

  1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.
  2. The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
  3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
  4. The employee is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2).
  5. The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the child care provider of such son or daughter is unavailable, due to COVID-19 precautions.
  6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

Employers should note that the obligation to provide leave under the EFMLA and the EPSLA terminates at the end of the year. Although it is possible that these leave entitlements will be extended beyond December 31, 2020 there is no indication (as of right now) that they will be.
 

Although it may no longer be required, employers may consider voluntarily continuing these leave entitlements to their employees to mitigate the risk of potentially contagious individuals returning to work too soon. Another important consideration for employers who self-fund their medical plans is to confirm that their plan document is updated to reflect this change. If leave is allowed beyond the employer’s obligations and coverage is continued under the medical plan, the group will want to confirm that the stop loss carrier is aware of and approve the approach.

The U&C Gap Keeps Rearing Its Ugly Head

On December 8, 2020

By: Jon Jablon, Esq.

There’s no question that most health plans can’t remain viable without a stop-loss policy in place. The plan and stop-loss carrier share a common goal, which of course is cost-containment. Since the two types of coverage provided are so different, however, the brand of cost-containment that each uses is often vastly different – and when two companies are trying to contain costs on the same claims, things can get ugly if they say different things.

Many stop-loss carriers have antiquated notions of what should constitute U&C. Common definitions include the old “usual charge in the area” language or some variation thereof, but many carriers have taken their policies into the modern age and use multiples of Medicare for their allowable amounts. In theory, this makes sense; just like a plan needs to determine what amounts are reasonable for it to pay for claims, so does a stop-loss carrier. However, plans should consider that their carrier’s idea of what is reasonable may not align with their own.

Admittedly, this is not the first time we have brought up this topic of so-called “gaps” in U&C language between a plan and a stop-loss carrier. That’s because this issue continues to be relevant, and what’s worse, payors are often surprised by stop-loss denials when they didn’t think they had any reason to worry.

The best example is when the plan is subject to a PPO contract, which most still are. The plan is contractually bound to pay the network rate, and cannot limit its payment based on a percent of Medicare or other factors; instead, it must pay providers the established contractual network rate. The stop-loss policy, however, doesn’t reference the PPO rate, instead saying that it will pay the lesser of (a) 200% of Medicare or (b) the usual charge in the area. Again – no mention of the PPO rate.

As is generally the case, and as is the impetus for the reference-based pricing boom, PPO discounts or DRG rates are far higher than what is considered reasonable by most payors, and are almost always higher than 200% of Medicare. The fact remains, however, that a plan subject to an applicable PPO agreement may be bound to pay those network rates, however unreasonable they may be considered. The carrier is not subject to the PPO agreement, however, and is free to disregard its terms – hence capping its own allowable based on Medicare or other factors.

So, what happens? The plan pays the network rate – billed charges less a meager percentage, usually – and the carrier adjudicates the claim without regard to the terms of the network contract, and allows its claim at 200% of Medicare. That leaves a hefty gap between what the carrier will reimburse and what the plan has paid – and in some instances the carrier’s opinion of the plan’s allowable amount may not even rise to the level of the specific deductible, rendering the claim denied in full since it hasn’t met the attachment point.

If this has never happened to you, good – but The Phia Group is in a prime position to have seen these issues pop up over and over again. In fact, one group even sued The Phia Group because the group’s stop-loss carrier denied a claim for this exact reason! It could be funny if it weren’t so sad.

Moral of the story? As we so often implore… read your contracts. Make sure you understand what your carrier is going to pay, and not pay, and how that aligns with the allowances in the SPD. It might surprise you what you find.

Feel free to contact us at PGCReferral@phiagroup.com if you’d like some assistance.

There is no Such Thing as a 1099 Employee

On November 23, 2020

By: Andrew Silverio, Esq.

We couldn’t possibly count the number of inquiries we have received over the years about extending coverage to “1099 Employees” under a self-funded ERISA health plan.  So, it seems like a good idea to lay out some important concepts and issues that arise when discussing coverage under an ERISA plan for independent contractors.  First, there is no such thing as a “1099 employee”.  A 1099 worker is an independent contractor, which is by definition not an employee.  This may seem like a distinction which is relatively meaningless and semantic, but the difference has significant practical consequences. 

Whether a worker is properly classified as an independent contractor, who reports his or her income on a form 1099, or a true employee, who receives a W-2, is based on a multi-factor common law test.  Importantly, this common law test and the resulting question of how a worker is properly classified is a legal and factual question – this is not something that can be decided by an employer by simply documenting someone as a contractor as opposed to employee, or negotiated between the parties. These factors include the amount of control the company has over the work, the financial relationship between the parties (beyond regular pay, who covers business expenses, provides necessary equipment, etc.), and the type of relationship.  For example, is there a written contract governing the relationship?  Is the relationship continuous or for a defined period or project?  Does the worker receive benefits like vacation pay, health coverage, retirement benefits?  This last point is important – whether or not a worker is provided benefits like health coverage is actually a factor in the common law test of how they should be classified, so if an employer is looking at providing health coverage to 1099 workers, it must be aware that doing so can actually tip the scales and render them common law employees (triggering all the related legal and tax considerations).

The ERISA plan sponsor wishing to extend coverage to independent contractors also has various hurdles to consider that an employer purchasing a fully-insured group policy does not – namely, how ERISA defines an “employee benefit plan.”  Since independent contractors are not employees, covering them under an employee benefit plan, which exists for the benefit of employees and their dependents, can actually take the plan out of the realm of ERISA and into the realm of state law.  This could occur because the plan, now covering its own employees as well as those of another employer (even if those persons are self-employed) may be considered a multiple employer welfare arrangement (MEWA), which is subject to state law and regulation by the local department of insurance. This would have serious repercussions for an ERISA plan, as one of the main benefits of that status is the broad protections from state law such plans enjoy.

While we always appreciate the desire to be more generous with benefits, in the self-funded world the issue becomes very tricky when it comes to non-employees.  We would urge any plan sponsor to look carefully at all these different issues and consult with a local employment attorney with any questions about the proper classification of its workers.

The Dangers of Politicizing Health

On November 16, 2020

By: Ron E. Peck

As I – like so many others – anxiously watched election day results on television, a commercial played more than once.  The advertisement displayed a mask (not a fun Halloween mask, but rather, one of the protective masks with which we have all become familiar).  The voice advises that this is a mask.  It protects the wearer and others around them.  It is not a political statement.  It is a mask.

The advertisement struck me, but not for the reasons they likely intended.  It moved me for two reasons.  First, I was saddened that the message even needs to be sent.  Second, I was even more saddened by the fact that the message was wrong.  Love it or hate it, masks – like so many other things – have become a political statement.

This is one example of what I fear; the politicizing of health. 

Many important decisions are made by politicians on a daily basis.  Yet, there are some decisions that transcend politics.  If a school is under siege by a shooter, police respond, rescuers do all that they can to save lives, and we all watch horror stricken.  Yes, in the aftermath people will politicize every aspect of the tragedy; debating mental health, gun control, and the like.  How did it happen?  How can we prevent it?  Yet, in the moment – as the emergency is unfolding – we set aside political rhetoric, unify, and act.

Today we are dealing with the COVID-19 pandemic.  As with a school shooting, there is an emergency that is presently in effect.  Some people question the numbers; how many people actually have the disease, how many fatalities are attributable to the disease, and so forth.  Yet, everyone agrees that there is a disease, it is fatal for some, and there are certain behaviors we can alter temporarily to potentially reduce the risk.  Whether you believe masks are effective or not, as an example, the cost of wearing one is small.  In other words, if you think there is – at best – a 10% chance masks are effective, isn’t it worth it – even then?  The point is that, when performing an objective cost-benefit analysis, the cost of engaging in some simple acts is so low, it’s worth engaging in those acts – even if you think the benefit is minimal.

Yet, once the act (or lack of action) is politicized, a thumb is applied to the scales and the cost is increased. 

Masks and COVID-19 are one example.  Looking at the bigger picture, health care in these United States of America is too expensive.  Insurance premiums or contributions to self-funded health plans are too expensive – in part because they need to pay for the excessive medical bills, but also in part because premiums and contributions have become a privatized tax, whereby we all pool our money to cover costs arising from inefficiencies or losses elsewhere.

I absolutely believe payers can do more to reduce costs without negatively impacting the consumer experience.  I absolutely believe providers can do more to reduce what they charge for care.  I absolutely believe patients can do more to limit damages and through proactive measures reduce the burden they place on both payers and providers.  Yet, as with masks, so too has health care – how it is accessed, administered, and paid – been politicized.  Demanding that everyone assess their behavior, processes, and implement changes that will improve care, improve benefits, and reduce costs should not be a political issue.  Yet, it has become one. 

I have always believed that, before we fight over the pie, we should first identify ways to make the pie larger.  Abraham Lincoln is credited with having said, “Discourage litigation.  Persuade your neighbors to compromise whenever you can.  As a peacemaker the lawyer has superior opportunity of being a good man.”  Certainly providers will need to sacrifice some revenue, if the cost of care is to be reduced.  How much profit can be salvaged, however, by first identifying and eliminating waste?  Likewise, payers will reduce their incoming revenue when they cap premiums or contributions, however, they too can recoup those losses by adjusting their procedures, coordinating benefits with other payers, and delivering their services in a more focused, effective fashion.  Lastly, patients need to be mindful of their own physical health, lest poor health should become financial crisis.  Just as routine $50 oil changes avoid a $4,000 engine replacement, so too can patients take action to reduce the financial burden placed on the system.

Ultimately, the question of “how” we pay for health care should be subservient to the question of what health care should cost… and to answer that question, we need to first consider all that goes into determining what the price ought to be.  The discussion of how we pay for health care may be political, just as deciding who will pay for dinner may be a matter for debate.  Before my father and I argue over who can pick up the tab, however, let’s first ensure we were not charged for a cheesecake we most certainly didn’t order!  That bit of common sense is certainly not political, nor should it be.

Discretion vs. Actual Decisions

On November 2, 2020

By: Jon Jablon, Esq.
 

The concept of “discretionary authority” within a plan document can be somewhat esoteric. After all, Plan Administrators have to make decisions sometimes; even if the SPD doesn’t explicitly provide the Plan Administrator with the discretionary authority to interpret the provisions of the SPD (which it always should), practically speaking, the Plan Administrator could not possibly administer the plan without exercising some degree of discretion.
 

Let’s break down what discretionary authority really is, and what it really isn’t. The easiest way is to give a real-life example of something that our consulting department has worked on extensively; here are the facts: a VIP of the plan was driving while intoxicated after an evening work function. The police report would later provide that despite being intoxicated (as tested at the scene), the driver was obeying all traffic rules and did not cause the accident; instead, the accident was caused when a pickup truck slid on some ice, through a stop sign, and t-boned the intoxicated driver’s car. Again – not the intoxicated driver’s fault. But, the SPD language provides that the plan will not pay any expenses for injuries sustained while a plan member is driving while intoxicated. Not caused by the intoxication – but simply while the driver is intoxicated. This is not uncommon, and of course is designed to disincentivize employees from driving while intoxicated.
 

Eventually, it came time for the Plan Administrator to review the claims and the circumstances under which they arose. The Plan Administrator cited the Plan’s standard discretionary authority language – giving the Plan Administrator the discretion to interpret the terms of the plan and decide questions of fact – and ultimately determined that the member’s intoxicated driving, while not ideal, did not cause the accident, and the Plan subsequently paid the claims. The issue arose when stop-loss denied the claim down the line; the carrier’s denial noted not that the claim was not payable due to a strict interpretation of the SPD (which should have been the reason), but instead the carrier gave the denial reasoning that the Plan Administrator did not have the discretion to make this determination. That incensed the Plan Administrator, since the Plan Administrator felt that the discretionary authority language in the SPD was proof that it did, in fact, have this discretion. (After all, what is that language for, if not to give discretion to the Plan Administrator?!)
 

Despite the carrier’s odd choice of wording, the carrier is technically correct. A Plan Administrator’s discretion is not absolute; it extends to applying the terms of the SPD or making factual determinations. In this case, the SPD was clear, and the Plan Administrator incorrectly used its discretion to override the terms of the SPD, which is not the purpose of that language. By that logic, the Plan Administrator would have the authority to arbitrarily pay or deny any claims, which is certainly not the intent of ERISA. And what about stop-loss?! Just imagine how a plan could ever be underwritten if that were the case. The fact is, the Plan Administrator’s discretion may be broad, but it does not allow the Plan Administrator to choose to cover something that is explicitly excluded.
 

Instead, the function of the discretionary authority language is for the Plan Administrator to be able to interpret provisions that may be ambiguous or unclear in any way. It’s effectively an extension of plan language, rather than a vehicle for changing plan language; ideally, the SPD language will be drafted as clearly as possible, but it’s just not realistic to expect the language to perfectly account for every conceivable situation. A good way to conceptualize discretionary authority is like a court making decisions about what it felt the drafters of the Constitution actually meant. The courts can’t change the Constitution, but they can decide what they think it means. Same goes for the Plan Administrator.
 

If you need help interpreting plan language, or if you need help understanding the extent of a Plan Administrator’s discretion, or anything else, please don’t hesitate to get in touch with The Phia Group’s consulting department, at PGCReferral@phiagroup.com.

National Disability Employment Awareness Month: A Personal Perspective

On October 29, 2020

By: David Ostrowski

This October marks the 75th observance of National Disability Employment Awareness Month, a milestone that is being commemorated with a wide spectrum of events and activities, focused on the theme of “Increasing Access and Opportunity.” The slogan means many different things to many different people. Please allow me the opportunity share how it impacts my family.

As parents of a six-year girl, Colby, who has a significant form of non-verbal autism, my wife and I are not worried about saving for college. We do not have fantasies of our daughter becoming a neurosurgeon or corporate attorney or high school biology teacher. In short, we do not expect her ever to be financially independent.  

But we do have hope that Colby can have access to a fulfilling career opportunity thanks to the phenomenal school that she has been attending for the past three years. It is here that students (aged 3-22) on the autism spectrum disorder learn, grow, and develop. Whether they communicate with limited verbal skills, or, in the case of our daughter, with electronic devices, the students work with dedicated teachers to reduce challenging behaviors and acquire the tools to one day become productive members of the national workforce. As students enter their late tweens and early twenties, the focus shifts towards developing vocational skills necessary for a wide range of jobs that keep America running.

Whether or not students are able to live and work independently, schools that focus on the needs of severely disabled children ensure that graduates have abundant opportunities for parlaying their developed skills towards succeeding in professional careers. Countless former students are currently serving as critical members of society through stocking shelves, bagging groceries, greeting visitors, and managing cash registers. It is through these schools that young adults with significant intellectual disabilities can realize their potential and find professional work that provides fulfillment, appropriate challenges, and, perhaps most importantly, enjoyment.

As the calendar soon flips to November and Halloween gives way to Election Day, the legacy of National Disability Employment Awareness Month endures … largely due to the schools that transform young adults with disabilities into highly functioning and valuable employees.