Self-Funding, Make America Great Again
- The Election Hangover Edition -
Presented By
Tim Callender
Lead PACE Counsel
&
Staff Attorney
The Phia Group
[email protected]
November 17, 2016
The Phia Group
• LEARN
– Various Legal & Consulting Services
• PLAN
– Plan Document Services & Software
• SAVE
– Claims Recovery, Negotiation, Network Alternatives
• PROTECT
– Plan Administration Defense & Outsourcing Fiduciary Duties
• OUR MISSION:
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To reduce the cost of healthcare through innovative technologies, legal expertise,
and focused, flexible customer service.
We support employment based group health insurance and are confident that selffunded health plans lead the way.
Today’s Overview
• Self-Funding, 101
• The Cost Solution
• Top Three (well… four) Innovative Solutions
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Subrogation
Reference Based Pricing
Fiduciary Transfer
Captive Risk Management
• Other Trends in Self-Funding, The Laundry List
Self-Funding, 101
Self-Funding, 101
• Ingredients:
• (1) Employer, Plan Sponsor
– Private/public employers; tribes; churches; governmental entities
– MEWA; VEBAs; Captives
• (2) Plan Administrator (outsourced TPA or ASO model)
– Some other vendors: stop-loss / MGU; networks (leased, none, direct contracting); UM/CM/DM;
re-pricing; patient advocacy
• (3) Plan Document
• (4) Funding (sort of… you can be “unfunded”)
Self-Funding, 101
• How are claims paid?
• Claims are paid out of the Plan Sponsor’s general assets or
from a trust (participant contributions can help fund both
models)
• Funded v. Unfunded (plan assets v. general assets)
• Risk transfer
ASO v. TPA
ASO
TPA
Fixed Risk – “Premiums”
A La Carte (“Unbundled”) Options for Stop-Loss,
Networks, Negotiations, Etc.
Set It and Forget It
Strong Ability to Contain Costs
Standard Claims Administration
Customized Approach to Handling Claims
No Balance Billing
(but Limited Cost-Containment)
Ownership of Claims Data
No Stop-Loss Gaps (but No Options)
Control Over Plan Assets
Less Control Over Claims Dollars
Loyalty to Plan and Members
Discounts
Make Up Discounts Through Cost-Containment
The Cost Solution
Healthcare Costs – Out of Control… Why?
• Lack of transparency
• Convoluted and confusing system
• The wrong incentives
• Payer, Provider and Plan Sponsor tolerance
– We’ve made this mess together – we can fix it together
Healthcare Costs – Out of Control… Why?
Lack of Transparency
• $57 for a FRED (Fog Reduction Elimination Device: a 2 in. square gauze strip used to wipe
moisture from lenses in the operating room)
• $200 for a bag of IV solution
• $985 pair of scissors
• $1,028 for a 1oz. container of contrast solution
• $11 for a mucous recovery system (a box of tissues)
• $350 for an IV kit
Healthcare Costs – Out of Control… Why?
Some of the worst offenders:
• Air Ambulance
• Charges are typically 400%-500% of Medicare allowable rates
• Implantable Devices
• Devices typically marked up between 500% and 1,000% of cost
• Some providers get gouged on the procurement side as well
• Dialysis
• Dialysis facilities routinely charge 1,000% to 2,000% of Medicare allowable rates
A Bloody Toe & A Stuffy Nose
Healthcare Costs – Out of Control – Why?
The Wrong Incentives
• Current incentives are perverse at best
• Rx kickbacks
• Protectionism
• Praise for “curing” provider-created problems
• Over-treating
• Use the “big boys” and get a discount off of billed charges based on... ?
• Discount is ultimately higher than the market rate – if there were such a thing
Healthcare Costs – Out of Control… Why?
Payer and Plan Sponsor Tolerance
• If you feed a dog steak when you bring him home, he’ll expect steak for every meal
• We have to work together and eat Tofu sometimes… or maybe just cheaper
steak
What Can We Do?
• Work with best in class partners, like Echelon, to innovate and contain costs
• Regions like ours we have a unique advantage in being able to closely work with
our health systems (there aren’t 7 systems and millions of belly buttons)
• Self-funding is the vehicle we can use to create and maintain savings while
delivering healthcare and providing fair reimbursement to providers
• Educate, educate, educate
• Transparency & dialogue with all stakeholders
• Tim’s Top Three (well… four) things we can do, coming up next
Top Three (well… four)
- Subrogation - Reference Based Pricing –
- Fiduciary Transfer –
- Captive Risk Management -
Subrogation & Overpayment Recovery
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Recover third-party dollars that belong to the Plan
– Keep the Plan solvent & healthy
– Your fiduciary duty
– Guarantee there are Plan dollars being left on the table
•
Auto accidents, class actions, toxic torts, Rx & implant/product recalls
•
Medicare COB and obtaining overpayment recovery from providers
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Group can set pursuit parameters
– VIPs?
Subrogation & Overpayment Recovery
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The current recovery landscape
•
Montanile =
That million dollar settlement… you
should probably go spend it on
narcotics and a vacation to Cabo…
Dirty rotten
Plaintiff’s Lawyer
Reference Based Pricing
• What is it: utilizing a “reference point” to establish a fair reimbursement rate for provider
billed charges
• Medicare+ (“we will pay all out-of-network claims at 150% of Medicare”)
• Can be done across the entire plan – no network
• Can be utilized as a compliment to your PPO to simply cover out-of-network claims
• Can be utilized as a carve-out & applied to particularly troublesome benefits like dialysis
• How is this accomplished:
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(1) Plan document language, EOB language, full transparency
(2) Reconcile with your networks – bolt RBP with your PPO
(3) Member education
(4) Medicare pricing vendor
(5) Balance billing / patient advocacy support program
(6) Direct contracting with the health system (utilization & prompt pay incentives)
Reference Based Pricing
• What is it: utilizing a “reference point” to establish a fair reimbursement rate for
provider billed charges
• Usual, Reasonable & Customary (“We will pay you based on the usual,
reasonable and/or customary reimbursement rates prevalent in this region.”)
• Similar process as Medicare+ but can be a bit more difficult (depending on who
you ask)
Reference Based Pricing
Is it working…? Yes, but differently across various regions
• Threats:
• Relationship damage between Plans & Health Systems
• Providers balance billing your members = noise
• Threats of lawsuits = noise
• Solutions:
• Direct contracting w/ providers (utilization guarantees & prompt payment
guarantees)
• Approach RBP with a “partnership” and “goodwill” attitude – no scorched
earth tactics
• Maintain a strong patient advocacy & claims negotiation program
Fiduciary Transfer
• Fully-insured v. ASO self-insured v. “pure” TPA self-insured
• In a fully insured model, the carrier is the fiduciary
• In an ASO model, the carrier is the fiduciary… sort of…
• In a “pure” TPA self-insured model, the Plan is typically the fiduciary, fence
to fence
• Very large barrier to “pure” self-insurance has become fiduciary concerns
• Solution: transfer that fiduciary liability to a third party
• Some examples of fiduciary concerns
Fiduciary Transfer
•
Johnson & Towers v. Corporate Synergies Group
– Widowed spouse amendment – broker “forgot” to give this to stop-loss
when underwritten
– Claim came in for that spouse but the carrier denied
– Broker held as fiduciary in placing the stop-loss
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Hartfield, Titus & Donnelly LLC v. Loomis Co.
– TPA held liable as fiduciary for making overpayments caused by erroneous
claims processing
Fiduciary Transfer
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Mason v. FedEx Corp (D. Alaska 2016)
– TPA & plan sponsor sued by plan member for breach of fiduciary duty over
appeals process, asserting TPA had a financial interest in returning appeals
determinations that denied benefits
– Holding: TPA and plan sponsor had a conflict of interest in how the
appeals process was setup
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Dragu v. Motion Picture Ind. Health Plan (N.D. Cal. 2015)
– Plan member sues plan sponsor for breach of fiduciary duty over a
misapplication of plan terms
– Holding: Plan Sponsor misconstrued the terms of its plan which equaled a
fiduciary breach
Fiduciary Transfer
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Pac. Shores Hosp. v. United Behavioral Health (9th Cir. 2014)
– TPA & plan sponsor sued by provider for breach of fiduciary duty under an
assignment of benefits for refusal to pay inpatient benefits
– Holding: plan sponsor failed to adequately review benefit determinations
and breached its fiduciary duty
•
Connt. Gen. Life Ins. v. Humble Surgical Hosp. (S.D. Tex. 2016)
– TPA & broker sued by provider for breach of fiduciary duty over out-ofnetwork payment issues and overpayment collection efforts
– Holding: $2.3 million award to the provider under a finding of breach of
fiduciary duty
Fiduciary Transfer
• Keeps costs down through:
• Objective & accurate interpretation of your plan document
• Stop paying claims you should not be paying
• Alternatively, avoid denying claims you should not be denying
• Incentives from your vendor partners (stop-loss; captives)
Captive Risk Management
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What is a captive: group of self-funded, employer-sponsored Plans (typically
small to midsized) sharing risk – managing their own “insurance”
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Allows smaller employers to self-fund, when the financial risk might otherwise be a barrier to
entry
Typically share an industry tie or regional tie
How does it work:
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A handful of employer groups form a captive – everyone pays in
Each employer group covers its own “smaller” claims – below a particular threshold
The Captive (shared risk pool) covers claim above a certain threshold
Each employer group has its own stop-loss policy as well (membership in the captive is
attractive to carriers on the individual policies – lowers their risk)
At the end of the year, the captive members share in the “Delta”
Captive Risk Management
The three players in a Captive arrangement:
Other Trends in Self-Funding
Education & Incentives
• Lunch & Learn? Open enrollment meetings? Loop in providers!
• Choice of hospitals – patients pay lower or no coinsurance at lower-cost hospitals
– Certain hospitals can be paid at no OOP and even cash rewards
• Maternity care: diapers, baby wipes, gift card
• Percent of savings for finding errors and finding alternatives
• Ex. Nebulizer: $300 with 30% discount…or on Amazon for $118
• Medical tourism & family vacations – give them the difference
• Wellness goals – throw a party
Disrupt The “Market”
Some proven ideas – some crazy ideas
• Claims negotiation – with sign off (coupled with patient advocacy)
• Revocation of the assignment of benefits
• 501(c)(3) non-profit
• Report as self-pay
• Remember “The Bloody Toe” – what if Tim walked in and said, “hi, I don’t have
insurance…”
• Car insurance…
THANK YOU
[email protected]
[email protected]
www.phiagroup.com
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