RON E. PECK, ESQ. SENIOR VICE PRESIDENT & GENERAL COUNSEL THE PHIA GROUP, LLC “Mind The Gap!" Best Practices for Savings

Overview Mind the What? The Stop Loss Relationship Areas of Concern Impact on Subrogation Resolution & Gap-Free Review

Mind the What?

What is “the Gap” and why should we mind? The “gap” refers to gaps in coverage which exist between benefit plans and the reinsurance protecting them. Plan document excludes one thing… Reinsurance policy excludes something much broader

Mind the What? Example Patient (driver) involved in a motor vehicle accident Driver was drunk Driver is charged with a misdemeanor (DWI/DUI) The Plan excludes felonies only… pays the claims Reinsurance excludes all illegal acts… request for reimbursement denied

The Stop Loss Relationship

Insurance for Insurance Benefit plan pays more than the specific deductible in claims Plan submits excess amount to carrier for reimbursement Carrier processes claim and (hopefully) reimburses

The Stop Loss Relationship Passing the Fiduciary Buck? Some TPAs and Plans are afraid to pay claims until after the stop loss carrier tells them that if they pay the claim, stop loss will reimburse Many reinsurers are now driving home the fact that:  They do not pay medical bills – the Plan does…  They do not make claims decisions – the Plan does…

The Stop Loss Relationship Meet the Deadline… Or Else… Ordinarily, claims need to be paid before a deadline, or stop loss will not reimburse the claims Stop loss has no sympathy for Plans that fail to pay claims during the contract year

The Stop Loss Relationship Advanced Funding Advanced funding is a mechanism by which a benefit plan which lacks sufficient funds to pay claim(s) submits the claims (beyond the deductible) to the stop loss carrier, so that they (the Plan) can obtain stop loss funds prior to paying the claims They rely on obtaining these funds to afford the claims

Areas of Concern

Tough Love Some “Advanced Funding” policy language includes terms which allow the carrier to avoid payment indefinitely The same Advanced Funding language obligates the Plan to pay claims within a certain number of days of receiving the bills, and/or before the final 30 days of the policy year Areas of Concern

Tough Love Many stop loss contracts fail to explicitly state how long after they receive a claim the Plan will receive an Advanced Funding decision Other issues include:  Questioning plan membership  What constitutes “paid” (drafted, mailed, received, deposited)? Areas of Concern

Stop loss carriers are enforcing the terms of the applicable plan document, independent of the benefit plan or TPA’s interpretation of the terms. Areas of Concern

Medical Necessity The Plan thinks it’s covered (Medically Necessary) The Carrier disagrees Example Neck surgery to fix bulging disc for brain-dead patient

Areas of Concern Usual… Customary… Reasonable? Per the SPD, charges in excess of the usual and customary (“U&C”) amount are excluded Plan defines U&C based upon what other providers in the area charge Plan believes the claims are “U&C,” and pays… Stop loss does its own audit, deems the claims to be excessive, and denies

Between a Rock and a Hard Place Areas of Concern

SPD & Stop Loss  TPA & Plan  PPO & Provider Between a Rock and a Hard Place

Areas of Concern The Network Dilemma TPA or Plan signs a PPO Network Agreement TPA or Plan is now contractually responsible to pay the charged amount (minus the PPO discount), before the specified deadline

Areas of Concern The Network Dilemma Stop loss ignores the PPO agreement and enforces the SPD as written Stop loss determines the U&C rate (maximum allowable according to the SPD) is less than the PPO rate (even with the discount) Reimbursement is based upon the U&C amount, not the amount actually paid (per the PPO agreement)

Impact on Subrogation

Look at the Contract Who pursues reimbursement? Who makes subrogation decisions? Who gets paid first, and how much? Who pays the cost of pursuit?

Many SPDs do not require a separate, signed “subrogation” or “reimbursement” agreement… but some stop loss carriers want one… The Signed Subrogation Agreement Impact on Subrogation

Possible Issues with the Signed Agreement Lessens the Impact of the SPD Creates False Impression of Importance Terms Conflict with the SPD State Law Based Contract Scares Participants into Representation Unnecessary “Bad Blood” Claims Paid “Pre-Agreement” are Not Related?

Impact on Subrogation Delays in Payment = Disaster Lost Discounts Failure to Pay = No Lien; No Lien = No Rights Claims Paid Post-Settlement / Post-Disbursement Hinders Ability to Negotiate

Impact on Subrogation Other Stop Loss Subrogation Issues False Liens; (not actually paid… awaiting advanced funding)  Contradicts balance billing by the provider against the patient… which you will likely hear about Altered Liens; (Plan authorized payment alters based on stop loss audit and reimbursement)

Impact on Subrogation Other Stop Loss Subrogation Issues No Payment Until Delivery… No Delivery Until Payment…  Signed Subrogation Agreement  Accident Report  No-Fault/MPC/PIP Ledger  Biographical Information  Case Status

Resolution & Gap-Free Review

SPD Drafting  Make sure it says what the sponsor wants  Avoid ambiguities  Avoid conflicts with other relationships The Stop Loss Policy  Compare line by line to the SPD  Discuss concerns with the carrier preemptively  Who makes payment decisions?  Who Interprets the SPD?

Resolution & Gap-Free Review Open Communication  During implementation  When claims arrive Apply Murphy’s Law  Discuss scenarios before they happen… Discuss subrogation needs, and tactics, before a case is identified… and be reasonable!

Questions?

Contact Us Ron E. Peck, Esq. Sr. Vice President & General Counsel The Phia Group, LLC 163 Bay State Drive Braintree, MA Phone: Fax: