100 Plus Employee Companies Struggle with Obamacare Regs (As seen in the 9/29/14 Edition of the North Bay Business Journal) 

 

Source: Timothy Jost, Heath Affairs Blog, October 12, 2014

On October 10, 2014, the Departments of Labor, Treasury, and Health and Human Services issued a frequently asked question (FAQ) regarding the use of reference-based pricing in non-grandfathered large group employer plans. Although the issue the FAQ addresses specifically is the use of reference pricing, the FAQ is remarkable insofar as it is the first departmental guidance that I am aware of that addresses the use of networks by self-insured ERISA plans.

Network adequacy is an issue that has long been addressed in the nongroup and insured group market in many states by state insurance law. The ACA also requires qualified health plans, and arguably any individual and small group plan subject to the essential health benefits requirements, to have adequate provider networks. Special rules implementing ACA section 2719A of the ACA limit cost-sharing for out-of-network coverage for emergency services.

The departments also stated in an earlier FAQ that cost sharing cannot be applied by any non-grandfathered health plan for preventive services provided by out-of-network providers if the services are not available in network. But I am unaware of the departments otherwise attempting previously to regulate group health plan network requirements, at least under the ACA.

Background

Section 2707(b) of the ACA applies section 1302(c) of the law to large- and small-group health plans. Section 1302(c) imposes an annual maximum on out-of-pocket costs on non-grandfathered group plans, which for 2015 is $6,600 for self-only coverage and $13,200 for non-self-only (family) coverage. Cost-sharing does not, however, under 1302(c) include "balance-billing amounts for non-network providers." The HHS rules interprets this provision more broadly to not require health plans to count toward the out-of-pocket limits any cost sharing paid by, or on behalf of, an enrollee for out of network benefits. The departments adopted this provision as well in an earlier FAQ for all group plans.

The goal of reference-based pricing is to allow plans to negotiate prices with high-quality providers and to encourage plan participants and beneficiaries to use those providers. A health plan offers a fixed amount which certain providers will accept as payment for a particular procedure. Plan participants and beneficiaries who use a provider that does not accept the reference price must pay the difference between the provider's charge and the reference price out of pocket. These out-of-pocket payments do not count toward the statutory maximum out-of-pocket limits.

This presents a problem, however, if plan participants and beneficiaries are not able to access adequate services without exceeding the statutory out-of-pocket maximum. Reference-based pricing could serve as a subterfuge for imposing otherwise prohibited out-of-pocket costs on plan participants and beneficiaries.

The departments released an FAQ in May stating that they would not consider a plan out of compliance with the maximum out-of-pocket requirement, "provided the plan uses a reasonable method to ensure that it provides adequate access to quality providers." They also asked for comments on how reference-based plans should be regulated.

What's In The New Guidance?

The October 10 guidance states that the departments will "consider all the facts and circumstances when evaluating whether a plan's reference-based pricing design . . . that treats providers that accept the reference-based price as the only in-network providers and excludes or limits cost-sharing for services rendered by other providers is using a reasonable method to ensure adequate access to quality providers at the reference price . . . ."

Plans must have standards to ensure that the network is designed to offer high-quality providers at reduced costs and not serve as a subterfuge to evade the maximum out-of-pocket limitation. Pricing that treats providers that accept reference prices as the only in-network providers must do so only for services where there is sufficient time between when the need is identified and when the service is provided to allow the consumer to make an informed choice of provider. In particular limiting or excluding cost-sharing for providers who do not accept the reference price is not permitted for emergency services. This would be independently prohibited by the ACA, as noted above.

Plans must also ensure that an adequate number of providers that accept the reference price are available to plan participants and beneficiaries. In determining adequacy, plans should consider approaches developed by the states, including geographic distance standards and whether wait times are reasonable. Insured group plans are, of course, independently subject to applicable state network adequacy regulations. Plans should also ensure that an adequate number of providers are available that meet reasonable quality standards.

Plans should have available an easily accessible exceptions process that permits participants and beneficiaries to use providers that do not accept the reference price if providers that accept the price are not available within a reasonable wait time or in a reasonable distance, or if adequate quality care is not available for a particular individual -- for example because of co-morbidities or patient safety issues.

Finally, plans must provide automatically, through the summary plan description or similar document, information on the pricing structure, including a list of services to which the pricing structure applies and a description of the exceptions process. On request, the plan should provide a list of providers that will accept the reference price or a negotiated price above the reference price for each service, as well as "information on the process and underlying data used to ensure that an adequate number of providers accepting the reference price meet reasonable quality standards." No disclosure is required from providers, however, at point of service, when it would be much more helpful.

Broadly Applicable Reasoning

Although the FAQ is aimed specifically at reference-based pricing, it describes reference-based pricing as a kind of network design and extends the FAQ to "similar network design[s]." The reasoning behind it would in fact seem to apply to any network. In any situation where a plan network does not offer accessible providers of adequate quality, plan participants and beneficiaries risk having to pay excessive out-of-pocket costs. And any time a plan is self-insured it is not subject to state regulation or indeed to any regulation unless the departments assert regulatory authority.

Reference-based pricing plans are relatively new, and the departments presumably concluded that it would be advisable to assert their authority from the beginning. But some form of regulation for network plans generally can and should follow.

The FAQ concludes by stating that the agencies will continue to monitor the use of reference-based pricing and may provide further guidance in the future, including guidance regarding additional requirements that apply to individual and small group essential benefit plans. But more guidance regarding networks for ERISA plans generally is also needed. 

Contributed by The American Association of Payers, Administrators and Networks.

This is the first in a three-part series examining the self-funded insurance market. Part One takes a look at the significant role that the self-funded market plays overall in the healthcare arena, current statistics including the substantial increase in self-funding since the enactment of ACA and the benefits of self-funding. Part Two will look in-depth at the role of the TPA in administrating self-funded plans and Part Three will outline the business practices of the stop-loss carrier in providing coverage for self-funded plans.

In today's marketplace, 61 percent of all individuals with health coverage are covered by self-funded plans as employers and employees alike welcome the options and control they provide to beneficiaries. Competitive pressures to provide attractive employee benefits have always been a driving force for employers to consider alternatives to fully-funded plans. But never has that been truer than now as employers begin to come to terms with the realities of health care reform which is making self-funded insurance an attractive alternative more than ever.[i] 

Yet, even as self-funded insurance is gaining in popularity with employers, the self-funded market is increasingly vulnerable due to the regulatory implementation objectives of the Affordable Care Act (ACA). State and federal policy makers, in an attempt to avoid adverse selection away from exchange benefit plans, are considering policies that could limit employer access to the self-funded market, depriving them of this needed alternative.

After holding steady as a percentage early last decade, a substantial increase in self-funding occurred after the enactment of the (ACA). As we move into the second year of ACA Exchanges, one implementation factor in this trend is still looming - the 2016 implementation of the employer mandate to employers of 50 to 99 employees. As nearly 70 percent of American employees are employed by small firms, the pending implementation of the mandate is driving small employers to look at all options.[ii] 

Traditional benefits of self-insuring

A number of features have made self-insurance an attractive option for employers.

1. They can tailor a policy to the current (and projected) needs of their workforce, rather than paying for benefits employees are unlikely to use. They may also have a greater range of provider network options.[iii] 

    

2. They retain access to and control over current and historical employee health claims data, which can help in ensuring that plan resources are cost-effective while meeting employee needs.[iv] 

    

3. They retain, invest and earn investment income on their health plan reserve dollars, and capture cash flow by not prepaying for services employees may or may not use. They also avoid the added expense of state taxes on employer-paid insurance premiums.[v] 

    

4. They avoid dealing with complex state regulations,[vi] freeing up cash and time, especially for companies with employees in multiple states, that can be invested in operations, expansion and job creation.

The ranks of self-insurers are large and growing

Most people with employer-provided health insurance are in self-funded plans. The percentage of covered employees in completely or partially self-funded plans grew from 49 percent in 2000 to 61 percent in 2013. As of last year, 83 percent of workers in large firms (200 or more employees) that have health care coverage are currently in self-insured plans, according to a Kaiser Family Foundation estimate.[vii] 

An estimated 59 percent of these employees are in plans that are covered by stop-loss insurance. The average attachment point for large firms surveyed by Kaiser in 2013 is $317,000. The average attachment point for smaller surveyed firms is about $96,000.[viii] 

Companies are increasingly moving to self-insurance

Sixteen percent of firms with fewer than 200 employees surveyed by Kaiser in 2013 are self-insured, up from 13 percent in 2011. This level, however, remains below 2001's 17 percent rate of self-insurance among small employers.[ix] 

The ACA may be spurring small employers to consider self-insurance, as some ACA mandates do not apply to self-insured plans. The mandated essential health benefits package included in the ACA, for example, applies to traditional insurance plans but not to self-insured ones.[x] While Jost and Hall of Washington & Lee University (2012) cite stop-loss plans with attachment points as low as $10,000 targeted at small employers as increasing the number of small employers considering self-funding, [xi] the $96,000 average attachment point cited by Kaiser supports the position that other factors are leading employers towards self-funded insurance.

Ultimately, the decisions determining the benefits and access to health care services employers provide to employees will be based at some level on price. While lower stop loss attachment points may make self-funding achievable for some small businesses, the effect is simply to provide an employer with an additional option to find the best fit for health care coverage for employees.

To view the complete white paper, including Parts II & III, click the following link; 

About the Author

AAPAN provides the platform for the unification of payers, administrators and networks and the ability for a stronger collective public policy voice to enhance the position of each stakeholder as essential to the future of affordable healthcare delivery options centered on patient choice. For more information check out our website at www.aapan.org.

In 2004 my firm decided to give United Claim Solutions a trial period for 90 days as we had not had good experience with other organizations in repricing our out-of-network claims. After the first 30 days we decided UCS was the solution we were looking for. We received great results and had zero push back on the repriced OON claims.

As we grew our relationship with UCS, we had some special projects and ideas we wanted to implement. We discussed our projects and ideas with the management of UCS. This provided a coordinated working structure which would not only benefit our firm but also provide a new structure for UCS to use with the rest of their clients and offerings. The structure we implemented in 2005 provided a basis where all claims electronic and paper went to UCS. UCS would process all in network, out of network, negotiations and structure them in an EDI file. This structure provided a means for us to increase our capacity by 25%+ as well as increase our profits when analyzed based on our internal processes. This structure also provided more capacity for our IT division. By the end of this project, all claims were received EDI and ready for final processing. This additionally allowed our firm to have all Rx claims done the same by freeing up our IT department to develop the process for importing all claims medical and Rx to the employee / dependent level and mapped appropriately for the specific and aggregate reports. This also allowed us to submit all specific and aggregate claims electronically to stop loss creating a higher efficiency.

UCS over the years of my relationship with them have consistently looked at providing additional solutions to the TPA market.

I have since retired from the TPA business but consult with TPAs across the country to help them attain the highest levels of efficiency. I highly recommend that all TPAs seek the highest level of efficiencies in their claim flow, reduction of claim cost and internal cost by pursuing the various services made available by UCS.

About the Author

Randall Childers, Jr., CFC Graduated from Hanover College with a Bachelor of Arts in Business Administration in 1983. Author: Forensics of a Medical Plan "Dissecting Health Benefits on a Company Level" Publisher: Xlibris Corporation- 2011. Forensic Expert: Health Benefit Plans Specific to Self Funded Health Benefit Plans. Licensed Third Party Administrator, Employee Benefits Consultant and Life and Health Insurance Agent and Certified Forensic Consultant (ACFEI). Member of NAIFA, National Association of Insurance and Financial Advisors and currently serves on the Board of Directors, President Elect (Louisville Metro Chapter.), a Member of ACFEI, American College of Forensic Examiners Institute and an ACFEI Certified Forensic Consultant.   

To learn more about UCS please contact Corte Iarossi, VP, Sales & Marketing at 866-762-4455 ext. 120, or at ciarossi@unitedclaim.com