ERISA Health Plan clients are engaged in nearly every industry in the United States. There are nearly 139 million Americans covered by ERISA Health Plans and 2.5 million Health Plans. Yet, operating a health plan has become increasingly difficult as healthcare complexities abound. After representing several companies with ERISA health plans, I have developed a list of recommendations for company representatives overseeing these plans. These recommendations cover various health plan topics from health plan design to oversight and monitoring to investigation and enforcement actions.
Daily Out of Pocket Maximums. Many health plans are both over and under-inclusive in their coverage of health services. Plans with daily maximum payments risk underpaying for life-saving acute care and incentive providers to bill the maximum amount just under the daily maximum. On the other hand, failing to impose a daily maximum can invite an opportunity for wasteful care that may be billed and collected at high rates and never noticed because of the Plan’s liberal provisions. Although a daily out of pocket maximum may not make as much sense in the hospital or emergency setting, it’s likely important to keep a daily out of pocket maximum relatively low for outpatient surgery and other non-emergency care. Ideally, outpatient surgery limits should be set at $40,000 per day and indexed for inflation over time. In the outpatient setting, there is a much lower risk of denial of urgent or lifesaving care, since outpatient surgery centers – by definition – are intended for patients who will be discharged home the same day.
Tracking daily out of pocket bills and payments that come close to (within $5,000) of the daily maximum is also recommended. These reports can be run quarterly and show which providers are potentially taking note of the daily maximum and raising their rates to meet them. Health plans should not assume that higher bills do not result in higher payments. There are ways around the coding system, such as, a higher or more complex service to obtain a higher reimbursement, coding an unlisted service, and unbundling the services (for example, separately charging for supplies, when they are already included as part of the facility fee payment for surgery). Although a single high value claim is unlikely to draw scrutiny, receiving the same high value claim from the same provider in the same geographic location is likely to warrant further scrutiny.
Out of Network Benefits. Another important piece of the health plan design is the extent to which the plan will cover out-of-network benefits. “Out-of-network” refers to the providers and facilities who are not directly contracted with a plan or its administrator health insurance company. These benefits may cover surgeries with a provider not directly in the geographic area or who has chosen not to accept a specific payment rate up front. Out-of-network charges and reimbursements tend to be higher than providers and facilities in the insurance network. Providers that are “in-network” receive referrals from insurance companies and health plans who are required to publicize an updated list of their providers to promote access to care.
In some cases, the recent Federal No Surprises Act and other state laws have limited out-of-network providers from being paid out-of-network rates when treating a patient at an in-network facility or when a patient is emergently transported by an out-of-network ambulance company. For example, a radiologist who is out-of-network would receive payment equal to the median in-network rate when performing services at an in-network hospital or in the emergency room. However, an out-of-network radiologist would not be so limited when interpreting patient images at an out-of-network MRI center. There are ways around the No Surprises Act, including by having a patient sign a pre-procedure consent a few days before receiving care, though radiologists, and a handful of others, are not allowed to use this notice and consent exception.
Because out-of-network providers are not bound by the terms of any binding contract, this tends to be an area where waste and abuse flourish. To avoid attracting providers looking for generous out-of-network benefits, I recommend having at least a 40% to 50% patient co-insurance requirement. Plans should also monitor the number and type of Single Case Agreements being offered to providers who are out-of-network, as these agreements may undermine Plan terms by bringing out-of-network providers in-network after care is rendered, regardless of whether the provider abided by Plan terms.
Patient Co-Insurance. One of the most difficult design elements of a health plan is how to charge enough to the patients to give them some incentive to be in the driver’s seat of their healthcare, but, at the same time, not limit access to care. Occasional and random audit calls to patients should be done to determine whether providers are collecting co-payments or whether care is being unnecessarily incentivized because it is free.
Location of Services. Recruited patients are increasingly an issue for Plans. Most Plans have sufficient in-network providers is the geographic area where the participants live. Having a large number of patients obtain non-emergency surgery in a community far away, or in another state, can be an indication of a recruiting scheme. Health plans should consider a geographic limit for covered services, though allowances need to be made to ensure that the area is large enough to encompass in-network providers for all covered services.
Investigation. Unfortunately, it tends to be that the most generous Plans are the ones that need to be the most vigilant against Plan abuse. Regular auditing of the Plan should include at least an annual check-in with members of the Human Resources team throughout the organization to see if there are any complaints or concerns that have been raised about the Plan. A company’s own employees are often the best source of firsthand information about Plan abuses.
Plans can harness the power of AI to monitor when a provider bills 200% to 300% above the Usual, Customary, and Reasonable (“UCR”) reimbursement amount to pinpoint providers engaging in possible fraud, waste, or abuse. UCR data is available from several sources, including FairHealth.org and others. A typical investigation starts by looking at the provider billing and coding alongside nationally-recognized standards for when a code applies.
If anomalies are found, the Plan should consider working with a coding or claims expert to audit the claims on a CPT code by CPT code basis. Ideally, Plans should retain consulting experts who are certified coders and fraud examiners. These lawsuits can be hard fought, so the Plan may want to consider involving an attorney pre-litigation to help assess the loss amount and prepare a litigation strategy.
Enforcement. Although formal enforcement actions are not always needed, Plans terms should contain a few key provisions granting the Plan and its fiduciaries discretionary authority and control over the administration and management of the Plan's assets. In addition, Plan language should provide authority for enforcing the terms of the Plan and pursing any overpayments that are made to patients or to providers on the patients’ behalf. For example, the Plan should state that the Plan and any Plan fiduciary has the right to seek reimbursement of any overpayments and the Plan may file a lawsuit in its own name or in any patient’s name to pursue recovery from any other involved individuals, providers, facilities, insurance companies, or organizations. Further, the Plan terms should state: To the extent that the Plan makes an overpayment or erroneous payment, an equitable lien will be created on such overpayment or erroneous payment. The lien will remain in effect until the Plan is repaid in full, and the overpayment or erroneous payment will be held in trust for the benefit of the Plan.
Finally, the Plan should reserve the right to recover any payments made by the Plan that were made in error or made to any patient or on any patient’s behalf when the payment is greater than the amount payable under the Plan. This language is important because providers and facilities will ask patients to sign financial paperwork placing the provider in the shoes of the patient for purposes of seeking reimbursement from the Plan. These financial documents allow the Plan or any of its fiduciaries to sue for recovery of an erroneous payment made to a provider (acting on a patient’s behalf). Together, these provisions create standing for the company to sue under ERISA § 502(a)(3) to obtain equitable relief to redress violations of the plan or to enforce plan terms including through equitable restitution and imposition of a constructive trust over the assets or overpayments that can be traced.
For additional information on ERISA Health Plans, see ERISA | U.S. Department of Labor and HEHS-95-167 Employer-Based Health Plans: Issues, Trends, and Challenges Posed by ERISA.
