NOTE: HonestMedicine is very glad that SiCKO "Hitman" Lee Einer has agreed to write his second guest column for this site.
♣ In his first HonestMedicine article, "Faux Health Insurance for the Self-Employed: The Sham, The Scam, The Shame of It," Lee exposed one of the insurance industries "dirty little secrets."
♣ In this article, which follows, he exposes another.
♣ You may also want to listen to HonestMedicine's audio interview with Lee. In it, Lee shared lots of other industry secrets.
The Truth About Self-Funded Plans
Back in the early seventies, Congress had a bright idea to encourage more employers to provide health coverage. Congress wanted a “private sector solution,” and so they made it more attractive for employers to provide pensions and health insurance for their employees by enacting a body of legislation called the Employee Retirement Income Security Act, or ERISA. Much of ERISA has to do with pension plans, but with respect to health coverage, ERISA made it possible for employers to pay for their employees' health coverage directly rather than paying premiums to an insurance company.
There is a lot of legal mumbo-jumbo surrounding ERISA healthcare (or self-funded) plans. Since I am not a lawyer, I will confine myself to the bare-bones basics of how a self-funded plan works, how it differs from health insurance, and how you can fight back if you need to.
FIRST, HOW IT WORKS
With a self-funded plan, an employer has a document drafted that spells out who is covered, what conditions and treatments are to be paid for, and within what limits. If you are thinking that this sounds a lot like the insurance contract you get from an insurance company, you are right. In fact, you may have gotten such a self-funded plan document from an employer in the past and not known that it wasn't an insurance company's certificate of coverage. One of the ways to identify the difference is that the document creating the self-funded plan is called a Plan Document, and the coverage description you get as an employee is called a Summary Plan Description or SPD.
The employer then puts up a pool of money to pay for the expenses described in the Plan Document. That pool of money is itself subject to risk. If, for example, five people in a small company all get renal failure or AIDS, or need heart-lung transplants, the expenses could exceed the money in the fund and the fund could be wiped out. Because of this, most self-funded plans are themselves RE-insured by a large insurance company against yearly losses exceeding a set amount.
The vast majority of employers do not have either the manpower or the knowledge base to administer such a plan or even draw one up, so these plans are usually drawn up and administered by entities known as third party administrators, or TPAs. These days, most large health insurers are also third party administrators. So you may have a benefits summary that says “CIGNA” or “Blue Cross” on it, for example, and Cigna or Blue Cross may indeed be processing your claims. But you may not be insured through CIGNA or Blue Cross, or for that matter, anybody – because a self-funded plan is not insurance.
“What's the difference,” you might ask “as long as they pay my claims?” Well, as long as they pay your health claims, there may be no difference from your perspective. But what happens when they don't?
One of the aspects of the self-funded plan that makes it attractive for employers is that they are exempt from state laws governing insurance. This cannot be emphasized strongly enough. Let’s say that one of your hospital bills goes unpaid for six months, and you call customer service and raise hell. They are indifferent, so you file a complaint with your state Insurance Commissioner. Your complaint will go nowhere, as the state Insurance Commissioner has no jurisdiction over self-funded plans. The TPAs know this, and it tends to make them cocky.
The fact that the self-funded plan which covers you is exempt from state law means that it does not have to provide certain benefits, such as minimum post-partum hospital stay, required under state law. A savings for your employer, but a good deal for you? Not so much.
It gets worse. Let’s say your self-funded plan knowingly refuses life-saving care for your (covered) spouse, and he/she ends up dying as a result, as happened to Julie Pierce's husband, Tracy, featured in Michael Moore's documentary, SiCKO. You are outraged, you get a lawyer, and. . . you get the other bad news: It’s tough to sue a self-funded plan. The arena in which you will fight such an issue legally is in Federal District Court, and unlike most lawsuits, there will be no punitive damages, no pain and suffering. If you prevail, the self-funded plan will be forced to pay what they should have paid in the first place, no more. They may not even have to pay court costs.
Julie Pierce found out it was the Board of Trustees of the hospital where she worked that nixed payment on the treatment that might have saved her husband's life. She confronted them and said in her rage and despair that if it had been the CEO's spouse, the treatment would have been approved. She was probably right. One of the aspects of a self-funded plan which makes it attractive for employers is that it enables an invisible, two-tiered system of reimbursement. I once worked for a TPA that administered self-funded plans, and I can tell you that for certain plans, I was given a list of the top company officers and their family members and told “claims for these people and their family members do not get denied. Ever. There is no deductible, no coinsurance. All claims get paid at a hundred percent, it doesn't matter whether the service is cosmetic, unnecessary, whatever.” Now, knowing that it is your employer behind this, it probably will not sit well with you that, while they denied your wife's claim for a kidney transplant, they paid for breast implants for the CEO's trophy wife.
So, that is pretty much the incentive for the self-funded plan – you get health coverage which may fail to meet the minimum requirements of state law, the plan can deny your claims with nearly zero repercussions, and can treat the company brass like kings while they treat you and your family like dreck. So let’s talk about how to fight back. Trust me, there are ways.
STEP ONE: GET YOUR SPD
As soon as possible – and before any problems have arisen -- get your summary plan description if you don't already have it. Most Insurers and TPAs play it coy, and give plan participants vague brochures “outlining” their coverage instead of providing the actual SPD. You need your actual SPD, and if what you got wasn't lengthy, detailed, and labeled as a “Summary Plan Description,” you didn't get it.
You are entitled by federal law to receive a copy of the SPD with no foot-dragging. If your employer does not provide you with one promptly upon request, tell them you either need an SPD, in hand, ASAP, or you will be filing a complaint with the US Department of Labor. And if they don't comply, make good and contact the USDOL and complain. You can also sue for failure to provide an SPD in a timely manner upon request. According to DOL regulations, “If you request materials from the plan and do not receive them within 30 days, you may file suit in a federal court. In such a case, the court may require the plan administrator to provide the materials and pay you up to $100 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the administrator.”
You need the SPD because the plan is obligated to issue benefits according to the terms stated in this document. If the SPD says it's covered, it's covered. You need to understand whether or not the treatment or condition in question is covered, you need to understand WHY it's covered, and be able to explain in writing why it's covered, citing applicable language from the SPD. This is a major key to winning a dispute.
The SPD will also explain the appeals process which you need to follow, and the timeframes within which you will need to respond.
THE APPEALS PROCESS: FACT-FINDING
You need to get the medical records, medical journal articles, your medical Explanations of Benefits (those things the insurance company sends out that declare “THIS IS NOT A BILL”) and/or any other document which supports your position and begin to prepare your case. Your mission, should you desire to succeed, is to provide an unbroken chain of evidence and logic showing that the services which you wish the plan to reimburse are in fact reimbursable under the plan. You may need to call the insurance company or TPA and identify the underlying rationale for the refusal to pay. If you do, document every call; date, time, the name of the person you spoke with and what they told you.
SUBMIT YOUR APPEAL:
Keep a copy, and submit the appeal by certified mail or some other form, such as UPS, which will provide you with proof of receipt. “We have no record of your request” is a first line of defense with these companies.
The plan has a limited time to respond to your appeal. The time frame varies according to the type of claim you are disputing. Following is a summary of the time frames, depending upon the type of claim:
a. Urgent care: Urgent care claims are those in which application of the longer time frame could jeopardize life or health or the ability to regain maximum function. They also include claims in which, in the opinion of a doctor knowledgeable about the claimant's case, the delay would subject the claimant to severe pain that can't be managed without the treatment in question. Urgent care claims must be decided as soon as possible given the medical exigencies of the case, but no later than 72 hours of filing the claim. If the plan determines the claim is incomplete, it must notify the claimant within 24 hours, and allow the claimant 48 hours to submit additional information.
The plan makes the determination of whether a claim involves urgent care, applying the judgement of a prudent layperson who possesses an average knowledge of health and medicine. However, if a doctor with knowledge of the claimant's medical condition determines a claim involves urgent care, the plan must treat the claim as an urgent care claim.
b. Pre-service: Pre-service claims are those in which the plan requires prior authorization or approval. Initial benefit determinations of pre-service claims must be resolved within 15 days. The plan may seek a 15 day extension if, for reasons beyond its control, it cannot issue a decision within that time period, and it provides notice to the claimant of the need for the extension before the expiration of the initial 15 days. If the extension arises because the claimant has failed to submit information needed to resolve the claim, the notice of extension must specifically describe the missing information and give the claimant at least 45 days from receipt of the notice to provide the information.
c. Post-service: Post-service claims involve payment for services already received. They must be resolved within 30 days of receipt of the claim. The plan may seek a 15 day extension, for reasons beyond its control, if it notifies the claimant of the need for the extension before the end of the 15 days. Again, the plan must inform the claimant of information the claimant needs to provide, and give the claimant at least 45 days to provide the information.
d. Concurrent care - Where a plan has approved an ongoing course of treatment to be provided over a period of time or number of treatments, the plan must notify the claimant sufficiently in advance of a reduction or termination in the treatment to allow the claimant to appeal and obtain a determination before the action is taken. Requests to extend a treatment that involves urgent care must be decided within 24 hours if the claim is made within 24 hours before the termination or reduction. Other claims must be decided within the time frames for pre-service and post-service claims, as appropriate.
THE OTHER FORK IN THE ROAD:
What we have talked about thus far assumes that your plan is operating with some degree of good faith; that is to say, they are at least maintaining an appearance of reasonableness and fairness. Such is not always the case, however. Sometimes they may take an arrogant, “might makes right” approach and jerk you around. If this is the case, it could be time to get tough.
By tough I don't mean loud, rude, profane, abrasive or even discourteous. I do mean, escalating the issue, and I do mean offering alternatives, as in, “I need to have my appeal reviewed promptly as required by law; I would really like to work with you, but if you can't or won't comply with this reasonable request, I will have to take the issue to the US Department of Labor, because as near as I can tell you are in breach of federal statute.” There, you have not disparaged their parentage or threatened to find out where they live. You have in fact been quite urbane and poised, but you have made it clear in a manner both fair and firm that they need to do the right thing or there will be consequences.
You can also play the insurance company or TPA against your employer. Tell your employer that you know it's not their fault but that the TPA is not playing by the rules and you need them to straighten out. Your employer often will try to tell you that they have no control over the claims processing, and they can't help you. That's when you tell them that you feel bad too, because you have looked into it and the thing with self-funded plans is that the employer is ultimately responsible and you hate to be in the position of filing a DOL complaint against them, but you need the claim paid and the TPA is giving you no choice. Ask them to help you so you don't have to do this awful thing. Be so nice and sincere that it doesn't seem like a ploy.
And if that doesn't work and you have nothing to lose by burning your bridges you can try to embarrass your employer and the TPA in the media. It could work.
You may exhaust your appeals, and you may find out that your employer doesn't give a damn, they'd rather keep that half-million dollars than pay for your heart-lung transplant. Your final resort is to get a lawyer and sue. Realize that they are largely immune from torts, your case will likely end up in federal district court, and there will be no punitive damages, no pain and suffering; in fact, even if you win it is the court's discretion as to who pays court costs. And the payout from your employer will be limited to what they should have paid for your claim in the first place. But if it's your last resort and you need that transplant, go for it and good luck.
You should also know and accept that the nature of self-funded plans, and health insurance also, is that they don't cover everything; if you have read your SPD carefully, and the treatment you need or the condition you have is plainly excluded from coverage, you may need to come up with another strategy, like seeking an employer with a better health plan.