That’s What Subrogation and Reimbursement Are All About
When a plan member requires medical treatment following an injury or accident, their health plan is almost always the first line of defense. In some instances, however, the responsibility for medical treatment should really lie with another insurance plan, such as the member’s auto policy or workers compensation coverage.
In most cases, the health plan pays the claim and has the option to use subrogation to recover the funds from another insurance company. In other instances where a third party may have been responsible for the injury or accident, it may be necessary for the health plan beneficiary to seek compensation from the third party’s insurance carrier. This process, known as reimbursement, will require that the responsible third party pay for the damage they caused, including the plan member’s medical treatment.
Serving the Plan’s Best Interests
Diversified Group helps self-funded clients use these tools to make sure their plan only pays health claims it is responsible for paying. While some employers are hesitant to use subrogation and reimbursement, plan sponsors have a fiduciary duty to ensure prudent management of plan assets. And while there are costs associated with these activities, the funds recovered will help cover future claim costs incurred by all plan beneficiaries. To learn more about subrogation, reimbursement and other matters related to fiduciary responsibility, talk to Diversified Group today.
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A fee-based model that gives individuals unlimited access to a primary care physician without their insurance being billed is being heralded as the right prescription for healthcare. Most patient needs, such as consulting, tests, drugs and treatment are included, and no insurance billing is involved.
Sources estimate there are about 1,000 direct primary care practices in the continental United States. While most patients pay for the service out-of-pocket, more and more employers are choosing to offer this as a benefit and sharing in the cost.
TPAs and advisers supporting the trend caution that direct primary care is not a replacement for insurance, but rather a great supplement to an existing health plan. By removing the barrier of costly copays and deductibles, employees can forge a much closer relationship with their doctor, making them far less likely to choose a costly emergency room or urgent care clinic when the need for medical care arises. Direct primary care is an option that is growing and one we’d be happy to talk with you about at your convenience.
Missing, incorrect, or late information regarding eligibility can lead to mistaken interpretation of coverage, no coverage/denied claims, or incorrect participant information. These can all lead to overbilling, underbilling, and claim payment errors. Additionally, eligibility errors can “over-obligate” the plan by allowing an invalid member to linger on the plan, for example: enrolling in COBRA for 18 months or longer. The ACA prohibits a rescission of coverage except in cases where the individual has engaged in fraud or made an intentional misrepresentation of material fact. This emphasizes the importance of getting eligibility correct the first time!
One area that is often overlooked or not tracked efficiently are the circumstances surrounding when a member terminates their coverage under the group health plan. Coverage in the group health plan will end based on the termination language outlined in the plan’s medical plan document. It is important to be aware of these terms and to realize that termination of coverage does not necessarily mean termination of employment. There are situations when a member may no longer be eligible for the health plan while still maintaining their employment with the employer, for example:
- Illness / Disability
- Federal FMLA
- State Continuation/FMLA
- Workers’ Compensation
- Leave of Absence
- Reduction of Hours
||This is a difficult area to track as the employer may have to rely solely on the member’s notification. Without that, ex-spouses could be left on the plan and only discovered when a claim is filed with stop loss.
||Dependents are no longer eligible upon attainment of age 26. Refer to your plan document for the actual coverage end date/qualifying event for dependents.
||WC typically leads to a reduction in hours which is considered a COBRA event. Also, if your plan specifies that an employee working under a specified number of hours is not eligible, then extending coverage to someone with reduced hours will contradict the plan and will lead to concerns with stop loss coverage.
|Actively at Work
||Employees who are left on the plan but are not actively at work can be flagged when a stop loss claim is filed. Medical records and/or payroll records will show that the person could not/was not at work.
|Leaves of Absence
||Be sure to follow your plan document language as to any continuation of coverage provisions for leaves of absence. FMLA requires continuation of coverage for up to 12 weeks. Various states have implemented paid family and medical leave that will require continuation of coverage for a certain time period. Once this time period is exhausted, employees must be offered COBRA if they have not returned to work.
||Be familiar with COBRA rules concerning qualifying events, secondary qualifying events, the timeframe to offer COBRA, and when COBRA can be terminated.
||As a self-funded plan, you are responsible for paying your member’s claims. A late termination could mean costly, high dollar claims for medical and Rx being incurred and paid for by the plan for an inactive member.
Diversified Group encourages all plan sponsors to follow its best practices for enrollment, such as:
- Fully completed enrollment forms, annually
- Verification of loss of other coverage
- Verification of marriage, divorce, birth or adoption
- TPA and COBRA administrator should be the same or at least working together in real time
The plan administrator has a fiduciary duty to manage a self-funded plan in a manner that serves the best interests of the participants and the beneficiaries. This includes following the instruments of the plan, such as the rules outlined within the plan document. Failure to do so can be costly!
Always contact Diversified with any questions concerning an enrollment, eligibility, or termination.
Research reported by the Execu Search Group shows that flexibility may very well be the key to keeping millennials engaged. Allowing more vacation time, better training and a more flexible work schedule, including the ability to work at home when needed, are keys that will make young people happier and more productive. The SHRM says that more companies are offering these benefits in order to retain young workers in today’s competitive labor market.
On July 23, 2019, the Internal Revenue Service (IRS) issued Revenue Procedure 2019-29 which indexes the contribution percentages for 2020 for purposes of determining affordability of an employer’s plan under the Affordable Care Act (ACA). For plan years beginning on or after January 1, 2020, employer-sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed 9.78 percent of the employee’s household income for the year for purposes of the employer shared responsibility rules. This is a decrease from the 2019 affordability threshold percentage of 9.86%. The 2020 decrease in the affordability percentage for employer shared responsibility purposes means that employers will have to charge employees a slightly lower price for their health benefits to meet the “affordability” test.
Since an employer would not know an employee’s household income, IRS Notice 2015-87 confirmed that ALEs using an affordability safe harbor may rely on the adjusted affordability contribution percentages if they use one of three affordability safe harbor methods. The three safe harbors to measure affordability are Form W-2 wages from that employer, the employee’s Rate of Pay or the Federal Poverty Line (FPL) for a single individual. The affordability test applies only to the portion of the annual premiums for self-only coverage and does not include any additional cost for family coverage. Also, if an employer offers multiple health coverage options, the affordability test applies to the lowest-cost option that also satisfies the minimum value requirement.
Below is an example of how the percentage change impacts an employer’s monthly affordable amount using the three safe harbor tests. The example assumes an employee earns $11/hour.
*Based on Jan. 2018 FPL of $12,140 for 2019 and Jan. 2019 FPL of $12,490 for 2020
Under the ACA, employees (and their family members) who are eligible for coverage under an affordable employer-sponsored plan are generally not eligible for the premium tax credit from the Exchange. This is significant because the ACA’s employer shared responsibility penalty for applicable large employers (ALEs) is triggered when a full-time employee receives a premium tax credit for coverage under an Exchange.
As more workers struggle with stress in and out of the workplace, some are requesting time off in order to cope. This is not a problem for companies with sick-day policies that allow employees to use their paid personal days for any reason. In other workplaces, people who are honest about asking for a mental health day can sometimes be looked upon as suffering from a mental health issue. Regardless of how your organization may handle these issues, it is important to respect employees’ right to privacy and avoid probing for sensitive information about a person’s well-being.
On July 17, 2019, the U.S. House of Representatives voted across bipartisan lines to repeal the ACA’s Cadillac Tax. The final vote in the House was 419-6 in favor of repeal. The tax was designed as a penalty tax on high-value health coverage, to convince health plan sponsors to reduce benefits and keep costs down by discouraging overly generous plans. However, both employers and union groups opposed the tax.
This repeal is good news for plan sponsors but the measure still has to pass the Senate. One of the challenges to Senate passage is that the tax was originally included to help finance the ACA. Repealing the tax without replacing it with some other revenue source arguably leaves a sizable hole in the federal budget. It is estimated by the Congressional Budget Office that repealing the tax will cost the government approximately $196.9 billion over 10 years.
The Cadillac Tax, originally slated to go into effect in 2018, has been delayed by Congress repeatedly. After several delays, the 40% excise tax on the cost of health coverage that exceeds predetermined threshold amounts goes into effect in 2022. Currently, those thresholds, which will be updated prior to 2022, are $10,200 for individual coverage and $27,500 for family coverage.
Diversified Group will keep you up to date on any additional action on this topic.