HFMA 16: Limited benefit ERISA plans pose balance billing, legal threats

Insurance claims form documents

LAS VEGAS--Inpatients with value-based limited benefit plans should raise an immediate red flag for finance executives, says attorney Ellen E. Stewart.

Stewart, a partner with the law firm Berenbaum Weinshienk in Denver, told an audience at the Healthcare Financial Management Association annual national institute in Las Vegas last week that patients with such coverage could leave hospitals holding the bag on tens of thousands of dollars in unpaid bills. And patients, frustrated by the situation, may be enticed into joining class-action lawsuits against hospitals over balance billing practices.

Although Stewart represents hospitals in such matters and was sympathetic to their side, her presentation cast into high relief issues such as the lack of price transparency and the tenuous relationship hospital chargemasters have with real-world prices.

Regarding value-based limited benefit plans, Stewart said conflicts arise when the patient is treated and the hospital and other providers do not have a direct contract with the insurer. That often means the patient winds up with a huge balance bill owed. Federal regulations on such plans provide a significant amount of leeway for the insurer to determine how much they should pay on a hospital claim.

According to Stewart, many ERISA employers are seeking out such plans because premiums are kept low. But they are primarily inexpensive because they have few providers under contract, often placing the patient and hospitals in conflict over how much is owed and how much should be collected. And since the plans are governed by federal ERISA regulations, they do not have to adhere to a state's prompt payment law.

Citing a case study, Stewart said the plan usually tells hospital it will pay 80 percent of the allowable claim amount but does not provide any details of what it considers to be allowable. As a result, it may pay $16,000 on a $60,000 hospital bill, leaving the patient on the hook for the additional $44,000.

The patient may then contact a law firm, which will consolidate their case into a class action against hospitals for balance billing patients--a proviso that includes the end of negotiating payment from the patient, Stewart said.

Moreover, hospitals may be nitpicked by the attorneys over issues such as markups for supplies, such as aspirin.

“They don't get that it has to be stored, inventoried--they don't care about that,” Stewart said. Even worse, the attorneys may start asking for invoices of every supply to determine the hospital's costs and markups and allege fraud if they believe the hospital is overcharging or their chargemaster is not easily accessible.

As a result, Stewart suggested more transparency on behalf of hospitals, including giving patients estimates of the charges and documenting the estimate. Patients should also be referred to any relevant price comparison websites.

The suggestions hew toward policies that the Department of Health and Human Services haas been promoting in recent years, including holding a contest to create a clearer hospital bill.

Moreover, hospitals should keep their financial assistance policies up to date. Stewart also strongly suggested that during the admission process hospital billing and finance staff inquire from the plan if its coverage is adequate for the service being provided, as well as clear definitions of what they consider to be reasonable and covered charges.

“You want to develop a strategy for these limited benefit plans,” she said.

More HFMA16 coverage: 

Communication between physicians, management crucial for cost savings

HRSA ratchets up audits of 340B hospitals

University of Utah Health Care bends cost curve

Price transparency: ‘Rational pricing’ may lead to reduced costs