Who's behind the card? Plans sometimes administer, rather than insure

The growing trend for companies to self-insure health benefits could mean less recourse for physicians having trouble getting paid fairly and on time. But most physicians don't know which patients are covered by self-insured plans.

The problem for doctors, says Tim Maglione, senior director for government relations at the Ohio State Medical Assn., is that they don't know "when someone shows up with a UnitedHealthcare insurance card [whether] that could be a fully insured patient or United acting as a TPA. There's no way to know that."

TPA stands for third-party administrator, a role health plans are being asking to play more frequently. According to surveys by the Kaiser Family Foundation and Health Research and Educational Trust, 44% of workers with health benefits were covered by self-insured plans in 1999. That percentage had risen to 55% in 2007.

Though self-insurance used to be an option only for large companies with rich cash flow, smaller companies have moved to self-insurance as a way to save money, said Mike Ferguson, chief operating officer of the Self-Insurance Institute of America, a lobbying group based in Simpsonville, S.C..

Health plans serving as TPAs often get paid less than they would if they take full risk. A TPA also has less control, as it under more direct marching orders from a client company.

How this affects doctors is not always clear.

The most important thing is whether companies are going to a self-insured plan to create an inferior or superior benefit, said Brian Kalver of Wilentz, Goldman & Spitzer, a law firm in Woodbridge, N.J. An inferior plan "is going to hurt the doctors, because insurance will just cover less of their bill."

ERISA and you

The trend matters to doctors because states have much less power to monitor, regulate or fine insurance programs that are only administered by health plans. Self-insured plans, also sometimes called self-funded, are generally regulated by ERISA, the federal Employee Retirement Income Security Act.

The shift is a combination of rising health care costs -- and consolidation of insurers, experts say.

National insurance plans are attractive partners, especially for employers with locations in multiple states, because one company can allow access to a national network of doctors and hospitals.

Insurers have reported an unexpected growth in administrative-only business over the last year. WellPoint's membership mix has fluctuated in recent years but generally has moved toward self-insured business. In 2007, its membership was 51% administrative, making fully insured members in the minority. UnitedHealth Group's membership was also 51% administrative-only business, but its business shift over time has been more marked: In 2004, just 30% of members were covered by a self-insured plan with United as administrator.

Aetna has seen particularly rapid growth in its administrative-only business in recent years. In 2000, 50% of its commercial health insurance membership was in self-insured business. In 2007, self-insured membership had risen to 66%.

At a June investors' meeting hosted by Goldman Sachs, Aetna Executive Vice President and Chief Financial Officer Joseph Zubretsky said this year the plan's administrative-only business "was a lot higher than we expected."

Zubretsky said Aetna's executives feel the shift is part of a cyclical trend.

But Ferguson, at the Self-Insurance Institute, said he is skeptical about that -- it's actually very difficult to switch back and forth, and the savings from self-insurance sometimes isn't realized for a few years, so it doesn't make sense to go back and forth. "Once you've gone self-insured, you're going to stay self-insured."

Different regulations

Once a health plan is serving as a TPA, its dealings with doctors in some cases fall under federal rather than state rules. Federal rules in many areas give an employer more flexibility in coverage and in how benefits are handled. Recourse for physicians or patients who aren't served well by a self-insured plan are generally slower, and the potential remedies are often more limited.

The difference in regulatory territory -- territory that is shifting with court rulings and legislation -- matters to doctors, but they often are unaware of any distinction between an insurance plan offered by a company like Aetna, compared with a plan it merely administers.

The American Medical Association's official policy, first adopted in 1996, is to support amendment of the ERISA statute and uniform patient protection laws in all states, and to support "targeted elimination of the ERISA preemption of self-insured health plans from state regulation."

State societies also have pushed regulators to apply the same rules to self-insured and fully insured plans.

"We believe that many of the managed care and patient protection laws we have worked to pass recently in Connecticut must be adhered to, regardless of the plan type ultimately involved (self-insured or fully insured), since these laws really do not regulate insurance as much as they address unfair business practices," Matthew Katz, executive director of the Connecticut State Medical Society, wrote in an e-mail to AMNews.

One state's answer

In Ohio's case, that application has been made explicit in legislation. Maglione said federal courts' most recent rulings indicate that state laws such as prompt-pay requirements do apply to health plans when they act as third-party administrators.

The Ohio State Medical Assn. helped ensure that the 2007 Healthcare Simplification Act, which set out requirements for plans contracting with doctors, applied to health plans administering self-insured employer plans.

The law requires clear contract language and fee schedules and banned "most-favored nation" clauses and rental networks, or silent PPOs. The state Chamber of Commerce opposed the bill.

Before the passage of the new law in Ohio, third-party administrators were among the worst at paying on time and credentialing in a reasonable timeframe, Maglione said.

Despite Ohio's 30-day prompt-pay rule, in place since 2001, "it was the TPAs that were going out 60, 90, sometimes 120 days," he said. "Some have actually said, 'The state prompt-pay law doesn't apply to us because we're acting as third-party administrators.' "

If a physician wanted to challenge a slow payment from a third-party administrator, the only option was to go to federal court -- not a speedy means of resolution, Maglione said.

What to do about it

Who really pays for claims -- the employer or an insurer -- is one in a long list of details physicians and their staffs should note about patients' insurance, said Michael Schaff, chair of the corporate and health care departments at Wilentz, Goldman & Spitzer.

In cases where a health plan is acting as a third-party administrator, Schaff said, "The next issue you really have to be concerned about, from my perspective, is what is the administrator being hired to do? Are they there to process the claims, or deny the claims?"

He said TPAs' contract terms differ so that depending on whether a plan is paid a flat fee or by the volume of claims, they could be working with an incentive to deny claims.

Kalver said another major issue with self-insured plans is the benefit design, which won't be subject to state rules about coverage, only federal requirements under ERISA.

"The bottom line is, how do you deal with problems?" Schaff asked. "Unfortunately, you may not be able to control this, but it should be on your radar screen."