ERISA plans behind slow reimbursement
ERISA plans behind slow reimbursement
State laws don't apply in self-funding setup
An Internet list serve - an e-mail forum for sharing ideas - for health care managers has been filled in recent weeks with complaints and queries for help concerning delinquent third-party payers. "Is there anything we can do," the refrain went, "about insurers who delay reimbursement for weeks longer than guidelines specify?"
What many disgruntled managers fail to realize is that perhaps the majority of those late payments are due, not from the insurance company to whom they've sent the bill, but from an ERISA plan the company is administering, suggests Dennis Hawkins, FHFMA, a health care consultant and former patient financial services director.
Although the claim may be directed to Aetna or Travelers or Blue Cross, Hawkins points out, the true insurer may be "Zeke's Woodcarving," a 50-employee company that has a self-funded plan under the welfare benefit plan portion of the federal Employee Retirement Income Security Act (ERISA) of 1974. ERISA plans, as they are commonly known, are not subject to state law.
Most states require insurance companies to pay claims within 30 to 45 days. "Some states, like Kansas, even say that payment is due immediately upon receipt," adds Hawkins, who works for Midland Professional Services, a health care financial management firm in Topeka, KS. During his tenure as a patient financial services director, his organization had an aggressive policy of involving the state insurance commissioner when insurance companies delayed payment.
But if the claims in question are through an ERISA plan, the nasty letter you've written to Aetna or Travelers and copied to the state insurance commissioner may hold zero clout, Hawkins says. "You'll get a letter from Aetna that says, 'Sorry, this is not an Aetna plan, we're just the third-party administrator.'"
Hawkins says some 60% of the claims at the last hospital he worked for were through ERISA plans, and the number could be higher at many facilities. "I have talked to people who said 80% to 90% of what used to be indemnity insurance is now ERISA. Most major insurance carriers have third-party administrator [service]."
ERISA was passed in response to several major companies going bankrupt and leaving underfunded retirement plans, he explains. Unfortunately, the U.S. Department of Labor (DOL) in Washington, DC, which administers ERISA, offers little recourse, he says. While serving as a patient financial services director, he asked the DOL for help getting payment and received a written response stating, "ERISA regulations do not address the rights of third parties, such as doctors and hospitals" and do not "set a specific time limit for the payment of benefits."
As long as a plan responds "within a reasonable length of time," it's fulfilling its fiduciary responsibility, the DOL states. The letter added that a reasonable amount of time could be 90 days, Hawkins recalls. "Essentially, all you can do is go after the patient [for payment], and he will usually go to the employer complaining about how nasty the hospital is," he says. Even so, making the patient aware of his insurer's delinquency can get results.
"I sent a form letter to these folks that said, 'You need to contact your human resources person or union rep and let them know [about the late payments].' I sent them copies of letters I had received from the insurance company and advised the patient that the hospital gave them services immediately, and now the money is needed by the hospital. I ask them to please go ahead and pay and seek recourse from the employer."
Patients caught in the middle
Occasionally, patients actually would pay the bill, he says, but the real intent was to get them to apply pressure to the insurance company through the employer. He also has gotten results by sending packets of information, including correspondence with the insurance company, to human resources directors. "I remember in two instances getting letters back thanking me, saying they had decided to change third-party administrators. The [employer] had been guaranteed the [insurance company] would pay promptly."
When there are millions of dollars to invest, and an insurance company can hang onto it for an extra 60 days, it doesn't care if it gets some complaints, he points out. On the other hand, if those complaints come from upset HR directors who can take the employer's business elsewhere, the insurance company is inclined to pay attention.
Hawkins' experience is that insurance companies acting as third-party administrators typically receive between 3% and 11% of the value of the claims. And although the insurance companies may drag their feet on reimbursing providers, they are quick to threaten cancellation if the employer isn't timely in its upfront transfer of funds to cover the claims.
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