ERISA is the Employee Retirement Income Security Act, a 1974 federal law that governs employer – sponsored and funded employee benefit plans, including plans that provide healthcare coverage. The terms under which coverage is provided is determined by the written Summary Plan Description (SPD).
Because ERISA pre-empts, or takes precedence over, state laws governing health insurance, these SPD’s can vary greatly from plan to plan as what they will cover. ERISA gives great discretion to the plan sponsors to tailor and limit the coverage provided.
Some of the SPD provisions that can affect claims payment include:
Other party liability/COB
Subrogation and reimbursement
Improper use of PPO
How does an ERISA Plan Impact a Hospital’s Revenue Cycle?
In a study done by Harvard/RAND appearing in Health Affairs magazine of 500,000 patient accounts processed, it was discovered that 40 percent of denials for non-covered items were incorrect.
That is, the items were not excluded on the Summary Plan Description (SPD) and should have been covered by the plan. As few hospital claims departments have personnel with the expertise to address the myriad of SPD provisions that result in denials, they often go unchallenged. You may be writing many of these accounts off to bad debt and basically forfeiting your rights to collect on these monies.
How do we help hospitals?
Most hospitals do not have the resources to effectively follow-up on every problem claim and denied account to produce the greatest recovery. Because ERISA law is very specific, the use of Legal Counsel with experience and knowledge of ERISA is imperative. Outsourcing this service allows for hospital staff to focus on obtaining the highest level of reimbursement on non-problematic claims and at the same time will allow our firm to focus on the more problematic claims. Here is how we help:
- Assignment of Benefits/Authorization
Most plans have mandatory internal appeal procedures. The final arbiter is the Plan’s Board of Trustees. ERISA regulates the procedures that Plans must follow, including strict time limits for decisions. Pursuing these appeals timely, aggressively and effectively requires someone with knowledge of the law that governs these appeals.
- Internal Appeals
A properly drafted assignment of benefits/authorization to appeal form, executed by the patient, at admission is essential. We will review hospital admission documents to make sure they provide the hospital with the ability to challenge denials, both with the plan and in court.
- Going to Court
When an ERISA plan does not correct an improper denial, hospitals can seek relief in Court. Their ability to do so depends on the efficacy of the Assignment of Benefit/ Authorization forms discussed above. A properly worded Assignment allows the hospital to use any remedy available to the member to seek payment. A credible threat to sue can often lead to resolution of these matters without actually having to file suit.
CASE STUDY NO. 1
A patient was struck by a car while crossing the street. He was covered by an ERISA plan. The plan denied payment of nearly $100,000.00 in claims, relying on a provision that barred payment when the injuries are caused by a “violation of the law.” The violation? The patient had a small amount of illegal drugs in his pocket, which resulted in a charge of possession. He had no drugs in his system, but the claims were denied anyway. When the matter was referred to ALO, the first thing we did was obtain the Summary Plan Description. The exclusion language was very clear: it excluded payment only when the illegal act was the cause of the injuries. Here, there was no causal connection between the injury and the illegal act. This argument was presented to the Plan, along with the promise of litigation if they continued to improperly deny the claim. The claim was paid shortly after our involvement without the need to resort to litigation.
CASE STUDY NO. 2
A patient covered by an ERISA plan suffered horrendous injuries in a motorcycle accident. The ERISA plan was part of a PPO and entitled to a discount upon prompt payment. The plan has stop-loss insurance to pay claims over a hospital was able to recover this money.” certain amount. This claim exceeded that amount and the plan made its partial payment and turned the matter over to its stop loss carrier. Because of a change in carriers around the time of the accident, there was a dispute over which carrier was responsible to pay. They eventually resolved the dispute, but the resulting payment was beyond the deadline for the prompt payment discount. We sought full payment and, when the ERISA plan refused, filed suit against the Plan, the responsible stop-loss carrier and the PPO. The case was settled before trial with the hospital being paid what it was owed.
Bad debt in Hospitals and Healthcare systems continue to grow for various reasons. The timely placement of your problematic claims will allow hospitals and healthcare systems to focus on resolving claims which offer the highest and fastest value of receivables. In turn, we will work your problematic claims to recover and ensure that you are not writing off accounts that could otherwise be collected on.