It may be tough to decide on plan design, communication strategy and contributions for medical benefits, but once the crush of implementation begins, plan documents will start flooding inboxes. It’s critically important that advisers ensure clients understand them completely.
The first step is to check the principal plan terms against the plan proposal. The “non-boilerplate” language is usually bolded and easy to verify. Some things to look at are:
- Accumulators: Are they applied on a calendar year or plan year and if there is a carrier change, does the new carrier allow credit for expenses incurred during the same accumulation year? For example, a plan renews June 30 and has a calendar-year accumulator. Usually, the new plan will allow credit for expenses applied to the deductible in the prior plan during the same calendar year; however, credit is generally not granted toward out-of-pocket cost maximums.
- Deductible cross-application: Do in- and out-of-network deductibles apply separately or are they cross-applied? Some plans apply in-network deductibles toward out-of-network, but not out-of-network to in-network.
- Deductible for family members: In a non-single plan election, is the deductible per person or per family? If the plan has a $1,000 single deductible and a $2,000 family deductible, is the deductible for one family member considered satisfied once that member has met $1,000 in covered expenses or does the full $2,000 family deductible apply before charges for one or more covered persons are reimbursed?
But the review doesn’t stop there; non-participating insured arrangements are usually pretty straight forward and mostly non-negotiable, but larger clients and alternatively-funded arrangements can certainly request performance guarantees and wellness allowances can be obtained to defray the cost of promoting employee activation and wellness awareness.
A closer look
Self-insurance contracts take a lot more vigilance to review. There are many ‘devil is in the details’ provisions that need to examined. A self-insured contract holder will be asked to sign a number of documents in connection with their plan, such as an Administrative Services Agreement that outlines the terms under which the third-party administrator will service your plan. Some things to look for closely include:
- Run-out provisions: Should you terminate your plan, how will incurred-but-unpaid claims be processed? Is there an additional cost?
- Shared savings: Generally, the TPA wants to share savings for out-of-network claims when less than the billed cost is paid, and it’s important to understand how this works.
- Subrogation and claim recovery costs: Usually the TPA retains a portion of the recovery for third-party liability and may bill costs associated with collecting these payments.
Stop loss agreements will also need to be reviewed, and these are complex. Some things a policyholder should look for:
- Minimum annual attachment point: If there is a downsize, the aggregate insurance is likely subject to a floor and this can bite hard should it go unnoticed.
- Terminal liability provisions: What happens if you terminate your agreement early for some reason? Is there terminal protection and if so, for how many months and is there a cost?
- Claim reimbursement: Is there automatic reimbursement, or if not, is there a guaranteed funding timeframe?
Pharmacy contracts, which outline these costs, are the most opaque documents. Some considerations:
- Rate and rebate guarantees: Are the factors indicators or guarantees? And if guarantees, what is the timing for payment, if any?
- Term: Most pharmacy benefit managers will try to lock you into a three-year deal. This is a rapidly changing landscape, so you’ll probably want to put a repricing opener in the agreement.
- Zero balance claim: If a drug costs less than the copayment amount, how is this treated?
These are just a few of the surprises that a plan sponsor can avoid by spending time tying up the loose ends. Ensuring the process goes smoothly is a critical role we advisers play.
