Proceed with caution: Service provider changes in self-funded trust plans

Verrechio-ValerieTrustees and plan sponsors of multiemployer or single-employer self-funded health trusts are often charged with the responsibility of reviewing service plan providers every few years to make sure that the dollars meant for employee healthcare are managed wisely.

The two largest expenditures in a health plan are medical costs and prescription drug costs, so the process often begins by sending a request for proposal (RFP) to medical carriers and/or administrators and pharmacy benefit managers.

After the results of these proposals have been summarized by the consultant, and a decision made to change providers, implementation work begins. Trustees, plan sponsors, attorneys, and consultants often underestimate the potential time commitment (and ultimately financial commitment) necessary to minimize disruption to the participants and assure that the plan is administered according to the prevailing plan documents and regulations. The following areas may require a high degree of oversight:

• Coordination of eligibility processes, confidentiality issues, data coordination, responsibility for inpatient vs. outpatient, and specialty drug benefit administration
• Appeals
• Out-of-country claims
• Member communications
• Coordination and consensus of vendors and trust attorneys
• Termination provisions in the current vendor agreements
• Fees for claims runoff and transition files
• Data integration
• Claims runoff management

The following checklist recommendations are based on our experience in providing implementation assistance, including most recently to a health trust client who changed to a new medical claims administrator and a new pharmacy benefit manager (PBM). These suggestions are intended to assist plan sponsors and consultants in identifying what to look out for when projecting time and financial commitments for these types of changes.

It is optimal to allow at least four to six months to prepare for these changes; however, a three-month turnaround is not impossible if the transition plan is prepared in advance and closely adhered to, with all parties committed to the priority of the transition. To minimize potential problems, we recommend a coordinated effort that includes all parties in the implementation process, i.e., recurring joint meetings with status updates.

Termination of current claims administration/preferred provider organization (PPO) vendor(s)

• Check termination clauses in all agreements and send timely notification confirming the contract termination.
• Review existing contracts to determine if fees are charged for adjudicating runoff claims incurred during the contract period, and note the period of time the provider will continue to reprice and/or adjudicate claims.
• Determine how claims incurred during the existing contract period will be repriced once the runoff period terminates.
• Ensure that the timing for stop-loss coverage in terms of incurred and paid is integrated between the incumbent and new vendor. This assures that there are no gaps in coverage.

Termination of PBM vendor(s)

• Check termination clauses and send timely notification confirming the contract termination.
• Check termination clauses to determine how long the existing PBM will adjudicate paper claims incurred during the contract period.
• Review the incumbent PBM’s fees for transition files to the new PBM. Sometimes the new PBM will offer a credit to account for these fees.

Implementation: Medical claims administration and PBM

Joint issues

• Develop a communication plan to make sure plan participants understand the changes that will be taking place.
• Determine if one identification card can be issued to participants for both medical and PBM benefits. Often, there are copyright issues that prohibit either provider from issuing a combined identification card. Also, make sure there is a usable logo from the client that can be sent to the vendor(s) for the card(s).
• Submit the summary plan description (SPD) to both providers for review of relevant sections. Make sure the appropriate services for members, spouses, and children can be applied.
• Determine if a combined summary of benefits and coverage (SBC) is feasible and coordinate who will be responsible for drafting and distributing the final document to participants.
• In conjunction with the vendors, coordinate production of a summary of material modification (SMM) or revised SPD for timely distribution to participants. As a result of the Patient Protection and Affordable Care Act (ACA), the SMM must be issued 60 days in advance of any material plan change effective with the date of distribution of the required SBC.

Administrative issues
• If the plan is non-grandfathered and the external appeals process applies, determine how appeals that include both medical and pharmacy charges, and are paid by the respective vendors, will be processed.
• Determine how to integrate pharmacy and medical data. In consideration of protected health information (PHI), ensure there is a clear way to identify each participant so that information can be combined electronically.
• Coordinate how specialty drugs will be administered in an outpatient setting. Will these be paid under the medical plan or the pharmacy benefit?
• Review both the medical plan and pharmacy benefit plan to assure consistency in drug inclusions and exclusions between the benefits.

Eligibility/technology issues
• Send eligibility test files to determine compatibility. Pay special attention to coding for spouses, dependents, and primary coverage through Medicare and/or another carrier if the plan sponsor is responsible for tracking this information. For certain seasonal or variable-hour employees, determine how plan rules treated these situations in the past so annual deductibles and accumulators are not restarted and new identification cards aren’t issued.
• Determine how frequently eligibility files will be updated.
• Determine how ad hoc changes will be handled between regularly scheduled eligibility file transfers for late enrollees, new dependents, and spouses. Often, vendors will give plan sponsors access to a secure site to update eligibility when needed.
• Determine methodology for transfer of funds from the health trust to the vendor’s account and how often wire transfers will be required, e.g., weekly, biweekly, etc.
• Coordinate stop-loss contract implementation (where applicable) and transfer of data to the reinsurer for timely reimbursement of excess loss claims.

PBM vendor-specific issues
• Procure signed business associate agreement (BAA), letter of agreement, and/or provider service agreement in coordination with the plan sponsor’s and vendor’s legal counsels.
• Develop contract performance standards and measures to incorporate into final agreement, and include timetable for delivery of results.
• Coordinate transfer of existing retail, mail order, and specialty drug refills between the incumbent and new PBMs. There is sometimes a transfer fee required by the outgoing provider, but this could be offset by any implementation credits negotiated with the new PBM.
• Obtain specialty, prior authorization, maintenance, and specialty drug lists from both the prior vendor and the new vendor. Determine how participants will be notified of any changes in drug lists and what type of grace period will be granted by the new vendor to accommodate these differences.
• Determine how urgent and routine denials and participant appeals will be coordinated between the vendor and the plan sponsor.
• If retiree drug benefits are provided, determine how the retiree drug subsidy (RDS) process will be coordinated with the Centers for Medicare and Medicaid Services (CMS).
• Ensure the list of pharmacies to use is implementable.
• Understand in more detail how reporting will work and what steps, such as training, are needed to make sure you have access to this information.

Issues specific to medical claims administrator
• Procure signed BAA, letter of agreement, and/or provider service agreement in coordination with the plan sponsor’s and vendor’s legal counsel.
• Develop contract performance standards and measures to incorporate into final agreement, and include timetable for delivery of results.
• Review the existing plan document in detail with the new vendor to ensure that the vendor’s claims payment platform can administer benefits as intended in the underlying plan and as administered in the past. Areas of special attention include:
o Coordination of benefits language and examples to ensure that both parties administer these provisions in the same manner, especially with regard to payment of claims where Medicare is primary (when retiree coverage is a factor only)
o All definitions and exclusions for consistency
• Determine how subrogation claims will be handled and who will be responsible for tracking these cases.
• Understand in more detail how reporting will work and what steps, such as training, are needed to make sure you have access to this information.

Finally, because there can be several tasks to be coordinated with various combinations of parties, we strongly suggest that you utilize a tracking system that includes party-specific deliverables, timetables, and follow-up dates. This could be as basic as a log and will help to delegate tasks to the most appropriate parties and assure a smoother coordination of the overall process. We hope this information will be valuable to other consultants who may be new to vendor implementation projects for clients.

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