Tag Archives: multiemployer

COBRA extension deadline considerations for multiemployer plan sponsors

Recently, the U.S. Departments of Labor and Treasury and the Internal Revenue Service jointly issued guidance extending certain deadlines related to COBRA continuation coverage.

The extension of deadlines described are based on the “Outbreak Period,” which is defined as the period from March 1, 2020, until 60 days after the federal government declares the end of the National Emergency, or other such date announced by the agencies. The guidance issued by the agencies also includes suspension of time limits related to HIPAA special enrollment rights and filing benefit claims, appeals, and external reviews during the Outbreak Period. These time limits do not begin to run out until the end of the Outbreak Period.

In this Multiemployer Alert, Milliman’s Sean Silva and Eric Walters discuss the COBRA election period, COBRA payment deadlines, and the potential impact on plan sponsors.

Financial analysis of Taft-Hartley plans

The second annual Milliman Multiemployer Health and Welfare Study shows that the average multiemployer health and welfare plan could pay for approximately one year and one month of benefits and expenses with its net assets. The study shows that total incomes exceeded total expenses by nearly 10.6%, an increase of 1.4 percentage point over the prior year.

To learn more about the study, click here.

Know the specifics of your health and welfare stop-loss policy

Many trusts that provide medical and prescription drug benefits on a self-insured basis do not have sufficient assets to absorb the impact of unexpected large claims. As a result, self-insured trusts often protect themselves against the impact of large claims by contracting with a stop-loss carrier. As fiduciaries to health and welfare trusts, trustees must understand the details regarding their stop-loss carrier contracts in order to ensure the trust is receiving the most competitive price while also receiving sufficient protection against large claims in order to maintain sufficient trust assets. This Multiemployer Review article by Milliman consultants Sean Silva and David Stoddard focuses on specific stop-loss policies employed by multiemployer plan sponsors.




How much reserve should be held in net assets?

In a recent Milliman report entitled “Status of collectively bargained benefits: Multiemployer health and welfare fund statistics,” my colleague Marcella Giorgou and I analyzed the 2016 financial disclosures of 705 multiemployer health and welfare funds. One of the more interesting statistics analyzed was net assets (shown as months of total expenses). This measures the number of months a plan would likely be able to continue providing members benefits if all income ceased.

Trustees, fund administrators, and bargainers should consider how many months of total expenses are held in assets when reviewing a fund’s financial health, as this can be thought of as a reserve or a cushion against adverse experience. If assets are too low or too high, bargainers and trustees may need to take action. Each fund is different and there are a number of contributing factors for trustees and bargainers to consider when reviewing how many months of total expenses are held in assets. They include:

When does the collective bargaining agreement expire?

Trustees and bargainers should consider holding more in net assets earlier in the contract period and spending down surplus (if necessary) later in the contract period, because a longer period of time results in more uncertainty.

How quickly can bargainers negotiate changes in benefits or contributions?

If the financial health of the plan changes, what can bargainers or trustees do to correct the situation and how quickly can it be accomplished? Some plans will add either a reopener clause or a provision that dictates what happens in the event that net assets fall below a predetermined level.

Is the plan self-insured or fully insured?

A self-insured plan will have more volatility on a month-to-month basis, while fully insured plans will face changes in premiums annually.

How many members and lives are enrolled in the plan, and what is the active/retiree ratio of the plan?

Larger plans tend to have more predictable cash flows due to reduced claims volatility. Plans with larger percentages of retirees will generally need larger percentages of employer contributions devoted to retiree benefits, because most plans generally only have employers contribute based on the active population.

In what type of industry do members of the plan work?

An industry with varying work patterns may need to hold a higher reserve to account for months where hours and/or membership (and, consequently, contributions) are lower than average.

When reviewing the financial health of your fund, it is important to consider each factor discussed above, or others unique to the fund, and discuss the implications with your Milliman consultant.

This article first appeared on LaborPress.org.




Improving pricing and increasing efficiencies

Multiemployer health and welfare funds face a difficult challenge—how do you maximize benefits provided to your members while operating under a collective bargaining arrangement where the contributions paid to the fund are generally predetermined? In other words, how do you get the biggest “bang for your buck”?

There are a few ways to maximize the dollars spent on benefits—including optimizing pricing terms from vendors and audits, and reducing administrative costs.

Creating a benefit program that operates efficiently traditionally depends on the size of the group. Many insurance carriers, third-party administrators (TPAs), and pharmacy benefit managers (PBMs) offer more favorable pricing to groups that are larger in size. TPAs may offer lower administrative services only (ASO) fees and PBMs may offer better administrative fees, discounts, and rebate guarantees. Larger groups may also be able to negotiate trend or maximum increase guarantees in their renewals.

An alternative way to achieve better pricing terms is to join a labor coalition. Labor coalitions are set up as a group of welfare funds that contract with a particular provider or providers in exchange for more attractive pricing. The coalition operates as a collective with a board that makes recommendations, but each individual fund is still responsible for its own claims experience. The benefit is that vendors (generally, PBMs and stop-loss providers) will offer better pricing or lower administrative costs because they have exclusive contracts with the larger coalition, so each individual fund receives pricing based on a population much larger than its own.

In addition to administrative expenses that are paid to insurance carriers and TPAs, funds should review operating expenses. Administrative expenses are necessary so that a fund can provide benefits to its members, but dollars that are devoted to administration are dollars that are not being used to provide benefits to members. Therefore, it is in the fund’s and the members’ best interests to keep administrative expenses as low as possible, by reducing duplicative operations or by consolidating certain efforts.

You can also ensure that the dollars spent on claims are consistent with the intent of the plan with a claims audit and / or a dependent eligibility audit. A claims audit is generally performed by an outside vendor, who reviews a sample or a certain subset of self-insured claims that the fund’s TPA pays on behalf of the fund. Claims audits typically need to be written into the TPA contract. Dependent eligibility audits are also generally conducted by an outside firm that sends mailings to all members with dependents. Members must provide proof of eligibility (e.g., birth certificates, marriage certificates) for each of their dependents so that their dependents continue to be eligible for the plan. A dependent eligibility audit can remove spouses who are divorced or children who aged off of the plan, ensuring that the dollars spent on members and dependents are only for those who actually should be on the plan.

Finally, it is good practice to do market checks or requests for proposals (RFPs) on a regular basis. A market check is a pricing comparison and analysis to compare competitive pricing for substantially similar-sized customers and for substantially similar PBM services. The market check is measured on the basis of a total, aggregate comparison of the pricing terms offered by a single vendor to a single plan, and not on the basis of individual pricing components or best price points available from multiple vendors. Aggregate PBM pricing comparison includes the sum of the cost of medications, including dispensing fees and claims administrative fees, less rebates received by the plan. This type of analysis creates leverage in negotiations with current PBMs, as well as informing trustees when it may be time to renegotiate and / or consider a more competitive PBM contract. On the other hand, an RFP process asks for quotes from other providers (in addition to your current provider) and allows you to determine whether another carrier or service provider can provide a better or more cost-effective product. For prescription drugs, it is a good idea to do a market check on a regular basis, although PBM contracts often establish market check parameters that limit the ability of plans to perform this important benchmarking. It is also a good idea to perform an RFP once the contract is set to expire, allowing yourself enough time (at least three – six months) to implement a new carrier as smoothly as possible if you decide to switch after analyzing the RFP results. For other vendors, it is a good idea to do an RFP on a regular basis.

This article first appeared on LaborPress.org.




Managing autism treatment in self-funded plans

Self-funded plans frequently deal with issues at the intersection of physical health, behavioral health, medical science, and government regulation. One emerging issue that relates to each of these areas is Applied Behavior Analysis (ABA) treatment for autism spectrum disorders (ASD).

ABA is one of the fastest growing state benefit mandates. Today, 46 states mandate some form of autism coverage with varying degrees of benefit coverage and limits. ABA is a prime example of the type of coverage required by state mandates.

The prevalence of ASD has risen precipitously. In the early 1980s, population prevalence was estimated at 0.05% (five of 10,000 children). The most recent studies estimate prevalence to be 1.5% (one in 68 children). Traditionally, commercial insurers excluded or minimally covered treatment for ASD. However, more recent federal mental health parity laws and essential health benefit requirements (EHBs) of the Patient Protection and Affordable Care Act (ACA) have served to increase access to ASD treatments.

ABA is a behavioral strategy to improve socially significant behaviors to a meaningful degree. Targeted behaviors include adaptive living skills such as gross/fine motor skills, social skills, communication, reading, eating, and dressing. The ABA treatment regimen typically involves highly structured, intensive interventions for up to 30 or 40 hours per week. The course of treatment can last many years, from diagnosis at early ages (e.g., ages 3 to 4) through adolescence (and sometimes beyond).

While self-funded employer-sponsored plans are not required to comply with state mandates under federal law (ERISA), they are not immune from the trend toward greater ABA coverage driven by state mandates for insured plans.

Challenges for self-insured plan sponsors include:

Medical necessity. Medical carriers will often advise that ABA is not medically necessary for its self-insured customers but will cover it for its insured business to meet state mandate requirements. This makes it difficult for plan sponsors to explain to members why it is not covered under their plan.
Cost. Assuming conservatively the average age of diagnosis is 4 years and average age of completion is 15 years, adding this benefit can be a long-term expense to the plan. Cost estimates range between $25,000 and $50,000 per case per year.
Utilization management. If plan sponsors decide to cover ABA, then it is important to make sure members access school-/community-based services, which play a significant and progressive role in offsetting plan costs.
Network management and provider credentialing. As demand for ABA services grows, plan sponsors may want to review credentialing and network utilization to assure ongoing access to qualified providers for these services.
Compliance. Plan sponsors must not run afoul of the Mental Health Parity and Addiction Equity Act (MHPAEA), which prohibits plans from restricting mental health benefits more so than physical health benefits.
Related benefits. Even if a plan specifically excludes coverage for ASD treatment and diagnosis, members with autism are most likely already receiving related functional health benefits such as physical therapy and speech therapy (habilitative and rehabilitative). It is important to understand the interconnectedness of benefit administration and the underlying equities.

The increasing prevalence of ASD, the growth in state ASD benefit mandates, and the widespread treatment of ASD through ABA can affect self-funded plan sponsors, requiring them to think comprehensively about balancing member needs and access with care cost and care management.

This article first appeared on LaborPress.org.