FAP Text Book Example: Memorial Herrman Financial Assistance Policy
Sunday Morning Bathroom Read (“If you RBP, the CAA requires you to check the FAP” /ERISA Plan Fiduciary/Part 2 of 2):
Text Book Example:
The Houston, TX based Memorial Hermann Financial Assistance and Billing and Collection Policy (“MH FAP”) provides as follows:
“Underinsured Patient” is defined as :
“A patient who is covered in whole or in part under a policy of insurance who as a result of receiving emergency or eligible services has out of pocket expenses that exceed their ability to pay the remaining balance for care received.”
More to the point, Paragraph 2 of the Memorial Hermann (“MH FAP”) provides that MH does not have authority to engage in any type of “Extraordinary Collection Action” (“ECA’)including any reporting to credit bureaus. RBR is by definition a defined benefit and will result in a patient being underinsured since there is no contractual obligation in place. Put simply, this FAP at this facility implicitly sanctions RBR and results in a hospital billing statement serving as a crumpled nerf ball to slam dunk in the trash can.
ERISA Fiduciary Plan Design Considerations:
A) Why would any plan fully insure its health benefits under this FAP if the facility does not have authority to engage in any type of “ECA”? RBR is significantly less expensive with zero chance of any balance billing;
B) Why would a plan pay a pepm for a balance billing protection program if there is zero chance of any balance billing;
C)The facility in reality is a “de facto” stop loss carrier since any claim (assuming the member qualifies for financial assistance) will be absorbed by the facility. Stop loss premiums should reflect this fact;
D) In fact, I would argue that price transparency is irrelevant at an income level <400% of the FPL at this facility under this FAP. Who cares if the CT scan is $10,000 or $161? The facility is fully at risk so charge whatever you want;
E) Claims Data = Medical, Rx and member financial information. Any time that risk can be fully transferred or clams paid at the applicable AGB percentage is a prudent use of plan assets;
F) Moving forward, if any state based policy maker wants to move the market and reduce prices (absent any free market reforms), send the Charlie Brown lump of coal back to the facility. 85% of the country is in this bucket. The Barbarians will certainly be at the gate… .
Sunday Morning Bathroom Read Bonus Edition:
Illinois recently enacted HB 2719 (effective 1/1/24) which provides significant guardrails around charity care and hospital collection activities. Put simply, the burden is now on the facility to screen every patient for eligibility for charity care before any collection activity may occur and limits the eligibility requirements to tax returns and/or W-2’s plus pay stubs and nominal assets
