Employers are obligated to make sure “that there are no hidden fees and expenses and limitations” on audit rights in the contracts they enter into with service providers.
Have you checked your ASO contract lately? Take a gander at this one. Going to page 5, Section 2.10 you will notice the following audit right limitations:
- Audit samples will be limited to no more than three hundred (300) Claims
- No more than one (1) audit shall be conducted during a twelve (12) consecutive-month period
The Brownsville Independent School District (BISD) taxpayer supported self-funded health plan with more than 7,000 employee lives, is contractually prohibited from conducting claim audits of more than 300 claims a year. How in the world would anyone agree to limit their ability to fully satisfy their fiduciary responsibilities to plan members and taxpayers? BISD’s insurance consultant and the BISD missed this one. What else could they have missed?
Well, since your asked. They missed SECTION 3: CONFIDENTIAL DATA, page 6 because they advertised their unredacted BCBS ASO Agreement in the public domain on the BISD purchasing website last month at the request of a vendor seeking additional information during an active RFP process for TPA services.
I have found over the years that few plan sponsors read anything…….including lawyers.
Years ago a County Judge, who was also an attorney, signed an ASO Agreement without first allowing us to review it despite a requirement under our consulting agreement mandating our review of all contracts prior to approval. I asked him in a public Commissioners Court meeting:
“Judge, did you read the contract before signing it?”
“Yes, of course I did!” he replied in a huff. “
“Then why did you sign it” I asked.
After I was through pointing out all the reasons he royally screwed up by signing the agreement, committing the county to all sorts of things Commissioners Court never approved, it was obvious to everyone in the room my tenure as their consultant would be short lived. It was.
Employer Lawsuits Heat Up Against Health Plan Administrators
By Sara Hansard – Senior Reporter
Lawsuits by employers against insurers that administer employer health plans are beginning to mount, and workers could soon join the fray with litigation against employer-sponsored health plans.
Kraft Heinz Co.‘s employee benefit plan filed a suit June 30 against Aetna Life Insurance Co. in the US District Court for the Eastern District of Texas, accusing the insurer of mismanaging the company’s health and dental plans by pocketing undisclosed fees and paying millions of dollars in claims that shouldn’t have been approved.
Employers that provide health benefits for employees are increasingly expected to ensure that claims paid and fees charged are reasonable, and they are becoming more aware of those fees as a result of data that hospitals and insurers are required to provide under the Consolidated Appropriations Act, 2021 (Public Law 116-260) and the transparency in coverage rule issued in 2020.
“These are the first of many cases to be filed by employers and employer plan sponsors,” Christin Deacon, founder of VerSan Consulting LLC in Haddonfield, N.J., said in an interview. VerSan focuses on policy related to employer-sponsored and union health benefits.
Lawsuits also have been filed against Elevance Inc. and against Blue Cross Blue Shield of Massachusetts. The suits allegebreach of fiduciary duty by plan administrators in not providing adequate claims data to employers so that they can review whether the plans are being properly administered, she said.
Moreover, plaintiff’s law firm Schlichter Bogard LLP appears to be scouting on LinkedIn for employees to be plaintiffs against Target, State Farm, and PetSmart regarding the companies’ health plans—actions that could open the door to employees alleging company breach of fiduciary duty, Deacon said.
The firm has been heavily involved in lawsuits against employers over their retirement plans, and on its website it quotes an article describing managing partner Jerry Schlichter’s impact as “the Father of the 401(k) case.”
“It would be a mistake to conclude that these ads mean something in a global way,” Jerome Schlichter, managing partner of Schlichter Bogard said in an interview. “Nothing may come of it beyond these companies,” he said.
“There are factual situations involving these companies that are the basis for our investigation, and nothing more than that,” he said.
He declined to describe the factual situation Schlichter Bogard is investigating at the three companies. The companies didn’t immediately respond to a request for comment.
Similar Conduct
“If these large carriers, TPAs [third party administrators], are engaging in this kind of conduct with companies like Kraft Heinz, you can be sure that similar conduct is happening with other large employers around the country,” Deacon said.
“If these cases bear out, and employers don’t do something to correct this behavior, then the employer is at risk for being sued by their employees for breach of their fiduciary duty,” she said.
Amy Gordon, an employee benefits partner with Winston & Strawn LLP, said in an interview that contracts between health plan administrators and employers have added more fees in recent years. “It is very problematic that over the years, that they have essentially added more and more types of compensation into the agreement,” she said.
Employers are obligated to make sure “that there are no hidden fees and expenses and limitations” on audit rights in the contracts they enter into with service providers, Gordon said.
Providing Claims Data
In their lawsuits, a major point of contention is the alleged failure of plan administrators to provide employer plans with claims data.
In its lawsuit, Kraft alleged that Aetna approved false, fraudulent, and improper claims, including thousands of duplicative claims. Kraft asked Aetna to turn over its claims data in 2021 so it could investigate these matters, and the company responded by producing only “self-selected” and incomplete data, Kraft said in the suit.
An Aetna spokesperson said the company has no comment.
“The medical claims data Kraft Heinz seeks belongs to Kraft Heinz,” the suit said. “Aetna merely has the ‘right to use’ that information.”
“Without this data, Kraft Heinz is unable to assess Aetna’s handling of the Plans’ funds and associated payment integrity. Kraft Heinz owns this data and has an absolute right to it,” Kraft Heinz said.
Employers need to ensure that they have access to their claims data in the agreements they negotiate with plan administrators, Gordon said.
Self-insured employers “are paying for those claims. You should have full access to those claims,” she said.
The employers that have filed suit against their plan administrators so far are “willing to make the very difficult and uncomfortable decision to sue these large carrier entities that have, in many cases, been their vendors for years,” Deacon said.
To contact the reporter on this story: Sara Hansard in Washington at shansard@bloomberglaw.com
To contact the editors responsible for this story: Brent Bierman at bbierman@bloomberglaw.com; Cheryl Saenz at csaenz@bloombergindustry.com
