Plan sponsors of self-funded health plans inevitably experience an out-of-contract claim. How does this happen? Who is responsible for such mishaps? More importantly, who’s going to suffer the repercussions if one occurs?
What is an Out-of-Contract Claim?
An out-of-contract (OOC) claim is any claim paid outside of the plan document’s schedule of benefits and therefore ineligible for reimbursement by the stop loss policy (i.e., contract). An OOC claim can come in many forms and occur in many ways:
- A claim not covered by the stop loss policy due to plan document language.
- A known OOC claim unwittingly signed off by the plan sponsor via an Ex Gratia form.
- A disparity in the PPO contract that requires payment for a service not covered by your stop loss policy.
- A direct contract with a hospital that defines “medically necessary” differently than your plan document.
- An employee termination not being reported in a timely manner by your HR department.
Between the ambiguous terms in this area you could easily be surprised by an OOC claim. You’ll need a skilled, experienced lieutenant to guide you through.
Stop Loss Insurance
When purchasing stop loss insurance for their self-funded health plans, plan sponsors often focus more on price and less on what’s covered. For example, we recently acquired a client that had a 13/12 contract. What benefit (if any) does a 13/12 contract provide? Does having just one (1) month of run-in protection for the plan year save the client on premiums, or later cost them more in uncovered claims?
Know Your Stop Loss Policy
Evaluating a potential stop loss policy for your self-funded plan more closely can answer questions just like this:
How long is a claim eligible for payment? Most plan documents allow 365 days from the date of service for a claim to be submitted to the plan for payment.
What are my plan exclusions? Your plan exclusions should be the same as the exclusions in the stop loss policy. If not, there could be a gap in coverage, which could create an out-of-contract claim down the line.
Does the stop loss policy agree to defer to the plan’s definitions? The stop loss carrier should agree to defer to the plan’s definitions of the following:
- Usual and Customary exclusion
- Medical Necessity exclusion
- Experimental and Investigative exclusion
- Illegal Acts exclusion
- Occupation Injuries exclusion
- War exclusion
- International Claims exclusion
Does the contract period provide sufficient plan protection? Though a 13/12 contract (as previously mentioned above) most likely costs less than the 24/12 contract, a 13/12 can leave your plan exposed to a high-dollar claim.
Will the carrier reimburse you throughout the 12-month contract period or wait until the plan year is over? If you must pay eligible claims up front and wait 365 days (i.e., until the end of the plan year) to receive reimbursement from the carrier, it could create undue financial hardship for your plan.
Does the stop loss policy impose a run-in limit? If so, determine if the carrier will remove this limit with additional reporting. Since not all carriers offer this run-in removal option, understanding what liability your plan is agreeing to when accepting a policy that includes a run-in limit is important.
Does the stop loss policy limit cost containment fee reimbursements? Having an effective cost containment program doesn’t offer much benefit (i.e., savings) to your plan if the carrier limits the reimbursements on any associated fees.
Summary
At GBS, we know stop loss. The points noted above are but a few things to consider when buying a stop loss policy to protect the plan and the plan sponsor. Every stop loss policy from every carrier we work with is reviewed by outside attorneys who specialize in self-funded plans and policies. These reviews ensure we thoroughly understand each policy’s coverage prior to recommendation (and purchase!), not afterward which exposes the plan to unexpected costs.