ERISA and All Claim databases

Nicholas Bagley is worried about a Supreme Court case.  In Liberty Mutual, a self-insured company that has an administrative services only (ASO) contract with an insurer, is arguing that the requirement to submit claims data to the state of Vermont is a violation of the ERISA law that does not allow states to tell companies how they administer benefits to their employees.

It’s thus perverse that the Supreme Court is poised to rule in a case that could thwart efforts to get good data about health-care prices. In Gobeille v. Liberty Mutual, the Court will decide whether the Employee Retirement Income Security Act of 1974 (ERISA) supersedes laws, on the books in 18 states, requiring self-insured employers to report data about the prices they pay to “all payer claims databases.”

Because about two-thirds of all employees receive coverage through self-insured firms, exempting those firms from the reporting obligation would blow a giant hole in the state databases. If you’re persuaded that we’re paying too little attention to the problem of market power—and I am—then ruling against the states in Gobeille would be especially boneheaded.

There is a sub-optimal work around if the Supremes rule for Liberty Mutual.

Most ASO contracts use standard networks and benefit configurations attached to a standard plan design.  ASOs will often seek cost savings by having their administrator craft narrow networks that carve out certain high cost providers.  But they are still attached to a standard plan design.

From a provider point of view, the provider can’t tell if a patient is Mayhew Insurance Fully Insured or Mayhew Insurance ASO employer self-insured.  They get paid the same rate for the same ste of services if the patient is in a Mayhew PPO or a Mayhew HMO.  The contract that a provider has with the insurer is far broader than the numerous options ASOs believe that they are getting.  One provider contract can and does cover a hundred network tweaks and eight hundred cost-sharing variants.

Most ASOs are fairly small (under 5,000 covered lives).  There is a limit to what an insurance company is willing to do to customize a plan.  Re-slicing a network is fairly easy.  That task could be anywhere from an afternoon if we were slicing out the most expensive 1% or 2% of the providers (a fairly common request) to a month if we were building a home host multi-tier with appropriate provider access designed to funnel money to a provider and take money away from a competing provider group.  The big challenges would be presenting a draft model to the clients built according to their written specifications and having them come back and tell us to add their CFO’s cardiologist and their CHRO’s endocrinologist back into the mix.  And those two docs belonged to the group that they were trying to screw.

What does not happen in most ASO custom plans  is a rewrite of provider contracts.  Renewing and rewriting provider contracts and more importantly, having providers sign onto a new contract is much more expensive than recutting an already contracted network.   For the Mayhew narrow Exchange product 70% of the prep cost was getting new contracts out to providers to sign.  This changes when the ASO is large enough (Boeing and Starbucks in Seattle are doing some very interesting things on healthcare where contracts need to be rewritten) but most ASOs will have provider pricing similar to fully insured groups.

Since provider pricing is similar, probabilistic matching could be used to create demographically similar dummy members and their projected claims experience could be estimated within a useable but wide error band.

This is not ideal, it is a third best hack to solve a problem of a company not wanting to give a massive text file data dump that does not cost them a lot to either produce internally, or request from their administrator.  Their administrator already produces that file anyways in order to bill the self-insured company.  The ideal case is the Supreme Court says this is a reporting requirement and not a benefit requirement so GTFO.

4 replies
  1. 1
    Ahasuerus says:

    Good morning Richard! Per John’s request stated in your earlier post, you might want to re-tag/also-tag this post as Insurance Below instead of/along with Wonkery.

    Nitpicking aside, I want to thank you for all the work you’ve done on illuminating the subtleties of the US health insurance industry. It also doesn’t hurt that you’re a pretty decent writer, so I guess John done good as well.

    OK, back to lurking. Ciao!

  2. 2
    japa21 says:

    Self-funded employers have always liked to say that they don’t have to follow ERISA standards, which normally is true. Here they are saying that ERISA standards should apply.

    My understanding was always that ERISA didn’t apply, but state rules did.

    This will be an interesting case.

  3. 3
    burnspbesq says:

    ERISA pre-emption makes sense in the vast majority of situations in which it arguably applies. Certainly, a single, uniform, Federal standard for judging the behavior of pension plan fiduciaries has prevented a race to the bottom among the states.

    In this case, it doesn’t make a lick of sense.

  4. 4
    Villago Delenda Est says:

    @burnspbesq: It does if your definition of “fiduciary” is “this is a fully lootable pile of money!”

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