George J. Pantos, MyHealthGuide
Source: Employer’s Guide to Self-insuring Health Benefits, published by Thompson Publishing Group

Employers who sponsor health plans need meaningful claims information to make more informed choices about their plan funding options, including self-funding under ERISA. This report outlines the benefits of greater health claims data transparency, summarizes federal privacy provisions, and reviews the features of a unique new Texas law — the first of its kind in the nation — that could serve as a model for other states seeking solutions to escalating plan costs.

Just as consumers need reliable product information when they are in the market for the items they buy, so too employers that sponsor health plans need meaningful claims information and loss experience data when making decisions about how to spend their valuable health care dollars.

Timely and detailed claims information facilitates cost-efficient management and administrative decisions by employers that sponsor group health plans. By analyzing what they are spending on health insurance and the benefits received by their employees, employers are able to identify the services, risk exposures and utilization trends that lead to high costs and help them to make better choices about how to manage their plans

Detailed claims data helps employers to customize health plan design, including cost sharing, as well as to develop risk management strategies that improve plan performance and control costs.

Greater transparency of claims data also provides employers with important data to tailor valuable disease specific programs (for example, diabetes, cardiovascular) for employees, including special wellness programs and disease specific information programs.

Ready access to timely claims information allows employers to make informed decisions about plan financing options, including self-funding the plan under ERISA. An employer interested in obtaining competitive bids on new coverage — whether from an insurer or to consider self-funding — needs access to timely health insurance plan information.

Employers considering the self-insurance option will usually purchase stop-loss insurance to cover their liability above specific/aggregate attachment points. The cost of stop-loss coverage will depend largely on plan claims and loss experience data. Ultimately, complete and detailed claims information is vital so that the stop-loss carrier can quote medical stop-loss on a currently fully insured plan.

Barrier to Claims Data Transparency

Employer/plan sponsors seeking claims data have encountered resistance from many insurers who have raised concerns about possible exposure to liability for violation of privacy laws in connection with release of claims and loss data.

Insurance carriers have been reluctant to hand over plan claims data to employers, except in Texas where a state law requires transparency of plan claims data by insurers. This industry practice has been a barrier to transparency, depriving many employers from access to valuable information from their own health plans that can help them achieve significant cost control.

Data and predictive modeling technology based on analysis of plan claims data is producing significant results in controlling and reducing health costs — without the expenditure of a single dime in taxpayer funds. The claims data transparency issue is not squarely addressed in pending health reform bills.

HIPAA and Privacy Concerns

While Congress sought to protect the privacy of individual medical information in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) 1, the law provides federal standards and strict safeguards about the right of access to protected health information (PHI).

Under HIPAA, insurance carriers (often referred to as “issuers”) are permitted to release individual PHI to the employer/plan sponsor, either in its capacity as the Plan Administrator or as a fiduciary.2

ERISA defines “Plan Sponsor” as “the employer in the case of an employee benefit plan maintained by a single employer…”3

Generally, under the privacy rules, a health insurance issuer is allowed to disclose certain “summary health information” to the plan sponsor for the purpose of obtaining bids from other health insurers or health plans. This includes data relating to claims history and claims expenses, as well as total claims and total dollars paid.

However, clearly, more than summary health information is needed by the employer in order to perform its duties as a plan fiduciary. To obtain meaningful, competitive quotes from other insurers or to consider self funding the plan, comprehensive claims data is needed by the employer.

Administrative Functions

To facilitate access to more detailed information, HIPAA rules permit the release to the employer/plan sponsor of certain individual PHI data to allow the employer/plan sponsor to carry out its administrative functions. 4

ERISA defines “Administrator” as “the person specifically so designated by the terms of the plan…” 5. Generally, the Plan Administrator is responsible for all operations and administration of the plan.

Under HIPAA’s standards and rules, disclosure and use of plan information for “treatment, payment and health care operations” (“TPO activities”) is permitted without written consent or an individual authorization. Health care operations include:

Underwriting and other activities related to creation, renewal or replacement of a contract of health insurance or health benefits;
Ceding, securing or placing a contract for reinsurance or risk relating to claims for health care (including stop-loss insurance and excess loss insurance. 6
Compliance with these provisions must be carried out consistent with appropriate plan procedures and applicable legal requirements.

For example, HIPAA rules require covered entities (essentially health plans, issuers and providers) to establish a contractual arrangement with their business associates —accountants, attorneys, auditors, data processing firms, among others — that includes assurances for safeguarding the confidentiality of protected information. This is HHS’ approach to ensure that the law’s protection is extended to information shared with others in the health care system.

In summary, rather than serve as a barrier to the release of important claims and loss information, HIPAA is intended to streamline the flow of information integral to operation of the health care system while protecting confidential health information from inappropriate access, disclosure and use.

Texas Claim Data Transparency Law

HIPAA takes the position that the federal privacy rules permit the disclosure of health plan information to the extent required by other law. 7

Texas is the first state to pass a health care transparency law. The Texas law (HB 2015) amends the Texas Insurance Code and establishes new claims information disclosure requirements for health insurance carriers that contract with employers. 8

The Texas statute recognizes that in order to control health costs, employer/plan sponsors must be able to examine how they spend their money on health care for their employees. To do this, employers must have access to claims and loss experience information which demonstrates the amount spent on employee health care and the manner in which it is spent. 9

The legislative history acknowledges the problems encountered by employers in obtaining this data:

Despite the importance of this issue to a competitive health care market, most employers across the state are routinely unable to obtain timely and meaningful claims or loss experience information pertaining to their health plans. 10

Complementing the federal statute, the Texas law establishes the right of employer/plan sponsors in the state to have access to their own health plan claims data.

The legislation, which became effective January 1, 2008, calls for greater plan transparency through standardized disclosure of health claims data, including protected data, by requiring group health insurers operating in Texas to release claims data to the employer or group policyholder.

Texas Law Requirements

Setting a new legal disclosure standard, the Texas law requires an insurer to respond within 30 days after the date a written request for a written report of claim information is received from a plan, plan sponsor or plan administrator.

The claims information report is required to contain all information available to the insurer that is responsive to the request, for example, such as:

Aggregate paid claims experience by month;
Employee census data;
Total monthly premiums; and
Total dollar amount of pendant claims.
Insurers must provide a separate description and individual claims report when total paid claims exceed $15,000 in a 12-month period. Specific claims over $15,000 include a unique identifying number, characteristic, or code for:

The individual;
The amounts paid;
Dates of service; and
Applicable procedure codes and diagnosis codes.
The Texas law requires an employer/plan sponsor to provide the proper certification that appropriate plan amendments have been made by an authorized plan representative. This is required to insure that proper HIPAA safeguards are in place in compliance with federal regulations and state insurance provisions..

On receipt of the report from the issuer, the employer/plan sponsor may make a written request for additional information within 10 days for specified individuals. With respect to this request, the insurer is required to provide additional information relating to the prognosis or recovery if available for individuals in active case management, the most recent case management information, including any future expected costs and treatment plan that relate to the claims of that individual must be provided.

Caveat: An issuer is prohibited from disclosing protected health information if disclosure of the information is prohibited under another state or federal law that imposes more stringent privacy restriction than those imposed under HIPAA.

The Texas law is designed to facilitate timely and accurate exchange of information by allowing the health insurance carrier or HMO to send the information electronically or to post the information on a web site accessible to the requesting employer.

Health Reform and Transparency

Pending health reform legislation in the House (H.R. 3200) would require health plans to meet standards established by the Health Choices Commission relating to transparency and timely disclosure of plan documents and information, but does not reference health claims data transparency.

Employer health plan sponsors concerned about escalating health plan costs need access to claims information and loss data in order to assess plan performance, cost trends and how they are currently spending health care dollars. Employers with access to such information will be able to make sound business decisions about the more efficient operation of their health plans, including evaluating all available options for funding and coverage—whether insured or self-insured—that are beneficial to plans and covered participants.

Health reform legislation truly designed to achieve significant cost savings should require transparency of claims data so that employers who pay over $1 trillion dollars for health care can utilize available technology immediately to analyze plan trends and adopt actionable strategies to control health costs.

Notes

Health Insurance Portability and Accountability Act of 1996, as amended, 29 U.S.C.
Sec.1181, et. seq. (HIPAA).
45 C.F.R. Sec. 164.501 (2000)
Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Sec.1002
45 C.F.R. Sec. 164.504 (f) (3)
29 U.S.C. Sec. 1002 (16) (A)
45 C.F.R. Sec. 164.506
HHS E-Mail, March 11, 2008
H.B. 2015, signed June 15, 2007 by Governor Rick Perry
Senator Smithee, Bill Analysis, (# 80R145888 DLF-F), May 13, 2007)
H.B. 2015, Section 1215.002-03.
About the Author, George Pantos, Esq.

George Pantos is former Washington General Counsel to Self-Insurance Institute of America (SIIA), and now a consultant with WellNet Healthcare in Bethesda, Md. He is an editorial board member of Thompson Publishing Group’s Employer’s Guide to Self-insuring Health Benefits.