Everyone likes to get something for free. If your workplace is like mine, it is a great day (and quite unusual) when there are leftovers from a meeting that save you from buying a lunch. What would you say if you knew your benefit plan was paying for something your plan members could get for free?
We recently completed a medical claims audit for an Ontario-based client. Overall, we determined the insurer was doing a good job. Claims were being paid according to the contract and few errors were being made. One of the most interesting findings was a claim for a CPAP machine. CPAP stands for Continuous Positive Airway Pressure and it is a machine used to ensure a flow of oxygen to individuals with sleep apnea.
Under most plans, CPAP machines are eligible expenses, typically limited to one every five years, but, and here is where it gets interesting, CPAP machines are also covered by the Assistive Devices Program (ADP) in Ontario. This means that the benefit plan need not shoulder the full cost of a CPAP machine for plan members in Ontario. Currently, ADP pays 75% of the cost up to a maximum of $675. Reflecting this limit, some insurers will then limit the claim amount to the outstanding 25% or $215. If the plan member paid more than this, they purchased a “deluxe model”, not fully covered by ADP, and, depending on the plan, they could be out-of-pocket.
In our audit, we identified a CPAP claim for $1,040. It was actually flagged not for the amount, but for the frequency, as less than five years had passed since the plan member’s last CPAP claim. The insurer explained that the plan had a “calendar year maximum”, which means that as long as the actual year the claim was incurred in was five years after the year the prior claim was incurred in, it was eligible. So, in reality, the frequency is once per “four-and-a-bit” years. A plan member could purchase a CPAP machine in December of 2010 and have it covered and then again in January of 2015 and have it covered.
So all of this raises the question, what do you want your plan to pay for? This is a small example of an opportunity to tighten contract wording to protect the plan from costs that are neither unaffordable nor catastrophic. Provincial coverage will pay the lion’s share of the cost of this item, leaving the plan to cover a smaller portion and freeing dollars up to be directed to support the coverage of high-cost treatments. And what if that calendar year frequency applies to everything on your plan? Once per five calendar years may not seem to have much impact, as employees rarely stay with one employer for decades, but if that applies to something with a shorter frequency, such as vision care, it provides an opportunity for a run on your plan by employees who are planning on leaving.
In the face of high-cost life-saving treatments where plan sponsors are worrying about the sustainability of their health plans, I believe it is crucial to ensure savings are captured whenever possible. Many benefit plans are saddled with old language from a time there was little exposure to high costs. Now it is imperative to manage the small stuff so there is protection from the big stuff.
If someone offers you a free lunch, what would you do?
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