July 31, 2017
Question: Telemedicine can be a convenient, economical way to access physician services. Can we add this to our self-insured major medical plan? Could we offer a telemedicine-only plan? It might be attractive for healthy, tech-savvy employees.
Answer: Self-insured major medical plans can include telemedicine services. But, as explained below, you can’t offer a “telemedicine-only” plan because it wouldn’t satisfy health care reform’s preventive health services mandate and might not satisfy other federal mandates.
First, let’s explain what we mean by “telemedicine,” since the term has no universally accepted definition. Telemedicine generally refers to the provision of care by physicians or other health care professionals through technology such as the Internet or a phone-video system, rather than in person. Patient consultations via telemedicine typically function as physician office visits (that is, they’re used to obtain a diagnosis and treatment plan).
Telemedicine may include other services, such as monitoring patients with an ongoing diagnosis or assessing the need for specialist referrals. Because a physician consultation via telemedicine is often less expensive than an office visit, these services may reduce benefit costs while increasing convenience for participants and beneficiaries. Telemedicine can be attractive to employees who have busy schedules, live in remote areas, or travel extensively.
To add telemedicine services to your self-insured major medical plan, you need to contract with a third-party vendor that offers a telemedicine network and associated administrative services. A logical place to start would be with your plan’s current third-party administrator (TPA) or insurance company providing services under an “administrative services only” contract.
Ask your TPA if it maintains, or can subcontract with another entity to provide, a telemedicine network. If so, you may be able to add telemedicine services to your existing contract. (This would streamline compliance with, for example, HIPAA privacy and security, and COBRA obligations.) If not, you may still be able to enter into a separate contract with another entity — but you’ll need to confirm that your TPA can coordinate claims administration so that, for example, participants’ covered telemedicine claims will count toward the plan’s deductible and out-of-pocket maximum.
Before making a decision to add telemedicine, you should consider the scope of services for your participants. Several states have laws restricting the provision of telemedicine services. For example, state law might limit the types of services that can be provided without an in-person visit, or restrict providers licensed in one state from providing telemedicine services to individuals in another state. Depending on where your employees are located and the availability of providers, you may find that some employees have few options. You’ll also want to project expected usage levels and understand any additional administration charges to determine what cost-sharing levels your plan should require for telemedicine services. Your TPA or telemedicine network may be willing to share claims data.
The availability of telemedicine should be communicated to participants in a summary plan description (SPD) or a summary of material modifications updating the SPD. It should include restrictions, conditions, and cost-sharing provisions.
Although some employees may be interested in a telemedicine-only plan, offering self-insured telemedicine services on a stand-alone basis is problematic. Reason: As a separate group plan, the telemedicine-only plan would be unable to comply with health care reform’s preventive health services mandate, and might not be able to comply with other federal mandates. The preventive health services mandate requires in-network coverage (without any cost-sharing) of certain categories of preventive services (including diagnostic tests), many of which can only be provided through in-person visits.
Question: Our company offers coverage under a self-insured major medical plan to all full-time employees.
Can we offer cash incentives to specified employees with a history of high claim costs to opt out of our plan and purchase individual policies instead?
Answer: No. According to guidance jointly issued by the Department of Labor, IRS, and Health and Human Services, offering a choice between cash and enrollment in the employer’s standard group health plan constitutes prohibited health status discrimination under health care reform and HIPAA if the offer is made only to employees with high claims risk.
Although it may seem that you’re treating the high-claims employees more favorably by giving them a choice between cash and coverage under your plan — especially now that health care reform guarantees availability of individual coverage without preexisting condition exclusions — the federal agencies don’t view this choice as permitted discrimination in favor of individuals who have adverse health conditions.
Seen to Discourage Participation
According to the agencies, these employees have a greater effective cost of coverage because their cost is deemed to include the cash they will forgo if they elect to enroll in your plan. In addition, the cash-or-coverage offer is considered to be an eligibility rule that discourages plan participation based on a health factor.
Consequently, the agencies view these arrangements as discriminatory, regardless of whether:
- The cash payment is pre-tax or after-tax to the employee,
- The employer is involved in the selection or purchase of individual insurance policies, or
- The employee obtains any individual coverage.
In addition, because choosing between cash and tax-favored health coverage requires a cafeteria plan election, the agencies assert that imposing an additional cost to elect health coverage could result in prohibited discrimination under Internal Revenue Code Section 125.
Note also that you couldn’t condition availability of any financial incentive (whether or not based on health or claims history) on the employee’s actual purchase of an individual insurance policy.
Doing so creates an employer payment plan that violates health care reform’s prohibition on annual dollar limits as well as the requirement to provide coverage of preventive services. Violating these provisions can result in substantial excise taxes.
Other Federal Laws
Moreover, the proposed incentive might raise concerns under HIPAA’s privacy rule if you are considered to be using protected health information (that is, health or claims history) for a purpose unrelated to plan administration (to identify employees eligible for the cash incentive).
Other federal laws, such as the Americans with Disabilities Act or the Age Discrimination in Employment Act, could also be implicated.