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Authorizing Medical Payment

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As always, Read the Fabulous Document.

One imagines a plan could provide its administrator a power to supersede a claims administrator's decision.

I once heard a knowledgeable employee-benefits lawyer debate, with herself, whether it would be good or bad for a plan's creator to provide such a power.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania



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There is not enough information presented, nor is this the best vehicle for a discussion such as this. Short answer is yes, but you need to be careful.  Let’s assume a new plan is being implemented 1/1, the plan documents provided to employees during open enrollment define the expense as eligible but when the SPD is developed and/or the claim procedures were developed by the TPA, it was defined as ineligible.  (This has actually happened)  Clearly this can be overridden.

Now assume the overrides is for a HCI, and it is done multiple times for other HCI’s.  You are now in a different world, with 105 implications.

My point is, be careful as you think through this.  If it is a one-off and you have good, substantiated reasons to override, do not worry.  Anything else, you may want to engage an attorney.

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Want to add my two cents to Fiduciary Guidance Counsel and leeveena, with whom I agree, and say this happens a lot. However, you want to find some provision in your plan document that provides a basis for it (which probably won't be hard) and to also base it on the premise that the fact situation you are confronting is unique and was not thought of when plan was drafted. In other words, the exception needs to be principles-based. If another participant with similar facts is denied the same treatment, you could well have a fiduciary breach or tax nondiscrimination problem.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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Along the lines of what Fiduciary Guidance Counsel said, most of the time final claims decisions, even for self-funded medical plans, are delegated to the TPA.  Most plan sponsors do not want to be in the position of making final claims decisions, both for the practical reason that they do not have the medical expertise to do so and because, as leeveena and Luke Bailey stated, it opens the sponsor to 105(h) issues and breach of fiduciary duty claims.

In short, absent some irregularity of the first type leeveena mentioned, I would not recommend this to any plan sponsor.  A plan sponsor should stick to the document, in terms of who decides appeals and following the actual terms of the plan regarding whether a particular service is covered.  If the employer wanted to do something for the participant, outside the plan is the better place (in my humble view).  Of course, outside the plan has tax consequences that inside the plan does not.

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  • 2 weeks later...

Don't forget that the beneficiary has the right under the ACA to an External Review by independent IRO.  I would suggest that the plan administrator never override the denial - allow the 1 (maybe 2) internal level appeals play out and then if beneficiary opts for it, should use External Review which is the final and binding decision.  

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