____________________________________________________________________________
OPINION OF TRUSTEES
____________________________________________________________________________
In Re
Complainant: Pensioners and Surviving Spouses
Respondent: Employer
ROD Case No: CA-066 – February 25, 2003
Trustees: A. Frank Dunham, Michael H. Holland, Marty D. Hudson, and
Elliot A. Segal.
The Trustees have reviewed the facts and circumstances of this dispute concerning the provision of benefits under the terms of the Coal Industry Retiree Benefit Act of 1992 (Coal Act) Employer Benefit Plan maintained pursuant to section 9711 of the Internal Revenue Code.
Background Facts
Effective January 1, 2002, the Respondent implemented a mail service pharmacy program for maintenance prescription drugs—drugs that are used on a long-term basis to treat chronic conditions such as high blood pressure, diabetes, asthma and high cholesterol. In general, under the Coal Act Employer Benefit Plan, a beneficiary pays a $5.00 co-payment per prescription up to a maximum of $50.00 per family per plan year. According to the Respondent, if a beneficiary purchases a maintenance drug through the mail order program, the $5.00 co-payment (if applicable) is waived. If a beneficiary purchases a maintenance drug at a retail pharmacy, the beneficiary pays the $5.00 co-pay (if applicable) plus a $10.00 surcharge. However, the $10.00 surcharge is waived if the beneficiary can document for reasons of medical necessity that the beneficiary is unable to use the mail order program. For example, the $10.00 surcharged is waived for beneficiaries who reside in nursing homes. Furthermore, the $10.00 surcharge is not applied to drugs prescribed for a short-term basis (such as antibiotics to treat strep throat) that are purchased from a retail pharmacy.
The Respondent’s program was communicated to beneficiaries by mail in August 2001 and September 2001. In addition, 136 meetings were held to discuss the program with beneficiaries and two new positions were created to help assist beneficiaries with their prescription issues.
The Complainants state that the $10.00 surcharge applied for purchasing maintenance drugs through a retail pharmacy is in violation of the Coal Act Employer Benefit Plan.
Dispute
Is the Respondent’s mail order maintenance drug program in violation of the Coal Act Employer Benefit Plan?
Positions of the Parties
Position of the Complainants: The Respondent’s mail order maintenance drug program is in violation of the Coal Act Employer Benefit Plan by requiring an additional surcharge of $10.00 for maintenance drugs purchased at the retail pharmacy.
Position of the Respondent: The Respondent’s mail order maintenance drug program is not in violation of the Coal Act Employer Benefit Plan for the following reasons: 1) The program has not eliminated or reduced any benefits participants are eligible to receive under the Coal Act Plan; 2) Articles III and IV of the Coal Act Plan support the implementation of cost containment rules that encourage participants to utilize mail order deliver of maintenance drugs; 3) By waiving the $5.00 co-payment, the mail order maintenance program saves the beneficiary money; 4 ) The program provides an appeal process for identifying medically necessary situations that require alternatives to the mail order program; and 5) The $10.00 surcharge is derived from a retail administrative and dispensing fee of $3.75 plus $6.25 which is the difference between the average cost of ingredients at retail and the average cost under the mail order plan.
Pertinent Provisions
The Introduction to Article III of the Coal Act Employer Benefit Plan states:
Subject to Article IV, the benefits provided under this Plan are set forth in this Article III. Benefit payments shall not exceed reasonable and customary charges for covered services and supplies. Covered services shall be limited to those services which are reasonable and necessary for the diagnosis or treatment of an illness or injury and which are given at the appropriate level of care, or are otherwise provided for in the Plan. The fact that a procedure or level of care is prescribed by a physician does not mean that it is medically reasonable or necessary or that it is covered under this Plan. In determining questions of reasonableness and necessity, due consideration will be given to the customary practices of physicians in the community where the service is provided. Services which are not reasonable and necessary shall include, but are not limited to the following: procedures which are of unproven value or of questionable current usefulness; procedures which tend to be redundant when performed in combination with other procedures; diagnostic procedures which are unlikely to provide a physician with additional information when they are used repeatedly; procedures which are not ordered by a physician or which are not documented in timely fashion in the patient’s medical records; procedures which can be performed with equal efficiency at a lower level of care. The benefits described in this Article are subject to any requirements implemented pursuant to Article IV. Covered services that are medically necessary will continue to be provided, and accordingly, while benefit payments may be subject to managed care and cost containment rules, this paragraph shall not be construed to detract from plan coverage or eligibility as described in this Article III.
Article III A. (4) (a) of the Coal Act Employer Benefit Plan states:
Drug Fee Schedule
(Prescription Drugs)
(4) Prescription Drugs
(a) Benefits Provided
Benefits are provided for insulin and prescription drugs (only those drugs which by Federal or State law require a prescription) dispensed by a licensed pharmacist and prescribed by a (i) physician for treatment or control of an illness or a nonoccupational) accident or (ii) licensed dentist for treatment following the performance of those oral surgical services set forth in (3)(e). The initial amount dispensed shall not exceed a 30 day supply. Any original prescription may be refilled for up to six months as directed by the attending physician. The first such refill may be for an amount up to, but no more than, a 60 day supply. The second such refill may be for an amount up to, but no more than, a 90 day supply. Benefits for refills beyond the initial six months require a new prescription by the attending physician.
Reasonable charges for prescription drugs or insulin are covered benefits. Subject to any cost containment rules and procedures adopted pursuant to Article IV, reasonable charges will consist of the lesser of:
(1) The amount actually billed per prescription or refill, or
(2) The average wholesale price plus 25%, to be not less than $2.50 above nor more than $10.00 above the average wholesale price per prescription or refill, or the Plan Administrator may determine average wholesale price from either the American Druggist Blue Book, the Drugtopics Redbook, or the Medi-Span Prescription Pricing Guide.
(3) For a pharmacist participating in a Trustee-established prescription drug program, the current price paid by the Funds and available to the Employer in a piggybacked program.
(4) The price of the applicable generic substitution drug, if AB or better-rated, approved by the federal Food and Drug Administration; or, in the event the prescribing physician determines that use of a brand name drug is medically necessary, the price of such brand name drug;
(5) The rate for the drug listed on the formulary list of specific drugs along with payment rates adopted by the Plan Administrator and provided to Plan participants;
(6) The current price paid to participating pharmacies on a Participating Provider List (PPL) adopted by the Employer pursuant to Article IV. The Employer will notify Beneficiaries of the need to use PPL pharmacies. If a Beneficiary purchases a prescription drug or insulin from a pharmacy that is not on the Employer’s PPL, the Employer will advise the Beneficiary by letter regarding the future consequence of using a non-PPL pharmacy. If the Beneficiary fails to use a PPL pharmacy a second time, the Employer will contact the Beneficiary in person or by telephone to counsel the Beneficiary on the consequences of using a non-PPL pharmacy. Following such counseling, the “Hold Harmless” protections of section (10)(g)3 will cease to apply to prescription drugs and insulin purchased for such Beneficiary or his eligible Dependents from any pharmacy that is not on the Employer’s PPL.
Article III A. (8) of the Coal Act Employer Benefit Plan provides in pertinent part:
(8) Co-Payments and Deductibles
Certain benefits provided in this Plan shall be subject to the co-payments set forth below and such co-payments shall be the responsibility of the Beneficiary. The Plan Administrator shall implement such procedures as deemed appropriate to achieve the intent of these co-payments. Beneficiaries and providers shall provide such information as the Plan Administrator may require to effectively administer these co-payments, or such Beneficiaries or providers shall not be eligible for benefits or payments under this Plan. Any overpayments made to a provider who overcharges the Plan in lieu of collecting the applicable co-payment from a participant or Beneficiary shall be repaid to the Plan Administrator by such provider.
Co-Payments for covered Health Benefits are established as follows:
Benefit
Co-Payment
(a) Physician services as an outpatient
as set forth in section A(2) and
physician visits in connection with the
benefits set forth in section A(3),
paragraph (c) but only for pre-and
post-natal visits if the physician charges separately for such visits in addition to
the charge for delivery, and paragraph
(g) through (m), paragraph(n) except
inpatient surgery, paragraph (o) and
section A(7), paragraph (f).
$5 per visit up to a maximum of $100
per 12-month period per family.
(b) Prescription drugs and insulin, as set
forth in section A(4)
and take-home drugs following hospital confinement set forth
in section (A)(1)(a) $5 per prescription
or refill up to $50
maximum per 12-month
period per family.
Note: For purposes
of this co-payment
provision, a
prescription or refill
shall be deemed to be
each 30 days (or
fraction thereof) supply.
The 12-month periods shall begin on March 27 of each year.
Additional Rule Regarding Brand Name Prescription Drugs where a generic equivalent is available:
In addition to the regular co-payment, the beneficiary is responsible for the additional cost of the brand name drug over the cost of the generic substitute. A generic drug will not be considered “available” unless it has been approved by the federal Food and Drug Administration. In addition, if the prescribing physician determines that use of a brand name drug is medically necessary, the generic drug will not be considered “available,” and there will be no additional payment by the
beneficiary for the use of the brand name drug. NOTE: “Hold Harmless” protections of section (10)(g)3 do not apply to brand name prescription drugs where a generic equivalent is available.
Article III A. (10) (b) of the Coal Act Employer Benefit Plan states:
(10) General Provisions
(b) Administration
The Plan Administrator is authorized to promulgate rules and regulations to implement and administer the Plan, and such rules and regulations shall be binding upon all persons dealing with the Beneficiaries claiming benefits under this Plan. The Trustees of the UMWA 1992 Benefit Plan will resolve any disputes, including excessive fee disputes, to assure consistent application of the Plan provisions which are identical to the benefit provisions of the 1992 Benefit Plan.
Article III A. (10) (g) 1. and 2. provides the following:
(g) Explanation of Benefits (EOB), Cost Containment and Hold Harmless
1. Each Beneficiary shall receive an explanation of billing and payment rendered on behalf of such Beneficiary. Should full payment for a service be denied because of a charge that has been determined by the Plan Administrator to be in excess of the reasonable and customary charge, a copy of such EOB shall be forwarded to the UMWA (International Headquarters, Attention: Benefits Department).
2. (i) Regarding health care cost containment, the Trustees of the UMWA 1992 Benefit Plan are authorized to establish managed care and cost containment rules and procedures pursuant to section 9712(c) of the Internal Revenue Code. Among other programs, the Trustees are authorized to take steps to contain prescription drug costs, including but not limited to, paying only the current average wholesale price, encouraging the use of generic drugs instead of brand name drugs where medically appropriate, and encouraging the use of mail order drug programs when advantageous.
(ii) The Trustees shall make available to the Plan Administrator any special cost containment arrangements that they make with outside vendors and/or providers. Further, the Plan Administrator may “piggyback” the cost containment programs adopted by the Trustees, and may utilize the managed care and cost containment rules and programs adopted by the Trustees.
(iii) Disputes shall be resolved in accordance with (l0)(b).
(iv) It is expressly understood that nothing contained in this Section shall diminish or alter any rights currently held by the Employer in the administration of this Plan.
* * *
Article IV A. and B. of the Coal Act Employer Benefit Plan states:
Article IV. Managed Care, Cost Containment
A. The Employer may adopt Participating Provider Lists (PPL’s) of physicians, hospitals, pharmacies and other providers, provided that any such PPL has been approved for adoption under the Employer’s benefit plan maintained pursuant to Article XX(c)(3)(i) of the National Bituminous Coal Wage Agreement of 1993 (“1993 NBCWA”). The Employer may also implement a formulary for prescription drugs; implement a mail-order procedure for prescription drugs, including appropriate limits on quantity and periodic physician review; and subject the prescription drug program to a rigorous review of appropriate use.
B. In addition, the Employer may implement certain other managed care and cost containment rules, which may apply to benefits provided both by PPL providers and by non-PPL sources, but which (except for the co-payments specifically provided for in the Plan) will not result in a reduction of benefits or additional costs for covered services provided under the Plan.
* * *
Opinion of the Trustees
The Trustees deadlocked on this matter. Trustees Holland and Hudson found for the Complainants. Trustees Dunham and Segal found for the Respondent. Under the ROD procedures approved by the Trustees of the UMWA 1992 Benefit Plan, the matter was referred to a neutral interest arbitrator, Robert E. Nagle, for resolution. The arbitrator was directed to choose one of the two draft opinions proposed by the Trustees. The arbitrator’s choice is printed below as the opinion of the Trustees.
Decision of the Arbitrator
The Employer’s mail service pharmacy program for maintenance prescription drugs is inconsistent with the prescription drug coverage and cost containment provision of the Employer Benefit Plan, and therefore is not within the Employer’s authority to implement under the Coal Act and Article III. A. (10)(b) of the Coal Act Employer Benefit Plan.